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London councils to seek devolution of further tax powers

London councils could demand full control of tax powers, subject to a successful pilot of business rates devolution.

A statement of principles, which London Council leaders were asked to sign up to at a board meeting yesterday, says that full control of council tax powers is vital to offset loss of revenue due to London’s unique business rates structure.

Business rates vary across the capital, with three boroughs (Tower Hamlets, Westminster and Camden) accounting for 50% of income.

In contrast, 75% of businesses in Lewisham are small businesses that, under the increase in the threshold announced in the March Budget, would pay no tax at all.

Therefore, the statement says: “Following successful implementation of a London scheme, however, we would want to return to the issues of full control of rate setting – including the safeguards that would be required to prevent a disproportionate tax burden on business – along with a broader range of fiscal devolution.”

These powers could include setting tax liability thresholds, discounts, reliefs, baselines and reevaluations.

Prior to a pilot scheme, London councils could seek to increase the mayoral supplement for funding transport and infrastructure projects.

London accounts for 28% of the total national rateable value despite only holding 16% of the properties.

A recent report from Core Cities UK argued that devolution of tax powers besides business rates will be necessary in all devolved areas.

The capital’s councils will also seek to define distribution of income to the Greater London Authority and boroughs, in order to reward their contribution to growth. This will involve either establishing a defined, periodically-reviewed split between income for the councils and the Greater London Authority, or the establishing of a separate mayoral rate.

They argue that these funding changes are necessary to reach the unique pressures on London, including a rapidly growing population and housing and living costs.

At the meeting, the councils also said that they are currently in talks with the government to allow them control of the capital’s work and health programme, while the £400m adult education budget is due to be devolved to London by 2019.

(Image c. Ray Wewerka)

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