Business chiefs in London are urging Rachel Reeves not to damage the capital after the Treasury changed the public spending rule book to allocate billions more to the regions.
The new Green Book will focus less on delivering value-for-money and instead guide spending based on broader criteria to “support fairer and more balanced public investment” and address “historic underinvestment” in the North and Midlands.
Announcing the change, the Chancellor said: “For too long, people outside of London and the South East will have felt the system is working against them and their community, not for them.
“These groundbreaking reforms are part of a new approach from the Treasury that truly makes a long-lasting difference for all areas across the country, ensuring they get the fair hearing they deserve.”
But business leaders in London warned Ms Reeves against undermining the capital, the country’s economic engine, as she desperately seeks GDP growth to fund better public services.
Karim Fatehi, chief executive of the London Chamber of Commerce and Industry, said: “A fairer Green Book is welcome, but fairness must work for London too.
“Investment for the wider UK must not come at the expense of the capital.”
He added: “A serious growth agenda requires the Government to be bold to unlock London’s full potential, because a thriving London underpins prosperity nationwide.”
John Dickie, chief executive of London business group BusinessLDN, stressed public investment was needed across the country to unlock opportunity and drive growth for local communities.
“That includes London, which has the highest unemployment rate in the country and highest poverty rate once housing costs are taken into account,” he added.
“The new Green Book needs to ensure the capital gets sufficient public funding so that it can play its full part in driving growth and boosting the UK economy.”
Antonia Jennings, chief executive at Centre for London, emphasised that the capital and South East are the only two regions which are net contributors to the Treasury’s coffers.
“Decades of politics have pitted London against the UK. It needs to stop,” she said.
“If the Government continues to extract revenue from the capital without providing additional tools to invest in infrastructure and housing in the capital, it risks undermining the funding that the rest of the UK relies on.”
Ms Jennings also stressed that London is too often portrayed as just a wealthy city for all its residents, rather than having some of the most deprived communities in the country.
“One in four Londoners live in poverty after housing costs,” she explained.
The reform to the Green Book was welcomed by the Mayor of the Liverpool City Region, Steve Rotheram, who said that the system had been “stacked against” the North West for years.
“It meant projects that could genuinely change lives in the North were too often overlooked,” he stressed.
Richard Parker, Mayor of the West Midlands and Tracy Brabin, Mayor of West Yorkshire, also backed the new spending rule book.
