Economic and Employment Prospects (London)

Part of Orders of the Day — Abortifacient Drug (Licence) – in the House of Commons at 6:45 am on 22nd July 1991.

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Photo of Simon Hughes Simon Hughes Opposition Deputy Chief Whip (Commons), Shadow Spokesperson (Education) 6:45 am, 22nd July 1991

I am always happy to have an opportunity to introduce a debate and generally happy to have one even at this hour of the day. I am returning to an old habit. I had a fallow year last year, but in the two previous years I drew the 4.1 am straw and the 4.21 am straw in the debates on the Consolidated Fund Bill. At least I have moved to a slightly more civilised hour. I welcome the Minister to this early morning debate on London matters, and in particular on economic and employment prospects for Londoners.

This is a debate about the London economy. Colleagues who represent other parts of the country sometimes forget that one reason why the London economy is very important is that it is the area with the largest number of people in it. It is the most populous economic region. It is also the capital city. Sadly, it also has the greatest disparity of wealth. Increasingly, it is becoming two cities.

The figures in a report issued a few weeks ago by the London Research Centre for the London borough grant committee makes it clear that the average gross weekly income of households in Greater London conceals a far wider disparity between the highest and lowest income groups anywhere else. In 1988, the wealthiest 10 per cent. of households received £687·39 a week, more than 12 times as much as the lowest 10 per cent., whose average income was £56·97.

It is unfortunate that, until recently, we had a Prime Minister who did not seem to understand these things, despite representing a London constituency. In her final speech as Prime Minister, in the debate on the motion of no confidence in the Government, when I pointed out that there was one unchallengeable statistic—that during the years of her premiership the gap between the poorest and the richest had widened—the right hon. Member for Finchley (Mrs. Thatcher) gave what can only be described as a fatuous answer, which was: People on all levels of income are better off than they were in 1979. The hon. Gentleman is saying that he would rather that the poor were poorer, provided that the rich were less rich."—[Official Report, 22 November 1990; Vol. 181, c. 448.] Nobody would argue that case and it shows how little she understood or cared.

One further complication about London is that it has one of the most diverse communities. It is diverse in terms of age range and background, including ethnic background, language and the rest. Therefore, the London economy has great potential, but tragically, after 12 years of Tory rule, London increasingly is not working.

Let me give a few anecdotal examples before confirming them by means of some Londonwide statistics. My riverside constituency—or part of it—is supposed to be in the docklands corporation area and, as such, the beneficiary of Government goodies over the past 10 years. The corporation was set up 10 years ago this month. Yet some of the last manufacturing industries have closed this year: Paynes tea factory closed earlier this year and Sarsons vinegar factory is closing in a matter of weeks. One of the most established firms in the construction industry—Sir Frederick Snow and Partners, which is about 100 years old and has a worldwide practice—went into liquidation a few months ago. The construction industry is experiencing increasing difficulties. Jobs in the public service are also being cut: London Regional Transport is cutting its staff and—somewhat embarrassing for the Government—Guys hospital has done the same.

At a lunch with representatives of Price Waterhouse, a leading British accountancy firm and one of the largest employers in my constituency—if not the largest—I learnt that it had had to lay off a good many staff, for the first time ever. Constituents who run businesses complain to me that they are increasingly being priced out by massively escalating rents imposed by, for example, the British Rail Property Board on the one hand and the local authority on the other. A Conservative Member told me the other day that he had never known the position to be so bad that there were a number of shops which could not even be let on this side of the river, down the King's road.

The economic situation is far from good. I have compared the unemployment statistics for March 1983—the month in which I took my seat—with those for the current month. I am sad to report that the figure for Southwark and Bermondsey was 18·6 per cent. in March 1983 and is 18·5 per cent. now. That is hardly a great improvement to show for eight years of Tory Government.

Not only businesses but ordinary London residents are finding life increasingly difficult. The cost of housing is constantly rising. The average rent for a London room or bedsit is now £385 per calendar month. For a one-bedroom flat, the figure is £619; for a two-bedroom flat or house it is £774; for a three-bedroom flat or house it is £974; and for a four-bedroom house it is £1,075. Rents for bedsits, rooms and studios rose by 17 per cent. between November and May. In the same six months, retail price levels, which the Government use in setting housing benefit levels, rose by only 2 per cent.

Let us examine the disparity between those costs and people's earnings. The average rent per week for a bedsit is £76.15. The net income that someone under 18 would need to be able to afford that without recourse to housing benefit is £146·07. Fewer than 50 per cent. are earning that much, and thus able to afford such rents. A couple over 18 living in a one-bedroom flat with a weekly rent of £143·25 would need a net income of £278·30 to pay for it. Only half those living in the capital could afford that. The average rent of a one-bedroom flat for a single pensioner is £143·25 and that pensioner would need an income of more than £269. Not surprisingly, fewer than 10 per cent. of London's pensioners could pay that.

Those who have bought their homes have stretched themselves to the limit to take out mortgages. Record repossessions have resulted from their inability to keep up the payments. As those of us who served on the Standing Committee considering the Housing Bill predicted, housing benefit did not keep pace with those developments, and there is an increasing disparity between the rents of available properties and the housing benefit that would enable people without sufficient incomes to pay those rents.

Fares and prices generally in London are higher than elsewhere in the country. Thames Water rates have escalated enormously. London holds the record for the highest poll tax. Business rates in London are substantial. More and more people come to see me, having been served with summonses, with the bailiffs threatening to come to their door. When I hold a surgery, more people come to see me now than ever before. More people are in economic difficulties than ever before.

One of the blackest trends is that unemployment has been mounting increasingly for over a year. Ten of the 30 constituencies with the highest unemployment in the United Kingdom are in Greater London. Four of the top 10 in London include, I am sad to say, my own constituency. About 6,500 people in my constituency are registered as out of work. About 320,000 in Greater London are registered as unemployed. There are patches in my constituency—the area around the Elephant and Castle, for example—where unemployment is over 25 per cent. There has been an increase in unemployment in the London Docklands development corporation part of my constituency. In some areas it amounts to over 25 per cent. The age groups affected are those under 25, or those between 25 and 35.

There are always some chinks of light. The London chamber of commerce, in its quarterly economic trends survey published on Monday, said that there were some improvements and that 36 per cent. of service-sector companies now predict that profits will increase in the next 12 months, compared with 26 per cent. in the last quarterly survey. However, those companies make it very clear that they want and need interest rate reductions if they are to improve their business. They also say that jobs are now being lost at a faster rate in manufacturing companies than in service sector companies. The London chamber of commerce says that a total of 62 per cent. of manufacturers reported a fall in domestic orders in the second quarter and that 89 per cent. of businesses are now operating below full capacity, compared with only 81 per cent. in the previous quarter. The proportion of manufacturing employers reporting an overall reduction in staff rose from 41 per cent. in the first quarter to 52 per cent. in the second quarter of the year. The London chamber of commerce, concludes the article yesterday in the Financial Times, predicts that London will continue to suffer disproportionately from job losses. The reality is that the economy in London is not in good shape. There are very few signs of encouragement. There are very few signs that the recession is bottoming out and that things are getting better.

One of the things of which the Government claim that they are proudest is that they have chosen London as the flagship for their inner-city initiatives. In 1981, during the first term in office of the Secretary of State for the Environment, they chose to set up the London Docklands development corporation. Earlier this month there was a great beano to celebrate the establishment of the LDDC in 1981. There was, however, some subtle disinformation about the success of that venture. In the press release that was published to mark the first 10 years of the LDDC the claim was made that by the end of the century, jobs in London Docklands will increase from the present 53,000 to over 200,000. The press release continued: This compares with 27,000 when the LDDC began its work in 1981. The reality, according to the Government's own answer, given by the Under-Secretary of State for the Environment, the hon. Member for Salisbury (Mr. Key), on 8 May 1991, at column 520, is that the figures do not come to the same total. He says that there are about 48,000 permanent jobs and just under 5,000 temporary jobs, of which about 41,000 have become available since 1981. The majority of those—almost 25,000—are not new but relocated jobs. Fifteen thousand jobs have been lost and if one disregards temporary jobs, in the past 10 years the number of permanent jobs in docklands has therefore reduced. That is not a record of which the Government can be proud.

The Government have tried various measures. There have been plenty of programmes and initiatives, such as urban programmes, city grants, task forces, city action teams, city technology colleges, opted-out schools and opted-out hospitals. Some of them have had some success. In addition, Ministers were appointed not long ago to oversee seven inner cities—the hon. Member for Lewisham, East (Mr. Moynihan) was made Minister for London—but, as an editorial in The Times said about them on 20 April last year, They have sunk without trace. Sadly, the majority of the Government's initiatives have equally not succeeded. London has as many problems now as it had 10 years ago. New houses have been built and more are being built now than in recent years, but few are being built for rent, and many that were built to buy are still empty. There is much concern that if the docklands corporation is winding down, much of the social infrastructure, which is supported by Government and local authorities, will be lost. Day nurseries, creches, the Surrey docks farm in my constituency, youth centres and adult education classes are a source not only of social cohesion but of employment and training.

We have a terrible housing crisis. To show how ridiculous the housing policy for London is, I cite but one example. A constituent of mine who could not be housed by the local authority moved into private rented accommodation in a "Quality Street" home just off St. James's road. She moved there with her children. Her fiancéreturned from duty with the Army in Germany. If he went to live with her—he wanted to do so because they wanted to marry and be together again—she would have to forfeit the housing benefit that she received. He has moved back in and if he works, which he wants to do, they risk losing their benefit. The rent will be more than they can afford. They are likely to lose their home and as a result will be in bed-and-breakfast accommodation, or a hotel at best, if not worse. Any housing policy that offers people a disincentive to work is not compatible with getting our city working again.

We have reached a crisis in the way in which we look after and provide for young people. I put that point to the Prime Minister during Question Time the other day. Massive cuts have been made in the budget of the youth service in all London boroughs. Cuts have been as high as 50 per cent. in Haringey, 25 per cent. in Hackney and £1·5 million in Southwark. Without a properly funded youth service, the prospect of adequately providing for the needs of young people will be reduced and the chance of their moving to criminality will be increased. The crime figures are increasing.

The Government cannot claim to have a wonderful record on providing for the skills of young people. I quote the Financial Times of 14 March 1990. The article says: The Thatcher Government has not achieved a significant increase in staying-on rates which remain low by international standards. Academic achievement"— I remind the House that this is after 10 years or more in office— is unimpressive. Only about 30 per cent. of 16-year-olds gained the equivalent of five or more good GCSEs while just 16 per cent. of 18-year-olds gained two or more A-levels. The number of apprenticeships has fallen since 1979—apparently by almost two thirds in manufacturing. At the same time, only a tiny proportion of YTS graduates have gained worthwhile vocational qualifications. Around a third of 16 to 19-year-olds received no education or training. The current state of youth training is almost disastrous. A central London careers officer is quoted in this month's "Youthaid" working brief publication as saying that "July and August" is the "crazy season" in the careers service with no work and "no YT places". The mismatch between youngsters going to look for training or employment and the number of vacancies is becoming increasingly embarrassing. In employment exchanges—I went recently to my local one—the ratio between applicants and jobs is about 45:1. In some employment offices and jobcentres, the ratio is 70:1. People are desperately looking for youth training places. For many of them, there is none available. Unless the Government put significant new funds into the training and enterprise council programme and into youth training, those young people will go without the training or skill which, I remind the House, the Government have guaranteed that they should have.

What is needed? I and my colleagues in the House believe that we have to start by getting the economic strategy right and by getting the fundamentals of the British economy in order. That requires one to do fundamental things, such as cutting interest rates. We must ensure that we have a proper fiscal policy that encourages growth. We must invest in the sectors of the economy which desperately need investment, such as education and training. Unless we do that, we shall not be able to get the economy going again.

My hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) set out succinctly a summary of proposals in his speech on the Budget. We proposed that almost £2 billion should go into education, training and child care, and £1 billion or more into public transport. In London, that would include a fast link to the channel tunnel and an increase in the London Transport external financing limit. We proposed a £1 billion package for business, including legislation to tackle the late payment of bills. We said that a transitional relief scheme was needed for the uniform business rate. We proposed a package for jobs, particularly jobs that are environmentally friendly.

The country and London need such an investment package. Without such a strategy, the economy of London will not recover. We need a regional strategy, too. One cannot have a regional strategy without a mechanism for delivering it. We are more certain than ever that, without co-ordination of economic regeneration policy by a Londonwide authority, we shall never get the capital city moving again.

We need to deal with the disparity of income to which I alluded. That can be done only by a decent citizen's income to ensure that the gap between the rich and the poor does not increase, but decreases. We need to ensure that there is a series of measures to encourage enterprise, training and the rest. At our conference in Nottingham in the spring Liberal Democrats approved the establishment of regional development agencies to stimulate and encourage regional economic activity. We proposed local development agencies as a method for injecting extra resources from outside the area. We proposed the decentralisation of local authority services. We have to ensure that the political, democratic process is the vehicle through which economic regeneration happens.

We need more money in vocational training. We need to ensure that there is a better link—there are some good examples—between education and jobs. We must ensure that there is a bias towards those who find it difficult to obtain work, for example, those with disabilities. Child care provision is needed by many women who would like to get back to work. We need to help those from the black and ethnic minorities who are, according to all the statistics, the most discriminated against in terms of their economic and employment opportunities.

We will be unable to fulfil those needs unless people have adequate housing in which to live at a cost they can afford. That is why we believe that housing cost relief should be introduced. Mortgage tax relief should be abolished and replaced by a more equitable system. We must ensure that a new form of funding is introduced through an intermediate level of rented accommodation.

We must deal with our skills shortage. Walworth school in my constituency has converted its top floor into something called the "world of work". That teaches secondary school pupils how to prepare for the world outside and it does a good job. Yesterday a training and access programme whereby one can obtain information from a machine in the shopping centre in Surrey Quays was opened. Such initiatives are good, but they are not sufficient unless we have an economic strategy to back them up. Unless we undertake co-ordinated economic planning we will not succeed.

The transport system of the capital city must deliver people to and from work without frustration and often delay. The London chamber of commerce and the Confederation of British Industry have made it clear that our reduced efficiency and reduced ability to compete with other nations is the price we pay for the congestion of our capital city.

In the short term we must introduce an urgent package of measures to bring jobs to the capital city. If that does not happen we will pay the price not only in terms of increasing poverty, homelessness, poor health and increased expenditure on social security, but in terms of bad morale. It will also lead to a capital city that looks increasingly dirty, tacky and in poor repair. One cannot have a successful citizens charter if those citizens do not have the ability to earn a decent wage with which they can enjoy the services, public and private, in relation to which the charter seeks to give them rights.

We must have immediate economic activity, stimulated by the Government, to bring jobs to the capital city. We could invest in housing, school buildings and hospitals. We could do that in a practical way by reducing the controls on capital receipts and relaxing the controls on local government by exempting some of its activities from capping. We could employ a large number of people in energy conservation activities to make our homes better insulated and draught-proof. We could put more money into the training and enterprise councils so that they can provide a much more wholesome and wide-ranging service. We could second people by transferring them from employment to train people who are not in employment.

We could put money into seedcorn businesses through loan guarantee schemes and business expansion schemes. We could help businesses by giving them a statutory right to interest after 30 days so that they are not increasingly in trouble because of the late payment of bills. We could also give those businesses the power to enforce more effectively the payment of their debts. We could give local authorities the opportunity to be much more effective generators of wealth.

If we do all those things, our capital city stands a chance of taking its place in the post-1992 Europe. If we do not, many of the jobs and economic benefits of a united Common Market will go to Frankfurt, Paris or even Glasgow or Birmingham.

In my time in the House I have never felt that, in one respect, London risks going back to the dark ages that prevailed a decade ago. But it seems that economic history could repeat itself. Crime is rising, and youth crime in particular. Racial tension is increasing and the British National party is finding it easier to recruit and is working harder at it. The tension between the traditional long-standing communities—principally white, and including the Irish as well as the British—and the more recently established communities is growing. It is growing because there are not enough jobs and houses for both, so people are feeling aggressive and defensive. The police will confirm that the number of incidents of racial violence and threats is growing in our capital city.

One reason why so few people vote Conservative in a constituency such as mine—this goes back to before the war—is that they realise that, although the Conservatives may promise much for the inner city, the minority will obtain the majority of the benefit while the majority will remain relatively as poor as ever. Many will continue to struggle because the goodies simply do not trickle down as the former Prime Minister, the right hon. Member for Finchley (Mrs. Thatcher), and her advisers thought that they would. That is not to say that my constituents have not been failed by others, too.

After 12 years of this Government, London's economy is in a bad way. On balance, the Government's initiatives have not rescued the capital city or prepared it for the 1990s, let alone the next century. Unless they realise what is needed soon, Londoners will have to look elsewhere for an economic agenda that will meet the job. My hon. Friends and I offer an agenda that will give London and Londoners the opportunity to get back to work.