My Lords, this is a timely debate and I am grateful to the noble Lord, Lord Myners, for its scheduling.
Rather than repeat the many wise points made earlier, I base my remarks on my experience of London business over recent months as chief executive of London First. Indeed, the Minister, in one of his first official engagements, shared a breakfast with London First business leaders, where he displayed his strong grasp of the then acute challenges facing the financial services sector and the Government's strategy in addressing them.
Fundamentally, we must prepare and strengthen ourselves for the upturn, while seeking to reduce both the impact and duration of the dip. First, we need to step up investment in infrastructure. We could learn not just from Keynes and from Louis XIV's Colbert but from Maharaja Umaid Singh, who, in the face of famine and drought overwhelming the Marwari people, commissioned in 1928 a great palace—the Umaid Bhawan Palace. It employed many hundreds of Marwaris for some 15 years, transforming the short and long-term fortunes of Jodhpur, its capital. Closer to home, I trust that our downturn will not bring famine, nor last 15 years.
We have existing commitments to economic infrastructure, such as Crossrail and Thames Tideway, but London also has both unfunded transport projects and those which could be accelerated—for example, the modernisation of the Tube and phase 2 of the East London line. Work can start now if the funding is provided, providing activity and jobs now while building our capacity for future growth. They are London's equivalent of the Maharaja's palace.
We should also invest in social infrastructure, increasing the new Homes and Communities Agency's budget so that it can be an active investor in housing development in London. This would both stimulate the private sector and enable the public sector to acquire new, much needed social housing while prices are low.
We also need to invest to support London's future growth. Of course we must deliver the Olympic Games cost-effectively, but we must not mix up investing in the long-overdue regeneration of the East End with this cost. The Olympics provide a once in a lifetime catalyst: we must invest the public money necessary to provide the foundation for the private investment which will turn the East End into a powerful part of London's future. For example, why are we scaling back the Olympic village on the one hand while stressing the need for thousands of houses in the same area?
It is a myth to think that low borrowing makes you a saint and higher borrowing a sinner. What matters is where the money goes, and London, the engine room of our economy, will deliver a decent return on investment for our hard-pressed Treasury.
My second area for action is to look afresh at regulation. There are areas—most obviously, financial services—where action is needed. Boardrooms and regulators need to understand fully the risk profile of the products and services which they trade and oversee. We need proper risk management without undermining competitiveness. That is not necessarily heavy touch or light touch; it should be right-touch regulation.
So we need no knee-jerk response; instead, we need thought-through global co-ordination, and no one should pretend that that is easy. The British Government's recent impressive international leadership must continue—to avoid regulatory arbitrage and ensure that international regulators, whether in Brussels or Basel, do not take short-term, short-sighted actions. For instance, in the longer term, it makes no sense for the failure of a bank such as Lehman's to be treated so differently by authorities in the US and the UK that the market may be skewed to the disadvantage of its creditors, customers, workforce or competitors.
Equally, we must guard against overzealous UK regulation, which will simply drive business offshore. The competitiveness reviews of financial services commissioned by the Chancellor and London's mayor before the recent crisis should provide real-time input to policy-making.
We also need to look more widely at the impact of regulation; now is not the time to load extra burdens on business. The Planning Bill before this House places a new infrastructure levy on developers. We need to ensure that it is a practicable measure which will support, rather than deter, investment. Similarly, the Government should not be starting to levy full business rates on empty properties, hitting businesses when they are down.
Finally, in these difficult times, I reiterate that the UK's capital remains open for business. We need investment, we need to improve Londoners' employability, and we have to avoid more own goals on tax and regulation. But London remains, according to most studies, the best place in the world to do business. Our competitive advantage extends beyond the City, from world-class research and development, to visitor attractions and creative industries; from, as it were, the A and B of celebrated architecture and newly opened-to-the-public Buckingham Palace Gardens, to the Z of London Zoo. Londoners have skills, diversity and flexibility and, for dollar-based investors and tourists, our premium product is now surprisingly affordable.