London Finance Commission: Raising the Capital

Baroness King of Bow Excerpts

Wednesday 3rd July 2013 Lords Chamber

[Baroness King of Bow]

This report sets out the role that financial autonomy can play in driving economic growth. A greater tax base for London means a greater incentive to promote growth and, as the report’s conclusion states, this would be good news not just for London but for the whole country. It is amazing to consider that New York keeps over 50% of taxes levied there, yet London keeps only 7%. London needs to be freed up to compete with the other leading global cities.

On the whole, it is fair to say that I am not a huge fan of this Government’s economic policy—it seems to have almost pushed us into a triple-dip recession—and therefore I am not known for quoting its key architect, George Osborne, but perhaps I may change the habit of a lifetime and quote him very approvingly. The Chancellor of the Exchequer stated that,

“under the right conditions, fiscal devolution has the potential to increase the financial accountability of local government and promote additional growth”.

I was also very impressed by the three tests the Chancellor of the Exchequer set the commission, which my noble friend Lord Harris has already quoted. His proposal was that whatever the commission came up with, its recommendations should be judged against three tests; namely, whether they were evidence-based, whether the proposals had cross-party support and whether they were without detriment to the rest of the UK. Those are excellent tests and I am sure that we would all like a lot of legislation to be benchmarked against them, especially in the current climate.

However, the real issue is how we are going to deal with a huge and growing city, and support growth in London. It is estimated that the infrastructure spend required to support London and allow it to thrive will need to be about £75 billion by 2020. Like the noble Baroness, Lady Hamwee, I feel strongly that housing is one of the most important aspects of infrastructure, although it is not always technically considered to be infrastructure, along with transport and so forth.

As regards housing, the London Finance Commission states:

“Measures to shift public funding from personal subsidy to investment in built assets should be further explored”.

I have argued for that since I became an MP many years ago. The London Finance Commission has put that in very polite terms but the lack of affordable housing in London presents a massive, ongoing crisis. London workers need somewhere to live. Not everyone can commute into London, especially those on modest incomes which do not allow for the cost of the commute. If we do not have that investment in bricks and mortar, only the very rich, or the very poor in whatever social housing is left available, will be able to live in the capital city. That will inhibit growth for our capital, and that is putting aside for one moment the moral obligation that I think is there as well. Therefore, as has been stated, one way in which to resolve the issue is to move from individual subsidy to bricks and mortar. I trust that the Minister will press the Government to look at this issue with urgency.

While I am on housing, I cannot help but comment on what the noble Lord, Lord Patten, said. He decries the concept of more government but is concerned about rough sleepers. The biggest drop in the number of rough sleepers was under the leadership of Louise Casey who was tasked with reducing rough sleeping. Although she is one of the most innovative civil servants you will ever come across, even she would admit that a lot of her success was down to the fact that investment was quadrupled. A laissez-faire approach is the last thing that will reduce the number of rough sleepers on our streets. This cross-party report clearly argues that such an approach is also the last thing that will deliver a high-level investment plan for London.

The report essentially argues for a more grown-up relationship between London and central government. It argues that London needs greater freedom to borrow. Most critically, that would be subject to London’s own self-discipline. It is only where that self-discipline is proven that such freedom should be granted.

In summary, we do not want a city state. We want a world city which will support the growth of the whole of the UK. I believe that that is what this report sets out. It provides the framework for that and I sincerely hope, notwithstanding the politics between the Mayor of London and the Prime Minister, that this report will be acted upon.