I rise to make the case for new clauses 10 and 11, which stand in my name, but first, I should preface my comments by supporting the remarks of my hon. Friend the Member for Nottingham North (Mr Allen) about a constitutional settlement. That is an entirely sensible way forward. I do not know whether he has considered the distinctiveness of London as part of that settlement, but I think that any such convention should recognise its difference, the scale of the challenges facing it and the significant contribution it makes to the wealth of the UK as a whole.
I read new clause 22, debated in the previous group, with interest, and I commend my hon. Friend the Member for Croydon North (Mr Reed), whom I understand was its genesis. I hesitate to commend him more fully, in case it damages his career, but I am encouraged that the Labour Front-Bench team recognise the need to argue quickly for more devolution to London. I hope to persuade him and the Committee that my new clauses contain the substance of what needs to be devolved to London.
The substance of new clause 11, referred to by my hon. Friend the Member for Sheffield South East (Mr Betts), secured cross-party support in London as a result of the
London Finance Commission, which Tony Travers chaired and which was established by the Mayor of London, the hon. Member for Uxbridge and South Ruislip (Boris Johnson). That commission recommended that the full sweep of property taxes—not just business rates, but council tax, stamp duty, capital gains, property development tax and the annual tax on enveloped dwellings—should be devolved to London.
High property prices in London mean that the capital contributes a disproportionate amount to the Treasury through property taxes. Last year alone, some £3 billion was paid in stamp duty in London—40% of the total, more than was paid in Scotland, Wales and Northern Ireland put together.
It is right that much of the wealth generated in London is redistributed around the UK. There should be continuing equalisation measures, as my hon. Friend the Member for North Durham (Mr Jones) rightly said, perhaps through the revenue support grant or other means. There should also be a corresponding reduction in grant income to London to ensure that devolution of property taxes is fiscally neutral to the Treasury.
My point, however, is that London needs to control more of the wealth that we create to solve the challenges that our city faces. We have the most severe housing crisis of any part of the UK, the highest cost of living, and the starkest levels of inequality. Our transport infrastructure is under huge pressure, and we have stubbornly high levels of child poverty and deprivation. I say that not in any way to dispute the fact that other parts of the UK face significant challenges as well, but merely to underline the argument that London needs to be able to control more of the levers to shape our responses to these challenges.
I thus support the instinct to retain 100% of business rates, but it is the full devolution of all property taxes that is needed to help us in London to tackle our challenges, with a pound-for-pound reduction in London’s revenue support grant as the quid pro quo going forward. There is widespread support among the business community for the devolution of property taxes because that community recognises that it is key to developing the necessary infrastructure to promote economic growth.
I use as my example the 40 years it has taken to start work on Crossrail. Given the pressures that London’s rapidly growing population is creating for further investment in infrastructure, it is vital for big infrastructure decisions to be brought to resolution more quickly and for the control of property and taxation to be exercised at London-wide levels, which would increase the Mayor’s ability—and, indeed, that of local councils—to put the financing together for the infrastructure schemes necessary for the future. Greater control over property taxes would ease the borrowing constraints on London’s local councils so that they could invest in vital infrastructure such as affordable housing.
As the London Finance Commission set out, London currently controls only 7% of the taxes that are paid here, compared with more than 50% in New York. Property taxes are set locally in Paris, Berlin, Madrid and Tokyo. Such control would not only enable London to plan infrastructure projects better, but allow greater scope to ensure that the property taxes that are levied suit London’s property and land markets. For example, the introduction of a hotel occupancy tax, as successfully levied in New York, could raise up to £50 million a year
for London. Even if the Minister is not minded to support my new clause 11 at this juncture, he might give some indication of being tempted to develop a feeling of courage in taking on the Treasury and advocate further devolution of more property taxes to London.
New clause 10 devolves responsibility for housing law to the Mayor and Assembly. That matches arrangements for Scotland and Wales and would allow Londoners themselves to decide whether to extend the right to buy and whether or not to cut rents. It is the scale of the housing crisis that provides the overarching rationale for this new clause. We have seen a huge drop in owner-occupation in London. An average home in London costs nine times the average wage of a police officer, 21 times the average wage of a chef and 35 times the wage of a Foreign Office cleaner. Rents have rocketed, and are not expected to bottom out any time soon. Homelessness has also increased rapidly: there has been a 50% increase in my own borough over the past five years. Meanwhile, Ministers—and I say this with all due respect to the Minister who is present—sit on their hands doing very little about a crisis which, given that we are building fewer than half the homes a year that London needs, is likely to become more rather than less acute unless radical steps are taken.
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I strongly believe that the Mayor of London has not had the will to tackle London’s housing crisis. It is also true to say that he has not had at his disposal all the levers that he might have had if he had really wanted to get to grips with it. One of the benefits of the amendment is that we would be able to put in one set of hands, or in the hands of one institution, all the crucial levers that would enable us to tackle that crisis. A mix of solutions is needed. The potential for those solutions currently lies in a multiplicity of hands, including those of the Treasury, the Department for Communities and Local Government, the Homes and Communities Agency, the Mayor and the Valuation Office Agency. We need to bring those responsibilities together, so that a mayoral London housing strategy can have real teeth and real resources with which to meet its objectives.
Decisions about the right to buy, about cuts in rents and about the introduction of rent controls in London, which I think are needed, planning rules, tax powers and the power to write the rules for the housing market more generally should be the responsibility of the Mayor, with the support of the Assembly. I think that property taxes should be as well, so that, for example, we can impose higher taxes on empty homes or on land that could be, but is not being, developed. Such decisions could be made more quickly by the Mayor. At present, councils must head for the Treasury to try to persuade the Chancellor.
I recognise that there are those who think that London has all the power and all the wealth, and that further devolution will only make that worse. As I said earlier, the wealth that London creates needs to be redistributed. Most Londoners continue to support that principle strongly, but I do not think that Whitehall always knows best. I think that there are more policy areas in London in which the expertise—I say this gently—of Scottish, Welsh and other English MPs is not needed, and which should be devolved to the Mayor and the Assembly. Property taxes and housing law, for instance, are crucial in that regard.
London is different from the rest of England. The scale of our economic and social challenges, our rapidly rising population and the fact that our competition is now far more about New York, Berlin and Tokyo than about other UK cities demand a much stronger devolution package for London. That does not by any means undermine the case for further devolution to other parts of England, as the Bill already suggests.