London’s share of the nation’s output makes its role in any devolution plan essential, according to a recent commentary by public‑policy professor Patrick Diamond. The analysis argues that the new prime minister, Andy Burnham, must grant the capital additional powers and funding if the broader “level‑up” agenda is to succeed.
London’s contribution to the national economy
London generates more than one‑fifth of the United Kingdom’s gross domestic product, a proportion that translates into tax revenues that support public services across the country. The city’s dense network of legal, financial and professional services underpins growth in other major urban areas such as Birmingham, Leeds, Manchester, Newcastle and Bristol. Diamond notes that the capital’s economic health is therefore directly linked to the wellbeing of the rest of the nation.
Despite this importance, the past 15 years have seen stagnation in London’s growth and productivity. The 2008 financial crisis dealt a lasting blow to the financial sector, while later global headwinds and the impact of Brexit further reduced output. Within the capital, disparities are stark: affluent Westminster sits beside deprived boroughs such as Newham and Barking and Dagenham, illustrating how uneven development inside London mirrors the wider regional gap.
Calls for a more radical devolution settlement
Diamond contends that the existing governance framework falls short of what other global cities enjoy. He points out that London’s institutions lack the same degree of policy scrutiny and fiscal autonomy as those in New York, Paris or Tokyo. While the recent “integrated financial settlement” that pools existing budgets is a step forward, it still places many constraints on the city, with numerous strings attached to Whitehall.
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The professor argues that London should receive powers comparable to those held by devolved bodies in Wales and Scotland. Specifically, he cites the London Finance Commission’s proposal from nearly a decade ago, which recommended devolving stamp duty, property‑related capital gains tax, business rates and council tax. Retaining a share of income tax would also enable the city to fund major infrastructure projects without relying on Treasury grants.
Greater devolution, however, should not concentrate authority solely in the mayor’s office. Diamond stresses that borough councils need their own budgets and levers to drive local growth. Evidence suggests residents are more likely to accept contentious decisions—such as the placement of new housing or transport facilities—when they perceive those choices as locally made. Boroughs, therefore, should act as partners rather than merely as delivery arms of the Greater London Authority.
In practice, this could mean that a borough like Newham, which has long struggled with low growth, might gain control over business rates to attract investment, while a wealthier borough could direct funds toward housing affordability. Such a shift would align decision‑making more closely with the people who live there, potentially easing the tension between city‑wide ambitions and neighbourhood concerns.
Why the capital cannot be ignored
Diamond warns that without additional powers, London risks falling behind its international peers. The capital’s productivity has been stagnant for a decade, and the current devolution settlement does not provide the flexibility needed to address emerging challenges, such as an aging population and the transition to net‑zero emissions.
He notes that the city’s ability to finance large‑scale projects—housing, transport, climate‑related infrastructure—depends on a reliable revenue stream. Relying on occasional Treasury largesse is unsustainable, especially as the nation’s fiscal pressures grow.
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London needs more fiscal freedom.
From a practical standpoint, giving the metropolis more autonomy could help it invest in sectors that drive competitiveness, such as fintech, creative industries and advanced manufacturing. These investments would likely spill over into other regions, reinforcing the “level‑up” goal that the Burnham administration has set.
In short, the argument is that a stronger, better‑funded London can serve as a catalyst for nationwide economic improvement, rather than a siloed enclave of wealth.
While the commentary is focused on policy recommendations, it implicitly acknowledges the political reality that any shift in powers will require negotiation with central government. The proposal to align London’s fiscal autonomy with that of the devolved nations suggests a broader rethinking of the United Kingdom’s internal balance of power.