London taxpayers should have more say about how their money is spent. This is the key message of the London Finance Commission’s report.
Scotland will soon have substantial devolved taxation powers, including income tax, while Wales is bidding for something similar. Yet London, which has a larger population than these two nations added together, has little discretion over taxes and spending.
The Commission examined cities such as New York, Paris, Berlin and Toronto, which have far greater access to taxes paid by their citizens than is the case in London. It considered academic research about the link between devolving power and growth. The successful experience of devolution to Scotland and Wales was also analysed.
This suggested that there was support for a reform of London’s funding arrangements, to make it easier for the city to invest in the new trains, housing and schools needed to accommodate its rapidly rising population.
Income tax, VAT, corporation tax and a number of other revenues could not, it was judged, be immediately devolved to London. The extent of commuting would make it unclear where tax should be paid. Property taxes on both homes and businesses appear more appropriate for devolution.
The Mayor and the boroughs would have to decide how best to manage the new arrangements. London would have more control of its destiny.
Professor Tony Travers was chair of the London Finance Commission
