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He who pays the piper doesn't call the tune: London workers subsidise rest of UK to the tune of £11 billion

London contributes up to *£11 billion from its taxes to the rest of the country says a new research report written by academics from the London School of Economics and Political Science (LSE), published this week (Tuesday 9 November) by The Corporation of London.

London's Place in the UK Economy 2004, written by Professor Ian Gordon|, Dr Janet Stockdale|, Tony Travers| and Professor Christine Whitehead| of LSE, states that although London receives an above-average per capita share of public expenditure from central government this is far outweighed by its very high tax bill.

Michael Snyder, chairman of the Corporation of London's Policy and Resources Committee said: 'We welcome the Government's commitment to increased public spending on essential public services and infrastructure to cope with the growing demand, particularly in London. However our new report points out that London gives more to the Exchequer than it actually receives - London continues to make a positive economic contribution to other regions.

'If our capital city is to continue to contribute such large sums of money it requires more investment in its infrastructure and public services. There are hopes that a number of vital transport projects will go ahead and we look forward to continuing discussions with the Government regarding the funding of Crossrail. Unless we can find a solution, London's economy remains at risk.'

Other key findings of the report include:

London's competitiveness appears to have been at least maintained, more as a result of a flexible and relatively highly skilled workforce than of capital investment. New evidence suggests that its strengths are heavily concentrated in financial, professional and business services, its range of markets and often in foreign owned firms.

London's economy has shown some recovery during the year although that recovery is not strong. Across London, demand has been sustained by population growth, increased debt and a number of major construction projects. Employment is growing more slowly than output, and investment in the commercial property sector, another indicator of the buoyancy of the London economy, is only just starting to recover.

Earnings in London are more than 25 per cent higher than elsewhere in the country. However, once the mix of occupations and differences in the cost of living are taken into account, standards of living in London are just 11-12 per cent higher than in the country as a whole.

Employment has grown in London unlike in most of the other world cities, notably New York. Over the last year and against past trends, this growth has been concentrated more in inner rather than outer London. The east continues to perform relatively badly and there are as yet no signs of improvement following government announcements about large-scale initiatives in the Thames Gateway.

On headline figures London appears to be disproportionately open to crime even though it has by far the largest police force in the country. But crime, on average is actually falling, and for some types of crime, quite steeply. Moreover, in addition to fighting crime and anti-social behaviour, London's police have to deal with many capital city and security activities as well as with vast inflows of commuters and tourists.

London's Place in the UK Economy 2004 is available on the Corporation of London website: www.cityoflondon.gov.uk|

Ends

For further information, please contact Fiona Milligan at the Corporation of London on 0207 332 3451 or mobile 07900 244200. 

Notes:

* It is estimated that between £54 billion and £66 billion of public expenditure was made in the city in 2002-2003. At its mid-point, this represents 14.5 per cent of total UK public spending compared to 12.4 per cent of total population. A similar estimate of the total take from households and businesses suggests that London paid taxes that year of between £65 billion and £68 billion. At its mid-point, this is 16.9 per cent of total UK taxation, significantly above the city's share of both public expenditure receipts and population.

An alternative way of calculating London's contribution is to consider the city's public spending receipts and tax payments in terms of their shares of the UK totals, and the difference in percentage points then applied to total UK public spending. Using this method, the mid-point estimate for 2002-2003 is that the gap between London's share of taxes and its share of expenditure - its contribution, in effect - was around £11 billion. This is somewhat lower in money terms than in the past two years because of a slightly increased share of expenditure though the percentage point difference is in line with previous figures.

Public expenditure in London and the South East is far below the national average as a proportion of the region's economy. This is significant because sustainability of the city's economy and taxable capacity depends on adequate infrastructure and public services.

10 November 2004

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