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A row has broken out between Sadiq Khan and chancellor Rachel Reeves on the eve of Labour’s first spending review for 16 years, with allies of the London mayor claiming he is being short-changed.
Senior figures in City Hall said Khan was increasingly convinced that London would not get the green light on any of its key “asks” in the government’s spending review on Wednesday — and could also lose out on economic growth funds.
The Financial Times revealed in February that the mayor was seeking funding to extend the Bakerloo line further into south London and for a £1bn project to expand the driverless Docklands Light Railway to Thamesmead in south-east London.
But Khan’s allies have said that at a recent meeting with the Treasury it was made clear that these demands would not be met by central government.
That is despite the fact that this is the first time in his nine years in City Hall that Khan, a Labour party politician, has been dealing with a Labour government.
“Sadiq will always stand up for London and has been clear it would be unacceptable if there are no major infrastructure projects for London announced in the spending review,” said one City Hall figure.
Transport for London has asked for greater financial certainty after having muddled through six short-term bailouts during the previous Conservative government, triggered by the Covid-19 pandemic.
Khan is concerned that London could be among regions losing out from cuts to economic and anti-poverty funds such as the UK Shared Prosperity Fund, Growth Hub Funding and the Levelling-Up Fund.
Three senior council figures based outside London said the future of the Shared Prosperity Fund was uncertain. The £2.6bn pot of cash, originally launched by the Conservatives in 2022 to replace EU structural funding, has been extended by Labour until next March.
One ally of the mayor said cuts to such schemes would be “incredibly short-sighted”.
“They say that they want economic growth but their actions in failing to invest in new infrastructure in the capital and cutting local growth funds will actually damage our economy, not improve it,” they said.
“They say they want regional mayors to be the drivers of growth but then remove their levers to achieve growth.”
But one central government aide described the criticism as “nonsense”.
“[Khan’s] settlement remains one of the most generous of any mayor across the country,” they said.
The Treasury declined to respond on any of the specifics of the claims from Khan’s office.
However, one Treasury official said the government had already given London support for the expansions of Gatwick, Luton and City airports as well as backing for a third runway at Heathrow. Khan is opposed to a new Heathrow runway.
The official said the government had also approved the pedestrianisation of Oxford Street and expanded late licensing in the capital.
The spending review will also include more than £1bn of funding for the Lower Thames Crossing, a major infrastructure scheme to the east of the capital between Kent and Essex.
The spat comes after Reeves unveiled a £15.6bn pot of investment for transport projects in regional cities last week, a key request of mayors outside of London.
Research by the left-leaning think-tank IPPR this week found that over the decade to 2022-23, London had received £1,183 per person per year of transport spending, twice as much as the English average and three times more than the East Midlands.
