The last decade has seen two different governments, a global recession and a number of tax reforms – particularly to income tax. This report provides a unique breakdown of the economy taxes, such as labour and property taxes, generated in cities across Britain to provide a ‘fiscal map’ of the country’s finances, and help to understand how recent policy changes and economic shocks have impacted different city economies.
Understanding how and where taxes are generated is important and has implications for the country’s finances; for how public services like health and education are funded and what money is available to invest in transport, infrastructure and housing.
The 10 years of economy tax data analysed in this report highlights five key trends:
- Many British cities generate less in economy taxes than they did 10 years ago. The total amount of economy tax generated in cities has risen from £283 billion in 2004/05 to £317 billion in 2014/15 (in 2014/15 prices) but some cities are actually generating less than they were a decade ago: almost a third of British cities (20 out of 62) have experienced a real-terms decrease in the level of taxes generated in their area.
- Cities are still more ‘tax productive’ than elsewhere but most have become less so over time. Workers in cities have generated on average £2,682 more economy tax per job than non-city areas over the decade but this masks differences between cities: 40 out of 62 British cities are generating less tax per job than they were a decade ago.
- Smaller cities have seen larger increases in their tax take but big cities remain crucial. London aside, tax revenues generated in small and medium sized cities have grown more quickly than in larger cities. However, Manchester, where tax receipts grew by only 1 per cent over the decade, added only slightly less tax into the national pot over that period than the 10 fastest growing small and medium sized cities combined.
- The reliance on London has increased over time. London in particular has seen its share of the urban tax take increase considerably: in 2004/05 London generated as much economy tax as the next 24 biggest cities, while in 2014/15 London generated almost as much as the next 37 cities.
- The ‘great recession’ had a significant and lasting effect on the levels and patterns of taxes generated in cities. The recession caused a two year dip in tax revenues generated in cities: between 2007/08 and 2008/09 revenues generated in British cities fell from £319 billion to £300 billion (6 per cent) and then by a further 8 per cent the next year to a low of £277 billion.
“This report is further evidence of how London has become the main tax generator for the whole country and highlights the importance of more balanced growth across the entire UK as well as ensuring the capital’s continuing success. Further devolution, so that London and all our cities and neighbourhoods can take back control, is vital to unleash the energy and dynamism that this country needs in the light of its decision to leave the EU. I am determined that London leads the way and maximises the opportunity for more autonomy, moving us swiftly away from the old Whitehall centralised model. Ministers, MPs and peers support this rebalancing of power across the UK and I hope that we will make quick progress.” Sadiq Khan, Mayor of London