'Give London back its tax': Boris Johnson demands return on cash that capital makes for Britain

 
Tax payback plan: Boris Johnson
ALEX LENTATI
Pippa Crerar4 April 2012

Boris Johnson today unveiled plans for Londoners to keep more of the tax revenue they generate to spend on better public services.

The Mayor said the capital should get a greater return on the cash they contribute to government coffers. In his biggest grab for power yet, Mr Johnson called for more control over how the money would be spent.

The equivalent of £2,500 for every Londoner goes to other parts of the UK rather than being spent on schools, hospitals, transport and fighting crime in the capital.

The Mayor wants to claw a lot of this money back and said London should no longer be a “cash cow” for the regions.

He said: “London is the powerhouse of the UK economy and it is time to look at formally recognising that and make sure hard-pressed and hard-working Londoners get the benefit of their contribution.”

Mr Johnson said he would argue for funding to be allocated “without ring-fencing” so he could have total control over how it was spent. The move risks a backlash from parts of Britain which are propped up financially by the capital.

Unveiling his economic manifesto in Purley in his fight to be re-elected Mayor on May 3, Mr Johnson said he would set up an inquiry into London funding and lobby David Cameron and George Osborne to consider the case for keeping a greater share of its own wealth.

Mr Johnson said ministers had so far been “very receptive” to his proposals. Around £1 in every £5 earned in the capital subsidises the rest of the UK. Mr Johnson would demand between £10 billion and £20 billion extra for London — to be spent on health and education as well as his core responsibilities of transport, crime and housing at City Hall — the equivalent of up to £2,500 for every Londoner.

Mr Johnson said: “I want to make sure that London’s funding sources are put on a secure long-term footing, giving the Mayor and the people of London increased certainty. It will examine whether it is time we should keep more of the taxes Londoners pay in London.”

In 2009/10, the last year for which figures are available, London contributed about £99 billion to UK GDP through tax — but only got £94 billion back in public spending. This net contribution of about £5 billion was lower than normal because of the economic downturn. Experts claim it would usually be between £10 billion and £20 billion a year.

Mr Johnson said: “If you’re going to drive the UK economy you’ve got to invest in London.”

A campaign insider insisted the Mayor was not “picking a fight” with other parts of the country.

Mr Johnson also said he would continue to stand up for London business against EU red tape and taxes. Other pledges include:

  • Find 10 unused Greater London Authority-owned buildings to be used for free schools.
  • Increase by a third the time motorists can park in “stop and shop” bays on TfL roads to support local businesses, and urge the boroughs to carry out parking reviews.
  • Hold an annual mayoral jobs fair funded by the private sector and lead a part-time jobs campaign to help parents back into work.
  • Lead a drive for 1,000 new apprenticeships every week and offer them a 30 per cent travel discount.

London devo-max is hard to resist

Commentary: Tony Travers

The Mayor is making a Scottish-style bid for increased London autonomy. Devo-max for the capital? Boris Johnson’s bid to keep more of London’s taxes is like the SNP’s demands for Scotland.

For many years, London has paid significantly more in taxation than government spends in the capital, creating a “tax export” to the rest of the UK. This export amounted to £10 billion-£20 billion per annum before the financial crisis though it is currently closer to £5 billion. The Mayor, if re-elected, wants to keep much or all of this cash in London.

His argument is akin to Alex Salmond’s view about “Scotland’s oil” and the taxes generated from the Scottish part of the North Sea. If Johnson were successful it would be possible to increase investment in the city’s infrastructure or services and/or to cut local taxation. Elsewhere in Britain the reverse would be the case, generating a headache for the Chancellor.

Johnson’s manifesto also raises the question of whether more of London’s taxes should be kept locally, which hints at the possibility of the Mayor setting some of them.

London has a population equivalent to Scotland and Wales combined, which now have devolved power over most domestic matters. The Scots will undoubtedly soon be setting their own taxes.

It is hard to see Ken Livingstone disagreeing with Boris’s policy thrust. Although the Treasury and the rest of Whitehall will resist a move to devo-max for London, it may prove hard to resist.

Within the next five or 10 years the Mayor may take responsibility for more tax-setting. Future mayoral elections would certainly see increased turnout.

Tony Travers is director of the Greater London Group at the London School of Economics

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