London now pays almost a third of UK’s tax
The UK government’s finances are “increasingly dependent” on London’s tax contribution, according to a new report.
The Centre for Cities study found that London generated just short of 30% of the UK’s ‘economy taxes’ in 2015 and paid as much tax as the next 37 largest cities combined.
'Economy taxes' are defined in the study as all of the taxes dependent on the growth of the economy, such as income tax, VAT, land and property taxes.
While London’s tax intake has increased by 25% since 2004/05, other major cities saw little or no growth.
Birmingham, Glasgow and Leeds saw their share of overall national tax intake fall by around 2%. Birmingham contributed £251m less tax over the past 10 years, while Glasgow’s take intake was £139 million lower.
The increase in tax generated by London from 2004/05 to 2014/15 amounts to a £28bn increase in cash terms.
Centre for Cities said its report highlights the risks of the UK government being too dependent on one city for tax revenues and said that if London’s economy were to slow down it would “pose major challenges to both the capital and other places across the country”.
Mayor of London Sadiq Khan said London has become “the main tax generator for the whole country” and said the findings show “the importance of more balanced growth across the entire UK as well as ensuring the capital’s continuing success”.
“The UK’s growing reliance on London’s taxes underlines the importance of ensuring that the capital prospers in a post-Brexit world,” Alexandra Jones, Chief Executive of Centre for Cities, said.
“But our research also shows that more must be done in the years ahead to strengthen the economies and tax bases of other city regions such as Greater Manchester, the West Midlands and the North East, many of which voted strongly for Leave.”
Source: Centre for Cities