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Boris Johnson wants tax-raising powers Boris Johnson wants tax-raising powers
(5 months later)
The London mayor, Boris Johnson, is to call for the capital to be given powers to raise property and new tourism taxes, as well the power to borrow money to build houses and improve the city's infrastructure.The London mayor, Boris Johnson, is to call for the capital to be given powers to raise property and new tourism taxes, as well the power to borrow money to build houses and improve the city's infrastructure.
The proposals, due to be unveiled next Wednesday, will be seen as an important intervention in the debate about economic growth. They have been drawn up by the Johnson-appointed London Finance Commission and leaked to the Guardian.The proposals, due to be unveiled next Wednesday, will be seen as an important intervention in the debate about economic growth. They have been drawn up by the Johnson-appointed London Finance Commission and leaked to the Guardian.
The commission's report sets out how substantial revenue-raising powers, including over property and business rates, should be devolved to London. Revenue streams worth more than £12bn in 2013-14 would be handed to London's control with a corresponding pound-for-pound reduction in the Treasury's grant to London.The commission's report sets out how substantial revenue-raising powers, including over property and business rates, should be devolved to London. Revenue streams worth more than £12bn in 2013-14 would be handed to London's control with a corresponding pound-for-pound reduction in the Treasury's grant to London.
The blueprint for London gives Johnson the political opportunity to put himself at the helm of a radical movement to demand Downing Street and the Treasury devolve more powers to England's cities.The blueprint for London gives Johnson the political opportunity to put himself at the helm of a radical movement to demand Downing Street and the Treasury devolve more powers to England's cities.
Johnson set up the 17-strong cross-party London Commission, chaired by the local government expert Professor Tony Travers, following his re-election last year. Its ideas are also likely to be embraced by Labour as proof that there is a respectable case for borrowing to boost growth.Johnson set up the 17-strong cross-party London Commission, chaired by the local government expert Professor Tony Travers, following his re-election last year. Its ideas are also likely to be embraced by Labour as proof that there is a respectable case for borrowing to boost growth.
The report denies its plans amount to turning London into a city state, but claims proposed reforms would increase the London government's accountability to residents and businesses. Citing international studies, it shows London has very low levels of fiscal autonomy, and the capital would benefit from having more revenue streams under its control.The report denies its plans amount to turning London into a city state, but claims proposed reforms would increase the London government's accountability to residents and businesses. Citing international studies, it shows London has very low levels of fiscal autonomy, and the capital would benefit from having more revenue streams under its control.
It says: "The full suite (council tax, business rates, stamp duty, land tax, annual tax on enveloped dwellings and capital gains property disposal tax) should be devolved to London government."It says: "The full suite (council tax, business rates, stamp duty, land tax, annual tax on enveloped dwellings and capital gains property disposal tax) should be devolved to London government."
London's government would also be responsible for setting council tax rate revaluations, banding and discounts. The report points out that nearly a third of the national revenue from stamp duty is derived from London.London's government would also be responsible for setting council tax rate revaluations, banding and discounts. The report points out that nearly a third of the national revenue from stamp duty is derived from London.
The report also says "a tourism tax would seem to have particular potential in London because of the particular needs of leisure and tourism". It says the money could be reinvested into London's tourism facilitiesThe report also says "a tourism tax would seem to have particular potential in London because of the particular needs of leisure and tourism". It says the money could be reinvested into London's tourism facilities
It also supports ending restrictions on Treasury-imposed rules on borrowing, saying: "We propose the GLA [Greater London Authority] group's borrowing ceilings be removed (while retaining prudential borrowing rules) and that no further constraints should be imposed on local authorities including through Housing Revenue Account restrictions.It also supports ending restrictions on Treasury-imposed rules on borrowing, saying: "We propose the GLA [Greater London Authority] group's borrowing ceilings be removed (while retaining prudential borrowing rules) and that no further constraints should be imposed on local authorities including through Housing Revenue Account restrictions.
It says: "borrowing which will be used to promote growth or reduce public expenditure and thus be repaid should be distinguished from other kinds of debt." Under the proposals all business rates would also be devolved bringing in £3.2bn for London in 2013-14, sufficient to fund the whole of the Transport for London budget. It argues that businesses would have to be given a strong say over the level of business rates.It says: "borrowing which will be used to promote growth or reduce public expenditure and thus be repaid should be distinguished from other kinds of debt." Under the proposals all business rates would also be devolved bringing in £3.2bn for London in 2013-14, sufficient to fund the whole of the Transport for London budget. It argues that businesses would have to be given a strong say over the level of business rates.
Many of these relaxations over borrowing to build houses have been proposed inside Whitehall by the business secretary Vince Cable, but so far the plans have been rejected by the Treasury. The relaxations would probably raise £4bn for housebuilding nationally and £1.5bn in London.Many of these relaxations over borrowing to build houses have been proposed inside Whitehall by the business secretary Vince Cable, but so far the plans have been rejected by the Treasury. The relaxations would probably raise £4bn for housebuilding nationally and £1.5bn in London.
Although the report does not specifically favour giving London's government income tax raising powers, it does suggest it should be able to raise smaller revenues, including through a tourism and environmental tax.Although the report does not specifically favour giving London's government income tax raising powers, it does suggest it should be able to raise smaller revenues, including through a tourism and environmental tax.
The report says: "The yields from these taxes would be offset by corresponding reductions in central government grant to London." It suggests its recommendations or similar options should be implemented in England's other big cities.The report says: "The yields from these taxes would be offset by corresponding reductions in central government grant to London." It suggests its recommendations or similar options should be implemented in England's other big cities.
It also rejects claims that because London is racing ahead of the rest of the economy, it should not be given extra freedoms. It points out London's population is likely to rise from 6.7 million in 1986 to nearly 9 million in 2010, and then 10 million in 2030.It also rejects claims that because London is racing ahead of the rest of the economy, it should not be given extra freedoms. It points out London's population is likely to rise from 6.7 million in 1986 to nearly 9 million in 2010, and then 10 million in 2030.
This will lead to a 30 % rise in passenger numbers on tube and rail between 2010-11 and 2020. It points out the cost of housing had risen to an average £392,0000, 60 % higher than the rest of the UK.This will lead to a 30 % rise in passenger numbers on tube and rail between 2010-11 and 2020. It points out the cost of housing had risen to an average £392,0000, 60 % higher than the rest of the UK.
Senior figures on the commission believe the calls to keep all the stamp duty revenue in London is likely to be rejected by the Treasury, but believe the proposals for the Greater London Authority, and London councils to borrow will be pushed hard.Senior figures on the commission believe the calls to keep all the stamp duty revenue in London is likely to be rejected by the Treasury, but believe the proposals for the Greater London Authority, and London councils to borrow will be pushed hard.
The report argues that London, through Transport for London, has been successful in raising finance for transport investment such as Cross Rail, High Speed rail and and underground maintenance, but the parallel infrastructure investment in water, energy and school buildings has not kept pace, and needs rethinking.The report argues that London, through Transport for London, has been successful in raising finance for transport investment such as Cross Rail, High Speed rail and and underground maintenance, but the parallel infrastructure investment in water, energy and school buildings has not kept pace, and needs rethinking.
The report is also expected to propose a devolution of powers to allow a gradual transfer of spending away from housing benefit to housebuilding. It proposes a London level merger of the communities department budget for housing investment and the work and pensions department's budget for housing benefit. Nearly £23.5bn is spent on housing benefit and only £1.5bn on house building. With more low-cost homes built, it would be possible over time to take social housing tenants on housing benefit out of high cost housing into cheaper accommodation, so creating a benevolent circle with less and less cash going on housing benefit, and more on housebuilding.The report is also expected to propose a devolution of powers to allow a gradual transfer of spending away from housing benefit to housebuilding. It proposes a London level merger of the communities department budget for housing investment and the work and pensions department's budget for housing benefit. Nearly £23.5bn is spent on housing benefit and only £1.5bn on house building. With more low-cost homes built, it would be possible over time to take social housing tenants on housing benefit out of high cost housing into cheaper accommodation, so creating a benevolent circle with less and less cash going on housing benefit, and more on housebuilding.
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