London accounts for the biggest share of the UK’s tax revenue, with the capital generating just under 30% of national ‘economy taxes’ in 2014/15, according to research from the Centre for Cities, which found that the tax take in the capital has far outpaced that of other major UK cities over the past decade
The 10-year analysis looked at those taxes dependent on the growth of the economy, namely income tax, land and property taxes and VAT, which the think-tank says account for 88% of all taxes raised, but did not include other categories such as alcohol and tobacco duty.
The research shows that London currently accounts for 28.6% of the overall national tax intake on these terms. Over the ten year period the capital was responsible for 43% of the ‘economy tax’ generated in UK cities.
In contrast to the capital, the other 62 UK cities which contribute most to the national finances have seen little or no growth in their tax intake in the past decade.
For example, while the amount of tax generated in London increased by 25% (£28bn) in real terms between 2004/5 and 2014/15, Manchester’s tax intake grew by only 1%, while Birmingham, Glasgow and Leeds all saw significant decreases in their tax intake.
The national economy’s increasing reliance on London is even more striking in terms of ‘work taxes’ (a subset of economy taxes – principally income tax and national insurance contributions), the think-tank says. In part due to policy changes such as the raising of the personal tax allowance, the capital generated £91bn in ‘work taxes’ in 2014/15 – more than the next 60 cities combined.
The report highlights the potential risk to the UK exchequer of relying heavily on one city to generate such a large portion of national tax revenues, warning in particular that a slowdown in London’s economy would pose major challenges to both the capital and other places across the country.
Alexandra Jones, chief executive of Centre for Cities said: ‘The UK’s growing reliance on London’s taxes underlines the importance of ensuring that the capital prospers in a post-Brexit world. But our research also shows that more must be done in the years ahead to strengthen the economies and tax bases of other city regions such as greater Manchester, the West Midlands and the North East, many of which voted strongly for Leave.’
The report, 10 years of tax: how cities contribute to the national exchequer, is here.
