Boris wants devo-max for London

Geraint Talfan Davies sees Boris Johnson’s claim for more money for London as part of the English question

If you were to offer awards for political chutzpah the common wisdom is that Scotland’s Alex Salmond would be way out in front. But it may be there is another contender coming up fast on the rails. I mean Boris Johnson, who is currently battling Ken Livingstone in the London mayoral election, and clearly not above taking a leaf out of Salmond’s book. Last week he made a pitch for ‘devo-max’ for London that made the front page of the London Evening Standard under the heading ‘Tax Payback for Londoners Plan’.

Now devo-max is one of those terms that can mean whatever you want it to mean, and Boris certainly wasn’t going to waste time on constitutional nit-picking. What he wants is for London to hang on to more of the tax revenues that are raised in the city, and plans to set up an inquiry into the funding of London, emulating Scotland’s Calman Commission and Wales’s Holtham Commission. Apparently he doesn’t want London to be a ‘cash cow’ for the regions of the UK, although, in what some might regard as a non sequitur, he says that he doesn’t want to pick a fight with the regions.

It requires quite extraordinary chutzpah to make this plea for money in same year that nearly £10billion is being ploughed into London’s Olympic Games (almost none of which qualifies for a Barnett consequential), when a fifth of that money is being specifically ear-marked for the regeneration of East London, when the reduction in the 50 top rate of tax will bring disproportionate benefits to the city, and when it is said that, exceptionally, the taxpayer rather than Thames Water customers are going to foot the bill for solving London’s sewage problem. And all in the aftermath of a global financial crisis created in large part by the willingness of Governments of different hues to respond to and fuel the hubris of the financial services industry.

Lobbyists for London claim that one pound in five earned in London goes to subsidise the regions, leaving London £5 billion short and perhaps more than twice that in good times. That may be true, but public expenditure figures tell a different story. In 2010-11 London had the second highest level of public expenditure per head of any region of the UK in real terms, and when indexed against the UK average. It is second only to Northern Ireland.

£ UK = 100
N Ireland 10,668 120
Scotland 10,165 114
Wales 9,947 112
England 8,634 97
London 10,198 115

The ideal route to allowing London to hang on to more of its money, would be to reduce the need for fiscal transfers across the UK by creating much more even economic development. In poorer nations and regions we know there is a need to rebalance the public and private sectors, but the rebalancing agenda is a three-legged stool. We also have to achieve a more productive balance between financial services and manufacturing – which requires an industrial policy for the UK as well as Wales – and a better geographical balance between the south east of England and the rest, that requires a UK regional policy. These things are not unconnected. The biggest worry is that London is now so economically large and dominant that nothing can resist its gravitational pull.

The fact that even the Evening Standard, in its editorial, did not see much chance of the UK Government granting London fiscal independence, means there may be another way of looking at Boris’s apparently shameless special pleading. Some of his argument may simply be a plea for increasing the power of the Mayor of London. Some will argue that his current powers, mainly strategic, are limited when compared with the mayors of comparable cities elsewhere in Europe, although the London Assembly of 25 members does not provide much in the way of democratic accountability – rather less than that of the Welsh Assembly which Cheryl Gillan, the Secretary of State for Wales, believes is inadequate. Could this really be about devolution, or rather centralisation, in England – the aftermath of the emasculation of local government by Margaret Thatcher followed, under the present coalition by the effective abolition of regional administration in England including regional development agencies.

And here we are back with the English problem – the subject of much discussion a week ago at the conference on Wales in the Changing Union, organized by the IWA in its partnership with the Wales Governance Centre and Tomorrow’s Wales/Cymru Yfory. Martin Kettle of The Guardian took issue with recent research – done by the Wales Governance Centre with the IPPR – that suggested that the English dog was beginning to bark. He thought it was still laying in the sunshine. And yet the coalition government has been moved to establish a Commission on the ‘West Lothian question’, ostensibly to allay English outrage that Welsh and Scottish MPs are allowed to vote on English matters, whereas English MPs cannot vote on matters that devolved to Scotland and Wales.

The Welsh representative on the commission, Sir Emyr Jones Parry, is one of those tasked with finding a solution. His long experience of diplomacy is such that I sense that in a different age he would have been the sort of person who understood the famously unintelligible Schleswig-Hostein question. He took the conference through some of the complexities that his own commission faces.

Sir Emyr made it clear that no possible solution in going to please everyone. All solutions will thow up problems. The creation of an English Parliament implies a federal Britain. ‘English votes on English laws’ raises the question of how to define a bill as ‘English’ – if there is a Barnett consequential it could be said that Scots and Welsh MPs have an interest. This would also create two tiers of MPs, even before asking whether such a rule would apply in the Lords, essentially a revising chamber. And who would decide whether a bill is ‘English’ or not – the Speaker or the whole House, and if the former would it be subject to appeal?

The other option that Sir Emyr mentioned was that of simply putting up with the anomaly, a solution for which you can make a better case than you might suspect. First, it would involve doing nothing – a much under-rated option – that would allow time for the Scotland/Barnett problem to be solved. After all, it is largely the overpayment to Scotland under Barnett that is getting under the skin of English MPs and London newspapers. Take that irritation away and much of the heat might be taken out of the situation.

In any case it is reasonable to argue that fiscal transfers and constitutional anomalies are the price that England has to pay for its overwhelming dominance of the Union in almost every regard – political, economic and cultural. The scale of the asymmetry is such that even legislation for England can have massive policy consequences for Wales – university tuition fees being the most obvious example.

The research on English attitudes may be right in highlighting an increased awareness of English identity, but Martin Kettle may also be right in thinking that it is a long way from being a spur to action. Perhaps a battle between Boris Johnson and English regions will put some overdue life into the case against centralism in England. But don’t hold your breath.

Geraint Talfan Davies is Chair of the IWA

4 thoughts on “Boris wants devo-max for London

  1. Fascinating stuff Geraint and I have to confess to being slightly envious of Londoners for having as charismatic a leader as Scotland. On the question of public expenditure per head, could you unpack this a bit more for us, as it’s so counter-intuitive to what we’ve all been told over the years? What is counted as public expenditure? Many thanks.

  2. This is based on the UK Treasury’s calculation of identifiable public expenditure by country, region and function. In the case of Wales this includes not only the expenditure for which the Welsh Government is responsible but also expenditure by other departments, such as Work and Pensions, “which can be recognised as having been incurred for the benefit of individuals, enterprises or communities within particular regions.” A detailed explanation can be found in the Treasury document –

  3. It’s really no surprise that per capita public spending is higher in London – the costs of providing public services there are also higher. If you want to build any infrastructure in the capital, you need to purchase very expensive land; if you want to employ any people, you have to pay a London weighting.

  4. Although London accounts for more tax revenues than it receives in subsidy, much of this accrues from it being home of head offices that actually trade all over the country, where the taxable income is earned. Also, the tax yield of the financial services in the City is counted without discounting for the sums of pubic money used to save it from bankruptcy. If Boris is re-elected it will only get worse.

    London has some of the poorest and most deprived areas in the UK (Tower Hamlets for instance) as well as the most prosperous (Kennsington and Knightsbridge). It is a highly dysfunctional mertropolis, and won’t get any better id Boris is re-elected.

    But it is not only we Welsh who have become discontented by the huge disparity we see in funding. Regions of England are beginning to stir. What is clear is that the union as it stands is so full of tensions and stresses that is inevitable with glaring inequality, that something has to change.

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