London’s National Economic Contribution

Sarah Olney Excerpts

Thursday 10th July 2025 Westminster Hall

[Sarah Olney (Richmond Park) (LD)]

It is a pleasure to serve under your chairmanship, Mr Western. I thank the hon. Member for Kensington and Bayswater (Joe Powell) for securing this important debate. London is an economic powerhouse, which generates revenue for the entire country. The capital city’s contribution to the economy is nearly 25% of the UK’s entire GDP.

While redistribution of revenue across the UK is important, it should be noted that London has some of the highest rates of poverty. In particular, it has the highest rate of child poverty, at 35%, compared with a national average of 29%. Disparate income bands and living standards are more evident in London than anywhere else in the UK, but the cost of living is also greater in London than in any other area. The average London house price is more than double that in the rest of the country.

I raise those points because the Government’s changes to local authority funding will mean that London councils face a funding shortfall of an estimated £500 million. Consequently, most London boroughs will have to raise council tax by the maximum amount each year to raise revenue for the funding of key statutory services. It also means that some councils will be threatened with bankruptcy.

Redistribution of wealth across the UK is important, but the absence or poor use of measurements in the Government’s fair funding formula will produce unfair results for Londoners. The index of multiple deprivation is being used as a need driver in the fair funding formula, but, as the hon. Member for Chelsea and Fulham (Ben Coleman) pointed out, that index does not include a measurement of deprivation after housing costs. London residents pay the highest average rents in the country, so excluding that statistic will result in an unfair measurement of deprivation, and London residents will lose out unfairly.

[Natasha Irons (Croydon East) (Lab)]

The hon. Member is making excellent points. On deprivation and the cost of housing, does she agree with me that when we factor in London’s housing costs, London becomes the poverty capital of the country? Without vital funding for housing in London, London does not grow. If London does not get the funding it needs for housing, it holds the rest of the country back.

[Sarah Olney]

I thank the hon. Lady for making that point. She is exactly right. Housing costs in London are far above the average for the UK as a whole. The average Londoner has to pay these costs out of an income level that is on average higher than across the country as a whole, but not to the same magnitude. Measuring deprivation based only on income before housing costs is a key unfairness for Londoners, because their housing costs are so much greater. She is absolutely right that if we underfund London, as will happen if the measure of deprivation after housing costs is not used, London will be underfunded and that will threaten the economic development and growth of the UK as a whole, because London is so essential to what happens across the UK.

The number of visitors that an area receives is also being used as a factor in the funding formula, but the review is using figures from the 2021 census. We were still coming out of the pandemic when those figures were collected, so London had significantly fewer visitors than in an average year. As somebody who has regularly travelled from outer London to inner London over the last few years, from 2021 to 2025, I can assure the Minister that the number of people on our tubes and trains has grown significantly. My data is anecdotal, but I am sure my impression is shared by many Londoners who made similar journeys in that period. If visitor numbers are to be used as a measure to feed into the fair funding formula, it is vital that up-to-date figures are used. I urge the Government to review the formula with updated figures to ensure that it does not produce inaccurate results, which will again result in unfair distribution of Government grants.

I and Liberal Democrats in general very much welcome the Government’s announcement of a 10-year infrastructure plan—a clear vision for housing, the economy and social infrastructure, which is required to drive growth and investment—but I am disappointed that the Government have yet to announce whether the £1 billion provision from the structure fund will be allocated towards the repair of Hammersmith bridge in my constituency, which, as I am sure the Minister knows, has been closed to motor traffic for six years. We remain uncertain about whether the Government intend the bridge to be repaired and whether they will commit to providing the funding for those repairs. Any indication of their position from the Minister will be welcomed by my constituents.

The closure of the bridge has affected local residents and commuters, particularly disabled and elderly residents, who have been cut off from the other side of the river, and emergency services remain unable to cross. It has also had a massive impact on businesses just south of Hammersmith bridge that relied on the passing trade. We look forward to the announcement of what the structures fund pot will be used for, and hope very much that some funding towards Hammersmith bridge will be included. I urge the Government not to miss that opportunity.

The bridge itself is a tourist attraction in my constituency. It is one of London’s oldest bridges—there has been a bridge on the site since the 1820s, and the current structure dates from the 1870s—and I dare say the fact that it is a museum piece is one of the many issues that has prevented funding from being allocated for its repair until now. It is one of many wonderful tourist attractions in my constituency. Kew Gardens was the second most visited paid-for attraction in the country last year. We also have the wonderful wetland centre just south of Hammersmith bridge and many other wonderful tourist sites, not least the park after which my constituency is named.

London as a whole is visited by more than 20 million tourists every year, who bring with them significant contributions to our economy. A key factor for tourists is to feel safe when choosing London as a destination, but the capital’s reputation as a safe city to visit is on the decline. It is vital that London has visible and sufficient policing to tackle crime and keep visitors and residents safe, but the Chancellor’s spending review did not include additional funding for the Metropolitan police, despite their commissioner warning that “eye-watering cuts” would have to be made if funding were not provided.

The cuts will be felt in my constituency. The disbandment of the dedicated royal parks police unit is of great concern to my constituents. The parks police serve Richmond park diligently, ensuring that crime and antisocial behaviour are kept to a minimum. Their removal will mean that our already stretched safer local neighbourhood teams have to take on additional responsibilities in their absence.

The Richmond Park constituency used to be home to three police stations, but after years of cuts not a single one remains, even though Barnes is one of 72 wards in London that are more than a 13-minute drive away from the nearest police station. These cuts cannot continue, and I urge the Government to stick to their commitment of increasing the police presence in London and across the rest of the UK. I receive daily emails from my constituents expressing their concerns about theft, violent crime and the lack of visible policing. Will the Government be able to provide assurances that my constituency will not have fewer officers serving it at the end of this year than before Labour took power?

Investment in London can and does boost economic growth, which provides investment for other regions. I urge the Government to understand and acknowledge the significant contribution that London makes to our national economy. London must not be short-changed by the Government. I encourage them to review the criteria for their fair funding formula, to invest in the repairs to Hammersmith bridge and to release more funding for the Met to ensure that residents and tourists feel safe walking our streets.