The BBC’s film on Monday night about London’s economy was a good discussion of an important issue. It showed the dynamism and growth of London well, from the hi tec cluster around Old Street to the redevelopment of Euston, from the new London Gateway deep water port through to Crossrail.
Large cities do attract large amounts of investment and talent when they have the right framework of tax, regulation and transport to make themselves attractive to the footloose and entrepreneurial of the world. On balance the BBC argued that the rest of the UK benefitted from London’s success. They showed people commuting over long distances to obtain better paid jobs. They showed large companies like Google attracted to London by the people and the opportunities in the capital. The general story showed that nothing succeeds like success.
London has its critics elsewhere in the country. Some say London gets too much of the nation’s public investment, citing Crossrail and tube investment in recent years. Yet if you look at public spending per head in total London is at the bottom of the table for the UK, falling way behind the North East or North west of England. My recent visits to other cities around the country demonstrate substantial public capital investment in trams, trains, and new public buildings outside London, as well as the much higher levels of revenue spending.
The proramme did not consider the amount of tax London pays. Given the much higher incomes enjoyed on average in London, London does contribute far more on a per capita basis than other parts of the country to the general taxation totals. The ability of London to entice in the rich and famous from around the world, and to provide offices for many high paying companies, does ensure much higher tax revenues for the UK as a whole.
Some seem to think there is a given lump of private investment for the UK and that London takes too large a share of that. As Mr Davis argued, London is in competition with other large cities around the world. If a company or rich investor decided he did not like London, he would probably go to New York or Shanghai or Hong Kong. Manchester and Birmingham would be less likely on his list of places to consider.
Mr Davis made a good comparison with the nineteenth century when the industrial north contributed relatively more to UK GDP, income and tax than it does today. It then provided an additional motor to London for the UK economy. It would be good indeed to recreate such success elsewhere in the UK to complement London’s achievement. Having a successful London is not an obstacle to success elsewhere, as the nineteenth century showed. We need to show skill in harnessing London’s success to help generate more growth in our other cities as well. Oxford, Cambridge, Edinburgh and Milton Keynes show that you can do so from a smaller base.