Debate on the Address

Gareth Thomas Excerpts

Wednesday 27th May 2015 Commons Chamber

[The Prime Minister]

My hon. Friend is absolutely right. I pay tribute to Lord Baker of Dorking. He was a huge enthusiast for education reform when he was Secretary of State, and he has kept that going all his life. The university technical colleges are a great success—indeed, we launched our election campaign in one in Swindon. They help to complete our education system by providing what was missing: a high-quality technical education for children who would benefit from it.

Giving people opportunity and security means investing in our national health service. That is why this Government will back the NHS’s own plan—the Simon Stevens plan—and deliver the extra £8 billion a year needed by the end of this Parliament. We started the previous Parliament by making a big decision to increase spending on the NHS every year. The Labour party told us at the time that we were irresponsible to do so—from what I have seen, it has learnt very little. At the election we promised to make the investment needed for the Simon Stevens plan, and again the Labour party opposed it. It just goes to show that the best way to protect the NHS is to make sure that the Conservatives are in government.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

May I ask the Prime Minister about another area of the public services: funding for the police? Can he confirm that the Metropolitan Police Service faces further significant cuts in its funding, potentially leading to the loss of between 5,000 and 10,000 police officer positions?

[The Prime Minister]

What I say to the hon. Gentleman is that the police did a brilliant job in the previous Parliament, taking spending reductions and cutting crime at the same time, and actually increasing the percentage of police officers on the front line. That is a remarkable achievement, and we believe that further savings can be made. Again, if Members do not agree that we need to make some welfare reductions, the police would have to be cut even more deeply. That is the problem that the Labour party will eventually have to confront.

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[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

It is, as ever, a pleasure to follow the hon. Member for North East Somerset (Mr Rees-Mogg), who is a provocative parliamentarian in the best of senses. I join him in congratulating the hon. Member for Argyll and Bute (Brendan O’Hara) on his excellent maiden speech. Given its quality, I suspect that he will prove to be a shrewd ally on one or two issues on which the Scottish nationalist and Labour parties will make common cause in the House, but a difficult opponent on many others.

I believe that Britain’s future is as a federal Britain, and I believe that we are heading for that destiny now. The journey is happening in a very British way, by means of evolution, and it will look very different in different parts of the United Kingdom; but we must master the route to a federal state, rather than being buffeted by events along the way. I believe strongly that London must be part of that journey, that it must have its own compass, and that Londoners’ voices must be heard. I welcome the plans in the Queen’s Speech for the devolution of more powers to Scotland, and also the plans to give Britain’s northern cities stronger powers to shape their citizens’ own destiny.

We have traditionally seen the Union as consisting of England, Scotland, Northern Ireland and Wales. It is time that we recognised that London is a very specific part of that Union. Yes, there are England, Scotland, Wales and Northern Ireland, but there is the city state of London as well. London is the centre of wealth creation in the United Kingdom. I recognise that Britain’s wealth has many sources, but London makes proportionally bigger contributions to the UK’s economy than any other UK region or nation.

Much of the wealth that is created in London is rightly redistributed to other regions and nations. I agree with that in principle, but I also believe that London deserves more in return, and that Londoners deserve a better quality of life. We have the highest cost of living in the UK. The housing crisis is at its most acute in London. We have the highest rents and the most expensive homes to buy. In 2005, the average home in London cost £274,000. Ten years on, it is £465,000. Earnings have not doubled, but costs almost have. That is the reality for Londoners. The ratio of rents to earnings is higher in London than in any other region or nation of the UK. Owning property is now out of reach for most Londoners.

In the next decade, London will see an additional 1 million citizens needing somewhere to live, needing to use public services—schools, GPs and hospitals—and looking for work. Our transport system needs significant investment now, never mind in future years. Those pressures demand increased public investment and of course private sector investment, too. Inequality and poverty are starker in London than in any other region or nation of the UK. I say that not to diminish the scale of both in other parts of the UK, but merely to underline the seriousness of the challenges in London.

I supported the recommendations of the London Finance Commission. It concluded that London needs fewer borrowing constraints and greater devolved tax powers. At the moment, London retains little more than 7% of all the tax paid by London residents and businesses. In New York, more than 50% is retained by New York’s mayor. Other cities of comparable size to London can set their own taxes, yet London cannot. Madrid, Paris, Tokyo, Berlin, Frankfurt and New York can all set property taxes. Paris, for example, can set a property tax on developed and undeveloped land. New York can determine land taxes, a hotel occupancy tax and a commercial business tax. The London Finance Commission made the powerful point that, if London has more control over its taxes and the ability to borrow, it will be better able to tackle impediments to further economic growth, never mind to tackle other key issues in our city.

Crossrail was first suggested in the 1940s. It was first formally proposed after an inquiry in 1974, but it has taken more than 40 years since then to start serious building work. We simply cannot take that length of time to decide whether Crossrail 2 should go ahead. London needs to be able to respond more quickly to the infrastructure challenges our city faces if we are to secure its continued prosperity and status as the greatest city on earth.

I share the view that London’s property taxes should be devolved to London’s government. Indeed, London generates a higher percentage of total income from property taxes than any other region of the UK. The House will be aware that London would still be making a greater than proportionate contribution to the Exchequer via corporation tax revenues, VAT revenues and other crucial areas of national income. Devolving property taxes would be a first step towards what should be a radical devolution package for London.

[Geraint Davies]

Given that Camden has greater asset value than Wales, the idea of devolving property tax, air passenger duty from Heathrow and all these other taxes to London would be a threat to the coherence of the Union.

[Mr Thomas]

I say gently to my hon. Friend, for whom I have considerable respect, that I profoundly disagree. Never mind the Scottish question, the Welsh question or indeed the English question, there is a London question that demands an answer: when will London be able to shape its destiny without always having to go to the man in Whitehall and the man in Downing Street to sort out our great city’s challenges?

[John McDonnell (Hayes and Harlington) (Lab)]

I was the last chair of finance at the Greater London Council. London did have control of its business rates. It did have an element of property tax in the sense that it could borrow against its own assets. In addition, it had its own capital fund. It was certainly not a threat to the nation then.

[Mr Thomas]

I welcome my hon. Friend’s intervention. I hope that he will agree with me on this, too: there is now a democratic deficit in this capital city. London did not vote for austerity on the scale we can expect. London did not vote for cuts in the NHS. London did not vote for cuts—to our police, our schools or the services our councils provide—on the scale that is set to befall our great city. I gently say again to the House that London deserves better. It is time to start a proper debate about the devolution of further responsibilities and about income tax being devolved to London.

Many international cities derive income from a local income tax, including, I am told, New York, Berlin and Madrid. In the UK, there is already a precedent with Scotland having the power to set income tax. Given the huge contribution that London makes to the rest of Britain, it is not identity politics that drives the case for further devolution; it is economic and social imperatives.

The London Finance Commission argued that property taxes should be devolved first and that is right, but it also concluded that, if greater powers, for example, in welfare, health or education were devolved to London, the option of devolving or assigning income tax in London should be revisited. I believe that moment is now. If Greater Manchester is being invited to shape the future of its health and social care, I believe London should be invited to do so, too.

The London Challenge helped to drive up standards in education. I believe that it should be re-established and London given more collective responsibility to champion stronger standards and higher achievement in our schools. Skills and employment training budgets should be devolved, too.

These are, I recognise, big judgment calls for London itself and for the country as a whole. I disagree with many of the current Mayor’s choices, but the mayoralty throughout the terms of its two incumbents has demonstrated generally sound management of major public services, notwithstanding the current garden bridge plans. I believe that it is time to establish a cross-party, cross-government inquiry, with business and other key stakeholders closely involved, and with the remit to explore both the case for devolution of further responsibilities to London and the case for devolving further taxation powers. The next Mayor, even if they serve for two full terms, may not be the Mayor who sees responsibility for income tax devolved to them, but I believe profoundly that it is time for London to accelerate its path to proper devolution. We should, for example, consider the case for more local control of London’s NHS. I want the NHS to continue to be a truly national service. I think there is a need for national targets—cancer and waiting times being two key yardsticks by which to judge quality of service—but it is surely right that Londoners have more control themselves over services we value so highly.

Why should London not have responsibility for the decision on whether to introduce a London living wage, of course after consultation, not least with business? Why does that power need to rest with Ministers instead of Londoners? Why cannot we in London decide whether to control the cost of renting? Londoners together should be able to make these decisions, not have them dictated to us.

Any further devolution of tax powers and extra responsibilities will inevitably require scrutiny over how London is governed and whether the current divide in powers between Mayor and local boroughs and the Assembly are correct. Instinctively, I believe more power should be devolved to London’s boroughs. City Hall has often felt remote from outer-London suburbs, but I suspect it has not always felt terribly helpful to some inner-London boroughs either. A root and branch review of the powers and effectiveness of City Hall and the Greater London Assembly ought to be part of the work of a commission looking at future devolution. I say that recognising the skill, hard work and powerful contributions of many in the Greater London Assembly, not least many of my own colleagues.

London is a great city, the envy of many worldwide, but we face huge challenges as our city grows even bigger. Certainly we look to this great House to help, but in London we have the imagination, the talent and the wealth to confront head on the issues that hold our city back or hold back the ambitions of our neighbours and fellow citizens. If others in this great country have succeeded in securing greater powers to control and shape the response to their problems, why should not Londoners expect their Mayor to have the powers to be able to act?

I want London to continue to play a leading role in the UK. Indeed, I want London to lead the UK. But for that to happen, Londoners need to be able to lead London’s future.