Monday, 19 January 2015

'Devo' London: No Taxation without Construction

Would Londoners get more new homes built if they had more control over their taxes? 

New homes for Londoners via fiscal 'devo'?
© Paul Coleman, London Intelligence 2014

'Yuk,' you might think, writes Paul Coleman.
Income Tax.
Value Added Tax.
Council Tax.
Stamp Duty on property.
Londoners pay them all, through the nose.
Well, not if you're a corporation that retains tax lawyers as sharp as tacks.

The vast bulk of London taxes end up at the Treasury.
The Chancellor spends this London money across the United Kingdom on welfare benefits, the National Health Service, schools and the military.
But what if Londoners could spend a significant chunk of their taxes on new homes and infrastructure specifically for London?
Londoners controlling where their taxes are spent is an idea gaining extra credence since Scottish independence narrowly failed in the referendum of September 2014.
Devolved Scotland and Wales have managed their own spending without any problem since 1999 - and they have smaller combined populations and Gross Domestic Product than London.
Then, the 'Devo London' question arose again in November 2014, when Greater Manchester secured greater control over its own affairs.

LSE London research centre director Tony Travers, speaking at NLA
© London Intelligence 2015

So, zip forward to a chilly winter's night (Monday, 19 January, 2015).
LSE London research centre director Tony Travers laconically outlines his blueprint for London's 'fiscal devolution' to a West End audience convened by New London Architecture.*
Travers can be a tricky speaker to photograph.
View Travers on one of his frequent TV 'appearances, rolled out by TV news producers for a reliable academia 'soundbite'.
Travers often seems to speak with his eyes shut.
But Travers openly and astutely answers tonight's NLA question: 'What would devolution do for London?'

Own way
"London is very unusual by international cities in having such a small tax base," says Travers. "London exports taxes even though London earns enough money to pay its own way."
Travers chaired the London Finance Commission in 2012-13 that concluded London needs a wider tax base than just Council Tax, the capped household tax that - surprisingly - raises only 5% of all UK taxes.
"Your family and friends mightn't see it this way, but for every £1 they pay in Council Tax, they'll pay £19 in other taxes," chimes Travers.

The LFC, echoes Travers, believed Council Tax, Business Rates and Stamp Duty Land Tax might all be spent far more wisely if controlled by an elected and devolved London government.
Of course, initially, London would lose government grant.
"But then London would be able to use the full suite of locally raised taxes in London to deliver housing and other infrastructure more rationally," says Travers.

"London government would be much more autonomous," adds Travers.
"If you live in London you get the need for capital investment. 
We all use the Underground and the railways. 
And we know about the housing shortage.
We understand because we live it - the need to invest more.
The average Londoner is more likely to vote for investment in London than the Middle England voter.
The Mayor of London and the boroughs would have a powerful incentive to stimulate growth and to drive forward developments that bring up tax yields to pay for the construction of infrastructure."

Travers cites Battersea as a good example of 'locally raised taxes' being put to this kind of constructive use. 
It's a massive development around Battersea Power Station made possible by an extension to the Northern Line tube, "itself funded by taxing the high density development nearby".
The development will also have to pay for Section 106 and Community Infrastructure Levy funding for schools, housing and other community benefits.

Battersea, though, isn't a popular development, chiefly due to it being targeted successfully at overseas property speculators.
And, for not being allocated to Londoners on average and lower incomes in dire need of genuinely affordable new homes.
As Travers himself says, an alternative was possible.
But the 'market state' at national and local level refused this route outright.
"The Government could've paid to renovate the power station and build the Northern Line extension," he says.
"And to build low rise affordable housing. But we haven't chosen to do it that way."

Green Belt
Growth, also, means different strokes to different folks - whether the money is raised through devolved local taxes or taxing developers on their high-value land.
Ben Harrison of Centre for Cities tells the NLA gathering: "Just building on one per cent of Green Belt land in London could unlock 800,000 to one million new homes."
To many Londoners, anxious to protect the Green Belt, this would be a dire environmental consequence of London's fiscal devolution.
Similarly, would locally funded growth mean more public services?
Or would the market state - local politicians serving corporate interests rather than local people - simply fund carving open more public services to private companies?

Politically,  though, London 'fiscal devo' might carry a hefty kick.
"If London seriously devolved, then UK central government wouldn't be left with a great deal to do," says Travers.
The sound of Westminster politicians and Whitehall civil servants squealing as they lose their jobs might prove popular with weary voters.
But Travers prefers to calmly advance the positive benefits of Londoners retaining and controlling their taxes.
"London needs this kind of freedom to generate the infrastructure it requires to meet its rapidly rising population," says Travers.

* Tony Travers, director of LSE London - a research body at the London School of Economics - spoke at 'What would devolution do for London?'; an evening debate hosted by New London Architecture at The Building Centre in central London on Monday, 19 January 2015.

© Paul Coleman, London Intelligence, January 2015

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