Is London too small – and how should we fund city services?

Is London too small?

Recently there has been some talk around the question of whether London is too small and if its political boundaries need extending. Some (if not much) of this talk is based on data which shows that there are some commuter towns which are very dependent on London to supply their jobs.

I feel that extending London’s political boundaries will not be politically acceptable to the people who live in these outlying areas; even minor changes to rectify local anomalies yet alone major extension to, say, include places like Dartford into the Greater London Authority. Even now many of London’s existing outer boroughs feel that they are neglected with too much focused on central London, and I imagine this feeling would be even stronger in places outside of the M25 which may be included in an extended Greater London Authority.

So, I can’t see London’s political boundaries being extended.

However, it is vital that those outside of political London, who use its services, do pay a fair share towards the costs of providing these services. There are plenty of examples in the USA where the centre of cities have become problem areas because too many of those who use the services in the core have moved out to surrounding lower taxed areas – they want the benefits of a city without paying the costs.

How do we ensure that those who use a place’s services pay towards the costs of supplying these services if we can’t get the political and economic boundaries to be co-terminous? We could allow the ‘core’ city to charge some sort of tax surcharge to the outlying areas (a precept of some sort), but there is no political or democratic control (from the point of view of those being taxed) in doing this, so to me this is a non-starter.

Although we can improve some of the political and economic boundaries so that they more closely match each other to minimize the amount of ‘free loading’, I think the complications and grey areas are so great that on the whole this cannot be done with any great accuracy.

Therefore, I think this stresses to importance of the role of central government in collecting taxes and re-distributing them to make the whole country and its constituent parts work for everyone.

It is this continuing need for re-distribution from the centre that needs to be recognized by those who seem to believe that localization of tax raising powers to local government is the solution to under-funding problems. In a nutshell the issues are: Firstly, the political boundaries (and thus taxation boundaries) do not match the economic boundaries and although can be improved will not be changed to any great extent; Secondly, most places in the UK outside of London do not have sufficient tax base from which to raise more taxes and so depend on transfers from central government; Finally, the last thing we need is for neighbouring local authority areas to enter into a complicated tax versus services bidding war – the UK is too small for this not to end in tears.

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