Capital growth

Infrastructure is now on the political agenda. The government has announced the creation of a TransNorth rail system and an investment programme it is calling the Northern Powerhouse. The Mayor of London is pushing ahead in seeking support for London’s 2050 Infrastructure Plan, while central government is giving him new powers over development. And there is a growing recognition that helping London grow is good for the nation as a whole.

After all, London provides £34 billion in tax more than it consumes – funding better public services across the country – and growth in London also tends to create jobs and generate higher investment outside the capital. In fact, 65% of the Gross Value Added (GVA) and job creation stemming from Central London office development accrues to the rest of the UK – with only 35% to London.

So the renewed focus on infrastructure is a good start, but sign-off from Whitehall on the Mayor’s infrastructure plan could still be a long way away. In recent decades, London has catapulted itself as a global city, acting as a magnet for people to work, live and play. Businesses love its talent and diversity, and its population is set to hit 10 million by 2030. Yet as a new London First report makes clear, the whole country’s future growth could be reduced unless the capital has the infrastructure investment it needs.

In the period following the Second World War, we made a conscious choice not to grow London and instead planned for its decline – an approach that was to the detriment of the UK as a whole

In the period following the Second World War, we made a conscious choice not to grow London and instead planned for its decline – an approach that was to the detriment of the UK as a whole. I don’t think we should make that mistake again.

If the Mayor’s plan were implemented, it could raise London’s annual growth rate from 2.5 per cent to 3.5. New figures crunched by KPMG for London First show investing properly in infrastructure could deliver a £1.9 trillion prize over the next half-century, and significant tax receipts. But if we are to capture those benefits, what do we need to do?

Well, first of all, central government could consider giving London greater powers over its finances. The GLA’s borrowing ceilings could be removed (while retaining prudential borrowing rules) and control over property taxes could be devolved to London. Greater fiscal autonomy would make investment in the capital more politically palatable as those benefitting would also be seen as those paying for it.

Secondly, the Mayor and the GLA needs to translate its infrastructure plan into a prioritised and integrated homes and infrastructure investment programme, created in concert with central government, businesses and other stakeholders, focused on driving higher economic growth.

Thirdly, the business community must recognise its own part in funding the infrastructure that’s needed, plus hold infrastructure providers to account as a quid pro quo for the funding provided.

Without these steps, London risks stagnating as a global centre for business. That would be a wholly unnecessary loss as historic low interest rates mean we have a once-in-a-generation opportunity to invest in infrastructure. Are we going to plan for a greater London or, by dodging the opportunity, once more effectively plan for decline?

Chris Grigg is chief executive of British Land