London Finance Commission: Raising the Capital

Baroness Hanham Excerpts

Wednesday 3rd July 2013 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)]

My Lords, I, too, thank the noble Lord, Lord Harris, for introducing the debate. Perhaps more importantly, I thank the people who produced the report, not least Professor Tony Travers, who is known to us all and who has been very influential on the London local government scene for—I had better not say a number of years, he might be offended by that—certainly some time.

The Government recognise the importance of this report. The London Finance Commission set up by the mayor has clearly carried out an in-depth study of what it thinks should be done. However, all I will say at the moment is that its potential impact on both London and, as the noble Lord, Lord McKenzie said, the wider country requires a great deal of thought and consideration.

The report was produced by a distinguished and wide membership, which I was glad to see included people who were not from London but from what we now call the core cities, where devolution is beginning to happen. So they had an understanding of what would happen outside London, which again we need to hold on to.

The proposals would have wide-ranging effects, not only on London but on government finances and the United Kingdom. Given the legal, constitutional and fiscal questions raised, this is clearly a matter that is not going to be decided today and may not even be dealt with in the short term. We need to look forward to see how practical the proposals are not only for London but for the country. The report is London-centric, as one would expect, but, as the noble Lord, Lord Bilimoria, pointed out, there is a lot to London—not just London government but a whole edifice underneath London which supports its financial position in the world.

There are innovative proposals for a further devolution of powers, particularly in regard to finance, and well articulated reasons for this; it is a very well written report, as I would have expected. However, the recommendations have to be considered against the background of the current and perhaps future financial situation.

As to its impact on the London boroughs, I know they were represented on the commission but there is a wobbly bit in the report between London and London government, the mayor and the GLA. It nips in and out of London government and, after reading it quite closely, I came to the conclusion that London government was London and the boroughs, and that London was the mayor. Everything else—London and government and the mayor—was very clear. It is not totally clear where the main emphasis lies except, pretty clearly, with the mayor and the Greater London Authority. Any changes to the way in which the finances are delivered, controlled, measured and administered will affect London boroughs as well.

It would not be appropriate for me to anticipate the Government’s response. I accept that the Chancellor laid out the conditions of what he would want in backing this report. I have no knowledge of his view now of where to go from here but, as I have said, the Government will consider the full implications of the proposals very carefully.

We are already seeing devolution and enormous changes in governance in this country and we cannot ignore the fact that places such as Liverpool, Glasgow, Newcastle and Manchester are all beginning to develop their own core cities along devolved and different paths.

We must not forget that there has been already significant devolution to London through the mayor and, through him, the Greater London Authority. That took place in the spending review of 2010. London recently has received a fair settlement despite the necessity for the deficit reduction. It is worth remembering that as a result of the Localism Act London has gained responsibility for housing. The noble Baroness, Lady King, raised the aspect of affordable housing. London now has responsibility for housing, economic development and the Olympic legacy as well as already having responsibility for transport, planning and the police. That is quite a big raft of local government life.

The London settlement, issued in February 2012, provided the mayor with about £3 billion in unring-fenced grant for 2011-12 to 2014-15. London also has a pretty broad range of financial levers, including business rates supplements—I think Crossrail is the only supplement that has been raised so far, but it has been done—infrastructure levy and tax increment financing. I know the latter is still constrained, and we have discussed this on many occasions, but the possibility of using tax increment financing is not only available to the mayor, but to the London boroughs. London also has, of course, its own enterprise zones.

The Treasury has agreed to provide a guarantee to allow London to borrow £1 billion from the Public Works Loan Board at a preferential rate to support the Northern Line extension to Battersea. Some of the infrastructure work, therefore, is already being done.

The Government are going to create a new enterprise zone in the Battersea and Nine Elms area. Anybody who was watching the news last night will have seen that being laid out, and what a large area it is. That will supplement London’s existing enterprise zone at the Royal Docks. My department has also transferred its assets in London to the Mayor to provide an important and financial growth lever. The Government have also contributed £25 million towards the costs of the Olympic stadium transformation.

London will also benefit from the flagship Francis Crick Institute for translational research which will open in 2015. That follows £650 million investment from the Medical Research Council, Cancer Research UK, the Wellcome Trust, University College London, Imperial College and King’s College. Finally, on the list of this there are three new catapult centres designed to commercialise new and emerging technologies, and they will be based in London.

London is not being ignored in any way at all. It is developing all the time with what it is able to do, and what there is for it to do. It is now largely independent of national government in a very significant range of policy areas, and it has greater financial autonomy than ever before. That is not to say that we should not look carefully at what has been proposed. I am not prejudging or saying that the Government have prejudged the report in any way at all. Clearly not; we have not had it for long enough. It is very detailed and it has some really important aspects to it. We will be looking at it.

The noble Lord asked me whether we would be setting up technical reviews. It is too early to say, but I am sure that one way or another this report has got to be studied very carefully by experts across the field. Whether that is a technical review or not, I am not sure, but if I can get any better than that for the noble Lord then I will let him know.

The noble Lord, Lord Bilimoria, was talking about London’s position in the world, and I think that we would all accept that it is now one of the most important cities. We recognise that; it is the fifth largest city in gross domestic product and it is a global city that is instantly recognisable. The mayor is instantly recognisable —I think both mayors have been instantly recognisable. It staged a fantastic Olympic Games and London is rightly ambitious for its future. We do not want to forget that the mayor has himself penned an attractive vision for London in 2020, and that is with this other report. It sets out a long-term plan for major investment in infrastructure.

We recognise the importance of investing in infrastructure. The Chancellor has announced that the Government will continue to provide the funding to get the £14.5 billion Crossrail project finished on time. There will be feasibility funding for London's Crossrail 2 project. We will continue to invest in transport and the Transport for London grant is now £1.5 billion.

I think that London has developed enormously over the last 10 years in terms of its independence and devolution. Further devolution, also part of this report, is something that we need to look at carefully on the basis of not only London but of other cities in the country. The noble Lord, Lord Patten, spoke about constitutional changes. Of course, further arrangements such as this would amount to a constitutional change.

Most of our expert speakers this evening recognised and supported the report. We had some excellent speeches on the subject, all of which were slightly different, so I am not going to refer to all of them. The noble Lord, Lord Patten, asked about rough sleepers, which takes us slightly away from the report, and we have had several Questions on this subject in the House recently. Yes, the number of rough sleepers did go down. Yes, it has increased again. I am interested in the noble Lord’s identification by nationality of those who were within his immediate sight. The figures that we have suggest that about 53% of rough sleepers are from eastern Europe—that does not excuse the fact that they are there. There is co-operation between the mayor and my department to ensure that there are projects set up for them, not least the mayor’s No Second Night Out programme, which means that people should not be on the streets for a second night. There is a phone line for people to ring if they are concerned about them.

The noble Lord, Lord Bilimoria, asked me a question right at the end, which I am afraid I missed—I have to be honest. So if I may look at Hansard and produce an answer for him in writing, I will do so. I was getting overexcited by that time.

I thank the noble Lord again for introducing this debate. We accept totally that this is an important report. I am almost certain that this will not be the last time that we have the opportunity to discuss it or London’s position in the world.