Don’t let ministers treat London as their cash cow

Asked to explain how she saw her identity, she had no hesitation in saying she was first and foremost a Londoner. Her greatest pride was in her city, not her country. She spoke passionately of how the capital – with its energy, its openness, its spirit of independence – was the most important part of her cultural chemistry.

Promise is my polar opposite in terms of background, colour, generation and gender, but I knew instantly what she meant. I share her stance – and suspect an increasing number of others do too, especially from those generations that have grown up in London since it became such a diverse global city and so different from the rest of the country.

I find it easier to identify with the extraordinary sprawling city in which I live than either England, that supposed land of warm beer and old maids on bicycles, or Britain, an amorphous concept that still defies definition. Gordon Brown’s futile attempts to lead a national debate on this was just one more example of how little he understood Britons.

Thanks to the political machinations of Alex Salmond, the future of the United Kingdom is firmly back on the agenda. Trailing behind the debate over Scottish independence is the risible idea England needs its own parliament. But perhaps the time has come to think about something far more radical: independence for London.

The South is bailing out the rest of the country to an astonishing degree. A study by the Centre for Economics and Business Research revealed last week that one in every five pounds earned in London goes to subsidise other regions. Along with the South-East, it is the only part of Britain that generates more in tax than it spends on state services.

The capital has become a cash cow – yet politicians want to milk it more. It is threatened with further punishment for its incredible success with an array of new measures aimed at hitting high earners, big home owners and the financial sector – all of which are concentrated in the South.

Stamp duty, land tax and the 50p income tax rate are already taxes imposed largely on this region. The mansion tax proposed by deputy prime minister Nick Clegg for expensive homes would be another attack. Meanwhile, the Government’s banker bashing and the Opposition’s daft talk of a Tobin tax on financial transactions threaten to undermine a sector that for all its flaws and greed remains invaluable to our economy.

London was last into the recession and first out -and since the financial crisis broke nearly four years ago the disparities have grown with the rest of the United Kingdom, which relies far more on the public sector for jobs. Employment has risen in London while falling in most other places, with output per head 10 times greater in parts of the capital than in parts of Wales. Even the house price gap has extended.

Curiously, the most prosperous region outside the South is Scotland – which shares London’s social liberalism and greater acceptance of immigrants. For the differences between the capital and the rest of England are about far more than finance: they are about attitudes, culture and politics. Even when it came to the AV referendum last year, several London boroughs were almost alone in wanting change.

The tolerance of outsiders has transformed London in my lifetime, with one-third of residents now born abroad. When I was in Moscow recently the head of a television station asked me which was Russia’s second city? His answer was London.

Successive waves of immigrants have made this a vibrant place to live while ensuring a constant exchange of ideas and influences to keep the city ahead of the game.

This is why some argue Indian food is better in London than Delhi, why the capital’s music, art and fashion retain their cutting edges and why there are four businesses started in London for every one in Sunderland. It is also why the immigration cap is so damaging, whether to businesses or Europe’s largest cluster of universities.

London has always been shy about shouting how great it is since its success annoys the rest of the country. To placate such feelings, we see fig-leaf absurdities such as the BBC spending £1 billion moving some production to Salford Quays – then employing just 24 people from Salford.

However unpalatable for the rest of Britain, London is now a global city whose competitors are New York and Shanghai, not Newcastle or Southampton. According to urban studies expert Richard Florida, the GDP of the London “mega-region” makes it the 15th biggest world economy, up there with Canada. “Cities such as London and New York are different animals from their host nations. They are their engines – but also increasingly like different countries,” he says.

There is a downside. One by-product of the highest average wages is some of the worst inequality; those in less-skilled jobs in London have suffered badly in the recession. If the capital ran its own affairs, however, it would have far more money to spend eradicating the worst pockets of poverty and deprivation.

Independence for London is a fanciful idea, of course. But as the mayoral race heats up, it is noticeable how little control the winner will have compared with his counterpart in New York to tackle such problems or tap in to the city’s innovation. There is no power to regulate advertising or raise taxes, let alone set minimum wages or run welfare schemes.

Regardless, as the devolution debate takes off north of the border, politicians would do well to recognise London’s unique identity as well. They should cherish it rather than undermine it for the sake of the whole nation – whatever shape that might be in the future.