Mayor of London Boris Johnson has told Construction News financial negotiations with the Treasury are giving contractors an edge “they do not need to have” in infrastructure and housing projects, leading to higher procurement costs.
“I see it the whole time,” he said when asked about how negotiations with central government over project finance stopped the capital getting the best deal from contractors.
“We go into negotiations with contractors, whatever it happens to be – rolling stock, signaling or housing – and because it’s done at the eleventh hour they have an advantage in the negotiations that they do not need to have.”
He added that giving London control over infrastructure plans would enable the body to “save money and sort out our infrastructure needs over a much longer time”.
Mr Johnson spoke to Construction News at the launch of the London Finance Commission’s report on investment arrangements for infrastructure in the capital.
The report recommends a number of power transfers to local London government – including a suite of property tax revenues – in order to cope with rising infrastructure and housing demands.
Speaking at the event, the mayor said it was a “chronic problem” that “endless hand-to-mouth negotiations with central government” about “penny packets” of finance, and the fact that the Greater London Authority had “no real certainty” about project financing post-2015, led to unnecessary costs in procurement.
“Our contractors have no certainty, which affects the price we can get for the deals that we do, and makes them more expensive” he said.
He also slammed the “bunker mentality” in dealing with central government, with City Hall officials nervous about upsetting the Treasury or “seeming too ambitious”.
The GLA is due to set out its ‘Vision 2020’ for the provision of infrastructure, transport, housing and utilities next month.
The Finance Commission report set out a number of recommendations to ease infrastructure delivery in London. These include:
- Giving the mayor a “responsibility to be a champion of all infrastructure planning for the capital”.
- Delegation of local infrastructure powers to London boroughs.
- Devolving “the full suite of property taxes” to London, including council tax, business rates, stamp duty annual tax and capital gains property development tax.
- Development of a “long-term, high-level capital investment plan”, setting out cost-resource evaluations of strategic investments.
- Central government distinguishing between borrowing used to promote growth or reduce expenditure, which would thus be repaid, and other kinds of debt.
- The removal of GLA borrowing ceilings.
- New powers for the mayor and local authorities to decide on tax increment financing projects.
- Relaxation or removal of borrowing limits for borough housing projects.
- Measures to shift public spending from personal subsidy to investment in built assets.
Mr Johnson said he “warmly welcomes” the report, adding that London had been a “fiscal infant” compared to other major cities.