Fiscal devolution for London

Date published: 
27 January 2017

Introduction

In May 2013, the London Finance Commission (LFC) argued for greater fiscal independence for the capital in order to invest and cater for growth. This included relaxing restrictions on borrowing for capital investment and devolving certain revenue streams like the full suite of property taxes. The Mayor of London, Sadiq Khan, has re-formed the London Finance Commission to review its original recommendations. In light of this, GLA Economics has produced a series of papers (see below) examining options for greater fiscal devolution to inform the Commission's work: Devolution: a capital idea

Council Tax in London

Working Paper 80 identifies a number of issues with council tax including its regressive characteristics, its spatial inequality and that it promotes the inefficient use of housing. As such, we present a range of potential reforms to council tax and illustrate the impact on individual boroughs and households across London.

Stamp duty in London

London contributes the most to stamp duty tax take than any other English region. That said, the tax promotes an inefficient use of housing and the tax yield is volatile making it an undesirable funding source. After discussing how stamp duty works in other countries, Working Paper 81 presents a number of options for reforming the tax that can mitigate some of these issues.
 

Devolving other national taxes to London

Working Paper 82 looks at how some national taxes are set and collected, as well as how far they have already been devolved to UK nations. In addition, it considers how much is raised by these taxes in London and the key costs and benefits if they were devolved to the capital. We look at income tax, payroll levies, corporation tax and VAT among others.

Options for a tourism levy

The LFC previously identified the potential for a tourism levy in London. Subsequently, Working Paper 83 considers the context and design of such a levy, the different potential systems for its implementation drawing on examples from abroad, and provides estimates of the revenue that could be generated.

Devolution and economic growth

Working Paper 84 updates a previous literature review looking at the impact of fiscal devolution on economic growth. We also present some rudimentary analysis looking at the relationship between devolution and economic growth, as well as productivity.

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