Would more independence for London benefit the nation?

To most of the world, London and Britain are so close as to be hardly distinguishable. Britain is Big Ben, Buckingham Palace, Trafalgar Square, Piccadilly Circus and St Paul’s Cathedral. London is the monarchy and parliament. But like many marriages that seem happy from a distance, this one has long had its tensions. Over recent years it has been going through a particularly difficult patch, with both sides feeling misunderstood and underappreciated.

The capital, as it often likes to point out, works incredibly hard and brings in most of the money. It houses an eighth of the nation’s population but produces almost a quarter of its economic wealth, according to the Office for National Statistics, and almost a third of all its taxes, says the Centre for Cities research unit. Much of the UK’s remaining standing and influence in the world — its soft power — is exercised through London. The UK is no longer a superpower among nations, but London is an urban superpower in an age when cities are becoming more important.

Moreover, London insists, it is eager to contribute even more to the marriage. All that holds it back is a domineering national government. The capital has remarkably little control over its finances or its services, compared with similar cities. The London Finance Commission — set up in 2012 by Boris Johnson, then London mayor, to look into tax and financing — found only 7 per cent of taxes raised in the capital go directly to London government (the mayor and boroughs), with the rest going to central government to be redistributed.

The current mayor, Sadiq Khan, and his supporters argue that giving the capital more power over its own taxes would allow it to design a tax system that worked for its peculiar circumstances and incentivised growth. This in turn would, of course, help the country as a whole, they say. London would get more of the pie but the pie would be larger and the union would be better off.

Yet these arguments fall on deaf ears. For the nation has its own grievances. It does not matter what measure you chose — population, wealth, tax take — London has moved ahead of the rest of the country in recent decades. So what, if the capital’s international counterparts have more freedom to govern themselves?

Few other cities so dominate their nation; the UK has by some way the largest regional economic disparities of any large advanced country. London already receives the lion’s share of investment in infrastructure and culture — all those gleaming railway stations and dazzling museums. Wouldn’t ceding London more freedom allow it to gobble up even more of the nation’s economic and cultural life? Wasn’t the vote for Brexit at least in part a vote against the London elite and their greedy ways?

The British people can hardly recognise themselves in their cosmopolitan, freewheeling, unimaginably expensive, crazily busy capital as it is. And now it says it wants more freedom to do its own thing. Better, national government insists, to keep London in its place and work on rebalancing the UK through promoting its “industrial strategy” and investing in cities, regions and nations beyond the capital. Prime minister Theresa May’s 2017 election manifesto, with its promise to move civil servants out of London and redistribute more arts spending away from the metropolis, seemed particularly anti-London, but all national parties — not to mention Scottish, Welsh and Irish ones — campaign on a promise to recast the economy away from London.

Like most couples going through a difficult patch, both parties need to listen more. London certainly has a point. The capital does make an outsized contribution to the nation’s economy and national standing, and is undoubtedly being held back from making a greater one by excessive centralisation. The Treasury in particular needs to let go. A city with more self-government would be able to come up with a much more effective and fairer system of property taxation than the one we currently have — and be able to invest the proceeds in vitally needed infrastructure and public services, and address its exceptionally high levels of deprivation. London might be rich, but once living costs have been taken into account, most of its people are not. A quarter of British children grow up in poverty, but a third of children in London do, according to London’s Poverty Profile, a report based on government data.

The capital can, in turn, come across as arrogant and uncomprehending. Harping on about how much it contributes to the country through supply chains and tax take is bound to provoke as much as it persuades — people do not like to be reminded of their dependency on a richer partner. It is humiliating. Successive mayors have often seemed much more enamoured by London’s role as a global city than as a capital.

London needs in particular to get better at making common cause with the UK’s other cities and regions and its smaller nations. Instead of always insisting on how much it brings to the table, the capital might consider committing itself much less reservedly than it ever has to the goal of rebalancing the UK economy. The UK’s very lopsided economic geography is not just bad for the regions but arguably hurts London itself. Stronger regional economies would take some of the pressure off the metropolis. The cities and regions should work together in pressing the case for devolution — they all suffer from the UK’s ludicrously over-centralised system of government.

We have all become used to seeing the mayor of London — a role created only 17 years ago — shaking hands with kings, presidents and international city mayors as they come to London or he travels around the world. But Ken Livingstone, Johnson and Khan have been slow to look after their relations with the rest of the nation. The mayor has a large organisation, London and Partners, responsible for promoting London internationally, but not a single officer responsible for promoting London across the rest of the UK.

As a first step, Khan could call for a national parliament of mayors: a body of UK city leaders that could speak up for the needs of the country’s cities — the heart of Britain’s economy. But he should make it clear he would not necessarily expect it to meet in London. 

Ben Rogers is director of Centre for London, a think-tank

Help the regions play a role too

What is good for London is good for the UK, right? Well yes, possibly, but that is not the whole story. Advocates of further devolution and public investment for London can point to myriad statistics that show how reliant the rest of the country has become on the capital. Office for National Statistics figures show London produced a £26.6bn fiscal surplus (just over £3,000 per head), which is redistributed to fund public services in struggling regions. If by “struggling” we mean anywhere receiving more in public spending than it raises in tax, we can include every region outside London and the south-east.

With London’s gross value added running at about 170 per cent of the UK average, it is easy to argue that investment in London delivers a bigger bang for the buck. But is that healthy? Quite apart from having all our eggs in one basket (even if laid by a seemingly indefatigable golden goose), do we really want to create a “city state” economy supporting an increasingly barren hinterland?

Transport infrastructure is perhaps the most egregious example of the gulf in largesse. Including Crossrail, London will receive £1,943 per capita for transport projects between 2016-17 and 2020-21, compared with £682 in the North West and £190 in Yorkshire and Humber, according to IPPR North, the think-tank. It is hardly surprising, then, that transport secretary Chris Grayling’s near-simultaneous cancellation of full electrification of the TransPennine route between Manchester and Leeds, while giving an apparent green light to the £31bn Crossrail 2, stuck in the craw of many in the north. But it was not just a PR gaffe. Quite simply, it fails to recognise the clear benefits that can accrue from investment in regional city economies backed with sustained political commitment.

The latest Centre for Economics and Business Research report on city economies shows Manchester’s economy has grown an impressive 9.1 per cent since 2014, with Leeds growing at 8 per cent — both ahead of London’s 6.9 per cent. It cannot simply be coincidence that these cities’ strong growth in sectors such as life sciences, financial services and digital technologies has quickened since the advent of former chancellor George Osborne’s Northern Powerhouse drive.

It remains to be seen what effect city-region devolution and metro mayors will have, but the examples of London and Scotland show that growth strategies tailored to local strengths can reap dividends. Yet to continue harnessing the benefits of agglomeration to fuel broad-based growth, we need to focus on the fundamental enablers. In the context of a national industrial strategy, this might lead us to consider that connectivity between cities in the north and Midlands, combined with greater control over skills and planning, should take a higher priority than further turbocharging of London’s growth engine.

Mike Emmerich is co-founder of Metro Dynamics, a consultancy specialising in city growth, and author of “Britain’s Cities, Britain’s Future”