Radical devolution can help London help itself and Brexit Britain too

The more I write about this city, the more I see how it is misunderstood. London is resented for being rich, yet many Londoners are poor. The poor are sometimes said to be being driven out, yet Londoners who struggle to make ends meet are at least as numerous as ever, and now include many who have jobs. London’s economy has proven resilient during this century so far, but its “hourglass” shape and punishing housing and childcare costs are undermining its cherished reputation as a place of opportunity.

London is sometimes blamed for national problems, though attacks on it for hogging public investment and leeching the life from the rest of the land underplay the economic interdependence of the nation and its capital and overlook the massive “tax export” from London to everywhere else. London is demeaned by Brexiters as no longer British, yet Brexit Britain will need remain-voting, immigrant-attracting London more than ever.

Explaining all this is a challenge which has become even greater since London’s resounding vote to remain in the European Union underlined how very different the capital is from so much of the rest of the UK. It entails demonstrating that London has great strengths but also weaknesses that threaten those strengths and therefore threaten the UK generally. Perhaps the hardest part of all is arguing that for the UK to get the best out of London means London being allowed to be more different, more powerful and, in some respects, more separate still.

The second report of the London Finance Commission, asked for by Sadiq Khan following last June’s Brexit jolt and warmly welcomed by him last week, makes that complex case with invaluable clarity. A document closely concerned with singalong stuff like “land value capture” and “agreeing revised baselines for devolved business rates” still succeeds in conveying why letting London’s two layers of government – the Greater London Authority and 33 local authorities – have far more command over how more than £90 billion in taxes raised in London is spent here would be better for London and the nation alike. As well as controlling the use to which its various property taxes are put, the commission recommends that a more autonomous London could also retain a proportion of the income tax and VAT raised in the city and its boroughs be allowed to introduce a levy of perhaps £2.50 a night on the hotel bills of tourists.

Those not beguiled by the possibility of the proportion of sub-national services funded from London’s own tax base rising from under 10% to as high as 50% should nonetheless spend some time with the foreword of commission chair Professor Tony Travers, in which he contends that “the stakes for democracy, both in the UK and elsewhere in the West, are now very high”. His point addresses where power lies in the structures and processes of governing and how the Leave vote, whatever else it revealed, can hardly be taken as a glowing endorsement of what he calls “the current use of centralised power by a small political elite, be it in Brussels or at Westminster”.

These are turbulent times. Watch the news. Step outside. Feel the mood. Across the pond, a belligerent amateur is reshaping the world. Here, the public’s attitude to how things are run and who runs them matters more and more. Professor Travers cites polling for the commission showing that people trust local and regional politicians more than those in central government. “The risks and opportunities that the EU referendum result creates affect the country not only at the national level but within its nations, regions, cities and other localities in different ways,” he writes. “These uncertainties are often more effectively and efficiently managed at the local level.”

Radical devolution offers ways in which London can better maintain its successes and deal with the failings that threaten them, all for the greater national good (in another part of the forest, strong arguments are made for London having its own immigration policy too). The capital trades heavily with other parts of the UK, from Scotland to England’s deep south-west. The damaging problems of low wages, high housing costs, skills shortages and taking constructive social welfare measures are harder for London mayors and borough politicians to address because so much of the cash required is handed straight down from Whitehall with too little recognition of local needs and too many unhelpful strings attached.

All of this may sound very bold, but compared with the freedoms and powers other big cities such as New York enjoy, London is dependent and hamstrung. That is not good for London and, as a result, not good for the UK. Is that idea so hard to grasp? Read the full London Finance Commission report here and and summary of it here.

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