Blog Post

Where does London fit in the Levelling Up White Paper?

Is it right to ask low-paid Londoners to subsidise transport for wealthy commuters from Guildford? Our Research Director Claire Harding explores the dilemma that the government face in their attempt to level up Britain.

It seems likely – although it has been delayed many times – that the government’s Levelling Up White Paper will finally be published in the next month or so. Reports before Christmas suggested that the levelling up agenda under Michael Gove might turn out to be less about central government funding pots, and more about devolution, with more directly elected mayors outside of big cities and maybe more local control over spending. On the face of it, this seems like less of a threat than allocating infrastructure funding to everywhere but London. But it still poses a real threat in our city and beyond.

Today’s government have not so far been big fans of local decision making. But making levelling up mean devolution might make a strange sort of sense to get them out of a tricky situation. Before Christmas, they once again postponed a full decision about Transport for London’s funding settlement, on the basis that the Omicron variant meant there was too much uncertainty. Even after Omicron, tube use and therefore TfL revenue is unlikely to return to pre-pandemic levels since so many people now work from home for part of the week. As my colleague Nick has pointed out, central government has three rather unattractive options: they can let services decline, which would play very badly with their commuter belt voters, give TfL more money from the Treasury, which would play very badly in Red Wall seats, or give the Mayor of London more powers to raise and spend city taxes. This would be hard to do if it was just for London, but doing it for lots of places at once might make it more palatable.

At Centre for London we are all for devolution of power – decision making in England is among the most centralised in the world, and centralised decision making is often bad decision making for local communities. We are especially for devolution of fiscal power, allowing cities and regions to determine some tax levels locally and spend the money in their own areas. But if this change of focus for levelling up could present a real threat. In the austerity years of the early 2010s, local council budgets were cut faster and harder than central government budgets, and funding for deprived areas – including inner London boroughs and urban unitary authorities like Nottingham – lost a higher proportion of their income. Desperate to protect social care services, councils cut community projects and closed libraries – and residents were, quite reasonably, furious. Councils got the flak, and government shrugged its shoulders.

Giving more responsibility for funding infrastructure to regional government in big cities like Manchester and London, risks the same problem: they are forced to either make high tax rises (with, in all likelihood, a very limited range of tax options on offer, and many of them regressive) or to let services decline. As in the 2010s, government could just shrug its shoulders. City infrastructure benefits people from well beyond the cities themselves, but insisting that local taxpayers fund it ignore this: risking low paid Londoners subsidising transport for wealthy commuters from Guildford, or low paid Mancunians subsidising commuters from Chester.

Every area in England should have a real say about what needs to change locally, and how this is funded. But this must not mean treating our cities as islands cut off from the rest of the country – this simply doesn’t reflect how businesses work and how people live their lives.

Centre for London is running a major project for 2022 on levelling up and what it means for London. Find out more here, and contact our research director Claire Harding if you’d like to get involved.

Claire Harding is Research Director at Centre for London.  Read more from her here.