You’ve heard this one before. If Labour wins the general election they won’t be turning on the public spending taps. There’s not much water in them. Despite the Tories piling up the highest tax burden since the war, the Treasury’s loft tank is empty. Its rivers have slowed to trickles. Its wells are running dry. How, then, would Keir Starmer find the money for reassembling a nation which, in so many ways, is falling apart? The answer has to be, can only be, to fire up the economy of London.
You’ve heard this before as well, but that doesn’t make it any less true – or mentioning it any less politically taboo. London’s economy accounts for close to a quarter of the entire United Kingdom’s economic activity and, despite being battered by it, emerged from the pandemic growing faster than any other English region. Only three of said regions generate a “tax surplus”, meaning more tax is raised in them than is spent on them, and London’s is the largest such export by far – a thumping £38 billion redistributed to everywhere from the Isles of Scilly to Inverness.
This isn’t bragging, swaggering London flash. It is longtime, hardboiled national fact. We might wish it was not the case that without London’s economy the entire island nation would be miserably broke, but for the time being – and, as things stand, for some time to come – we are, all of us, stuck with it.
Beaters of the northern grievance drum can moan about the Elizabeth line all they like, but if they’d care to look at where the money for it came from, they won’t find much cascaded down from Manchester. London workers stumped up the revenue required for HM’s Treasury to then hand back down, along with London businesses, levied directly.
In the first place, London does not “get everything”. In the second, without London the rest of the place would get next to nothing – next to no health service, next to no police, next to no public footpath repairs, next to no lucrative orders for everything from buses to sea bass.
What, then, should an incoming PM Starmer do about the parts of England, Scotland and Wales whose voters will between them have done more than the capital’s to pave his way to the door to Number 10?
Yes, London will have done its bit for him as well – that is to say, even more than it has been doing for Labour in terms of general election results in recent decades – but it is probably safe to say that the new Labour premier will want to repay – and be seen to be repaying – the restored faith of electors in the reassembled “red wall” and elsewhere.
Starmer has recently declined to do away with the concept of “levelling up”, discredited though it is. Rather, he says, he would seek to do it better. It would nicer if he junked it and thereby provided a partial, welcome release from the crude and divisive “north-south divide” narrative which reduces the long-term national problem of cities other than London struggling to thrive to one for which London is somehow to blame.
The reality is the opposite – without a high-performance London there will be less money to invest in other places that need and deserve it if they are to get stronger and better. But any lapse into candour about the outsized importance of the capital to one and all would trigger great howls of “betrayal!”
How might a Labour government handle that? Its leaders would know that their quest for growth cannot begin to succeed without London. They will also know that anything they do that opponents can portray as putting London, with its beastly bankers, teeming immigrants, and “metropolitan elite”, first will invite populist attacks.
Happily, there is a way out. To locate it, all a fresh and purposeful Labour government would have to do is look at how London is, listen to what its business groups and governance brains say, and decide that its Mayors and its local authorities should be given much more power to run the city than they currently have and leaving them to get on with it.
At the end of this month, two days before Londoners elect their Mayor and London Assembly members for the next four years, On London and the Institute for Government will hold an event to explore whether London needs a new devolution deal.
There is a hefty body of opinion that thinks it does; that for too long London’s potential to be a still more productive global city than it already is has been stifled by interference and game-playing from above, be that in the form of Michael Gove poking his nose into planning policies or Grant Shapps micromanaging Transport for London during Covid.
A new Labour government should jettison all that. It should regard its predecessor’s creation of the Greater London Authority in 1999 as just the start of a piece of constitutional business that now looks detrimentally unfinished.
It should take up the fiscal reform proposals of the London Finance Commission – a project, by the way, that began under Boris Johnson – to allow London government to demonstrate that all too often Whitehall really doesn’t know best.
It should give London’s Mayors and its boroughs the freedom to distribute their slice of the national taxation pie as they, not national civil servants see fit for addressing the city’s deepening housing emergency, its sapping skills shortages and its debilitating poverty.
It should, in short, help London to make a better job of helping itself – and in so doing help it to better help the rest of the country too.
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