Local Government - London decides

Londoners will vote in two weeks’ time on a proposal to set up a newsks Peter Williams. authority – a mayor and an assembly for the whole of the capital.

Nick Raynsford MP, the minister for London, speaks in favour of a new Greater London Authority on the basis that many of the city of London’s fundamental problems result from a democratic deficit.

Since the abolition of the Greater London Council in 1986, London has been left, as he puts it, not just rudderless, but more like a ship without a captain to guide it through very stormy waters.

Whether the majority of eligible voters – all those on the electoral register of the 32 London boroughs and the city of London – will agree, remains to be seen. But despite all the media hype over the characters and personalities of possible contenders, there has been little serious discussion about the merits of setting up a directly elected mayor. For accountants, the question is how a GLA would be controlled financially.

Raynsford is keen to debate this issue and has agreed to answer questions from London accountants at a meeting organised by the London Society of Chartered Accountants in conjunction with Moores Rowland at the English ICA on Thursday 30 April.

The real question that he needs to answer is whether a mayor for London will be good for business or simply another financial burden. In truth, the business and financial control angles will probably be overshadowed in the noise of the hustings up to 7 May.

But as well as individual electors, businesses of all sizes which create wealth and employment in the capital have a legitimate interest in the impact the GLA will have on their future economic and business prospects.

London has top productivity

Speaking recently at the launch of ‘Focus on London 98’ – a government publication detailing the statistics of London – Raynsford acknowledged the capital’s economic importance, pointing out that from 1986 to 1996 London’s gross domestic product per head grew faster than in the country as a whole and that London’s GDP per head was by far the highest in the UK.

Furthermore, he points out, London accounts for around a quarter of all businesses in the UK that have a turnover of #5m or more. Raynsford emphasises that, for the first time, there will be a dedicated body to co-ordinate economic development and regeneration in London. The new London Development Agency will promote sustainable economic development and social and physical regeneration, and co-ordinate the work of partners.

The mayor’s role will be pivotal, appointing a directly accountable, business-led LDA Board responsible for implementing his or her economic development and regeneration strategy for London.

There are no details on how the ‘business-led LDA Board’ will be selected but it must be a key target for accountants of different roles and experiences.

While an LDA may court publicity in securing new jobs, the GLA would affect London’s existing businesses as it would take on responsibility for key issues such as transport, planning and the environment.

The Labour administration is desperate to avoid any comparison with the controversial Thatcher-abolished GLC. For a start it has calculated that the mayor, assembly and related staff would cost less than #20m a year and most of that would be financed by central government. Londoners will pay the equivalent of an extra 3p a week on a band D council tax bill.

The white paper on the future government of London states that the substance of the existing financial arrangements for services that transfer to the GLA, funded through a mixture of grant, a share of business rates, council tax and credit approval, would be broadly maintained.

The changes should not lead to increased pressure on public finance and expenditure. In comparison, the current expenditure that the GLA would take on stands at #3bn.

According to the white paper, the mayor will have a degree of financial flexibility. He or she will propose a budget each year set within three central government restraints:

– major services must be maintained to adequate standards;

– where grants and credit approvals are given for specific purposes, they can be used only for those purposes; and

– limits will be set by government on council tax increases.

The budget will have to be approved by the assembly – or if changed, carried by a two-thirds majority, subject to upper limits on the GLA’s overall budget.

The government also consulted over whether the GLA should have any extra revenue-raising powers. The only possiblity seems a form of tax on cars aimed at easing London’s traffic congestion.

The GLA was well flagged in the Labour manifesto in the run-up to last year’s general election. With such a resounding victory for Labour, especially in London, the GLA seems an inevitability, but London borough elections are happening at the same time.

A year on, it will be interesting to see if voters are getting cold feet.

If the answer is ‘yes’, the first mayor and assembly elections would take place in about two years’ time and then every four years. But before London business has its vote, it can also have its say.

Peter Williams is a chartered accountant and editor of the newsletter Electronic Finance

FURTHER INFORMATION

The white paper should be available in London’s local libraries or on the Internet at http://www.london-decides.detr.gov.uk.

The London Society of Chartered Accountants debate is open to all accountants. Further details are available from Louise Cann on 0171 726 2722.