Alexandra Jones, Chief Executive of Centre for Cities, explains how London is important to the nation as a whole and why cities need to work together
Tension between a dominant London and other parts of the UK goes back centuries. William Cobbett, champion of rural England, wrote in his 1830 work Rural Rides: “But, what is to be the fate of the great wen of all? The monster, called, by the silly coxcombs of the press, ‘the metropolis of the empire?’”
Fast-forward a century, and in 1940, a report by the Royal Commission on the Distribution of the Industrial Population said: “London acts as a continual drain on the rest of the country both for industry and population, and much evidence points to the fact that it is already too large.”
Debate about whether London’s global success is a boon for the whole UK has become increasingly polarised since the financial crisis, blamed by many on the excesses of bankers in London and other centres. The capital’s economy got off relatively lightly in the recession and has recovered faster than most of the rest of the country.
Some complain that London sucks the life out of the UK, while others say the rest of the nation is a drain on its buoyant capital. There is even wild talk of London becoming an independent “city state”.
Such polarisation is unhealthy. While the economic gap between London and other cities has been widening, they are dependent upon one another far more than people appreciate. Both need more power and better funding to thrive – and with heightened interest in UK devolution since Scotland’s independence referendum, there may now be a realistic chance of achieving it.
The widening economic gap does make it hard to get people to see how London’s growth benefits everyone. In 1997, London and the south-east accounted for 35 per cent of the British economy; it increased to 38 per cent by 2012. And as our Cities Outlook 2014 demonstrated, London accounted for the vast majority of private sector job creation between 2010 and 2012 as the country emerged from recession.
For people outside London, it can be difficult to see how or why they benefit from government’s big investments there, such as Crossrail or Tech City.
According to a recent YouGov poll commissioned by Centre for Cities and Centre for London, 66 per cent of adults outside London think the capital has a positive impact on the national economy). But only 24 per cent think London has a positive effect on their local economy – which drops to single figures in some northern cities such as Hull (8 per cent), Sheffield (8 per cent) and Liverpool (9 per cent).
The truth is a stronger London does indeed benefit the economy. Cities thrive through connections between them: those outside London benefit via business contracts from the capital, jobs created by London-based businesses and by London’s tax revenue surplus being distributed as public spending – although other cities pay a price in talented young people leaving for the capital. London’s success depends on attracting business, people and money from other parts of the country.
The problem is not that London performs too well, but that other cities do not perform to their potential – which is holding back the national economy. As the City Growth Commission chaired by former Goldman Sachs economist Jim O’Neill noted, raising output in the 14 largest “metros” or city regions outside London to the UK average could boost the economy by £79bn a year by 2030, or about 5 per cent of gross domestic product.
London and other cities share one big problem: a pitiful lack of powers compared to their international counterparts. The UK remains one of the most centralised developed countries in the world: in 2009 local government raised just 17 per cent of its income from local taxation compared with the OECD average of 55 per cent, leaving cities with few levers to pull to meet their specific requirements.
Sensibly, they are making common cause. Last autumn Boris Johnson, London’s mayor, joined forces with the Core Cities group of large cities outside the capital to press for control of the revenues from all property taxes, such as stamp duty, council tax and business rates.
Cities need to work together, fill the leadership gap that the public perceives in national politics, and demonstrate that local flexibility can lead to better outcomes.
This article was originally published in Bright Blue's magazine, The Progressive Conscience