Simon Jenkins: It's now or never for London to run its won taxes

The promise to Scotland of increased powers over taxation should also be extended to the capital

Time to grow up: London Mayor Boris Johnson says the capital has been treated as a “fiscal infant” (Daniel Hambury)

23 September 2014

Now it is for real. London is in play. The collapse of the Scottish independence campaign and the resulting constitutional chaos have revived the “question of England”. The question of England revives the question of London. The Mayor, Boris Johnson, was right earlier this month to ask what “more powers” granted to Scotland meant for him. His best bet now is to stop asking and start demanding.

Devolution, once the driest of political topics, is suddenly electric. Might there really be a parliament for England, a first minister for England, devolved regions and even something called a “network of cities”? Most countries spend a generation debating and formulating such changes. Britain is arrogantly told by its ruling class to get it done overnight. It is ludicrous but apparently necessary.

At the centre of any new governance for England sits London: big, rich and dominant. It is not a region or a network. It is a world city. Like most cities it has a mayor and spread of boroughs. They run its social services, housing, transport and police. Unlike most cities abroad, it has no control over its health service or schools, and unlike most cities it has no flexibility over its revenue. That is regulated, capped and curbed by central government. At each election, all parties pledge to decentralise but afterwards they shamelessly renege.

After the pre-referendum offer of “tax-raising powers” to Scotland, Johnson demanded what “Manchester, Liverpool, Leeds and all of us want, which is give us more tax-raising powers too”. He did not say what powers he meant, but he should do so now. He — or rather we, after he has gone — are unlikely to get so good a chance again. It is now or never.

Last year the Mayor published a report on all this called Raising the Capital, from a commission chaired by the LSE’s Tony Travers. It suggested that a wide range of taxes be delegated to London’s various governments. They should include a “complete suite of property taxes”, including business rates, stamp duty and capital gains tax on property. London should be set free to revalue its council tax bands and free to raise or lower them at will. Since the capital is the repository of huge wealth, much of it in stupidly undertaxed property, the result could be large in-flows of money to the richer boroughs. A formula for cross-borough equalisation of some of this revenue should be agreed each year.

In welcoming the report Johnson said that “for too long London has been an economic giant, a political giant but a fiscal infant… It’s high time London was treated in a more grown-up, a more mature way.”

He did not say, but must accept, that increasing London’s capacity to collect more in taxes should diminish its claim on central resources. The rest of the country spends heavily on London’s hospitals, railways, housing and arts. “Maturity” should mean an end to this dependency.

Viewed in the current climate, these ideas seem modest. What about income tax, the fixation of tax radicals in Scotland and Wales? London is bigger than both together, and certainly richer. New York and many European cities can raise small sums from income tax. Why not London? If London boroughs could set their own council tax, why not their own income tax, a more progressive impost than a levy on property?

The obstacle to this was evident as soon as Johnson introduced the Travers report last year. He said he was not minded to introduce any new taxes himself. He is, after all, a politician. All he wanted was for the Treasury to give him the money it had already gathered, such as stamp duty and business rates. But even that degree of discretion, allied to a cut in support from central government, would meet his criterion of maturity.

More than that, London could regain its historic oversight of its health service and schools. It should be allowed to regulate transportation across the South-East journey-to-work area. The citizens of London, with an enhanced tax base, should be left to fund their own cultural activities not at the expense of the rest of the nation, if necessary from a new tourist tax — which could mean serious money.

This may all sound reasonable. Indeed, Johnson remarked last year that it was so reasonable “no reasonable person would be able to refuse it”. Sadly he is not dealing with reasonable people. He is dealing with politicians and, in this case, Treasury officials. He is dealing with people whose business is power and its retention in their hands.

London is unlikely to get anything from the Tories’ new call for an English parliament. It is, after all, merely delegation from Westminster to Westminster. Big deal. Indeed, such a parliament might feel even more empowered to meddle in London’s affairs. The demand must be for power to cities and counties — above all over their taxes.

This is not an argument or a debate. It is a fight in the long war between Britain’s central and local government, a war that central government has always won. Mrs Thatcher capped local rates in 1984 to furious but, it turned out, wholly cynical opposition from Labour. Ever since, local government in Britain has become the most centralised in Europe.

This month David Cameron and Ed Miliband raced north to keep the nationalist wolves at bay. They tossed powers galore over the back of the sledge without really thinking what they were giving away. They were in a panic. But toss powers they did. And London is as entitled as Scotland to pick them up.

This is the best challenge of Johnson’s mayoralty — if he can keep his mind off becoming MP for Uxbridge.

Simon Jenkins: It's now or never for London to run its won taxes

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