The Prime Minister today announced that mayors will be handed a share of taxes raised in their areas for the first time.
City experts called the plans the “most significant moment for devolution” in the capital for 25 years, which could reshape London’s approach to transport, housing and job creation.
Proposals, the details of which will come in Chancellor John Healey’s Autumn Budget, are expected to give local leaders greater freedom to invest in long-term projects without relying as heavily on funding from Westminster.
Greater fiscal flexibility could help accelerate transport upgrades, including improvements to the Underground, buses and rail links, while supporting investment in new infrastructure and jobs to meet rising demand.
Mayor of London Sadiq Khan
PA
Mr Burnham, the former mayor of Manchester, said his plans will give local leaders “more in their hands” to empower their regions.
Transport
Transport Secretary announced that mayors will be given a fast-track route to building new tramways, roads and light rail.
Large transport schemes put forward by local leaders need to have Government approval before they are built.
The cost threshold at which mayors need to seek approval was set at £200 million.
But Heidi Alexander announced on Friday that this would rise to £500 million.
The change will mean elected leaders can bypass the queue for Whitehall sign-off on their projects, if they cost less than half a billion pounds, paving the way for tram schemes, metro extensions and station upgrades.
“Today we’re giving local leaders more power to shape transport in their community,” the Transport Secretary said.
“Locally funded transport schemes up to £500 million no longer need Whitehall approval, meaning fewer projects get bogged down by bureaucracy, and you get the services that make your life easier.”
Housing
Housing could also benefit if City Hall gains additional borrowing powers or funding certainty under the devolution proposals.
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Prime Minister Andy Burnham has announced a huge devolution drive
Getty
This could enable more affordable homes to be built and speed up regeneration projects.
Antonia Jennings, CEO at think tank the Centre for London, said: “Today marks the most significant moment for devolution in London since the creation of the Greater London Authority and Mayoralty of London over 25 years ago.”
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But she warned that the larger costs of projects in the capital should be considered when rules for funding are being drawn up.
The West London Orbital, a proposed new 18.5km overground route connecting 10 existing Tube, London Overground, rail and National Rail services from Hounslow to Hendon as well as the Elizabeth line and future HS2, is seen as a relatively cheap scheme.
But it is still expected to need funding of at least £1billion.
Ms Jennings added: “The long-term goal should be good growth across every part of the UK, with every region empowered to prosper, attract investment according to its need and strengthen its own public finances.
“But we are not there yet. London continues to fund the rest of the UK, while facing economic challenges of its own.
“Productivity has stagnated. Housing costs continue to place enormous pressure on Londoners. 1 in 3 children live in poverty. And too many young Londoners are struggling to step into the job market.
“The answer is not to wait for a future settlement once other areas have caught up. The answer is to give London’s leaders the tools to tackle these challenges now before they get worse.
“London has shown what can be achieved when power and responsibility are aligned. From the delivery of the Elizabeth Line to major steps forward in adult education, we’ve proved the capital can and should be trusted.
“To that end, while Burnham’s proposal to allow locally funded projects worth up to £500million is welcome, London’s infrastructure needs exceed this threshold. Even projects deemed relatively ‘cheap’ for the capital, such as the West London Orbital, are projected to need funding of at least double this figure.
“Long awaited projects like the Bakerloo Line Extension are set to cost at least ten times that amount.”
A map of the proposed West London Orbital route
Transport for London
Jobs
If house-building and infrastructure projects are boosted by devolution, this will in turn offer more job opportunities in thos sectors in London.
Mr Burnham has also said mayors will be control over 16-19 funding and employment support, so young people can train for the jobs local employers need and people out of work can get tailored support back into employment.
He has also vowed to give mayors more power to back local industries and innovative businesses, and attract investment, creating more well-paid jobs.
Funding
Critics have warned that wealthier areas like London may gain a disproportionate advantage unless funding is carefully balanced across England.
Studies suggest that giving mayors 2.5 per cent of the 20p basic income tax rate would result in £2.3 billion for London a year but just £135 million for Hull and East Yorkshire.
Ministers have said mechanisms will be introduced to reduce regional inequalities.
Stephen Cowan, Chair of London Councils, said: “This is real progress towards real devolution from the new government – a landmark moment for the nation and local communities everywhere.
“The Mayor and London boroughs are clear that London is ready for greater autonomy. We are eager to invest our share of income tax revenue where it will have greatest impact for our fantastic capital city, in service of the nation.
“It is critical that London boroughs are involved in design and delivery of this and other fiscal devolution proposals.
“Councils are embedded in communities, delivering the services Londoners rely on every day. We uniquely possess the local knowledge to make devolution work on the ground and drive local economic growth across our places.”
