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30.01.17

Khan backs proposals for greater financial devolution in the capital

London should be given further devolution powers equivalent to other global cities to lead the way in the country post-Brexit, according to a new report drawn up for the city’s mayor Sadiq Khan.

The study by the London Finance Commission, reconvened at Khan’s request last summer after the EU Referendum, said that London should be brought in line with other European cities by allowing the capital greater tax-raising control in exchange for reduced central government grants, which currently make up 74% of the city’s funding.

The report, ‘Devolution: a capital idea’, follows a conclusion reached by the Commission in 2013 that only 7% of tax paid by London residents and business is redistributed by locally elected bodies, compared with 31% in New York and 25% in Berlin, with the city generating more tax through its residents than it receives back.

“London has the same population as Wales, Scotland and Northern Ireland combined, but we have far less control over how our economy and public services are run,” Khan said.

“Giving London more control would allow us to manage the current economic uncertainty in the aftermath of the EU referendum, giving London the stronger voice it needs so we can protect jobs, growth and prosperity for the future.”

The comprehensive devolution package sought by Khan would allow the capital to bring forward infrastructure investment and free up Whitehall to focus on the enormous task of organising Brexit, City Hall said.

The recommendations sought by Khan include a tourism levy which would be used to promote tourism in the capital, along with greater control over income tax, VAT and other tax revenues such as the apprenticeship and soft drinks industry levies.

The commission said that, in the long-term, the government could consider devolving other health-related taxes such as taxes on sugar sales and saturated fats which London government could manage independently.

Prof Tony Travers, London Finance Commission, said: “At present, the centralised nature of UK government makes it virtually impossible for the Mayor and the boroughs to bring about the required structural change to address the types of inequalities Londoners face, from housing to household income.

“This report makes the case for a much more ambitious devolutionary settlement for London. It argues that by giving London government greater power over the tax base and public services, the city’s leaders would be provided with stronger incentives to develop its economy and opportunities to reform public services.”

The report found support from London Councils, who said that it vindicated their “long-held position” that further devolution is “critical” to enable the further delivery of jobs, homes and transport to the city’s residents.

“The mayor and boroughs must be given new powers if we are to realise economic growth in London and the UK and prepare for the huge challenges that lie ahead,” said the chair of London Councils, Cllr Claire Kober OBE.

Councils across the country also applauded the report, warning that the UK is still “heavily centralised” despite ongoing devolution deals and saying that it makes a “strong case” for the government to give further finance powers to other cities across the country.

“Whitehall needs to loosen its grip and trust our cities to make the right decisions,” said Cllr Jon Collins, the leader of Nottingham City Council and finance cabinet member for Core Cities. “Business rates will be devolved, and this needs to happen in a way which maintains the principles of fairness and distribution, but in a post-Brexit landscape we have to wake up to the fact that cities drive growth for nations, not the other way around.”

Cllr Collins added that although Britain will soon be leaving the EU, the government could learn from the better distribution of national growth seen in countries across the continent before the UK eventually leaves the union.

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