There has been much talk of devolution over the past months. London will have to take a much different approach than other regions. Yes it’s true that we desperately need more fiscal autonomy, but we also need to define new economic boundaries.
The Capital needs to partner with the South-East to create a new devolved “Thames City” super-region. It would form the third biggest urban economy in the world, with a combined GDP of over half a trillion pounds.
Fiscal autonomy should be the first priority as London earns a lot more than it gets to keep. The Capital’s nominal GDP is £338bn, which is about a quarter of the total UK economy. Considering that it only comprises roughly an eighth of the UK population, the Capital is clearly punching above its weight.
It is, therefore, disappointing that London is an international outlier when it comes to fiscal autonomy. In contrast to most major cities, it relies heavily on central government transfers for its funding. In total, 73.9 per cent of its income is received through grants, which compares unfavourably to New York (30.9 per cent), Berlin (25.5 per cent), and Paris (17.7 per cent).
London is growing at a staggering rate. The latest projections estimate that there will be a 37 per cent increase in population from 2011 to 2050, with an average estimate of the resident population of 11.3m.
This by no means is a bad thing because a larger total population will obviously mean a larger working population. Workforce jobs, that is those located in London regardless of residence, will likely increase to 6.3 million by 2050 from roughly 5 million today. This city needs to house and provide transport to these extra million workers and their families.
London was set up in a strong mayor form, meaning the Mayor can act without much getting in his way, but in reality Parliament is in the driver’s seat. City Hall has to go begging to Parliament when they need new transport projects like Crossrail, or large new housing projects.
Central Government often do provide what the city needs; they obviously understand the economic importance of London even if they don’t always say it so directly. In the end the Chancellor can’t be seen to be favouring the South, and this leads to less focus than the region probably deserves considering its importance to the overall health of the UK economy.
London needs more affordable housing, schools, tech cities, transport infrastructure, the list goes on. The Mayor has put considerable effort in rallying the government for these things, but how many bike trips to Parliament -with hat in hand- does it take before that becomes his full time job? It’s time to cut out the middleman and give London the power it needs to succeed with the devolution of property taxes.
A modern global city needs to be responsive to be competitive, but with the big issues London currently can’t be. Devolved property taxes would allow London to respond dynamically to the kinds of population booms it so often experiences. When the population grows, housing prices go up, that pot of taxes grows, London uses that to build more and connect to new areas of growth.
This issue doesn’t stop at the borders of Greater London. London’s issues often become the surrounding regions problems. London provides the surrounding regions with a substantial amount of their employment, and these skills are essential to London’s economic growth. We need to move people between these regions, house them, and make sure opportunities are consistently growing.
In the past London has just swallowed up its surrounding regions. Here is an alternative. A partnership where these areas retain their independence. The government should give part of these devolved tax powers to a new body representing London and these surrounding areas. This body would co-ordinate the sizeable shared development pot; allowing for the large-scale projects needed to meet the growing gaps in housing and transport.
This new super region – a ‘Thames City’ region – would represent the shared goals of Greater London, Essex, Kent, Surrey, Berkshire, Buckinghamshire, and Hertfordshire.
The new region could collaborate to build 40 new “garden suburbs” on disused brownfield sites, and go beyond current transport plans to deliver Crossrail 3, 4 and 5. Giving these areas an equal say and new devolved powers would give the region what it needs, not what parliament thinks it needs.
More than anything else ‘Thames City’ would give the South-East a say in London’s growth.
For more details on this new ‘Thames City’ check out my policy report “Southern Powerhouse: True devolution for London and South East”