A succession of Conservative Chancellors - and there have been a few - have literally written London out of the script over recent Budgets and other set piece fiscal events.
In Jeremy Hunt’s Autumn Statement speech last November the capital got just a single mention - a throwaway reference to a small pot of money being shared with Leeds and Cambridge to unblock planning delays.
That was at least better than Hunt’s Autumn Statement of 2022 and Rishi Sunak’s final Budget in Spring 2022 when there were precisely zero references to the throbbing engine room of the British economy in their speeches.
The outlier was last year’s Budget when Jeremy Hunt was, relatively speaking, positively effusive about London, with six name checks. However, that was only one more than Manchester - a city with an economy about a tenth of size of London’s so perhaps we should not get too carried away.
The truth is that ever since the 2019 election win - delivered to Boris Johnson by the Brexit voting former Red Wall voters of the likes of Bolsover, Wakefield, and yes, Tony Blair’s former redoubt of Sedgefield - London has become the-city-that-must-not-be-named in the highest echelons of Government.
Politically it is easy to understand why. There is almost nothing left for the Tories, particularly in central London, where gloomy activists expect to lose every seat in the General Election with the exception of Greg Hands’ Chelsea and Fulham blue outpost, though even that is expected to be a close run thing.
Economically it makes far less sense. In a depressing era of low growth and productivity, London stands head and shoulders above the rest of the country. The most recent regional productivity data from the Office for National Statistics shows output per hour is 30% higher in London than the UK average. According to a report this month from the House of Commons library London’s half a trillion pound economy - more than the GDP or Belgium or Argentina - will grow at a forecast average of 1.5% over the next decade. Not good enough, but a long way ahead of any other region. If the Uk is ever to find a way out of the economic morass it is stuck in rhe escape will be led by London.
Yet the frustrated business community in London feels very strongly that its potential is being held back, blocked from generating the tax revenues that feed public spending in most of the rest of the country.
Nothing illustrates this better than what has been inevitably dubbed the tourist tax. It has been three years now since Rishi Sunak axed the perk enjoyed by millions of overseas visitors to the UK who were once allowed to claim back the 20% VAT paid on most of their shopping as they left the country.
Business leaders say it was no coincidence that the decision came into force on the same day as Brexit. Once Britain had officially quit the EU millions of European visitors would have been able to enjoy the benefit for the first time, perhaps not the best look for a “Global Britain” supposedly raising its sights beyond the Continent.
But the impact has been profound. While there has been a solid recovery in foreign tourist numbers since the pandemic, spending has lagged far behind.
Research by tax free payments platform Global Blue found that US shoppers in Britain spent one per cent more than 2019, the equivalent figure was 126 per cent for France, 101 per cent in Spain, and 90 per cent in Italy. West End store workers are full of stories of wealthy customers who did their “window shopping” on Bond Street or Regent Street then hopped on a Eurostar to seal the deal on the Champs-Élysées or Rue Saint-Honoré, saving thousands in the process.
Treasury officials are said to admit privately that abolishing tax free shopping was an anti-growth “own goal” that is hard to reverse for a variety of presentational reasons. It was a legacy of Rishi Sunak’s time in Number 11, and reimposed by Jeremy Hunt after a brief reprieve in the “blink and you miss it” Kwasi Kwarteng tenure as Second Lord of the Treasury. The two men who would have to sign off on a U-turn are the same double act who imposed it...and then doubled down. Jeremy Hunt has at least commissioned a study by the independent Office of Budget Responsibility to look at the fiscal and economic costs and benefits of restoring VAT free shopping. Yet expectations, it is fair to say, are set at a low level.
A host of other London-boosting “asks” are also likely to be ignored. Raising the £51,000 rateable value cut-off point for business rat relief would benefit thousands of struggling London businesses in the hospitality and retail sectors. Reducing or abolishing stamp duty on share trading could go a long way to reinvigorating the moribund London stock market, and easing the high rates of property stamp duty on million pound plus homes - of which half are in London - could kick start activity in the housing market,
Even the hated frozen higher and additional rate income tax thresholds are to some degree “a tax on London” as earners in the capital are far more likely to be dragged into the 40% and 45% bands by pay rises than in the rest of the country. The list goes on.
London has got used to being overlooked in Budgets and Autumn Statements and just months ahead of a General election is not expecting anything different next Wednesday when Jeremy Hunt rises to his feet in the Commons. But it would be refreshing for the Chancellor to at least admit that a Budget for London would also be a Budget for Britain.
