Labour calls for fiscal autonomy for London to accelerate infrastructure expansion

London’s future development hinges on granting the city greater fiscal powers, with Labour-backed reports urging Sadiq Khan to implement new taxes to fund vital projects amid government resistance.

Chancellor Rachel Reeves is facing mounting calls to empower London Mayor Sadiq Khan with greater fiscal autonomy to fund critical infrastructure projects in the capital. A recent report by Labour Together and the Yimby Alliance, titled London Unchained, advocates granting Khan the authority to levy taxes akin to those imposed by Paris, such as a payroll tax on businesses and a tourist tax on visitors. The report highlights how London’s infrastructure projects have been hampered—delayed, downsized, or cancelled—due to an overreliance on central government funding. It emphasises that it is “ridiculous” for one of the world’s richest cities to have to rely on annual grant negotiations with Whitehall for essential development.

The authors argue for London to have access to a dedicated tax toolkit, similar to Paris, which currently raises approximately £6 billion annually through a transport levy on wages and substantial tourist taxes ranging by hotel star rating. This autonomy would allow the city to self-fund transformative projects such as the much-anticipated Bakerloo Line extension, which remains unapproved. The report also stresses the broader economic implications, warning that failure to invest in London risks sacrificing one of the planet’s most potent wealth-generating engines, while unchecked regional investment without reciprocal growth in London could stymie national productivity balance.

Sadiq Khan has indicated his openness to considering a tourist tax, having signalled willingness to explore its implementation during late 2024 discussions. However, his requests for new fiscal powers and enhanced infrastructure funding appear to face resistance from Chancellor Reeves’s Treasury. Officials at City Hall expressed frustration ahead of the UK government’s recent Spending Review, alleging a lack of support for London’s vital infrastructure projects like the Bakerloo Line extension and Docklands Light Railway expansion. They fear the capital might face cuts to economic growth initiatives, including vital funds such as the UK Shared Prosperity Fund and the Levelling-Up Fund, despite London’s large economic contribution to the UK.

A senior government source contested these claims, asserting London’s funding remains among the most generous in the UK. They highlighted recent government approvals for developments including airport expansions and pedestrianisation schemes on Oxford Street. It is worth noting that Labour has committed £15.6 billion to improving transport infrastructure in regional cities, suggesting a strategic shift towards regional development that may be perceived as prioritising the “levelling up” agenda over London’s needs.

Reeves’s broader economic strategy confirms a commitment to aggressive growth through infrastructure investment amid the UK’s sluggish economic performance. Her government has pledged over £35 billion for economic infrastructure in 2025-26, focusing on projects that promote growth, decarbonisation, and resilience, including the continuation of HS2 rail line into London’s Euston Station—a move designed to attract private sector investment and regenerate the area. Yet despite some funding for Transport for London’s projects, long-term financial certainty remains elusive, with important road schemes axed and TfL relying heavily on short-term Covid-related bailouts in prior years.

Moreover, reports indicate Chancellor Reeves plans to remove London from the UK Shared Prosperity Fund, a key source of regional development cash established to replace EU structural funds post-Brexit. While Greater London had been allocated over £144 million for 2022-2025, City Hall sources speculate that London’s share may be cut to zero in upcoming budget savings measures. This potential funding withdrawal comes despite Khan’s repeated calls for new revenue-raising mechanisms, including a tourist tax, which sources suggest Treasury officials have tentatively rejected at least for the immediate Spending Review period. Across Europe, cities like Paris, Athens, and Barcelona have long used visitor taxes to curb overtourism and fund public services, and more recently, Manchester introduced a City Visitor Charge in April 2023, charging £1 per night for tourists staying in the business district.

Khan’s spokesperson welcomes the new era of devolution promised by recent legislation but underscores the need for further powers to “unleash London’s economy further,” noting that the UK remains highly centralised compared to other global cities. They affirm ongoing discussions with the government to secure additional devolution and underscore the mayor’s commitment to building a fairer, safer, and more prosperous London.

In summary, London’s infrastructure and economic future hinge on the resolution of a complex political and fiscal tug-of-war between City Hall ambitions and Treasury priorities. While the city seeks autonomy to generate its own revenue through novel tax powers to fuel expansion and modernisation, the government appears focused on balancing growth investments across the UK’s regions, reflecting broader economic and political considerations in this first Labour spending review in sixteen years.

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Source: Noah Wire Services

Noah Fact Check Pro

The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.

Freshness check

Score:
7

Notes:
The narrative presents recent developments regarding Chancellor Rachel Reeves and Mayor Sadiq Khan’s discussions on fiscal autonomy for London’s infrastructure projects. The report references a recent publication titled ‘London Unchained’ by Labour Together and the Yimby Alliance, advocating for granting Khan the authority to levy taxes similar to those in Paris. The earliest known publication date of this report is not specified in the available information. The narrative includes updated data but recycles older material, which may justify a higher freshness score but should still be flagged. The report also references previous discussions from late 2024, indicating that some content may be recycled.

Quotes check

Score:
8

Notes:
The narrative includes direct quotes attributed to Sadiq Khan and his spokesperson regarding their openness to considering a tourist tax and the need for further devolution to ‘unleash London’s economy further.’ These quotes are consistent with statements made by Khan in late 2024. The earliest known usage of these quotes is not specified in the available information. The consistency of the quotes suggests they are not newly fabricated.

Source reliability

Score:
6

Notes:
The narrative originates from Express.co.uk, a UK-based news outlet. While Express.co.uk is a known publication, it has faced criticism for sensationalism and lack of rigorous fact-checking in the past. The report references a publication titled ‘London Unchained’ by Labour Together and the Yimby Alliance, but the credibility of these organizations is not well-established. The lack of verifiable information about these organizations raises concerns about the reliability of the source.

Plausability check

Score:
7

Notes:
The narrative discusses the ongoing debate between Chancellor Rachel Reeves and Mayor Sadiq Khan over fiscal autonomy for London’s infrastructure projects. The report mentions the ‘London Unchained’ publication advocating for granting Khan the authority to levy taxes similar to those in Paris. The plausibility of the claims is supported by the mention of previous discussions from late 2024 and the involvement of known political figures. However, the lack of verifiable information about the ‘London Unchained’ publication and the organizations behind it raises questions about the authenticity of the claims.

Overall assessment

Verdict (FAIL, OPEN, PASS): OPEN

Confidence (LOW, MEDIUM, HIGH): MEDIUM

Summary:
The narrative presents recent developments regarding Chancellor Rachel Reeves and Mayor Sadiq Khan’s discussions on fiscal autonomy for London’s infrastructure projects. While the report includes updated data and quotes consistent with previous statements, the recycling of older material and the lack of verifiable information about the ‘London Unchained’ publication and the organizations behind it raise concerns about the freshness and authenticity of the content. The source’s reliability is also questionable due to past criticisms and the unverified nature of the organizations involved. Therefore, the overall assessment is ‘OPEN’ with a ‘MEDIUM’ confidence level.