Comprehensive Spending Review 2020: safeguarding London’s global position

This Spending Review comes at a critical time for London’s economy. Over the past 9 months the pandemic has forced the shutters down on many businesses, be that temporarily or permanently.  

As a result, London had the second highest unemployment rate in the country in Q3 2020 (6%) and saw the largest decrease in workforce jobs among all UK regions, at 104,000 (ONS). The most recent furlough scheme statistics show that London had the highest take-up rate in the UK (13%).

The need to support and invest in sustaining London’s competitiveness should not be underestimated or undermined. As a world-leading global capital, it has an essential role to play in the UK’s overall recovery, especially as we redefine our place on the world stage post-transition. While we support the Government’s commitment to boosting growth across the UK, it is critical that the ‘levelling up’ agenda does not lead to an effective levelling down for London.

Central London recovery
The impact of COVID-19 on London’s Central Activities Zone has been particularly severe, with many of its businesses either unable open at all, unable to make a profit due to the drop in footfall or only able operate with reduced numbers.

As detailed in the Central London Alliance manifesto, businesses that cannot operate profitably or reopen due to restrictions will need substantial sector-specific support, including:

  • Maintaining the business rates holiday for a further 12 months
  • Extending the deferral of all tax liabilities due in July 2020
  • Removing the obligation to pay interest on late payment on such liabilities
  • Extending the VAT cut to beyond March 2021 for hospitality businesses
  • Extending the threshold for hospitality grants beyond £51,000

To alleviate the impacts of Covid-19 on London’s attractiveness as a global flagship destination, the CSR should look to:

  • Reverse the decision to abolish VAT refunds for overseas visitors. This scheme should be extended to European visitors and made digital.
  • Help theatres contribute to London’s cultural recovery by increasing Theatre Tax Relief, and provide tax relief to supply chain businesses that supply the arts and culture sector.
  • Reduce VAT on admission for currently non-exempt forms of entertainment, such as “commercial” performances.
  • Invest in retrofitting Central London venues to improve their environmental performance and reduce their running costs.
  • Introduce financial support to cover the costs of the reopening venues, fund the difference between ticket sales and break-even point and cover the cost of cancellation in the event of further movement restrictions.

Transport
As a matter of urgency, a long-term settlement must be agreed with Transport for London (TfL). Ongoing emergency settlements do little to encourage business certainty and attract overseas capital.

A greener, more sustainable recovery should be at the heart of this settlement. The Government should use this opportunity to work with London governance to invest in:

  • Boosting the carbon efficiency of TfL’s own network
  • Scrappage schemes to support businesses’ transition to ultra-low emission vehicles
  • Increasing the quantity of EV charging points
  • Infrastructure that supports walking and cycling, such as increased cycle storage

It should also seek to agree a sensible roadmap for delivering upgrades and extensions to London’s existing transport network, so that capacity can encourage the use of London’s public transport services in future.

Any increase in rail fares would be a blow to workers as they navigate ongoing changes to working patterns. It would be most damaging to those who cannot work from home, namely key workers. Instead, LCCI is calling for flexible ticketing to help workers adapt to changing working patterns, and to incentivise commuters to travel back into central London.

Test and trace  
Along with the British Chambers of Commerce (BCC), we are calling for extensive and open-ended funding to be directed at immediate and significant improvements to the Test and Trace programme, ensuring efficient roll-out, quick turnaround of results, and rapid tracking. The BCC recommends an additional national spend at a minimum of £12 billion, doubling current spending.

An effective test, track and trace system will help to balance tackling the virus with giving business, their employees and their customers the confidence they need to start building back our economy.

The pandemic’s impact on the aviation sector has been a blow to the many local businesses that rely on its activity and the custom of business travellers and other visitors. An effective testing system will be critical to aiding in the recovery of this sector and its role in London’s overall recovery.

Green economy
LCCI has welcomed the Prime Minister’s ten-point plan for a green industrial revolution. The commitment to making London a global centre for green finance and the recently announced initiatives to support this, such as implementing a green taxonomy and introducing sovereign green bonds, are particularly welcome. Support should be targeted at incentivising SMEs to embrace this transition and play a strong role in innovation.

Further investment should be aimed at enabling local government to accelerate its delivery of retrofitting projects across the capital’s residential, commercial and industrial property stock. The Government should also work with local government to agree a framework for continued financing of retrofitting beyond this financial year.

Skills
Upskilling, reskilling and training for new opportunities continue to be vital for adapting the capital’s workforce to ongoing changes. We therefore support the BCC’s recommendation of doubling the National Skills Fund from £3bn to £6bn to boost adult skills and deliver key recommendations from its Workplace Training and Development Commission, particularly:

  • Boosting investment in employer-led, higher technical qualifications and in the quality of their delivery.
  • Additional apprenticeship funding to support SMEs’ access to high quality apprenticeships, as well as safeguarding existing apprenticeship funding and reinstating the £1.5 billion that was withdrawn from the apprenticeship budget at the outset of the Levy.
  • Bite-sized, more flexible and agile accredited learning opportunities, particularly to boost digital skills and support lifelong learning and retraining for new career opportunities.

In addition to this, steps should be taken to incentivise employers to take on apprentices, such as giving levy-paying employers the flexibility to direct some of their levy funds towards pre-employment training and the hiring or wages of apprentices.

International trade
The pandemic has caused major disruption to the flow of international trade, which many businesses rely on. The Government has taken some welcome steps to support traders, but as we near the end of the transition period, much more support will be needed.

Risks highlighted by the National Audit Office, namely the capacity of HMRC’s Customs Declaration Service to cope with the projected demand, and the readiness of infrastructure and systems for facilitating new border operations, are particularly concerning. As well as deploying the necessary resources to address these risks, the Government must direct support at businesses facing disruption arising from these gaps in public-sector preparedness.

We support the BCC call for an expansion of UK Export Finance (UKEF) capabilities to aid businesses exporting to the EU after the transition period with maintaining access to working capital, insurance and reduce payment risk. This should include providing partial guarantees to lenders to cover the risks associated with disruption, relaxing eligibility criteria to reflect changing needs, and greater resources to help with the expected rise in applications. The BCC recommends an additional national spend of £667 million per annum (increase capacity of the Direct Lending Facility) to deliver the additional UKEF capability.