“Governments with money centralise and claim the credit. Governments without cash decentralise and spread the blame. Those are not the views of a hardened media cynic. They are what I was told by one of the Tories’ top policy wonks before the election.”
Nick Robinson, BBC Political Editor, December 2010
Surprised? Why? The masters of the universe move in circles where cynicism is a sign of sophistication. The double standards are everywhere: privatise the profits, socialise the losses; what goes wrong is the last lot’s fault, what goes right is all down to us; introduce a Localism Bill, then use it to set limits to local discretion. The long-awaited discussion on English devolution turns out to be a discussion on English votes for English laws. Devolution from the centre to the centre. Westminster, faced with the unpleasant necessity of discussing devolution, turns inwards and debates instead its own procedures and party interests.
It’s more than tiresome and we believe the lies less and less. The Lord Mayor of London insists that she is not a member of the establishment. If she’s merely a member of the Outer Party, what is it you have to do to join the Inner Party?
Don’t despair. Politics does work. If, and only if, you vote for change and then keep on voting for change. Tony Blair’s government was as centralist in outlook as any but was forced by inherited circumstances to devolve power to Scotland, Wales and Northern Ireland. The political dynamic produced one other devolved assembly, for the one area of England that needs one least. London.
There continues to be a debate on whether, in a regional context, the Greater London Authority – the Mayor and Assembly – is the right answer to the question of London’s governance. There are many Londons, some smaller and some larger than Greater London. Other European capital regions – notably in France, Italy and Spain – are larger than the urban area alone. But for Labour, and for Ken Livingstone in particular, there was unfinished business left over from Thatcher’s spiteful abolition of the GLC. Putting it back together (but not too recognisably) was a political priority that also made a lot of sense administratively. After 14 years of chaos, Thatcher’s City backers were persuaded that even the return of Red Ken was better than a decapitated capital.
The result is England’s only regional assembly. Which creates some interesting anomalies. Hilary Benn recently coined the ‘West Ealing Question’ – why can an Ealing MP not vote on buses in Ealing (a matter devolved to the Mayor) but can vote on buses in Benn’s Leeds constituency? We might question whether MPs anywhere should be voting on buses or whether in a properly decentralised country they would find better things to do. But buses are a good example to use. London was the only part of England to be exempted from bus deregulation in 1985: congestion obviously is for the other man. It’s the only area where the colour of the buses is specified by the authorities, because London’s iconic heritage must be protected while that of lesser cities was long ago sacrificed to the free market.
Wessex and London have about the same population. So we should have no difficulty in claiming the same powers. What might be more of a struggle is to achieve a fair funding formula that doesn’t favour the capital as present arrangements clearly do. The Barnett formula doesn’t apply to the distribution of public spending withinEngland. So London is free to grab whatever its lobbying can obtain. This is an issue we have covered in a number of posts, so let’s recap, with a spot of updating and expanding.
London contributes 22% of UK Gross Value Added, while Wessex contributes 13%, Scotland 8% and Wales 3%. Wessex, with roughly the population of Scotland and Wales combined, comes out where we might expect it to be. So why does London appear to be storming ahead, the economic engine of the UK? Do its workers really go for it that much harder than everyone else? Any analysis of what’s going on must question how much of the economic activity that ends up there has any geographical reason to be there, assuming that it was ever real in the first place. London’s economic success cannot be entirely unrelated to its role as the political capital of a unitary state with access to the taxable resources of the whole UK. Wessex folk even subsidise its sewers. No doubt we shall subsidise its defences against sea level rise too until we can take it no more.
According to the National Infrastructure Plan, planned infrastructure spending per head in London is ten times that in Wessex. Statisticians argue over just how big London’s lead over the rest really is – it’s easily pushed downwards by adding in nuclear power projects whose final customers are many miles away from the plant – but no-one can doubt that it’s massive. And it’s set to get worse.
In 2010/11, London, with 15% of England’s population, got 34% of public spending on transport. The South West, with 10% of the population, got 6%. (The South West is the fourth smallest of the Prescott zones by population but received the least transport spending per head.) Devolution, linked to a fair funding formula, could therefore roughly double our money. Bristol might even get a real metro, with underground stations and wholly new lines, instead of the toytown version which is all that can be afforded while London helps itself to our taxes. Instead of HS2, we could start to put places back on the rail network for the first time in 50 years. Places like Gosport, claimed as the largest town in Britain without an operational railway station. London is NOT the only desirable destination on the railways yet national thinking still assumes that it is.
Arts funding – from the London-based Arts Council and DCMS – is even more scandalous. In 2012/13, London got £69 per head. The rest of England got £4.60 per head, a ratio of 15:1. The National Lottery was supposed to correct this geographical imbalance. But what do we find there? £165 per head in London, £47 per head in the rest of England: still 4:1.
There’s also a qualitative aspect to cultural funding. If budgets are centrally controlled, they will deliver the culture that the centre thinks we ought to have, not the one we choose for ourselves. If quangocrats in London haven’t heard of Wessex culture then they aren’t going to fund it, because it won’t tick any of the boxes. A similar attitude rules in planning, where development is always viewed as having a positive cultural impact. That’s because the new facilities that it can fund, for cultural products to be displayed or performed, are usually more measurable in standardised terms than what’s destroyed to make room for the development.
The Treasury publishes regional data for what it calls ‘identifiable public expenditure’. That isn’t the same as public expenditure by region. Things that go on in London but are deemed to be for the indivisible benefit of the whole UK aren’t included, so London’s share will be an under-estimate. About 14% of spending is ‘non-identifiable’ in this way. It includes debt payments, some defence items and overseas representation but there are also costs, such as tax collection, that must have a geographical base within the UK.
It’s this under-reporting that allows Boris Johnson, for example, to present London as a net contributor to the rest of the UK by at least £5 billion annually. If non-identifiable spending comes to 14% of the total, and that £5 billion is from the fiscal year 2009, when total spending was £634 billion, then 14% (£89 billion) leaves plenty of room in which to lose a mere £5 billion very easily. We need far better politicians, of course, but it seems we also need far better accountants, to track what really happens to all of the ‘non-identifiable’ money that is spent within the UK.
Despite the under-reporting, in 2012/13 London got 107% of the UK average spending per head on services. The South West got 94%, the South East 87%. London got 135% of the average spent on economic affairs (substantially more than any other English region), including 184% of the average on transport. It also got 158% of the average on recreation and culture and 157% of the average on public order and safety. London exceeded the average in 10 out of the 17 statistical categories in PESA 2014, Table 9.16. Nowhere else in England was so consistently well-funded and agricultural spending (15% of average) was the only category in which London fell below 79% of the average. The South West was well-funded only on agriculture, defence and environmental protection (presumed to include nuclear decommissioning) and fell below 79% in 6 categories. The South East did well only on science & technology and defence and fell below 79% in 8 categories. The high spending in some northern regions – mainly on employment, health and social protection – can be seen as a measure not of the UK’s success but of its chronic failure.
Does this distribution of spending reflect need? Not necessarily, because ‘need’ is itself a contested idea. If London ‘needs’ more money because its population is growing and the city is pulling in poor folk from across the globe then perhaps it should stop. London’s environmental unsustainability is being paid for by the rest of us who are doing things right. The more we pay to deal with London’s infrastructural shortfalls, the more it grows, the more attention it attracts and the bigger the problems become.
If London ‘needs’ more money because the cost of providing services is higher then the same applies. Do those services need to be in London? London’s high costs are caused by its over-expanded economy relative to its territory. Those who are convinced that regional assemblies would increase the cost of government should reflect on the lower property and labour costs that would be payable if more of government were done outside, and less of it inside, the M25.
Taxation is often presented as simply a class issue but it has a strong geographical basis that impacts on how daily life is lived in areas dominated by the affluence over which London presides. Half of all Inheritance Tax receipts in the UK come from London and the South East. That isn’t necessarily the result of thrift: much of it will be unearned ‘wealth’ produced by rising house prices, as government commentary makes clear. (That the Prescott zones next in line after those two are the South West and the East of England is perhaps a reflection of their attractiveness as retirement zones for an ex-London elite.) In London your house can make more than you do. So no wonder the political pressure to abolish Inheritance Tax is unlikely to go away.
Labour’s plans for a ‘mansion tax’ have been labelled an attack on the middle classes, because in central London all house prices are mansion prices, aren’t they? One estimate is that 85,500 of the 110,000 houses likely to be hit are in London. Better by far that those provincials pay more than that Londoners should find themselves a bit strapped for cash, don’t you think?
Well, no. It’s time we had a property taxation system that adequately reflects ability to pay. Council Tax banding only reaches the foothills of serious wealth. For as long as that happens, it means that the most regressive of taxes gives up the ghost before it has a chance to bite those whose accountants and lawyers can get them out of paying most other taxes. So London goes on being a magnet for some of the world’s worst economic psychopaths. The cost of living in London continues to rise for everyone there – and indirectly for everyone not there so long as we pay the difference through UK taxation and distorted public spending patterns. Those spending patterns remain inevitable without real regional power to hold a London-obsessed Treasury to account.
The Union works very well for London. The question the rest of us should ask is what we get out of it. If we don’t like the way the money goes, then we need to organise politically to get it back. The inflated weasel needs to feel the press of the pin.