Patrick Diamond, professor of public policy at Queen Mary University of London, argues that if Prime Minister Andy Burnham is to succeed with his devolution agenda, London must be granted additional powers and funding to invest in the key drivers of the UK's international competitiveness.

Burnham has placed devolution and economic growth at the centre of his government's programme. London, Diamond contends, must be integral to that agenda. The capital generates over a fifth of national GDP, and tax revenues collected in London help fund public services across the country. Its dense concentration of legal, financial, and professional services supports growth in major cities including Birmingham, Leeds, Manchester, Newcastle, and Bristol.

Yet London's own growth and productivity have stagnated over the past 15 years. The 2008 financial crisis dealt a lasting blow to the financial services sector, while global economic headwinds and Brexit further reduced output. Internal disparities within the capital are as pronounced as those between London and the rest of the UK — affluent Westminster stands in stark contrast to deprived areas such as Newham and Barking and Dagenham. The Burnham administration, Diamond warns, cannot afford to overlook London. The capital requires a comprehensive plan with expanded devolved authority to stimulate economic growth and productivity improvements.

25 Years of the GLA

More than 25 years after the creation of the Greater London Authority (GLA) in 2000, Diamond considers this an opportune moment to reassess London's governance. A common perception is that London devolution is already complete, and that the government's priority should be levelling up other city-regions — a view reinforced by the broader English devolution programme that has established elected metro mayors across combined authorities such as Greater Manchester, the West Midlands, and West Yorkshire. Diamond argues the contrary: for London to grow sustainably, it requires additional powers and investment capacity directed at the core drivers of competitiveness.

London, as a unique global city, needs a radical devolution settlement reflecting that status. Several aspects of current governance arrangements fall short — London's institutions do not always scrutinise policy effectively, and the city holds fewer powers than its counterparts in New York, Paris, and Tokyo, where sub-national governments typically exercise broader fiscal and regulatory autonomy. The creation of an integrated financial settlement that pools existing budgets is a welcome development, but Diamond notes that too many conditions remain attached by Whitehall. The city needs genuine autonomy to manage its economy and reform public services, particularly in light of an ageing population.

London's government, Diamond asserts, should possess the same powers as the devolved administrations in Wales and Scotland, including control over major taxes. As the London Finance Commission — established under then-Mayor Boris Johnson — proposed in its 2013 and 2017 reports, stamp duty, property-related capital gains tax, business rates, and council tax should all be devolved. The capital should also retain a proportion of income tax to finance major infrastructure and economic development projects — covering housing, transport, and net zero investment — rather than depending on Treasury allocations.

Greater devolution, however, should not simply concentrate more power in the office of the Mayor. London boroughs need their own budgets and policy levers to drive local growth. Local councils, Diamond observes, are too often sidelined. Evidence indicates that residents are more inclined to accept controversial decisions — such as the location of new housing or transport infrastructure — when those decisions are made locally. Most London voters identify primarily with the borough in which they live. Councils should therefore function not as a delivery arm of the GLA, but as full participants in joint decision-making, given their democratic mandates. As with combined authorities elsewhere, boroughs should be a driving force in the governance of the capital.

This new devolution settlement, Diamond concludes, is not optional. London faces a serious risk of falling behind. With growth and productivity stagnating over the past decade, the capital needs the freedom to invest in what matters most for the future economy.

Patrick Diamond is professor of public policy at Queen Mary University of London.