London First priorities ahead of the BudgetMarch 17, 2015
Ahead of the Budget tomorrow, Baroness Jo Valentine has written to chancellor to layout our priorities for the Budget.
I write ahead of your Budget statement on 18th March 2015, which will be followed shortly by the General Election in May, to set out the views of London business.
London is the leading global hub for international business, students and visitors. The London Enterprise Panel’s recently published economic development agenda (“London 2036: an agenda for jobs and growth”) sets out how the city is well placed to continue to grow in a changing world. London’s rapidly growing population is a source of great opportunity: however it also presents a challenge in that if this demographic growth is to fulfil its economic potential, the city needs continued and sustained investment in transport infrastructure and housing.
Your recent Long Term Economic Plan for London was a welcome development from the Government and echoes many of the priorities of London First. We welcome the Government’s aspiration for London to take on New York across a range of sectors and come out on top. But Shanghai and Beijing will overtake London in GDP by 2025, and 68% of future £1billion companies will be from emerging markets. As the centre of global economic gravity shifts East, London must be equipped to compete in terms of growth with not only its traditional rivals, but with new ones as well.
Ahead of the General Election, we recently published a short manifesto which covered five core areas that are vital to London’s businesses:
- expanding and improving transport infrastructure to meet the needs of London’s rapidly expanding population;
- taking urgent steps to tackle the housing shortage;
- supporting a competitive labour market through devolved skills funding and an effective immigration system;
- playing an active and positive role in Europe; and
- ensuring changes to tax policies support economic competitiveness.
Let me summarise our immediate issues ahead of the Budget on each.
We welcomed your commitment to deliver £10 billion of new investment in London’s transport over the next Parliament, including new tube improvements and better roads. We also welcomed your acknowledgement that London now needs to plan for the next big infrastructure investment after Crossrail, which we see as Crossrail 2. But London needs a philosophical shift at the Treasury that recognises and tackles the growing long-term infrastructure challenges facing London. The Mayor’s Infrastructure Plan anticipates that demand for public transport will jump 50% by 2036, and that tens of billions of pounds of investment will be needed to meet it. This investment will support strong growth in the London and UK economy, and deliver substantially increased tax revenues: the business case is clear, it is affordable and now it needs to happen. In particular, the current transport funding settlement for Transport for London through to 2020 must be seen as a floor for investment required.
London’s need for increased airport capacity in the South East was a surprising omission from your Long Term Economic Plan announcements. While the Davies commission you established will not report until after the General Election, we hope that you will commit to implementing its final recommendations swiftly.
We welcome the announcement of a London Land Commission to coordinate the sale of un- or under-used public sector land for much-needed housing. We hope it will answer our call for a modern-day Domesday Book, holding all the details of this land and administered by a single, well-informed source, as we laid out in our March 2014 report ‘Home Truths: 12 steps to solving London’s housing crisis’. The real challenge is to go from identification to utilisation — to join up the public sector and so release as much land as possible for new homes for Londoners.
Membership of the European Union and access to its Single Market is critical to the capital’s continued success and is a major factor in its global competitiveness. We would urge the Government to continue to put its energy into leading reforms in the EU, and in particular to driving the completion of the Single Market in services. We believe reform is needed in the way the European Institutions currently work in particular to address the criticisms that the EU is too inward looking and focused more on harmonisation and regulation than driving international competitiveness and growth. However, the spectre of an in/out referendum continues to pose a major risk for many of the international businesses headquartered in London. It is worth noting again that of the top 250 of the world’s largest companies, 100 have their global or European HQ in London.
London has one of the most competitive labour forces in the world, with more high skilled people than any other city. To maintain this position, we need a qualified and mobile talent pool from which to recruit, so we were pleased to hear of the Government’s plans to discuss giving more powers over skills provision to London, so that delivery can be better tailored to need. This is particularly important in high growth sectors such as tech, where a lack of skilled workers is cited by 80% of Tech City leaders as the biggest single barrier to growth.
While we want Londoners themselves to have the right skills to meet demand, we must also recognise that not all of the gaps can be filled by home grown talent and that sometimes companies will need to recruit internationally. We therefore need a migration regime that welcomes those who contribute economically to our country, including overseas students, business people and tourists.
While it is perfectly valid for the Government to have ambitions on migration levels, London businesses would welcome a system based on hard data rather than an arbitrary target. Within this, it is important that overseas students are classified as temporary visitors, not migrants, and that the automatic option for foreign students to be able to work in the UK for two years post-graduation is reinstated. Equally, it is important that UK Border Force and UK Visas and Immigration are managed and resourced effectively to prevent unwanted breaches of the system at the same time as ensuring visitors have a positive experience of London and the UK at our entry ports – in particular, ensuring that greater security does not translate into more delays for the vast majority of legitimate visitors.
Finally, we would emphasise the importance of tax stability and competitiveness. We strongly welcomed the Government’s decision to cut the top rate of income tax from 50% to 45% (or from 52% to 47% when national insurance is included). However this remains high compared to London’s international competitors and the balance of evidence suggests that it is above the revenue maximising rate. We would urge the Government to ensure no increases in the top rate of income tax and, over time, to review and reduce it.
Baroness Jo Valentine