Making the case for devolution
As the key co-ordinating body for London local government, London Councils has long made the case for greater devolution from central to local government, based on the capital’s impressive track record of delivery in recent years.
There is much more to which London could aspire to in unlocking the full potential of the capital to deliver inclusive growth. The economic, social and governance impact of the EU referendum result has strengthened the case for London and the UK’s other cities and regions to have greater control and powers over the issues that matter to them.
Devolution will need to work for everyone, and will need to work to rapidly address the socio-economic factors that led many in London and across the country to feel that the current system did not benefit them. This will require a holistic and integrated approach delivered at a local level and directly targeting those most in need of support. Approaches like this might include developing the skills of London’s citizens so that can access jobs.
Fiscal devolution is a practical step that has the potential to better equip London boroughs for the challenges ahead, including meeting the demand for housing and schools places. While it will not in itself resolve the revenue gap facing the boroughs, it would give them significantly greater freedom and flexibility to invest in their physical and social infrastructure.
The London Finance Commission LFC, re-convened by Mayor Sadiq Khan and chaired by Prof Tony Travers, published its final report in January 2017, which re-affirms its interim report’s suggestion that the greater local control and accountability for taxation would make possible reforms that would improve the way property taxes in particular operate and would provide a real incentive for London government to promote economic growth.
The final report argues that the case for sub-national control over the full suite of property taxes – council tax, business rates, stamp duty, annual tax on enveloped dwellings and capital gains property disposal tax – is stronger than ever, partly due to changes to the political landscape following the EU referendum result as well as a belief that the main British property-related taxes have become “badly administered”. In addition, the report recommends that boroughs should be able to set fees in a way that would enable them to recover the full costs of local property services for which they are able to charge, such as planning application fees and building control charges.
The report also concludes that London’s government has very little fiscal autonomy in terms of national taxes, such as income tax or VAT, and local taxes, such as apprenticeship or tourism levies, when compared with other similar countries. It recommends that a proportion of London’s income tax and VAT yields and its contribution to Vehicle Excise Duty revenue should be devolved to London government, along with permissive powers for London to implement an apprenticeship levy and introduce new smaller taxes including a tourism levy, health-related levies and a community levy.
Following the recommendations of the final report, London government is continuing to work with central government to secure further fiscal devolution in order to achieve greater freedom and flexibility for London to invest in its physical and social infrastructure.
A wider package of skills devolution to London continues to be sought in order to create the skills sytem the capital needs in order to respond to effectively to the skills challenges and opportunities that will arise from the UK's exit from the EU. London government aims to take a whole systems approach to skills training, including the commissioning of all 16-18 provision, coupled with the opportunity to review the apprenticeship levy in London within its first year of operation, with a view to ring-fencing a share of the capital's levy to be used by London government.
The Autumn Statement 2016 and Spring Budget 2017 contained commitments from the Chancellor of the Exchequer to devolve the Adult Education Budget (AEB) to London by 2019/20, subject to readiness conditions. London government is keen to finalise the detail and conditions for the devolution of the AEB in order to deliver adult skills provision that reflects local labour markets and econonmies within the capital.
London government has been making the case for a more place-based integrated approach to the capital's health and social care system and strategic estates reform. The London health devolution agreement made with the Government in December 2015 allowed the London boroughs and its health and social care partners to test different elements devolution across London, such as the integration of physical and mental health services alongside social care in Lewishman and new approaches to collaboration on estates and asset use in North Central London.
A Memorandum of Understanding between Government and London partners, which will facilitate the next steps of the London health devolution agreement, is expected to be agreed during 2017. The MoU will enable boroughs to opt-in to detailed devolution proposals regarding increased integration through delegation of commissioning budgets to local level, local freedoms to invest in early intervention and prevention initiatives, and local retention and reinvestment of capital and estates receipts.
Since the current Mayor of London was elected in May 2016, London Councils have been collaborating with the Mayor, the Mayor's Office for Police and Crime, and the Ministry of Justice to explore options for London government to possess greater influence over the capital's criminal justice service. The Spring Budget 2017 announcement on further devolution to London included assurances from Government that they would commit to a Memorandum of Understanding to support the process for collaborative working in criminal justice. It is hoped that this MoU will identify which aspects of the criminal justice service can be best delivered locally to provide better integrated delivery of services in London, including youth justice, offender management, probation, and victim and witness support.