London’s National Economic Contribution

Dawn Butler Excerpts

Thursday 10th July 2025 Westminster Hall

[Dawn Butler (Brent East) (Lab)]

It is a pleasure to serve under your chairship, Mr Western. I congratulate my hon. Friend the Member for Kensington and Bayswater (Joe Powell) on securing this vital debate.

If we are serious about national growth, we must invest in London. That should not be in dispute after what we have heard today. London is the UK’s top global city. It is home to more than 9 million people and generates almost one quarter of our entire economic output. Its net contribution to the Treasury now stands at a record £43.6 billion. That is why we need to invest in London—because London invests in the UK. It is essential.

On the way to this debate, I was talking to—or, more correctly, arguing with—a non-London MP, who was saying, “It’s about time we got some of that money out of London.” This is the environment that is being created when we talk about taking from London instead of saying that we need to invest in London and in the regions. We have heard how much tourists spend in London —a whopping £16.3 billion, even while still recovering after the pandemic. If the Government introduced a VAT exemption for tourists, that figure would be boosted, and an overnight accommodation levy of just £1 would bring in some more money, which could be used for the development of London by the Mayor of London. We need to stop the narrative that London is somehow separate from the rest of the UK and that we take from London to invest elsewhere. That was the attitude of the last Government, and it is the wrong attitude; it should not be carried over to this Government.

Let us take as an example the Bakerloo line, which my hon. Friend the Member for Kensington and Bayswater mentioned and which I travel on regularly. It is the oldest train service in the UK, and by gosh, when we are on it we can feel that. It very much needs to be upgraded. It runs right through my constituency of Brent East. If we invested in the Bakerloo line, not only would that make my life easier—although I know this is not about me—but the project would add £1.5 billion to the UK economy and support 150,000 jobs and more than 100,000 new homes. What is there not to like about investing in the Bakerloo line? In addition to that, two thirds of TfL’s suppliers are outside London—the new trains are built in Yorkshire—so that economic wealth is spread right across the regions. This is not London versus the regions; it is London working with the regions for the betterment of the UK. We can and must grow together.

The same applies to our safety and infrastructure. A safe and functioning London not only supports residents and businesses here, but ensures that our capital remains open to global investors, visitors and institutions. As we recently read, people now see London as the place to be and invest in. Companies are moving from the US to the UK: they want to invest here because of our infrastructure and our diversity, which we are proud of.

The reality is that after a decade of Conservative cuts and neglect, our emergency services are under huge pressure and are struggling to survive. The Fire Brigades Union had a lobby here yesterday. Ten or 20 years ago, there was talk of reducing the fire service because we had so few fires. Now, with the advance of electric cars, mopeds and bikes, we have more and more fires, so we need to invest. The Metropolitan police has delivered £1.2 billion in savings since 2012-13, and there is now talk of frontline cuts. We just cannot have that in London. That is a threat not just to London’s safety, but to our economic stability.

Past investment has delivered. To those who say, “That’s not the case,” I would point out that the Elizabeth line unlocked 55,000 homes, created tens of thousands of jobs across the country and added an estimated £42 billion to the economy. This is how we invest and make money. Not only that: the Elizabeth line has the best air-conditioned trains in the city—I think everyone appreciates that right now. We need to repeat that success, not retreat from it. We need to praise London.

Productivity in London has fallen since 2008. The Conservatives created funding formulas that pushed funding away from the areas that needed it the most. The then Prime Minister talked about that during the election—quite embarrassingly so. Since 2010, my borough of Brent has been forced to cut a whopping £222 million in funding due to the Tory austerity measures, and we still need to deliver. We need to stop cutting and start investing.

We are now behind cities such as Paris and New York in productivity. That should concern every single one of us in London and elsewhere. We need to work with London. I am concerned about the local government funding reforms, because although we are rightly introducing a new focus on deprivation, not including housing is a skewed way of looking at it. Often in my constituency, 70% of people’s earnings goes on housing.

I am always proud to see our London MPs—they are some of the best MPs in the House. I urge the Minister to reconsider the reforms and ensure that they reflect the unique, pressing challenges that London is facing. We should not shy away from that; we should be proud of what London brings to the UK. This is about not special treatment but sound economic judgment. A thriving capital fuels a thriving country. We do not have to choose between London and the rest of the UK. In fact, choosing London is choosing national growth, so let’s invest in our capital, our transport, our safety, our housing and our skills. Let’s back London, and let’s all love London.

--- Later in debate ---

[Luke Taylor (Sutton and Cheam) (LD)]

It is a pleasure to serve under your chairship, Mr Western. I thank the hon. Member for Kensington and Bayswater (Joe Powell) for securing this debate.

London is not where I was born, but for so many of us who come to our great city, it is where our life begins. As a wide-eyed, bushy-tailed teenager arriving to study at Imperial College—as has been mentioned already—in the early 2000s, I felt the visceral sensation of my life changing. London is, and always has been, a melting pot, smorgasbord, tapestry and every other cliché you can find to describe the world’s greatest city—as I am sure all of us present in Westminster Hall agree. That is why it is the honour of my life to be the Liberal Democrats’ Front-Bench spokesperson for this city, which I love so dearly.

As I sat in St Paul’s cathedral earlier this week for the commemoration of the 7/7 attacks, I reflected on what makes London so special: everyday heroes and ordinary working people, who face unbelievable challenges in a city that stands astride hemispheres and cultures, but who get up every day and carry on.

It is often tempting to separate economic progress from cultural pride, but I think they are one and the same. It is the hard work and energy of Londoners that make this city contribute so much to the nation’s economy and society. Yet they face immense challenges: some of the highest rates of child poverty in the nation; crumbling hospitals; crimes such as knife crime and tool theft that destroy lives and livelihoods; profound infrastructure problems that hold back growth and cut off opportunities, not least for the disabled or disadvantaged; and lingering environmental problems, with pollution thick above some of our major roads and dense in our great river.

I cannot pass up this opportunity to ask the Government not to leave London behind or simply continue to tack to the record of the last Conservative Government in failing to take steps to keep London as a world city, and a liveable one too. Yet I fear they are veering dangerously close to that path. Let me start with the hike in employers’ national insurance contributions. If we were looking for a way to actively stymie London’s innovation and business environment, which is already dealing with global shocks and Trump’s tariffs, that misguided tax policy would be right up there.

If Britain is an island of shopkeepers, London is its longest high street. Our economic activity makes up more than a quarter of the nation’s annual GDP. Were it simply the case that such growth was generated just by the hands of a few financial institutions in a glass tower above the City, that would be less impressive. However, it is in the enterprising small businesses—the family-run restaurants that punch above their weight—and the world-leading research institutions, big and small, that London’s real economic powerhouse sits. London’s care workers, bus drivers and street cleaners, who keep our city liveable for ordinary people, despite the rising cost of housing, are the fuel that keep the engine going. To hammer them with what turns out in practice to be a jobs tax is totally misguided.

The Office for Budget Responsibility has shown that the £25 billion a year the hike is supposed to raise is far too optimistic, and the figure seems to be much closer to £10 billion. Indeed, that figure could be more readily and justly raised by reversing Conservative tax cuts for big banks, increasing the digital services tax on the largest multinationals or the remote gaming duty for online gambling firms, reforming capital gains tax to make sure that the super-rich pay their fair share rather than hard-working Londoners being hit by the tax because of the ballooning housing market, or funding His Majesty’s Revenue and Customs to collect the tax that is owed and currently dodged by companies and individuals wealthy enough to afford the best advice.

Governing is about choices, and the Government have made the wrong choice for Londoners and the whole country with the NICs hike. Will the Minister outline whether a review of the policy, or at least exemptions, will be considered at the autumn Budget?

The Government have also chosen not to seriously grip the mantle of the reform that would turbocharge growth most of all: fixing the Conservatives’ botched Brexit deal that has left London languishing outside the European market in so many meaningful ways. It is good that they have begun some of the work of normalising our relationship with our biggest neighbour and trading partner, but they will not budge on the most critical issue of all, which is a new customs union with the EU that would boost growth and, by extension, tax receipts.

Nobody wants to return to the Brexit wars of the last decade, but the Government would do well to remember that nobody voted to make themselves poorer on that day in June 2016. Whether Londoners or the British people, remainers or leavers, nobody wanted to be worse off—and we were all promised by both sides that we would not be. There is a significant opportunity to right that wrong as we normalise our relationship, and the Government are just not taking it.

In much the same way, the Government are failing to invest in the infrastructure that London needs to deliver its share of the growth that Britain needs. Even though we welcome the 10-year infrastructure plan, many of us noted that there was no commitment in the spending review to the capital funding needed for the Bakerloo line extension. As my hon. Friend the Member for Richmond Park (Sarah Olney) so vividly explained, Hammersmith bridge—such a vital artery not just in her constituency but across west London—remains shut, with no commitment to a proper funding agreement to get it permanently reopened. Parts of outer London, like in Sutton in my constituency, remain in effect cut off from the TfL network, because of either poorly performing bus and national rail services or the complete absence of tram or tube infrastructure in the borough. To be absolutely correct about that, we have half a tram stop in Sutton, but we tend not to count that.

London is not just Soho and Chelsea: it is places like Sutton, Hillingdon, Hornchurch and Enfield—proud boroughs with combined populations of millions that must play their part in growing the pie, and that need commuter transport investment to do that. Where infrastructure projects happen, they seem either to be delivered at great delay and overspend, like the new Piccadilly line trains, or to be unimaginative white elephants, like Mayor Khan’s Silvertown tunnel. The new four-year deal for TfL outlined in the spending plan presents a chance to change that. I invite the Minister to outline whether the Government will now look at finally delivering progress on reopening Hammersmith bridge, on the Bakerloo line extension and on the DLR extension to Thamesmead.

It is just not good enough. Many Londoners are left asking why London’s contribution to the nation does not mean that its voice is heard. Compared with its peers around the world, London does not have anything like the appropriate devolved powers. In the patchwork of devolution that has been woven in this country this century, London’s settlement is looking increasingly threadbare and outdated.

The Greater London Authority has nowhere near enough power to shape the mayor’s agenda and hold them to account, and the mayor’s powers are themselves too limited. Not enough money raised in the city can be spent in the city. Local councils, the bedrock of London’s governance, are ignored, prevented from working strategically across the city, and powerless to stop year after year of funding cuts. How else can we explain the actions of a Government who are pushing ahead with a new funding settlement that could leave some councils losing 70% of their spending power? That is particularly foolish at a time when councils are doing great work to boost London’s growth, with superb research and development schemes such as the London cancer hub in my borough of Sutton, which could create thousands of new jobs locally.

Perhaps the most pertinent question is: who really speaks for London? It certainly isn’t Sadiq Khan, who promised us that with

“the winds of a Labour Government at our backs”

he would be able to deliver for Londoners, but on the day of the spending review made himself completely unavailable for media comment. Where was the voice that London needed on that day? He is evidently not as affective, and this Government not as receptive, as we were led to believe. As a result, I fear Londoners are being sidelined in respect of the industrial strategy and fiscal policy.

Why, for instance, is London excluded from the new £150 million creative place growth fund, and from the British Business Bank’s new nations and regions investment fund? Why have the Government not listened to calls, from not just the Liberal Democrats but the private sector, to replace the apprenticeship levy with a skills and training levy that is properly integrated with devolved powers over skills, to give businesses the flexibility they need? Why have the Government not even listened to our calls for lifelong skills grants? I hope the Minister can explain.

We must level up all parts of Britain. There are regional imbalances in this country that are totally unjust—I know that more than most, having come here from rural Lincolnshire—but there is no path to growing Britain without a strong, dynamic, self-governing London. As I stand here having recounted so many of the challenges that London faces in continuing to contribute to the nation’s economy, I wonder again in frustration why, in my role of Liberal Democrat shadow London spokesperson, I am not able to shadow a Minister for London—although I mean no slight on the Minister who is here. There has been one, on and off, for 30 years, and the Government’s decision not to appoint one is a gross oversight for all the reasons brought up in this debate.

[Dawn Butler]

It is actually not unusual that when there is a Labour Government and a Labour mayor—like when there was a Tory Government and mayor—there is not a Minister for London. Also, on the hon. Member’s comments about our Mayor of London, Sadiq Khan has been the biggest business mayor London has seen. He has been a better advocate for London than any Tory or previous mayor. It is a little bit unjust to refer to him in the way the hon. Member did.

[Luke Taylor]

The hon. Lady gives a stirring defence of the Mayor of London. We are trying to make the point that there is no cross-Government holistic view of London’s priorities. Londoners need a voice inside the Government: our interests ought to be not divided out across Departments and responsibilities, but co-ordinated and addressed holistically. That is the point about a Minister for London who would be able to co-ordinate Departments and responses.

There needs to be conflict with the Mayor of London—somebody fighting for London and against the Government, whether that is a Labour Government, a Conservative Government or, heaven forbid, a Liberal Democrat Government. We need that conflict, challenge and alternative view, because their goals often do not align perfectly. There has to be that champion, and I do not believe that the voice of the Mayor today is loud or clear enough in that regard. I take the hon. Lady’s points in the positive way that I am sure they were intended.

We deserve the attention, investment and confidence of greater devolution—even more powers for the Mayor to do as he sees fit, as the London regions and councils should direct. We need to keep on doing our bit to drive the economic value and contribute to our great country.