A healthy, wealthy London is the best medicine for Scotland’s ills
The capital is the powerhouse for the rest of the United Kingdom. It deserves better, says Boris Johnson

You know, I think we are reaching the limits of Jock-bashing. It is time that we called a halt to this casual anti-Scottish prejudice, before it gets out of control.

I have lost count of the number of times I have heard someone joke that the Scots subsist on a diet of smack and deep-fried Mars Bars. I have heard it said in London that we send them our taxes, and they send us their prime ministers – and chancellors, and the whole stream of gabbling Edinburgh lawyer MPs who make up the Tartan mafia.

He continues:  “I have heard Englishmen denounce the Scots as a bunch of tight-fisted, self-pitying alcoholics who continually refuse to support us at football.  It’s not fair, and it’s not true, and in any event the vague climate of Scotophobia in England may help to explain the symmetrical and worrying instances of anti-English prejudice in Scotland. So perhaps it’s time to assert the obvious: I love Scotland, always have done. I consider it to be one of the most gloriously beautiful places on earth. And I believe passionately in the Union, which is why – on this St Andrew’s Day – the Saltire is flying proudly outside City Hall.

In fact, I love the Scots and Scotland so much that I want to set before you the best single way to boost the Scottish economy. The way to boost Scotland is to invest in London.

You may be familiar with the Barnett formula, a system of amazing political antiquity by which the English taxpayer sends about £20 billion every year to Scotland as a kind of present. This famously helps to give the Scottish parliament the financial autonomy to do some things that are deemed unaffordable in England – such as free university tuition, certain anti-cancer drugs and free nursing care for the elderly.

This system is the subject of all sorts of Scot-bashing polemics, but seems unlikely to be fundamentally reformed because, after all, we have a Union and it is right that the richer parts of that Union should help the poorer parts. The real question, and the one on which I would like our beloved Scottish Prime Minister and Chancellor to focus, is how come we can afford to pay the Barnett formula? Where does the money come from?

I will tell you. It comes from London. There are only three regions of the UK that make a profit, in the sense of contributing more to the Treasury than they receive in spending, and they are London, the South East, and the East; and London is the powerhouse that drives the other two, with a net tax export estimated at £19 billion per year.

But then there is a much bigger and broader truth. Never mind the tax export, it is the dynamism of the London economy that powers the rest of the UK. More than any other region, London sucks in the cars of Sunderland, the potatoes of Lincolnshire, the microprocessors of Teesside; and it is the furious energy of the London services industry – exposed to the spur of global competition – that drives services elsewhere in the UK. Without the City of London, Edinburgh’s important financial services sector would simply not exist; and the same point can be made about the downstream professions, the accountants, the lawyers who make up the Tartan mafia.

It follows that any sensible allocation of resources – any sensible economic policy – would seek to maximise the competitiveness of London as the essential prerequisite to supporting the rest of the country. That is why we need to fend off any ill-thought-out pieces of legislation, emanating from Brussels, that may damage the City of London, inadvertently or not.

That is why we should be ensuring that London gets the housing and above all the transport infrastructure that it needs to make it competitive in the coming decades, especially Crossrail and the Tube upgrades.

This isn’t just some cold-hearted utilitarian calculus. I don’t recommend investing in London just because Londoners are 30 per cent more productive than people in the rest of the UK, and capable therefore of delivering the best return on investment – though that happens to be true.

We should be directing adequate funds to London because the capital also has the biggest gap between rich and poor, with four of the poorest boroughs in the UK, and it is a disgrace that after 12 years of an explicit government campaign to eradicate child poverty, that condition afflicts 48 per cent of children in some inner London boroughs. The city needs the cash in the name of simple social justice. We also need something that won’t cost a penny – and that is a bit more financial freedom.

The Calman commission has just come up with some very interesting proposals for Scotland, effectively to give the Scottish parliament the freedom to raise 10 per cent of tax as it chooses. I do not suggest such a system for London, of course; but with huge pressure on the public finances, and with huge demand for better transport infrastructure, it is time to look at tax-increment financing of the kind that has been so successful in America.

Suppose we need to build some new Tube stations in south London (Battersea springs to mind). The costs to the taxpayer are currently prohibitive. But you could suddenly allow the project to be financed if you permitted the borrowing to be covered by the income stream that flowed from a share of the future business taxes and stamp duties – which would be huge – that were produced by the regeneration.

It’s a beautiful idea. It doesn’t mean raising any new taxes. It would be a winner for London, and what is good for London is good for Scotland!”

You can read the longer version of this article in The Daily Telegraph