The Centre for Cities released the Cities Outlook 2014, reporting that 80% of new private sector jobs over 2011-12 are in London, and that the migration of the young and skilled to London can indeed be broadly characterised as "London sucks in all of the talent".

Other studies of UK cities are consistent e.g. LSE's Henry Overman: an empirical regularity called “Zipf’s law suggests that the second largest city should be half the size of the largest, the third largest city should be a third the size of the largest, and so on. To a reasonable approximation, this law holds for the relative sizes of cities in most countries. But it does not hold in Britain where our second-tier cities appear to be too small." This is important because economic theory (e.g Krugman) suggests that "'Cities [are] evidence that increasing returns and positive external economies actually play [an] important economic role".

If economies of scale are important, and if many UK cities are too small, then the dominance of London is a big deal. Scale economies are an example of circular, but correct, reasoning: economic activity goes to London because that's where it's most efficient, and it's most efficient because economic activity goes to London. George Rosie describes the loss of company headquarters from Scotland which is an aspect of this process.

The 'Key Messages' of the report include:

• Talk of constraining London is misplaced.
• The next largest cities punch well below their weight.
• The policy privileges afforded to London should be extended to other cities.

More devolution of power and local autonomy may help, but should London be “constrained”? I suggest that rather than being the ultra-competitive product of the free market, London’s success is actually founded upon a large dose of implicit subsidy - which should certainly be ended.

Public investment is distorted in London's favour (see IPPR analysis “highlight[ing] the stark and persistent imbalance between public infrastructure spending between the greater south east, including London, and the northern regions”). Though overall public sector employment as a share of population is not especially high in London, its share of central government employment is massive, and this (since it provides for a ‘thick labour market’ in highly talented, and influential staff) will have positive spillover effects for the London economy. London wages and housing costs are subsidised through the London weighting on public sector salaries and housing benefit payments that are linked to local rather than national rental rates.

If it is too expensive for the government to employ people and to operate out of London, then it should move its operations, not provide wage subsidies not available in poorer regions. If housing costs are too high and so real wages too low, then people would be discouraged from migrating to London. That would be the natural operation of the market. As policy stands currently, the rest of the UK subsidises London and in return sees the loss of its human capital and the elimination of possible economies of scale in other locations. Proposals to spread out central government employment and to eliminate central government funding of this level of public investment or these wage and cost of living subsidies would improve the performance of other cities in the UK. This is not a policy of constraining London, merely a cessation of the policy of favouring London.