London’s mayor should work with other city regions and their mayors, once elected, to put pressure on the government to devolve fiscal powers across the country, according to key figures on the London Finance Commission.
LGC reported earlier today how the commission’s proposals included calls for the capital to gain full control over council tax and business rates, while local authorities should also have the freedom to set their own charges and fees.
London mayor Sadiq Khan (Lab), who set up this second iteration of the commission, is hopeful more powers will be devolved to the capital at the next budget in March, but he acknowledged some of the finance commission’s recommendations would require “more work to persuade the government of our case”.
Professor Tony Travers, chair of the London Finance Commission, said there was “always a risk that parts of the country end up fighting each other rather than competing in a friendly way”. However, he thought directly elected mayors were more likely to “get together” to lobby government.
“That will raise the stakes significantly on devolution issues,” Professor Travers told LGC.
London Councils’ chair Claire Kober (Lab) said “there has got to be” greater collaboration between London’s mayor and the directly elected mayors of Greater Manchester, Liverpool City Region, Cambridgeshire and Peterborough, Tees Valley, West of England, and West Midlands once they are elected in May.
She said she had already sought to boost relations between and work closer with members of the Core Cities group.
“There’s much more chance of success if we’re working together and people can see that cities and city regions around the country will benefit from these sorts of changes,” Cllr Kober told LGC.
The finance commission’s recommendations about gaining full control of business rates, including the multiplier and discounts, and full control of council tax were her top priorities.
When the commission was reconvened last summer Professor Travers told LGC at the time the latest incarnation was “likely to be a bit more radical” than the “pragmatic” version produced in 2013.
Professor Travers thought the most radical proposals in the latest commission’s report related to London being assigned a percentage of Londoners’ income tax yield as well as London businesses’ VAT yield.
However, he added: “[The report] is radical by British standards, but not necessarily by global standards. It is deliberately positioned to be radical in Britain. An American reading it wouldn’t think so but we are where we are.
“We need to take careful steps to convince central government that at some level it’s in their interests to devolve power.”
Professor Travers said he had a “friendly” meeting with the Treasury to discuss some of the recommendations where officials “reasonably explained the difficulties” associated with changing a long-standing system. However, he said he would be going back to the Treasury, as well as the Department for Communities & Local Government, to discuss the proposals in more depth.
He thought the fact the government was “very, very busy dealing with Brexit” meant the proposals “offer a bit of relief if the government grits its teeth”.
Key recommendations from the London Finance Commission
- A modest percentage of London’s income tax yield should be assigned to it and could be used to fund major capital projects.
- Provide London with a proportion of its businesses’ VAT yield.
- Give London control over the full suite of property taxes, including stamp duty.
- Allow London to operate set council tax, including reforming council tax bands and the amount each charges.
- Gain control of the apprenticeship levy, due to be implemented from 2017, in order to fund a wide range of skills and employment initiatives in the capital. In the longer term, it should be for London to decide whether or not to retain such a levy, at what rate, and on what to spend it, in consultation with businesses.
- Allocate a share of London’s contribution to vehicle excise duty revenue to improve nationally strategic roads within the capital.
- Provide the power for London to introduce “smaller taxes” including a tourism tax on visitors - a £2.50 a night hotel levy would raise £102m over a year.
- Introduce community levies to fund “discrete projects ‘owned’ by Londoners”, provided they are approved by a ballot.
- Local authorities should be able to recover the full costs of services, even for charges currently set at the national level.
- Central controls should be removed on planning application fees, building control charges, land searches and licencing fees. Such fees and charges should be audited locally.