Will London receive the powers it needs at the Budget?
By Kumail Jaffer, Local Democracy Reporter
The Prime Minister’s political mantra has been clear since his first appearance outside No 10.
Significant powers must be relinquished by central government in Whitehall and handed to local leaders.
It is only then that the country will start to see “good growth in every postcode”.
As Andy Burnham passes 100 days in office – and ahead of his first major fiscal event tomorrow (Wednesday October 28) – Londoners are still waiting to see a major devolution breakthrough for the capital.
City Hall has long called for more tax raising powers, but have so far only been granted the prospect of retaining an undefined portion of the incoming overnight accommodation levy for visitors and a share of income tax exacted in the capital.
Devolutionary Promises
But Chancellor John Healey may yet have a proverbial rabbit to pull out of his hat when it comes to devolution during tomorrow’s landmark speech.
He has already announced an apparent end to Mayors in London and the South East “going cap in hand to Westminster” to ask for funding for major projects, with the Greater London Authority (GLA) and Cambridgeshire and Peterborough Combined Authority set to get more money and control over investment in their communities.
This will come in the form of an initial £285million “seed fund” to support Mayors, with a £1.5billion specialist borrowing facility to be set up in 2028 for local leaders to access funding.
Mr Healey said: “Local people have the right to decide their own future. London and the South East is full of potential – but it has gone untapped and wasted while money and power has been held in Westminster.”
The Mayor of London welcomed the move, suggesting that “giving London greater ability to invest in its future will help unlock transformational infrastructure projects such as the West London Orbital and Bakerloo Line Extension, Stratford International and the DLR to Thamesmead, supporting tens of thousands of new homes, jobs and economic growth.”
What else is the Mayor hoping for?
Sir Sadiq Khan has already laid out his three major demands for tomorrow’s statement – further fiscal devolution, funding for housebuilding and more money for “core public services” like policing.
Last month he told the London Assembly the the capital must be given “the tools and incentives to drive its own long-term growth and for the proceeds of this growth to be then reinvested in the city”.
He said he was lobbying ministers for further powers on business rates retention and an extension to the business rates supplement – a 2p per pound levy on larger non-domestic properties used to fund the Elizabeth Line that was introduced in 2010 but expires in 2029.
He also called for “sustainable funding to support the housing market” in London, and a boost for the Met Police and London Fire Brigade to combat “the impact of 14 years” of the Conservative government.
Lord Khan has also now clarified that he would like to see international rail services return to Stratford International station.
A City Hall spokesperson told the Local Democracy Reporting Service (LDRS): “The Mayor strongly supports the Government’s ambition to move power, funding and decision-making out of Whitehall and closer to communities.
“He hopes the forthcoming Budget grants London greater financial freedoms to allow the capital to become more self-sufficient and, in time, less reliant on Treasury funding.
“He also hopes to see confirmation that Stratford International Station will finally welcome cross-channel rail services and additional investment into housing delivery.”
What else could London receive?
Antonia Jennings, CEO at Centre for London, told the LDRS that the capital’s devolution settlement “needs to reflect the uniqueness” of the city.
“London has a different scale, economic make up and governance model to any other part of the country,” she added.
“Any future settlement should recognise these differences, rather than applying a one-size-fits-all approach. In practice, that should mean a dedicated London chapter in the forthcoming White Paper.
““If Burnham wants a genuine transfer of power from Westminster, London cannot be an afterthought. The capital needs a devolution settlement that reflects its economic importance, provides genuinely new fiscal powers and gives local and regional government the tools to drive growth and opportunity across the city, and for the rest of the UK.”
She also called on the Chancellor to propose a “progressive, partially devolved Proportional Property Tax” to replace Stamp Duty and Council Tax.
Ms Jennings added: “Under our model, existing local and regional tax-setting powers would be retained, preserving democratic accountability. Homes worth under £800,000 would pay broadly what they pay today in Council Tax, while benefitting from the abolition of Stamp Duty. Higher-value properties would contribute more through a progressive model.
“Reform is overdue, but it must be done in a way that works for Londoners rather than creating a new affordability crisis.”
London Falling
For some critics, however, the Prime Minister’s actions point to an anti-London agenda that need to be reversed.
New figures from the House of Commons Library, commissioned by the Liberal Democrats, reveal that 110,000 Londoners will be dragged into paying the 40p higher rate of income tax in 2026-27 as a result of the Labour Government’s decision to keep tax thresholds frozen this year.
Luke Taylor MP, the party’s London Spokesperson, said: “London-weighting for salaries is designed to reflect our out-of-control housing costs, but those salaries are already struggling to keep up, and now the hardworking people on them are being penalised for receiving them.
“It would mean enough people to fill Wembley Stadium and the 02 Arena facing a personal tax hike just as energy bills rise and inflation soars.
“The ground is moving beneath the feet of hardworking people in our city.”
