Magazine article The Spectator

London Matches the Glory of Venice in Its Prime

Magazine article The Spectator

London Matches the Glory of Venice in Its Prime

Article excerpt

When Tony Blair secured the agreement of the Scots and -- only just -- the Welsh for devolution in the referendums of 1998, it was supposed to herald a great revival of the regions. Britain was to be reborn as a kind of West Germany, whose constitution included a reference to ironing out the economic disparities between Hamburg and Munich, Frankfurt and Hanover. Instead, the opposite seems to have occurred. The concept of elected English regional assemblies has been quietly forgotten since rejection in the North East, and wealth and power have been concentrated increasingly in London -- to the point where the average Londoner now earns £37,323 per year, 53 per cent more than average British earnings. Indeed, the part of England that now seems most inclined towards independence is the capital itself.

Intriguingly, the notion that London could hack it as a city-state has been entertained at both ends of the political spectrum. For economic liberals independence is a way of freeing London from the burden of its £20 billion annual subsidy to the rest of the country. The Mayor himself, Ken Livingstone, seems to like the idea of a London city-state, too. Returning from a visit to the Far East he declared last year: 'Having been to Singapore and seen how successful it was, I think anything short of a fully independent city-state is a lost opportunity.' If Mr Livingstone wishes to pursue the idea, he might find a better model for a London city-state in 14th-century Venice.

Unlike Singapore, which is wealthy, grimly efficient but hardly a place of fun or great creative energy, London shares with Venice in its heyday a growing reputation, not as the most powerful city in the world, but as its best address. Over the past 12 months house prices in London's best streets have risen by over 30 per cent, inflated by demand from wealthy individuals from all over the world. Behind their façades, £15 million London houses are being rebuilt as £30 million palazzos -- all this at a time when the housing market in New York has been gently declining.

The world's wealthy want to come to London now for the same reason that they wanted to go to Venice in the 14th century.

It is, quite simply, the best place to do business. Its political system is stable, its laws and courts are trusted. It is tolerant of racial and religious differences. Like Venice, which acted as a gateway between Byzantium and western Europe, London sits between the time zones of Tokyo and New York. And unlike most world capitals it openly invites in wealthy foreign individuals by assuring them that the British taxman will not be trawling their global bank accounts just because they happen to choose to live in London: under the rules of 'non-domicile' tax status they will be taxed only on what they bring into Britain.

Anyone hoping that Gordon Brown will change these rules is likely to be disappointed. Although he made noises about doing so before he became Chancellor, he presented 11 budgets without bringing up the subject and has made no suggestion that he will tackle it again. Moreover, it was he who reduced capital gains tax for enterprise assets to 10 per cent, which has so swiftly made London the world capital for hedge funds:

a loophole or incentive -- depending on your point of view -- which he has shown no signs of reversing. Although much despised by some ordinary taxpayers, the attraction of wealthy foreigners through special favours is a fiscal model which would have been recognised by 14th-century Venetians. …

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