Sarah Olney

It is a pleasure to serve under your chairmanship, Mr Western. I thank the hon. Member for Kensington and Bayswater (Joe Powell) for securing this important debate. London is an economic powerhouse, which generates revenue for the entire country. The capital city’s contribution to the economy is nearly 25% of the UK’s entire GDP. While redistribution of revenue across the UK is important, it should be noted that London has some of the highest rates of poverty. In particular, it has the highest rate of child poverty, at 35%, compared with a national average of 29%. Disparate income bands and living standards are more evident in London than anywhere else in the UK, but the cost of living is also greater in London than in any other area. The average London house price is more than double that in the rest of the country. I raise those points because the Government’s changes to local authority funding will mean that London councils face a funding shortfall of an estimated £500 million. Consequently, most London boroughs will have to raise council tax by the maximum amount each year to raise revenue for the funding of key statutory services. It also means that some councils will be threatened with bankruptcy. Redistribution of wealth across the UK is important, but the absence or poor use of measurements in the Government’s fair funding formula will produce unfair results for Londoners. The index of multiple deprivation is being used as a need driver in the fair funding formula, but, as the hon. Member for Chelsea and Fulham (Ben Coleman) pointed out, that index does not include a measurement of deprivation after housing costs. London residents pay the highest average rents in the country, so excluding that statistic will result in an unfair measurement of deprivation, and London residents will lose out unfairly.