Dentons and London First hold an annual lunch at MIPIM for leading politicians, developers, investors, public officials and property professionals. The Mayor’s right hand man, Sir Edward Lister, was the guest of honour this year. The lunch gives an opportunity to explore issues important to London.
The success of London is critical to the future of the country. With this power comes responsibility. At the lunch we noted three particular challenges.
Firstly, rebalancing infrastructure investment – London has gobbled up the vast majority of recent public infrastructure investment in the UK. Any standard cost/benefit analysis suggests that future infrastructure investment should also be concentrated in London and the South East – that is where it will deliver most immediate economic benefit. And London needs more capital investment to continue to compete globally. However, it also needs other cities in the UK to succeed. The UK economy is too imbalanced, and would be more successful, sustainable, and less cyclical, if the cities outside London were stronger. The strength of those cities is dependant, in part at least, on capital investment, and now is perhaps the time for London to hold back and allow more national infrastructure monies to be spent elsewhere.
Secondly, funding London and local government generally – London can and should bear more of the cost of investment it needs. The Olympic supplements, the Crossrail rates supplement and Community Infrastructure Levy show what London can do. The London Finance Commission has proposed changes to ways in which SDLT and business rates should be retained for London. As a long term goal the retention of part of those funds may well be sensible. But changes cannot be introduced while there is such a disparity between the property tax revenues of London and the other cities. At the moment Camden and Westminster raise more in business rates than all the other core cities combined. Any change that uses the present property tax base will limit the possibility of future change. It will ossify an already outdated system. Instead, London should be aiming for greater and broader fiscal devolution, with local authorities, including London, looking at non-property taxes – local sales taxes, local income taxes, local hotel/bed taxes, etc. London should lead the argument for change, using any new freedoms to fund necessary infrastructure. This would then provide a fairer nationwide basis for funding local government. Critically, however, London should hold back on asking for changes that would just embed the present arrangements for funding local government.
Thirdly, addressing housing demand – London needs new homes. The Further Alterations to the London Plan propose 49,000 new homes a year, roughly double the number of homes that are presently being provided, and probably 20,000 homes less each year than is needed. The scale of change provides an opportunity for experimentation. It should be like a fast breeder reactor. We should all be working to identify and encourage new investors and developers, to promote different landownership/tenure arrangements, playing with new planning tools, and thinking about different ways of providing infrastructure. That may cause discomfort for existing house builders. It should be a concern for landowners where they are not, without good reason, developing. (The last great monopoly of land ownership needs to be weakened.) It may mean changes to the green belt, new towns built and suburbs being rebuilt. We should embrace these challenges, working both within London and with the boroughs outside. In one sense London might hold back. In a changing economy, maybe more effort should be made to build on the success of Oxford, Cambridge, Brighton, Reading and look to replicate that elsewhere in a way which reduces housing demand in London. In the absence of a regional plan for the south east, leadership and co-operation are critical.
London is the leading city. It should show leadership. A required leadership quality is adventurous self restraint and encouraging others to grow.