Delivering London’s required strategic infrastructure and housing demands significant investment of public sector funding. Because the UK possesses a comparatively centralised distribution of fiscal powers, substantial proportions of the total cost of strategic infrastructure tend to be funded through fiscal transfers, issued by the Treasury. This often leads to significant uncertainty over the outcome of a proposed project, and delays in funding being agreed. In recognition of the challenges this can create for industry, businesses and Londoners, the Mayor is committed to ensuring that London has more control over its own resources.
London is the world’s largest financial centre, and has one of the largest metropolitan GDPs. It is a vital component of the UK economy, driving growth across the country. London contributes significant amounts of the UK’s tax revenue and is a net contributor. In 2015/16 it contributed £136.7 billion, which was more than the total public expenditure devoted to London that year (£110 billion), generating a net fiscal contribution of £26.7 billion. To ensure that London continues to contribute in this way to the national economy, it is vital that the capital’s required infrastructure and housing is delivered to support the city’s economic growth, and ensure it remains a pleasant and healthy place to live, work and visit.
The Mayor believes that fiscal devolution is required to help ensure that London can deliver this vital infrastructure efficiently and to budget. The London Finance Commission report published in 2017 sets out the options and rationale for devolution. Devolution to London would allow the city’s government to develop bespoke policy for its citizens and manage its budget efficiently across areas of policy, rather than be tied to a mix of funding streams channelled through government departments and other agencies.
The London Finance Commission recommended the full devolution of property taxes, including council tax, business rates and stamp duty, as well as permissive powers to develop new mechanisms, subject to consultation. This would allow for the development of a consistent approach with Section 106 payments and the Mayoral and borough CIL. This devolved approach would help London to deliver major transport, and other capital investments, as well as taking the lead in solving its own housing problems.
The success of the UK economy depends increasingly on the success of our major cities. The Mayor recognises fiscal devolution as a national agenda, rather than a priority exclusively for Londoners, and is working with combined authorities across the UK and with newly appointed Metro Mayors, to promote devolution across the country.
Successful infrastructure systems benefit everyone in the city, and so it is logical that it is not direct users alone who fund them. All beneficiaries, such as road users, businesses, and home owners should contribute to funding transport and other infrastructure according to the benefits they receive, the external costs their use of it generates – such as congestion and air pollution – and their ability to pay.
In recognition of this, and following an invitation for TfL to bring forward proposals for funding infrastructure projects from land value uplift, the Government has agreed to establish a joint task force (including the GLA and TfL) to explore the options for piloting a Development Rights Auction Model on a major infrastructure project in London.