I am pleased to be able to speak in this important debate on devolution and the Union and I congratulate the Backbench Business Committee on making it possible. I want to speak about the devolution of powers to our great cities in the Union. There is a growing consensus about the importance of growth, if nothing else, and about devolving powers to our great cities. There was last year’s London Finance Commission. There was the RSA City Growth Commission, chaired by Jim O’Neill. The Communities and Local Government Committee held an inquiry into fiscal devolution. The consensus is that our great cities need more local control over policies and funding for provisions such as transport, skills and housing, but that we must also look seriously at the devolution of taxes, starting with property tax.
I stress to Members that this is not about asking for more money. It is not about asking for a bigger slice of the national cake. It is not about the Barnett formula. It is about asking for cities to keep a little more of the money that they raise. This is an issue that does not have to wait for a constitutional convention. Sir Richard Leese, the leader of Manchester council has said:
“Cities should keep more of the money they raise locally so it can be spent on priorities set locally to create jobs and improve lives. The evidence shows that cities with more control over taxes do better economically”.
To show that this is not a party political point, I quote the Mayor of London, Boris Johnson. He has said:
“Now is the time to unleash a new era of civic leadership by giving larger cities greater control over how they spend a modest proportion of the money they raise. This is not asking for more money, instead it is a tried and tested formula applied successfully in other leading world cities.”
One tax that could be devolved is the mansion tax. I support the mansion tax. It is a redistributive tax, which I always think is an excellent thing. My right hon. Friend the shadow Chancellor is to be congratulated on his continuing listening ear and willingness to refine it. As always, my right hon. Friend the Member for Morley and Outwood (Ed Balls) is our flexible friend.
However, there are some cons to a mansion tax. In London, for instance, with a wildly distorted housing market and stratospheric house price rises, a Hackney teacher who bought their house 30 years ago, not to speculate and make money but to live in, could find that a house that cost them tens of thousands of pounds is now worth over £1 million. Those stratospheric house prices will make Londoners, even though their house will come in under the £2 million that we are talking about, nervous about a mansion tax. I believe that the answer is to hypothecate the tax to a housing authority for London and spend the money raised on affordable housing—not Boris Johnson’s ludicrous 80% of the market rate but genuinely affordable housing.
Some of the money could also be spent on giving mortgages to key public sector workers. I recollect that my very first mortgage was from Westminster council. It handed out mortgages because it thought that it made Tories out of people. It did not work with me, but it was still a good idea.
There are huge issues relating to Scotland and the Barnett formula and there are very specific issues that should be addressed now about giving new powers and control especially over new property taxes to our great cities, and I hope that the House will consider that carefully.
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