London’s politicians have welcomed a new report calling for the capital to gain greater control of the money raised within it.
The report has been published by the London Finance Commission which was established by Mayor Boris Johnson under the chairmanship of LSE academic and local government expert Professor Tony Travers.
It calls for an end to ad hoc Government grants for specific projects in favour of greater local control and democratic oversight of tax collection and spending.
Joining Prof. Travers at the report’s launch were Mayor Johnson and Mayor Jules Pipe, leader of London Councils, the group representing the capital’s 32 borough councils and the City of London.
Under the proposals the Mayor and councils would control all property related taxes – including council tax, stamp duty land tax and business rates – ensuring they had a guaranteed income stream to fund investment in new projects.
Professor Travers said: “Wales and, in particular, Scotland are moving towards far greater discretion over taxes. London should be treated similarly.”
He added that the proposals were financially neutral as central Government grants would be reduced “pound for pound” to match the money gained under the reforms.
Any increase in the capital’s overall pot of money would be driven by economic growth, although Travers warned the reforms would also mean the capital coping with less if the economy slowed.
The report also calls for a relaxation in borrowing limits to allow investment in new in captain projects.
Mayor Pipe said it was essential to move on from an aversion to public sector borrowing and recognise the role it had in enabling specific projects which delivered a sustainable legacy.
Welcoming the report, Mayor Johnson said: “This excellent report sets out the case for a fairer deal for Londoners, one that gives residents and businesses a closer say over where their hard-earned taxes are spent.
“It recognises the acute need for London to be able to better plan and finance the infrastructure needed to prosper and maintain a great quality of life, in the face of a decade of expansion.”
Mr Johnson added: “Crucially, we can see that providing London with fiscal freedoms does not come at the detriment of other regions but can in fact help London to generate more jobs and growth across the country.”
London Assembly members have also backed the report’s recommendations.
Labour’s John Biggs AM said: “These proposals are very welcome and recognise the need to develop London government’s role in deciding the future of our great city. We need to be given the flexibility to invest in areas that are important to Londoners, including housing and business investment.
“By granting London the ability to control its property taxes and lifting the highly restrictive borrowing limits we can get growth going in our city. We can invest in the infrastructure that we need, strengthen London’s democracy and improve the accountability of its representatives.”
Liberal Democrat Stephen Knight also welcomed the report but called on Mayor Johnson to make “proper use” of existing powers “instead of just waiting for a new settlement between the Exchequer and London”.
The report has also been supported by the capital’s business community and campaigners at the Taxpayers’ Alliance.
Baroness Jo Valentine, Chief Executive of business group London First, said: “We agree that London government should retain a greater proportion of the taxes raised in London at levels broadly consistent with current spending. Where further functions are devolved, so too should be tax revenues.
“It’s time to free the Mayor from having to spend his time lobbying central government, and going cap in hand to the Treasury, when he should be focused on positive actions to bring in investment and growth.”
Matthew Sinclair, Chief Executive of the TaxPayers’ Alliance, said: “The current situation where local politicians are responsible for spending money but not for collecting it through taxation encourages irresponsible behaviour.”
Mr Sinclair added: “London faces particular issues with property taxes. Stamp Duty on homes is a fundamentally flawed tax that causes enormous problems in London and should be abolished. Handing tax powers down from the Treasury should be seen as an opportunity to cut rates, not an excuse to fleece Londoners for even more cash. The Mayor’s progress in cutting his share of Council Tax shows what can be achieved and international evidence certainly shows that devolution leads to better local government and lower overall taxes.”
Prof. Travers and Mayors Johnson and Pipe say they will now lobby ministers and politicians from all parties to ensure the report’s recommendations are implemented.