You are here

The Funding Gap

There is a significant gap between the public-sector funding required to deliver and support London’s growth, and the amount currently committed to London. In many areas of the city, major development projects are not being progressed because of the uncertainty around funding.

Public-sector funding is defined as money raised directly or indirectly through taxing or levying funds from individuals or businesses. The Mayor’s current fundraising powers are limited to council tax and business rates, user charges such as transport fares, and third-party contributions such as MCIL. These represent a small proportion of the large number of different taxes levied on London by Government. In 2015/16, London government only had direct control over 5.1 per cent of the tax it raised (council tax and 50 per cent business rates).

Finance is investment sourced from companies or organisations, usually in the form of debt or equity. Where local or national government obtains debt, this can be considered (deferred) funding, as the borrowing is backed by future tax revenue and levies on economic activity.

The London Infrastructure Plan 2050[147] outlined that the total investment in London’s infrastructure (as defined in the plan) required between 2016 and 2050 could reach £1.3 trillion (2014 prices, within a range of £1 trillion to £1.7 trillion). The actual number is likely to be higher given inflation and the revised population estimates underpinning this London Plan.

[147] London Infrastructure Plan GLA 2015

The research conducted for the London Infrastructure Plan 2050 analysed the likely total required public-sector investment, under a business as usual scenario[148]. Overall, the estimates suggest that the then current level of committed funding (particularly for infrastructure provided by the public sector) would not meet London’s growth needs. The research found that the total gap between required public sector investment and committed funds was estimated to be around £3.1 billion per annum. As this estimate was based on 2014 prices and lower predicted population growth, it is now likely to be higher. Where more up-to-date information is available this is used below.

[148] The method used to calculate required infrastructure investment in the London Infrastructure Plan 2050 is outlined in a paper prepared by Arup (2014).

The Mayor is seeking clarity from Government on the availability of investment for much-needed infrastructure in the capital, and more fundamentally, is seeking further devolution of fiscal powers in line with the recommendations of the London Finance Commission. Because of the scale of the funding gap, the Mayor is also exploring other potential sources of funding, such as land value capture, and looking at how private investors can play a bigger role in investing in the upfront costs of infrastructure. He has also, through this Plan and other strategies, set out how to make more creative and efficient use of existing infrastructure assets, for example, by managing demand for utilities and transport, using new technologies and changing user behaviours.