Power to the cities: It’s not just London that needs more control of tax revenue

Mark Boleat
Follow Mark
It's not as catchy as “Brics”, but “ManShefLeedsPool” – the latest coinage from the Centre for Cities’s Jim O’Neill, formerly of Goldman Sachs – could have an equally seismic impact here in the UK.

The growing difference between London and many of the UK’s other regions is a problem for the entire country. Politicians and commentators speak constantly about the need to rebalance our economy, and I agree with the need to promote economic development throughout the whole country. As London’s housing and transport infrastructure struggles to cope with the weight of people wanting to live and work here, regions in the north suffer from sluggish growth, high unemployment and a lack of demand.

Ensuring that all regions in the UK are able to support a sustainable and growing economy, which is the main thrust of a report released last week by the City Growth Commission, will go some way to solving these problems. Developing new infrastructure – especially better transport links, high quality office space and affordable housing – will inject new life into the northern powerhouses. But without the ability to directly make these decisions at a local level, the boost to our cities will not go far.

English cities need devolution – with powers similar to Scotland. The report points out that more autonomy for the regions could boost the national economy by almost £79bn a year. This isn’t a new idea either; the London Finance Commission revealed in 2013 that only 7 per cent of the taxes raised by London businesses and residents are retained here. The Commission recommended a rise to 12 per cent – which is still fairly modest compared to New York’s near 50 per cent and Paris’s 80 per cent. This rise in spending ability would enable London to capitalise on its role as the gateway to Europe, increasing the economic dynamism that brings so much to the whole of the UK.

It shouldn’t just be London that benefits – ManShefLeedsPool deserves to have these powers too. News that chancellor George Osborne is looking at allowing local authorities in the north to keep a greater proportion of the revenues they raise from business rates is to be welcomed. All of our regions should have the opportunity to bring economic growth to their cities, and local representatives are best-placed to understand the particular needs of their regions – whether that’s low-cost public transport, more modern office space, or town centre regeneration projects.

Empowered local institutions also help people to feel more connected with their elected representatives, and gives them a greater stake in their local communities. But we must be careful – transferring powers from London boroughs to the mayor does not empower anyone, and the same is true in the north. These powers must be above and beyond the powers local councils already hold. Only then will every part of the UK be able to reach its full economic potential, and flourish in ways that we may not yet be able to guess.

We know that healthy competition between cities is good for economic growth. Just as London vies for business with our international compatriots, Londoners should embrace an increased challenge from the north.