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Boris Johnson's call for tax-raising powers for London boosted by report Boris Johnson's call for tax-raising powers for London boosted by report
(about 1 hour later)
London's mayor, Boris Johnson, has backed a report calling for the capital to be given greater financial freedom in order to fund major infrastructure projects. The mayor of London, Boris Johnson, has expressed confidence that the capital could gain powers to raise property and new taxes while he remains in office.
Johnson said the way London received funding from central government was "simply not fit for purpose" and called for tax and spending powers similar to those devolved to Scotland and Wales. Backing a report, published on Wednesday, that calls for greater financial freedom for London in order to improve the city's infrastructure, the mayor suggested that no reasonable person would be able to refuse the demands. It recommends that London should be given complete control over property taxes, including council tax, stamp duty and business rates, as well as the ability to levy new taxes such as a tourist tax.
Under the proposals, London would be given complete control over property taxes, including council tax, stamp duty and business rates, as well as the ability to levy new taxes such as a tourist tax. Johnson said that what he was asking for was "not a revolution, not an attempt to create a city state out of London. It's a sensible and moderate attempt to face the challenges London has."
The London Finance Commission report also recommended giving the city the power to introduce new taxes, such as a levy on tourists, and greater freedom to borrow. Those challenges were described as "colossal pressures" on housing, schools, transport and other infrastructure, with London's population set to grow to nine million by 2020. The "Raising the Capital" report drawn up by the mayor-appointed London Finance Commission says the full suite of property tax revenue streams, including council tax, business rates and stamp duty, should be devolved to London. The capital's government would also be responsible for setting council tax revaluations and banding, although Johnson was coy about the prospects of making changes in this area, which would likely prove unpopular with voters. Johnson also said that he was not minded to introduce new taxes despite the commission, chaired by local government expert Tony Travers, raising the prospect of introducing tourism and environmental taxes.
Johnson said there was an "acute need for London to be able to better plan and finance the infrastructure needed to prosper and maintain a great quality of life, in the face of a decade of expansion". The Treasury has previously rejected calls for stamp duty to be devolved but the mayor expressed confidence that it would sign up to the proposals, preferring to point out that it has partially devolved business rates. Johnson, who said the current arrangements had caused a "democratic deficit" in London and across England, when compared to the rest of the UK, raised the prospect of candidates in the next mayoral election competing over detailed tax and spending plans.
He said: "The current system is simply not fit for purpose and is out of step with the funding settlements enjoyed by cities of comparable size and stature. He said the enhanced powers would incentivise the London government to focus on growth. At the outset, if the plans were implemented, there would be a corresponding reduction in the Treasury's grant to the capital. But thereafter, London's government would gain – or lose out – according to how high it set taxes and what growth was achieved. On London's current reliance on central funding as compared to major cities in other countries, Johnson said: "For too long London has been an economic giant, a political giant but a fiscal infant … It's high time London was treated in a more grown up, a more mature way, as a great city in the way other great cities are.
"Furthermore, Londoners will increasingly question why London government cannot enjoy similar fiscal freedoms as those afforded to the devolved governments in Scotland and Wales. London's key bodies are agreed that the capital's financial future lies in greater devolution. We will now be taking this case to government." The report did not look at the cost to London of administering the taxes but Travers said they had proved to be manageable in Scotland.
The commission was chaired by Professor Tony Travers from the London School of Economics, who said: "London needs greater financial autonomy to drive growth and deliver better infrastructure. Wales and, in particular, Scotland are moving towards far greater discretion over taxes. London should be treated similarly.
"Indeed, other cities in England could follow London down the route to greater financial accountability and self-determination. England is far too centralised and the London Finance Commission's pragmatic proposals would be a first step towards a more sensitive and popular democracy."
As well as control over property taxes, the commission recommended that London should be given the power to introduce other small levies, including on tourists. The report said: "The international evidence we received suggested that all the other cities reviewed had one or more tax of this kind, including levies on sales, betting and alcohol.
"A tourism tax would seem to have particular potential in London because of the size and particular needs of the leisure and tourism industry. If the city's cultural, tourist and entertainment industry are to flourish, there is a powerful argument for a levy that could then be reinvested in marketing and urban realm improvements.
"Similarly, allowing London government to introduce levies on, say, environmentally detrimental or unhealthy activity could assist in delivering wider public good objectives. We support the maximum discretion for the Greater London Authority and London boroughs in the use of such levies."
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