Chancellor Rachel Reeves is being urged to grant Sadiq Khan more powers to raise tax to fund infrastructure. A new report says the London mayor must be given the authority to tax tourists and businesses’ payroll in a similar way to Paris in order to fund infrastructure projects in the capital.
London Unchained, a report drawn up by Labour Together and the Yimby Alliance, argues that projects in the capital have been delayed, downsized and cancelled due to an inability to self-fund. Ministers have now been urged to give Mr Khan the powers to impose payroll and tourism taxes, as well as a new tax on the excess of a house’s value above a certain threshold, reports MyLondon. Whispers of a tourist tax on the capital began towards the end of 2024 with the Mayor of London, Sadiq Khan admitting he was “happy to look into” and began discussions about the possibility of a tourist tax imposed in London’s hotels.
The report slams the current setup where London “has to take its begging bowl to Westminster” to fund major projects.
“It is ridiculous that London, one of the richest economies in the world, has to come to the government with a begging bowl to fund the infrastructure it needs,” the authors say.
“The UK funds much of its infrastructure from a central pot of money in Whitehall. That means we waste time arguing about whether it’s better to invest in richer places like London so they can compete with New York, or to invest in poorer places like Birmingham to drag up their productivity to the national average.”
The report argues that “London should have the toolkit that a city like Paris has to tax the businesses and households that will benefit from new infrastructure.”
Paris currently raises £6 billion (€7 billion) a year via a dedicated transport tax which imposes a levy of up to three per cent on gross wages.
The tourist tax has also risen significantly in Paris with the levy ranging from €3.25 a night for two star hotels all the way to €11.38 for five star hotels.
The report adds: “If we just invest in the south east, we will fail to improve lives in the rest of the country. If we fail to invest in the south east, we sacrifice one of the most powerful wealth-generating engines on the planet.”
The authors cited the proposed Bakerloo Line extension, which is still yet to be given the green light, as a problem that the reforms can solve.
A spokesperson for Khan told the Local Democracy Reporting Service: “The mayor welcomes the new era granted to London through the latest Devolution Bill, which means we can move forward with innovative new policies to boost economic growth and raise living standards in the capital as well as across the country.
“More devolution would allow us to unleash London’s economy further, and compared to other global cities we remain a heavily centralised country, with too much power still in the corridors of Whitehall.
“The mayor will continue working closely with the government to deliver more devolution for the capital as we build a fairer, safer, more prosperous London for everyone.”
