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City Limits

City Limits

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IN 2014, THE EARTH TREMBLED slightly as Labour won its first seat on the Common Council, the body of elected members of the City of London Corporation. William Campbell-Taylor’s victory in Portsoken ward prompted an FT article under the hyperbolic headline “Labour win raises questions on City’s independence”, quoting comments from LSE’s Tony Travers that the City would “be uncomfortable with even one non-independent councillor”.

Portsoken is an unusual ward by City standards. Abutting Tower Hamlets, it contains two estates and a sizeable Bangladeshi population. A Corporation source remarked that Labour “would never get traction elsewhere”. So the discomfort levels must have risen sharply in the Corporation’s Guildhall HQ when in 2017 Labour won five seats - this time not just in Portsoken, but also in the wards around the Barbican and Golden Lane estates.

“Independence” is one layer in a rich mythology the Corporation has crafted to justify its extraordinary position. It is a local authority like no other.

In the Square Mile the Corporation empties the bins, runs libraries and issues parking fines. But those and other mainstream council functions are just part of its operations. Every other local authority is established under the elaborate statutory scheme for local government, traceable back to the municipal corporations legislation of the 19th century. The result is that each council’s structures and functions are tightly defined, and all its income and expenditure subject to rigid controls and transparency rules. But the Corporation escaped those reforms. Its local authority functions are grafted onto a unique non-statutory body whose origins, like its powers and financial arrangements, are never quite clear.

At the heart of the Corporation is the ‘City’s Cash’ account, a fund holding some £1.2bn, standing entirely outside the usual legal restrictions on local government expenditure. From this the Corporation subsidises three fee-paying schools (it maintains only one state school, Sir John Cass Primary, via its separate statutory ‘City Fund’) and, crucially, funds a slick lobbying operation on behalf of the UK financial services sector.

Of course, all councils see speaking up for key local industries as part of their political role - automotives in Oxford, steel in Newport, fisheries in Cornwall, and so on. But councils are not allowed to finance organised lobbying. The rules, established under the 1986 Local Government Act, were tightened under the Coalition government. Announcing the changes, Communities Secretary Eric Pickles condemned “lobbying on the rates” as a “wasteful and corrosive zero-sum game. The public sector never lobbies for lower taxes and less spending…”

None of that, however, stops the Corporation which - through a piece of legislative sleight of hand - evades the shackles of the 1986 Act. Last year’s City’s Cash accounts revealed gross expenditure of over £12m on the Corporation’s “core objective to promote UK-based financial services… at home and abroad.” In recent years the Corporation has extensively lobbied the UK government and Parliament, on key regulatory and fiscal issues, including EU limits on bankers’ bonuses, tax rates (arguing, naturally, for lower taxes - Pickles must have missed it), and the Mayor of London’s powers to block planning permission for major developments.

The last point is telling. The Corporation is the local planning authority for the Square Mile: in other words, in an area facing constant pressure for ever-greater (and higher) accommodation for the financial sector, often blighting areas of housing, it is supposed to act as a neutral decision-maker, holding the ring between developers and the City’s 8,000 or so residents. But its lobbying operation tells a different tale. Residents’ interests are always subordinated to the Corporation’s business constituency. Far from being “independent”, conflicts of interest are engrained in the Corporation’s DNA.

The primacy of the financial lobby is entrenched through an arcane, antidemocratic voting system under which businesses ‘appoint’ voters to elect common councillors, pro-rata to their number of employees, but without any obligation to consult staff on who becomes a voter. The resulting 11,000 or so registered business voters permanently outnumber residential voters - a state of affairs created by the City of London (Ward Elections) Act 2002, passed under the Blair government but opposed by several Labour MPs, including John McDonnell, who in a 2012 New Statesman article described the Corporation as the UK’s “last rotten borough”.

Labour’s previous policy of abolishing the Corporation was quietly dropped in 1997. With Labour now represented on the Common Council - but deprived by the business vote of any realistic chance of winning control - there is a lively debate about what the future of local government in the City should look like. Whatever emerges, it is impossible to defend the status quo. Those 8,000 residents of the Square Mile deserve better.

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