UK Economy (London)

– in Westminster Hall at 2:00 pm on 10th March 2004.

Alert me about debates like this

Photo of Harry Cohen Harry Cohen Labour, Leyton and Wanstead 2:00 pm, 10th March 2004

I am grateful to you, Mr. Deputy Speaker, for selecting this debate on the role of London in the United Kingdom economy. London is one of the great capital cities of the world, a world leader in finance, business and commerce. It is the historic seat of democratic government and the monarchy and, more recently, the seat of highly successful city government. It has much to offer and attract. It is a magnet for creative people, a polyglot of activity. London is large scale, with a large working population, which delivers economies of scale and ready markets. There is much choice and there is also lots of innovation with an easy transfer of talent and skills into both business and cultural activity.

London is of unique importance. It is a dynamic city and has world recognition. It is also the main driver for the UK economy as a whole, but maintaining the dynamism depends on continual, huge-scale investment. That cannot be taken for granted and it is not in anyone's interest in this country for the capital to run down and its arteries to become sclerotic. In recent years, there has been some recovery after years of underinvestment, but I emphasise that London's infrastructure needs regular renewal and modernisation, and the issues that hold back its people and business need to be properly addressed. There is a big pay off for the UK to do that, which the Government must take into account when deciding their comprehensive spending review priorities.

Let me make four key points to the Minister. Most important, as I have said, investment in London benefits the whole of the UK. Secondly, it helps to ensure that London contributes more resources to the central Exchequer than it receives for spending. Thirdly, investment in London is necessary for sound economic and social reasons, such as to deal with the projected growth in population and the high levels of poverty. Fourthly, investment in London enables many of the Government's important national targets to be met.

On the first point, London has a high level of productivity—in fact, the highest in the UK. It is 25 per cent. above the national average. That induces competitive pressure, which spills outside of London. We then achieve improved competitiveness and productivity in the UK as a whole. Investment follows and spreads to other parts of the country. London attracts foreign direct investment, which frequently permeates to other regions in the UK. I know from my role in economics and security on the NATO Parliamentary Assembly how essential and prized for a country's economic prosperity is foreign investment. We must continue to encourage it to invest in the UK, and London is invariably its starting point.

Investment in London is necessary to maintain its global attractiveness. Many businesses in London would not readily relocate elsewhere in the UK. They would more likely go to other countries. London contributes more to central Government than it receives. According to the Mayor, in 2001, it contributed between £9 billion to £15 billion more than it received in spending. Growth in the city's economic activity as a result of well-made investment would increase that amount.

While a net contribution is to be expected from a region that has higher than average income, if London invests insufficient resources to sustain its growth, its international competitiveness and contribution to the prosperity of the whole country will be diminished.

Investment in London is necessary for sound economic and social reasons. There are a number of respects in which that is important, the first of which is transport. London's economic strength is highly dependent on an efficient transport network, able to deliver London's relatively dispersed population to its concentrated areas of employment. If we are to use London's projected growth effectively, the transport infrastructure has to keep up and improve. I have pointed out in past debates in this Chamber on London underground that the system already creaks due to years of underinvestment.

London's population was forecast to grow by 800,000 between 2001 and 2016, and to become younger in age overall. That growth in population is being promoted by the Government. In my area of east London, there is the Thames gateway development and the new Stratford city proposal, both of which are welcome. Transport for London expects demand for trips on all modes of public transport to increase by 2 million passengers a day by 2016.

Photo of John Randall John Randall Opposition Whip (Commons)

I have been grateful to the hon. Gentleman in the past for securing debates on the London underground. Does he think that things are getting better on the underground?

Photo of Harry Cohen Harry Cohen Labour, Leyton and Wanstead

That is a good question. At least the money is beginning to flow. As the hon. Gentleman knows, I was not a supporter of the way in which that funding was arranged; that could have been done so as to present better value for money. However, I would not be overly critical of the infrastructure companies—at least, certainly not at this stage—which seem at last to be getting down to the job that they are paid to do. There is some improvement, but much more needs to be done, especially bearing in mind the population growth that is envisaged.

Substantial investment of about £1 billion per annum from 2005–06 will be required. Failure to invest in London's transport infrastructure will result in losses to both the London and the UK economies.

Photo of Pete Wishart Pete Wishart Opposition Whip (Commons), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs), Shadow Spokesperson (Transport)

Can the hon. Gentleman tell us where the extra £1 billion, and all the other extra expenditure that he has in mind, will come from? Will it come from the regions and nations of the United Kingdom? Has he identified where in the Treasury that money is available?

Photo of Harry Cohen Harry Cohen Labour, Leyton and Wanstead

I will come on to that, but London, as I pointed out, is an area of growth; it generates growth for the UK economy as a whole, so any extra investment—and this is the nub of my argument—is money well spent. It generates greater wealth and prosperity. The money does, initially, have to come from investment from the Treasury, but in the longer term there are other ways to get it. I am pre-empting my speech, but changing borrowing powers may, in future, be a way of getting more money.

Photo of Jon Trickett Jon Trickett Labour, Hemsworth

My hon. Friend is a powerful advocate for his city, but is it not also arguable that London is greedy? It wants increasing investment and produces more congestion, and then wants investment to sort out the congestion. Would it not be better to be not as greedy, and to hand over some of the jobs and investment to areas elsewhere in the country, thereby remedying the profound inequality in the nation?

Photo of Harry Cohen Harry Cohen Labour, Leyton and Wanstead

I do not believe that London is greedy. As I said, it is a net contributor to, and a driving force behind, the national economy. Its jobs spill over into other regions. However, I agree with my hon. Friend that the Government have to have a policy for the regions—and they do—to create jobs there. I do not think that it helps the regions to damp down London's growth potential.

Photo of Karen Buck Karen Buck Labour, Regent's Park and Kensington North

Is it not the case that one of the reasons why a number of London Members are seeking to argue for London is that, according to the Treasury's own figures, its share of national public expenditure has been falling in recent years? Its population has been rising during that time. Some of us want to catch Mr. Deputy Speaker's eye to make that balanced case today.

Photo of Harry Cohen Harry Cohen Labour, Leyton and Wanstead

The point is well made, and I will not add to it.

Failure to invest in London's transport infrastructure will result in losses to both the London and UK economies. For instance, if there were a failure to invest in Crossrail, the country would miss out on an increase in GDP of at least £19 billion. Analysts have suggested that Crossrail could support more than 20,000 additional jobs in central London by 2027. It would link the capital's major business centres, railway stations and Heathrow, and that would improve business opportunities throughout the country. I also urge the Government to approve the final funding scheme for the East London line extension. That will join up a significant proportion of the most deprived wards in London, bringing regeneration, new jobs and economic development.

I shall talk about poverty and worklessness. London is a city of great disparities. Inner London is by far the most deeply divided part of the country, with the highest proportion of rich and poor people anywhere; 48 per cent. of inner London children are poor, and ethnic minorities make up 29 per cent. of the population and have low employment rates. Women with children face particular problems in London's labour market. Policies to improve work incentives and opportunities for parents and people with relatively low skills are required. Increased availability of affordable child care and substantial skills training must be two key priorities for the Government.

The housing demands created by London's growing economy and population have not been matched by adequate supply. As a result, London's house prices have risen disproportionately. Between 1995 and 2002, the increase was 149 per cent. compared with 87 per cent. for the whole of the UK. High house prices create a need for affordable housing. The lack of affordable housing for intermediate and key workers has led to understaffing in our public services, which are important. That is a major problem. Increasing supply, such as at Thames gateway, takes time. For now, intervention should be focused on making housing supply more responsive to market conditions; for instance, social home providers should be utilised more effectively. The Government should also give the Mayor and the Greater London authority strategic control over public housing investment, as is the case in other regions.

I turn to public services, and in particular education and health. The key problem facing such public services in London is recruitment and retention of staff. London has a high vacancy and turnover rate for teachers and health workers. Research shows that in 2003 the cost of living in London was between 17 and 30 per cent. higher than in Edinburgh or Manchester. The cost of living in London is particularly high for the lowest income groups. The only effective way significantly to improve recruitment and retention of key workers is to compensate them financially for the relatively higher cost of living in London.

I move on to crime and community safety. Although significant progress has been made in tackling crime in recent years, London still suffers disproportionately from some of the crimes that are most costly to society, such as robbery and violence against the person. Levels of worry about crime and incivility—antisocial behaviour, street drug dealing and use, litter, rubbish and graffiti—are high in London. These fears have a worse effect in communities where there is economic deprivation, black and minority ethnic communities, women and homeless people.

Photo of Sir Sydney Chapman Sir Sydney Chapman Conservative, Chipping Barnet

Would the hon. Gentleman say that tackling crime and disorder in our capital city is not helped by the Government redefining the police allocation formula for funding and then, when they do reform it, not abiding by it and giving London £56 million less next year?

Photo of Harry Cohen Harry Cohen Labour, Leyton and Wanstead

The hon. Gentleman makes his point, but the Government generally have a good record on policing. We have record police numbers. As he will hear, I shall make a case for the Government to look again at funding and increase investment for the police.

It is essential that there is increased investment in policing, including fostering more productive relationships between the police and local communities. Better police numbers mean that more investment is needed in new police technology, new skills and training and better support services. I have been told that the Metropolitan police service infrastructure is creaking due to the lack of capital investment. In my constituency, the land where a new station was to be built has been left empty. Capital investment for the police must be addressed.

London's growth will place further pressure on its environment, not least in dealing with the quantities of additional waste that will be generated. The Government should consider appropriate changes to existing legislation to establish a single waste disposal authority for London. Parks and green spaces must also have greater protection and must be enhanced.

The Government's achievement of many of their targets—including increased bus and light rail usage and reduced congestion in large urban areas—depends on investment in London.

Photo of Angela Watkinson Angela Watkinson Opposition Whip (Commons)

Just before the congestion charge was introduced the subsidy for London bus services was about £1 million a day. Does the hon. Gentleman know what the effect is of the congestion charge? Has it increased bus usage? Has the number of fare-paying passengers increased? Has it had a beneficial effect on the necessary subsidy for bus services from the taxpayer?

Photo of Harry Cohen Harry Cohen Labour, Leyton and Wanstead

I cannot give the hon. Lady chapter and verse, although that is available from the Mayor's office and the GLA. There is no doubt that funds raised from the congestion charge would go to improve public transport. There has certainly been a big increase in money for buses and a better service on the buses in all areas of the capital, which I welcome. That is part of the point that I am making. The Government's national targets are met because of improved performance in London.

There are other targets, such as halving the number of children in poverty by 2010 and eradicating it completely by 2020, reducing the proportion of children in households with no one in work, raising attainment for 14 to 19-year-olds in schools and colleges, reducing inequalities in health outcomes, reducing crime and fear of crime, meeting national air quality targets, and ensuring a better balance between housing availability and the demand for housing. If London were not performing in any of those areas, the Government's targets would not be met.

The case for investment is strong. Investment in London needs to be budgeted for now in the Government's spending plans. As part of that, they should allow a prudent borrowing power for the Mayor, the GLA and Transport for London for strategic improvements. In the longer term I appreciate that local taxation powers, which are currently under review, will be changed. The London-wide strategic role, which is part of that, needs to be recognised. Resources from high land values and, perhaps, from sales need to be accessed. London's rich should be required to contribute a fairer share, and the business centres in the City of London and docklands should release more of their resources and be better integrated in meeting the London-wide objectives, to which I have referred.

I say to the Minister and the Chancellor, pay up for the investment in London—it is worth it.

Several hon. Members:

rose—

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

Order. Many Members are standing. I remind them that we have three wind-up speeches and that the object of the exercise is for the hon. Member who secured the debate to get an adequate reply from the Minister. If hon. Members keep their contributions tight, we could probably squeeze most of them in.

Photo of Sir Sydney Chapman Sir Sydney Chapman Conservative, Chipping Barnet 2:21 pm, 10th March 2004

I shall be as brief as I can, but I cannot begin without thanking Harry Cohen for raising an important matter of concern to Londoners: the amount of investment and the way that the Government treat London.

The hon. Gentleman mentioned four key points, and I shall stress one of them. Nine months ago, the Prime Minister's strategy unit reported on London and documented what more or less every Londoner already knows. It referred—I am paraphrasing and giving a short précis—to widespread poverty, severe housing problems and a seriously deficient transport system in Britain's greatest city. I do not deny that the Government are taking some action and I do not wish to quarrel with that. Unless action is taken, the problems will get worse because, as the hon. Gentleman said, it is estimated that by 2016 there will be an additional 800,000 people living in our capital city.

An additional and chilling point made in the strategy unit report was the condition of the poor. As every hon. Member who represents a London constituency knows, there are great disparities in our city. I have the privilege of representing part of an outer-London borough. However, if one detaches the statistics relating to the outer-London boroughs from those relating to the inner-London boroughs, on virtually every index inner-London is the worst region in the whole country, in the sense of the highest level of poverty and so on. London is therefore entitled to sympathetic consideration from the Government.

Of course, it is true that there is more wealth south of the Severn-Trent divide than north of it, but the idea that everybody living south of the divide is wealthy and that there is deprivation and destitution anywhere north of it is quite wrong. I have heard Ms Buck speak eloquently and sincerely about how her area has pockets of great wealth and pockets of extreme deprivation cheek by jowl.

In introducing his speech, the hon. Member for Leyton and Wanstead talked about the disparity between what London pays out in taxes and what it receives to run its public services. He mentioned a figure, but the figure I have is of the order of £20 billion. Whatever the sum, it is significant. All I say to the Minister is that London is entitled to have a review of the revenue support grant that it gets, and that we have suffered from its transference from London and the south-east to the midlands and the north. I cannot speak about Scotland and Wales, but I know that Scotland is very favourably treated under the Barnett formula. I hope the Government take account of that. If the gap is £20 billion, let us recognise that such a sum is the equivalent of £3,000 for every man, woman and child living in our capital city.

Photo of Pete Wishart Pete Wishart Opposition Whip (Commons), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs), Shadow Spokesperson (Transport)

The hon. Gentleman is probably aware of the research conducted for the Deputy Prime Minister's Office at Nuffield college, Oxford. It suggests that London does well out of identifiable public spending. It gets £5,177 per head compared with £4,724 per head for Yorkshire.

Photo of Sir Sydney Chapman Sir Sydney Chapman Conservative, Chipping Barnet

I hear what the hon. Gentleman says, but I cannot enter into a debate with him now. I shall say one thing: if there were equal wealth and poverty in London and in any other part of the country, London would still need more because of the extra cost of living in London, which is considerable. London weighting is inadequate for most professions. I shall end by saying that we are talking about £3,000 for every man, woman and child in this country and, to use the phrase that we hear so often on the underground, London is beginning to mind the gap.

Photo of Karen Buck Karen Buck Labour, Regent's Park and Kensington North 2:26 pm, 10th March 2004

I congratulate my hon. Friend Harry Cohen on securing this important debate and allowing us to put on record some of our arguments as to why London's loss would not be anybody else's gain. My hon. Friend outlined well the case for additional investment in London, and how that would have economic benefits for the whole country. I am not one of those who argue that London's economic success should not be a means of benefiting poorer regions, or that there is not desperate poverty, need and worklessness throughout the country that needs to be addressed. However, as I have said before, one should not kill the goose that lays the golden egg, and it is important that we grow London's economy.

The London analytical report issued last year by the Cabinet Office set out powerfully a framework for London's economic growth. Can the Minister say what has happened to that report? Will there be the promised follow-up? It is important that we take forward the report's findings and recommendations.

My hon. Friend the Member for Leyton and Wanstead made the argument forcefully for cash for infrastructure. That is the single most important issue. We must quickly move to a positive decision on Crossrail. Without Crossrail and some of the other major infrastructure projects, it will not be possible to meet the needs of a growing city, which is projected to grow by 800,000 in the next decade. Although Crossrail is a major project with significant upfront capital cost, investment in it will benefit the whole country. It is estimated that Crossrail will create GDP benefits of at least £19 billion over 30 years, and generate tax revenues of about £8 billion during that period. Such an investment is sometimes seen as a drain on our economic resources, but it creates the potential for much wider economic benefit.

I shall refer to the other issues touched on by my hon. Friend, including the removal of some of the barriers to London's economic success, with particular reference to its work force. Alongside a tight labour market, which is drawing in people from all over the country, Europe and the world to meet its needs, we have the worst unemployment of any region—7.1 per cent. in London, compared with 5.1 per cent. in the country as a whole. That feeds into the highest levels of child poverty, with 48 per cent. of all children in inner London living in poverty.

The reduction in unemployment has been slower in London than elsewhere, even while employment has grown. By the International Labour Organisation definition, since 1997 unemployment has gone down in London by an admittedly creditable 19.6 per cent. That is a tribute to the economic management of the country by the Chancellor of the Exchequer. However, that compares with 29 per cent. for the rest of the UK. The claimant count is down by 41 per cent., but the figure is 46 per cent. for the rest of the UK. Long-term youth unemployment is down 71 per cent. in London, but that compares with 77 per cent. for the rest of the UK.

The measures that have been introduced, from the new deal to the tax credit programme, have been successful and have made a major contribution to poverty and unemployment reduction throughout the UK. However, they have not had equivalent effectiveness in the capital. If we could only close that gap on poverty and unemployment, I would regard that as a task well done. That should be a critical challenge for the comprehensive spending review, the Budget and the next Labour Government. The disparity is due to three major factors: the cost of housing, the cost of child care and the longer time that it takes Londoners to travel to work compared with workers in other parts of the country. That underlines the need for an efficient, fast and affordable transport infrastructure.

Higher costs in London mean that lone parents have to earn £7.76 an hour to be better off in full-time employment than they would be on benefit. In other regions of the country, they need to earn only the minimum wage. To reduce such cost barriers, we look to the Government to increase investment in affordable child care and to reduce housing costs.

A number of changes could be made to the tax credit regime to make getting a job more affordable for parents. We seek support for London to make a capital investment in growing child care provision and in bringing together the disparate strands of child care funding so that we can close the child care gap in London, which is significantly greater than in any other part of the country. That is a point not about service delivery, but about the economy.

Were we able to make that child care investment, we would reduce unemployment in our hard-core unemployment areas, reduce benefit dependency, cut the benefit bill and increase the tax yield, as has been demonstrated by PricewaterhouseCoopers and many bodies working in child care. By creating jobs, we would be able to stem an unfortunate tendency for the London economy to lock a substantial minority of people out of employment, while drawing in people from outside to take the jobs. That increases the pressure on the other main difficulty—the housing market.

My hon. Friend mentioned housing supply problems. It is particularly unfortunate that, at a time when second home ownership is growing rapidly and the buy-to-let market has been flourishing, 80 per cent. of aspiring first-time buyers cannot afford to get their first toe on the property ladder. That has implications not only for key workers, important though they are, but for the entire London economy. It fuels the desire for higher wages so that people can afford housing costs. The house price to average income ratio is 4:8 in London, double the figure in the northern regions. The average private rent is three times higher in London and there are more than 60,000 families in temporary accommodation.

Photo of Mr Iain Coleman Mr Iain Coleman Labour, Hammersmith and Fulham

Does my hon. Friend agree that it is also important that the Treasury and the Office of the Deputy Prime Minister should consider the traditional forms of affordable housing? I was advised the other day that some affordable housing had been designated in a new development in my constituency, for which it would be necessary for purchasers to obtain a mortgage of £425,000. In most people's minds, that could not possibly be described as affordable housing.

Photo of Karen Buck Karen Buck Labour, Regent's Park and Kensington North

My hon. Friend is right. There are two issues. One is to make key worker housing affordable. I have experience of shared ownership projects costing £300,000. The second issue is to be rigorous in ensuring that when we speak about affordable housing, we mean not only buying homes. There is and will remain a substantial minority of people who require affordable housing to rent. That is where there is the greatest squeeze.

I hope that, when the Chancellor comes to consider the next spending review over the long term, not only is the argument for the capital infrastructure made, but we take urgent action to tackle the barriers that result in London having both a flourishing labour market and a very substantial minority of its population locked out of the available jobs.

Several hon. Members:

rose—

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

Order. I cautioned Members earlier that they would have to be brief if they all wanted to get in. I now caution them to be very brief.

Photo of Pete Wishart Pete Wishart Opposition Whip (Commons), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs), Shadow Spokesperson (Transport) 2:34 pm, 10th March 2004

I congratulate Harry Cohen on securing the debate. As there is a London mayoral election in the offing, it does not surprise me at all that the London lobby is asking for yet more of the nation's resources for the city.

I concede readily that London makes a net contribution to the rest of the UK economy. It is the centre of one of the most centralised states in Europe and it has the vast majority of the nation's resources. It would be foolish to deny that, but I hope that the hon. Gentleman concedes that the interdependency between London and the other regions and nations of the United Kingdom is more complicated than he outlined in his simplistic opening argument.

I have often been depressed by the terms in which the situation is depicted. I remember sporadic jock-bashing episodes in the London Evening Standardthat we are all subsidy junkies, whingers and moaners. I hope that the debate has moved on from those days, but if London wants to go another couple of rounds, it must accept a few unalterable facts.

London is the most prosperous city in Europe. Its gross domestic product of £170 billion is larger than that of some of our European friends and allies, including, for example, Austria, Belgium, Finland and Sweden. London has more millionaires per square mile than any other European city and contains the City of London, perhaps the most dynamic and prosperous financial sector outwith New York. London's economy is one of the most successful on earth, and it still seems to be a desirable place to live, as evidenced by the rising house prices and increase in population.

I concede that London has its problems. There is poverty in some of its boroughs and its transport system has struggled to cope with increased traffic. However, if anything, London is a victim of its own success. As its prosperity has continued to grow—a gulf has developed between it and the rest of the UK, and it is growing each year—it has become a magnet, with people wanting to come here. We should try to dissipate and redistribute what London has to the other regions and nations of the United Kingdom. That would make other places more attractive and some of London's problems could be alleviated.

Although we have devolution, the UK is still one of the most centralised nations in the world. People tend to forget that all the big Departments of State are based in London. Other than the Scottish and Welsh Executives, every Government Department is based in London, generating billions of pounds for its economy. It is extraordinary how little Londoners realise that. They probably see No. 10 and the big, grey buildings in Whitehall, but I am sure that they have no idea how much they contribute to the London economy. The same is true of the art galleries, museums and other tourist attractions that generate 30 million visitors a year. That is the hidden subsidy that London receives from the UK taxpayer, and that is not even to mention the headquarters of national organisations, quangos and the BBC.

London also does very well in identifiable spending, with London and the south-east securing 80 per cent. of all transport expenditure. The extension of the Jubilee line cost £3.5 billion alone, and heaven knows how much the proposed Crossrail will cost. As was noted in an intervention, Londoners do very well in spending per head, although I will not go over the figures again.

Photo of Mr Iain Coleman Mr Iain Coleman Labour, Hammersmith and Fulham

Would the hon. Gentleman tell any of the 65,000 homeless families—65 per cent. of the UK total—currently living in London in tacky and dreadful temporary accommodation that everything is so wonderful here?

Photo of Pete Wishart Pete Wishart Opposition Whip (Commons), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs), Shadow Spokesperson (Transport)

I concede that London has problems. As I said, it is a victim of its own success, and because it is prosperous, more and more people want to settle here. In Scotland we face the problem of depopulation, as London is a magnet for so many of our talented and bright young people because of its economic activity and prosperity. I suggest that we try to redistribute some of that so that we do not have the problems of depopulation in Scotland and other regions and nations of the United Kingdom. We should try to make the most over-centralised state in Europe more of a level playing field for our young people.

Photo of Jeremy Corbyn Jeremy Corbyn Labour, Islington North

Is the hon. Gentleman aware that the policy of decentralisation that he suggests is carried out against the poorest people in London? They are made an offer of moving to unlettable council accommodation in the north-east or north-west of England, thus leaving behind education, jobs, family and other relationships. In reality, we decant the poor and most vulnerable out of London to make way for the most wealthy.

Photo of Pete Wishart Pete Wishart Opposition Whip (Commons), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs), Shadow Spokesperson (Transport)

I accept the hon. Gentleman's point, but I would settle for some of those people coming to Scotland. We have depopulation. We need people and skills to come to our nation to help rebuild what is still very much a struggling economy. The economy is overheating in London and the south-east, and he seems to suggest stoking up the fire. I think that we should light a few more fires throughout the United Kingdom so that we have some of London's economic activity. Scotland has a stagnant economy; London is dynamic and going forward, and we should try to redistribute those qualities.

London is so rich and powerful because all the headquarters are located in the city and all corporation and other taxes are paid here. For example, BP and Shell have productive oil fields just off the coast of Scotland, but the taxes and revenues go to London. If the GDP from that were included in Scotland's statistics, it would look much richer and London would look much poorer. That would go some way to redress the balance and deal with what seems to be a fiscal deficit between London and the rest of the United Kingdom.

I read an interesting report by the London School of Economics, which suggested that 4 million jobs in the rest of the UK depend on London's demand for goods and services. That is again due to headquartering. Marks and Spencer, for example, depends very much on the activities of its stores throughout the rest of the UK, and the same is true of Barclays bank and other national companies that have headquarters based in London.

All that may be necessary, and we might have to revisit some of the investment issues as they relate to London, but I suggest to the hon. Member for Leyton and Wanstead, who made the case for London once again, that it is a victim of its own success. We should try to redistribute some of its massive wealth and resources, and I am sure that we could address some of its key problems.

Photo of Mr Iain Coleman Mr Iain Coleman Labour, Hammersmith and Fulham 2:42 pm, 10th March 2004

I am delighted to have the opportunity to speak in this important debate. I congratulate my hon. Friend Harry Cohen on securing it. I hope to highlight the key role that London plays in the UK as well as the difficult and specific problems facing London's public services.

I begin with the obviously contentious premise that what benefits London benefits the entire UK. Although it is necessary to acknowledge the real differences between London and the rest of UK, it is equally important to acknowledge how crucial London is for the life of the UK as a whole. Investment in London is investment in the UK and will help to ensure that London continues to contribute more resources to central Government than it receives in spending, as it very much does at the moment.

Needless to say, there are London-specific problems, especially in education, health and the recruitment and retention of public service staff, which should be urgently addressed by increased investment. London's wealth and reputation may give it an air of vitality and luxury but, in reality, it is a city that suffers from a variety of crippling social and economic problems. If London is to continue in its robust role at the centre of the UK economy, it will be essential to stress the specific issues of London's health, education and public service staff.

London is a truly global city with more internationally oriented businesses than any other city in the UK. Those businesses and general foreign investment are attracted by London's ability to offer, among other things, access to vast markets, a deep pool of highly qualified labour and a concentration of business activities that is unmatched elsewhere in the UK. It is essential to appreciate that if those businesses were to relocate, they would not readily go anywhere else in the UK, but would be likely to re-establish themselves in other countries. Investing and spending in London to maintain and further improve its position on the world stage is therefore crucial if the UK is to hold on to the benefits that such global businesses bring.

It must be stressed that London's continued success as a world city represents an indisputable opportunity for the rest of the UK. London garners financial resources through its position in the world markets, attracts highly skilled persons to the UK and helps to generate highly productive businesses. Additionally, foreign investment in London often permeates through to other regions.

Photo of Angela Watkinson Angela Watkinson Opposition Whip (Commons)

The hon. Gentleman is describing central London. Does he appreciate the difference between central London, which attracts the sort of investment that he describes, and outer London constituencies, such as Upminster and that of my hon. Friend Sir Sydney Chapman? Those local authorities are net contributors to Greater London schemes and suffer from a leaching of funds into central London. Outer London districts are in a different position to the one that he describes.

Photo of Mr Iain Coleman Mr Iain Coleman Labour, Hammersmith and Fulham

I understand what the hon. Lady says, but I remind her of the comments of Sir Sydney Chapman, whose contributions I listen to carefully. He recognised that inner London is the poorest area of the country and has the greatest problems. In my constituency, some of the wealthiest people in the UK live next door, albeit somewhat uneasily, to some of the poorest. It is essential that London's role in the economy is recognised by central Government and the Mayor.

More activity in London means more growth in other parts of the UK. London's higher productivity—25 per cent. higher than the national average—results in competitive pressure spreading outside London, helping to raise productivity across the rest of the UK. Investment in London is essential to ensure that London continues to contribute more to central Government. As my hon. Friend said, London contributed significantly more to central Government in 2001 than it received in spending. Recent tax policies, such as higher stamp duty, are likely to have tilted the tax burden towards London so that the flow of resources from the capital may have increased since 2001. I recognise that London, as the wealthiest region in the UK, should contribute more in taxation than it receives in expenditure. Yet for London to continue to generate the output and activity that enable it to make such an invaluable contribution to the UK, increased spending and investment must be provided.

Unfortunately, due to financial constraints, traditional Government methods of investment and spending are unlikely to meet London's need to continue to compete effectively. Therefore, we urgently need to consider more flexible methods of financing, whether that is prudential or other forms of borrowing from the Greater London authority. London's economic progress and evolution requires openness and adaptability on the part of central Government. I urge the Minister to address her reply specifically to my hon. Friend's question about whether the Government are giving careful consideration to the Mayor's request to be given extra borrowing powers.

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

Order. If the hon. Gentleman promises to be extremely brief, I can just about squeeze him in.

Photo of Chris Bryant Chris Bryant Labour, Rhondda 2:48 pm, 10th March 2004

The extremity of my brevity will be noticeable. Some hon. Members might feel that I have got a cheek taking part in the debate, not least because I represent a Welsh constituency—I see two hon. Friends nodding in agreement. However, I dissociate myself from the truculent attack on London that we heard from the Scottish Nationalists. It is wholly unhelpful, futile and economically naive to attack London from an ideological position, rather than trying to build a stronger UK economy, in which we rely on one another.

Sir Sydney Chapman referred to poverty and wealth in London as being cheek by jowl. For many years, people in the Rhondda used to say, "We didn't have any cheek; we just had the jowl." That is one of the economic problems faced by somewhere such as the Rhondda, which is geographically isolated not only from London, but from the Welsh capital city of Cardiff. Yet the ties that bind the Rhondda to London's economy are significant. London is a gateway for tourism for the whole of the United Kingdom, because the vast majority of international travellers come through London and are bound always so to do. We must ensure that those tourists do not visit only London, because if they have seen only London, they have not seen the United Kingdom. London cannot take the benefit that it would like to if people do not visit the north-west and north-east of England, south Wales, and especially the Rhondda.

Similarly, the financial services industry, which is the backbone of the London economy, weighs heavily on the people of the Rhondda. The Treasury Committee recently produced a report on the transparency of credit card charges. I urge hon. Members to read about the devastation that irresponsible marketing by credit card companies can inflict on a community such as the Rhondda, where people end up sleepwalking into debt that they will never be able to repay. As we learned last week, light-touch regulation of financial services is in danger of being featherweight. If there is no regulation of the financial services industry, or so little that consumers are not protected, the people of the Rhondda, who have higher personal debt than many in Cardiff or London, will suffer significantly.

I am wearing a Burberry tie, partly because Burberry products are made in the Rhondda, as well as in London. Economic decisions taken by the big houses in London affect what is left of the manufacturing industry in south Wales, yet the "man from Del Monte" attitude is often brought from London or international businesses to United Polymers or Chubbs in the Rhondda, which are told, "I know it costs £1.5p to make it this year, but next year we want it for 95p." There are better ways of enforcing productivity gains in the UK than that heavy-handedness.

Of course I want London to prosper, as any sane British person would, but my biggest worry is that it will be difficult if we remain exiled from the euro. London is the most expensive city in Europe, which is partly because we are still exiled from the single currency that is driving down prices throughout the rest of Europe.

Our financial services industry is likely to be threatened if we remain outside the euro. Trade and inward investment, which is growing in countries that have adopted the single currency, is being hit in the United Kingdom. If we do not join the euro our jobs will be threatened.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury) 2:52 pm, 10th March 2004

I congratulate Mr. Cohen on securing the debate. His speech captured the paradox in the debate, as there are positive things to say about London but many problems, too. Equally, London Members across the board have the feeling that they are underfinanced. I particularly identified with the comments of Sir Sydney Chapman about police funding, which is a classic example of how the formula works against London boroughs.

An equally understandable feeling was expressed by Jon Trickett, who was present for a short time, and by Pete Wishart, that the British economy is seriously unbalanced and London is over-dominant. I entirely understand that point of view; I grew up in Yorkshire, spent my early professional life in Glasgow and I represent a London constituency. I see every aspect of the problem and I sympathise with those who believe that Britain's decision making and much of its wealth is over-centralised.

It is worth briefly reviewing the positive aspects of London. It accounts for a fifth of GDP and it is more dynamic than the rest of the economy. In the past decade, 360,000 net new people have come to the capital. London is growing more rapidly than the national average and its average income is well above that of the country as a whole, although there are vast disparities within the city.

Mr. Coleman captured that point well, as his constituency and that of Ms Buck embody the problem. There is an enormous dual economy within the capital city. My constituency, which is a relatively prosperous suburban area, more closely resembles Chipping Barnet and Upminster, but there are pockets of extreme deprivation in council estates in my constituency that are as bad as any in London, or in Britain. The problem is balancing the different factors.

Various London problems have surfaced, the first of which is unemployment. I do not know whether the hon. Member for Leyton and Wanstead stressed it enough, but London now has a significantly higher average rate of unemployment than any region of the UK. It is 7.5 per cent. higher than Scotland, which used to be at the top of the league, or the north-east. The hon. Member for Regent's Park and Kensington, North asked why otherwise relatively successful programmes such as the new deal do not appear to work in London. The answer is that they do not shift the labour market.

At a local level, one can see what is going wrong. In my constituency there is a chronic labour shortage. Students work in term time because they need the money, and they, along with people from eastern Europe, keep the service economy going. Five miles down the road, there is double-digit unemployment, but people cannot work in Twickenham because they do not have the skills or cannot afford the bus or train fares.

At my surgery on Friday night, I encountered a young man who embodied the problem. He was a young man from tragic family circumstances, but who had managed to end up living in a social housing scheme. He was enterprising and had got himself a place on an industrial apprenticeship, but that was in north-west London and his home is in south-west London. He had done his sums and, on fairly low pay, after paying his rent and rates, he was bringing home £40 a week to live on. However, of that £40, £30 has to go on transport. Obviously, he cannot live on that, so he is running up rent arrears, and he will either have to give up his flat or his apprenticeship. Many young working-class people are in that dilemma. We need some explanation of why the existing schemes, which are designed at a national level, do not work more effectively in the capital.

I would like to ask another question specifically on the employment market and Government intervention, although I do not know whether the Minister has the answers or whether the question should be put to the Mayor of London. What is happening with the London Development Agency? Its chief executive and most of its senior staff have left, almost all of its operational targets seem to have been missed, and the organisation is in extreme crisis. Do central Government have any role in the matter, and can they explain what is going on?

My first set of questions related to employment and the odd and distorted nature of the London employment market. My second set of questions relates to the housing market. My suburban constituency may not be typical, but when a modest semi-detached house costs £200,000 or more, one can see the horrible distortions that that creates. I do not think that any of my house-owning constituents would be eligible for legal aid because of the asset value of their property.

Such a level of house prices creates an impossible barrier to entry for working people. On the traditional income multiplier of three, one needs a joint family income of £65,000 to contemplate buying a house, and of course most people do not have that. Consequently, people in modest professional jobs—working-class people have no hope whatever in that market—such as teachers or doctors with an income of £40,000 are buying houses at five times their income. They are therefore horribly over-exposed, and if the housing market turns down, as it probably will, they are potentially in jeopardy. That problem is partly related to the lack of new home building—particularly social housing—but is also a by-product of the overall crisis in the housing market.

The hon. Member for Leyton and Wanstead was right to suggest that overcrowding and long journey times are a major economic impediment. I support what he said about the East London line and about Crossrail, which would be a major advantage to the capital. However, I agree with hon. Members from outside London that those big transport projects have to be funded predominantly through the private sector. There is no reason why Crossrail should not be funded in that way, with additional funding provided through a supplement on rates in those areas that will derive enhanced value from the project, as they almost certainly will. There may be some pump priming from the Government, but the funding should come predominantly from the private sector.

On the funding issue, I agree with hon. Members who complain about the vast disproportion in public funding. There is an issue here that is related to what Galbraith called

"private affluence and public squalor."

It is not all private affluence in London, although there are some very affluent private individuals, but there is public squalor. That squalor is partly attributable to the distribution of national funding, however that is calculated; the share of public spending in the regional GDP of London is far lower than it is nationally. That accounts for the fact that all public services in London are seriously overstretched.

My party believes that we have to open that terrible can of worms called the Barnett formula. I know that that is a difficult issue because there will always be the sense that there will be losers if other people are gainers, but that issue must be faced. We must examine the potential for a need-based allocation formula.

Photo of Jeremy Corbyn Jeremy Corbyn Labour, Islington North

Does the hon. Gentleman also concede that part of the problem about the lack of investment in affordable publicly-owned housing in London is that, at headline level, the figures seem enormous, but to build a council house in London costs vastly more than it does to build one in the midlands or the north-east of England, let alone in Scotland or Wales? We are based on a national formula of what is spent on housing but, in reality, we receive far less for our money in London than elsewhere, hence the lack of affordable housing throughout London and the fact that the situation is becoming worse.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury)

I agree with the hon. Gentleman. I am in favour of drastic solutions and local planning committees. In addition, London government must insist on a tough application of either a 40 or 50 per cent. rule for social housing in commercial housing developments. Throughout my constituency, blocks of 14 private homes are being constructed because that is just under the threshold for social housing, and little social housing is being built. It is a scandal and the Government should be dealing with it.

My last point is about regional balance. I share the view of non-London Members. The UK economy is seriously unbalanced. The reference to the headquartering problem was absolutely right, but we cannot direct the headquarters of private companies to the provinces; they will go elsewhere. What can happen is that the Government take responsibility for relocating some of their own activities. I have adopted the controversial slogan of sending the Treasury to Liverpool. The Minister might welcome that because it would be nearer to her constituency.

Apart from the merits of the proposal, which would save enormous rental levels between central London, the north-west of England or other parts of the north, it is a metaphor, not a specific proposal. It is a suggestion that the Government use their own leverage in respect of decision making and employment, of which there is an over-concentration in London, and relocate much of it. I hope that the Lyons proposals will be reflected in the Budget.

Photo of Mark Field Mark Field Opposition Whip (Commons), Shadow Minister, Shadow Minister (London) 3:02 pm, 10th March 2004

London is a world city. Make no mistake, if its economy fails, the UK economy will fail. There is no doubt that London faces intense competition from a range of countries. I disagree with Chris Bryant because I do not believe that competition comes only from Europe. Increasingly, it is coming from further overseas. My medium-term sights are not on Paris or Frankfurt as financial centres, but on cities that have featured in my working life, such as Shanghai and Bombay. They will be the competition in the future, and that is something that the Treasury and Chancellor should pay considerably more attention to than has been the case hitherto.

I congratulate Harry Cohen on introducing such a timely and important debate. By my calculation, he is the sixth longest-serving London Member of Parliament and, indeed, one of the five slightly more senior, as is my hon. Friend Sir Sydney Chapman. Like me, the hon. Gentleman has the interests of the capital close to his heart. Since I have been an hon. Member, he has introduced similar debates.

Like all of us here, the hon. Gentleman has an eye on the general election. I want to take this opportunity to plug our own excellent local candidate in Leyton and Wanstead, Julien Foster, who requires a mere 19.2 per cent. swing to secure the seat from the Labour party at the next election. If the hon. Gentleman is a little complacent about such matters, I wish to point out that I am just old enough to remember a time when Leyton was a Conservative-held seat. That was at the famous 1965 by-election. I was only three months old. My mother told me that I cried all day, but I am sure that that had nothing to do with the fact that Labour had been defeated.

I shall return to the excellent debate. The historical importance of London goes back some 2,000 years. That makes it unusual. For example, Berlin was a small town in as recently as 1750, and cities such as Chicago barely existed 170 years ago. Therein lies a real problem. I refer to the sheer dominance of London and, to that extent, I accept what Pete Wishart said. Today, London is the political, commercial and cultural centre of our nation. Many from outside the capital city cast an envious eye over London's successes without perhaps appreciating some of its failures and problems, and wish at times to bring it down to size.

In opening the debate, the hon. Member for Leyton and Wanstead rightly said that London is the historic seat of democratic government and the monarchy in this country. I also agree with his comments about the large working population and the fact that that brings with it a lot of choice and innovation. London has a unique importance as a city and is the main driver of the UK economy. His message to the Minister was clear, and I think that I speak on behalf of all London Members who have contributed when I say that we hope that the Government will stand and deliver.

The Minister may have entered the debate with a somewhat heavy heart, but she will have realised from the contributions made on both sides of the Chamber that there is a great deal of unity among London Members on a number of these issues. I suspect that one of the usurpers, the hon. Member for North Tayside, might think that the debate constitutes a lot of whingeing from London Members, but he should hear what we say about Scottish Members in the Tea Room when we have discussed these matters.

My hon. Friend the Member for Chipping Barnet wisely recognised the deep disparities in wealth between areas and even within districts in London. Ms Buck, my constituency next-door neighbour, rightly outlined the crucial importance of Crossrail. The investment here in infrastructure projects, and Crossrail in particular, will benefit the nation at large. Indeed, I think that she said that it would prospectively generate very large tax revenues. Likewise, she emphasised the importance of employment and unemployment issues, child care provision and affordable housing for key workers, whether in the public or private sectors.

The hon. Member for North Tayside acknowledged how highly centralised the UK has become, and London is at its core. He also raised the notion of redistribution of much of the economic wealth that London creates. He is right to an extent when he says that London is a victim of its own success, particularly on issues of infrastructure, be it transport, health or education. I am not sure that I have all the answers, and I do not necessarily ask the Minister to produce them, but I will be interested to hear what she has to say on the hon. Gentleman's interesting and important contribution.

Mr. Coleman made the case strongly for London housing the deepest pool of our qualified labour. He was right to point out that relocating much of our labour stock is easier said than done. Equally, he rightly recognised that about 65 per cent. of homelessness in the UK as a whole is in the capital.

The hon. Member for Rhondda re-established his new Labour credentials, in so far as they ever needed re-establishing, with admirable aplomb. Seriously, he made a relevant and focused speech on a number of issues, and I will be interested to hear what the Minister has to say in response.

London's role as a global trading centre provides a great historical focus for Britain's outward-looking approach. It is often said that 55 per cent. of our trade is with mainland Europe—the European Union nations. Indeed, that is often used as an argument as to why we should join the single currency, but I say forcefully that the logical corollary is that 45 per cent. of our trade is with nations outside the EU. Often, they are the largest-growing and fastest-growing nations and will be the trading partners for the future.

Photo of Chris Bryant Chris Bryant Labour, Rhondda

It is precisely the nations that are choosing to do business with other countries in Europe that have joined the single currency. It is for the trade that we do with eurozone countries, and the fact that countries outside are choosing to do business with France, Germany, Italy and Spain rather than Britain, that we need to make the change.

Photo of Mark Field Mark Field Opposition Whip (Commons), Shadow Minister, Shadow Minister (London)

It is fair to say that we have done significant trading with many of those nations, but let us be honest: the power of the English language is an important part of that. The power of relatively deregulated employment markets—they were certainly very deregulated before 1997—has also made a difference in that regard.

London's historical trading is at the forefront of fostering and developing the links with some of the future economic powerhouses of the world. Equally, London's pre-eminence means that, as a city, we are estimated to contribute £15 billion to £20 billion to the rest of the UK, as my hon. Friend the Member for Chipping Barnet pointed out. I am not arguing that London should hold on to what might be considered our money, but I should like to make some observations and I hope that the Minister will consider them in summing up the debate.

We must remember that London is the showcase for the entire country, not only for tourists but for all overseas visitors, people who want to come and live here, and a significant number of businesses that wish to invest in the UK. Many businesses that invest outside the capital have representative offices in London. Therefore, investing in London's infrastructure is of key importance.

I entirely endorse the comments of the hon. Member for Regent's Park and Kensington, North. I was going to say what she said—that there is a risk that we will kill the goose that lays the golden egg. Indeed, I was going to use those very words. Failure to invest in the capital's infrastructure might have serious medium-term consequences. I hope that the Minister will take this matter to the Chancellor because what we are debating is the need for a vision about a wide range of economic and spending priorities for decades to come.

The debate addresses local government funding as a whole. I impress upon the Minister the need to keep more of business rates in the hands of London's local government. That would help to fund vital services, such as the underground, Crossrail and health and education. The contribution of Dr. Cable leads me to state that national pay bargaining helps to discriminate against London's poorest workers; we need to have a realistic London weighting regime.

The lesson of this debate is that all Members—not only London Members—should seek to praise, not to bury, our capital city. Now is not a time for self-congratulatory complacency, but we must also not subsume London's economic success by introducing ever more tax regulation and Government obstruction. London's initiative and innovation is key to our economic welfare in the years ahead.

On regulation, I take on board what the Minister said about the debate around the Penrose report on Equitable Life; I listened to that in great detail with my City of London hat on. I suspect that Jeremy Corbyn wishes to say a few words on that.

Photo of Jeremy Corbyn Jeremy Corbyn Labour, Islington North

Almost. The hon. Gentleman has a concern for light-touch regulation. I want him to turn his mind to social housing for just a second, and support all other London Members from other parties who want 50 per cent. social housing on all new development sites—not just those with more than 15 units.

Photo of Mark Field Mark Field Opposition Whip (Commons), Shadow Minister, Shadow Minister (London)

My concern is that when I talk to developers in Westminster, many of them say to me up front that if they are told that they must have a 50 per cent. social housing requirement for residential accommodation, that does not make it worth their while to develop and they will sit on their hands. I appreciate that Westminster is an exceptional case. The set rule that the Mayor has proposed sounds sensible superficially.

Whatever target is set for the proportion of social housing, we must appreciate that key workers are people who work in the private sector as well as the public sector. The glue of many of our communities is people who are in relatively low-paid employment but are not necessarily paid from the public purse, such as many shopkeepers. We need a more innovative approach to this matter, particularly in central London where, as has been pointed out, there are strong pressures.

Photo of Andrew Love Andrew Love Labour/Co-operative, Edmonton

The hon. Gentleman will be aware that the Mayor not only suggested the figure of 50 per cent. but commissioned considerable research into where that would be a reasonable target. The hon. Gentleman says that Westminster is not such a place, but the research clearly showed that that was not an unreasonable figure to ask for in Westminster.

Photo of Mark Field Mark Field Opposition Whip (Commons), Shadow Minister, Shadow Minister (London)

I talk directly with many property owners. They might not be the most Livingstone-friendly people. It is a grave concern that if a set target is in place it might be too inflexible for us to achieve the goals that we all want to achieve. There is not much difference in outlook and in the goals that we all want to achieve. We all appreciate that one of the joys of living in London is that the community is diverse, in all senses of that word. We do not want to see ghettoisation, either of very wealthy or very poor people, in parts of our capital city. We must allow flexibility to work to best effect.

Photo of Mr Iain Coleman Mr Iain Coleman Labour, Hammersmith and Fulham

I met last week the chief executive of Berkeley Homes, Tony Pidgeley, who spoke glowingly of his relationship with the current Mayor. I mentioned to him two developments in my constituency—one at Imperial wharf, where St. Georges and the council reached an agreement, and one on the former Queen Charlotte's site—where the proportion of affordable housing would be 50 and 85 per cent. respectively. May I suggest that the hon. Gentleman tells the Westminster planners to talk to their colleagues in the London borough of Hammersmith?

Photo of Mark Field Mark Field Opposition Whip (Commons), Shadow Minister, Shadow Minister (London)

I shall certainly make such a request, although I suspect that the hon. Gentleman will have even more joy directly to his left, with the hon. Member for Regent's Park and Kensington, North. On a serious note, I should also be happy to meet the managing director of Berkeley Homes. It would be useful to glean his views.

I was about to sit down to allow the Minister to take the hot spot. However, in summary, I hope that she will recognise that innovation and initiative are key to London's success, as they have been for 2,000 years. Innovation has an important part to play in our economy, and I hope that she will take on board many of the diverse issues that have been raised during this excellent debate.

Photo of Ruth Kelly Ruth Kelly Financial Secretary, HM Treasury 3:16 pm, 10th March 2004

I congratulate my hon. Friend Harry Cohen on securing this important debate. His contribution was useful and interesting, as were contributions from all parties today.

I should like to start by saying that I do not think that there is a divide between what is good for London and what is good for the rest of the UK economy. I could not agree more with my hon. Friend that London is a highly productive environment. He pointed to the fact that productivity in London's economy is 25 per cent. above the national average; in fact, it is closer to US levels of productivity than to average EU levels, for instance. London makes a huge contribution to the UK economy.

It is not, as Pete Wishart seemed to suggest at some points in his speech, a question of somehow redistributing what London has to the rest of the UK economy. It is a question of recognising London's strengths, addressing its weaknesses, overcoming the constraints on its growth and—as he said at other points in his speech—stoking fires in the other regions of the UK to try to create there the innovation, enterprise, creativity and dynamism that are found in London. I entirely agree with Mr. Field that London's highly competitive environment, its innovation and its enterprise are among its greatest strengths.

I also agree with my hon. Friend Chris Bryant, who says that London acts not just as a gateway from Europe to Britain, but as a gateway for tourists to other parts of the UK, including his constituency in Wales. It is important for other parts of the UK that London prospers and thrives. As the hon. Member for Cities of London and Westminster stressed, London is a world-class financial centre, and it is important to foster its strengths. It is also important that it is outward looking and that it looks not just to Europe, but to the United States and cities in the far east. It is central to the Government's strategy that we have tried to create a dynamic centre of growth that looks more broadly afield, not just to its neighbours but to other parts of the world economy. We have tried to get that message across to our European neighbours, so that we have a vibrant EU economy that looks outwards, rather than inwards. My hon. Friend the Member for Leyton and Wanstead recognises—indeed, he is keenly aware—that the financial services strength of London is one of the key issues that we consider when assessing the five tests on the euro.

In the remaining time I shall try to address the points raised in today's debate. A prosperous and successful London is, as I said, essential for a prosperous United Kingdom. Along with the south-east and the east of the UK, London is a net contributor to the Exchequer, as my hon. Friend pointed out. Some estimates have put the contribution from London to the rest of the UK economy at between £7 billion and £17 billion a year. London is not more heavily taxed than elsewhere in the UK. That contribution is a consequence of the UK's progressive tax system, where the wealthy contribute proportionately more than the poor. I am sure my hon. Friend will agree that that is fair and right.

I must, however, correct a misinterpretation among some hon. Members that London does less well in terms of spending per head. I have checked, and according to the latest figures on spending per head in each region, spending per head in London was £117 in 2001–02, compared with the average of £100. There is more public spending per head in London than in any other region of the UK.

Photo of Sir Sydney Chapman Sir Sydney Chapman Conservative, Chipping Barnet

The hon. Lady said that Londoners are not taxed more than people in other regions. She will know that because of the extreme additional costs, there is a London weighting system for most jobs. She might like to confirm that the London weighting element is still taxed by the Exchequer. It is not untaxed.

Photo of Ruth Kelly Ruth Kelly Financial Secretary, HM Treasury

As I said, the fact that London is a net contributor to the UK economy is merely a function of a progressive tax system, which is supported by all in the House. London is unique and has special factors—many of which I will address in a moment—and we are trying to deal with those in London-specific ways, some of which have been raised today.

Photo of Jeremy Corbyn Jeremy Corbyn Labour, Islington North

On the subject of regional allocations of money, the Minister will have heard my intervention on Dr. Cable about housing allocations. The reality is that substantial sums of money going into London do not go very far because of high land costs. Is the Minister prepared to review social housing allocations to London so that we get more properties for rent? That is the only way to deal with the terrible housing crisis that Londoners face.

Photo of Ruth Kelly Ruth Kelly Financial Secretary, HM Treasury

My hon. Friend is aware that the Treasury set up the Barker review to consider the responsiveness of housing supply and to address some of these issues. There will be an update on that in next week's Budget. I shall not pre-empt any announcements today. However, the Treasury is concerned with the housing market supply, the planning system and the responsiveness of the housing market.

Several hon. Members spoke about transport infrastructure. Public spending on transport in London is two and three-quarter times the UK average. Improved transport structure is essential to ensuring that London remains internationally competitive and that people are able to realise their full potential. My hon. Friend the Member for Leyton and Wanstead spoke about some of our ambitious plans, even in his own constituency—for example, the Thames gateway project. There is also the London-Stansted-Cambridge corridor, which is creating high quality mixed communities to meet the growth pressures that success brings.

Hon. Members spoke about Crossrail. I cannot give any definitive answers, other than to say that, as they are no doubt aware, my right hon. Friend the Secretary of State for Transport is considering the detailed advice on that subject that he received from Adrian Montague. He will publicise his findings in due course.

Transport Ministers have just received the Strategic Rail Authority's procurement proposals for taking forward the East London line extension. I understand that that will be considered in the context of the forthcoming spending review. My hon. Friend the Member for Leyton and Wanstead can look forward to that process. Transport will remain a vital component of London's economic strength. As he knows, the Government are committed to very long-term investment programmes in London, as in the rest of the UK.

The Government provide strong support to the Greater London authority, and the budget for the group as a whole was about £7.5 billion last year. More than half of that was provided by central Government. Fares and fees provided almost 40 per cent. of the budget, with the council tax precept providing the remainder. The London boroughs control a similar sum, spending approximately £7 billion.

My hon. Friend the Member for Leyton and Wanstead, who secured the debate, and my hon. Friend Mr. Coleman raised the question of whether the Greater London authority should be allowed to borrow. I may be able to clarify the proposals that the Treasury has agreed. From 1 April 2004, the prudential borrowing regime will give the GLA and other local authorities new freedoms to borrow to meet capital expenditure needs in London. The Government have imposed no upper borrowing cap for 2004–05. That new flexibility will increase Transport for London's ability to meet the capital's transport requirements. I am not sure whether the Mayor is asking for greater borrowing flexibility than the Treasury has proposed, but it may want to discuss those proposals with him to see if they meets his, and its, concerns.

The London Development Agency, one of the GLA bodies, also plays a key role. I noted the concerns of Dr. Cable on that score. The issue is one for the Mayor and the GLA, although of course the Government take a keen interest in the LDA's internal restructuring and how it has pledged to improve its service delivery. The LDA focuses on maintaining and enhancing London's international competitiveness and position as one of the world's leading economic centres, thus acting as a driver for the nation's economy. The LDA also addresses some of the market failures in the capital, particularly those associated with the high cost of housing, which I have already mentioned, child care, which was raised by my hon. Friend Ms Buck, and business premises.

Many of my hon. Friends and others stressed the stark disparity in wealth in London. There are disparities between ethnic groups, between types of household, between areas of London, and between those with higher qualifications and those with lower qualifications. As was mentioned by the hon. Member for Twickenham, key problems are levels of unemployment, which remain higher than in other parts of the United Kingdom economy, particularly long-term unemployment. My hon. Friend the Member for Regent's Park and Kensington, North mentioned the difficulties in respect of child care that have to be overcome before many people, particularly lone parents, can enter into the world of work.

Many Londoners find that they are ill-equipped to access its opportunities. They experience poverty, poor health and social exclusion as a consequence. The Government's strategy for tackling child poverty is multifaceted, but perhaps the most important part is to help each family to secure a decent family income, with work for those who can, and support for those who cannot work.

Some 20 per cent. of all lone parents live in London. We have considered that group in particular when trying to design schemes that make it easier for lone parents to get back into the work force. On child care, we are aware that affordability remains a problem in parts of London among particular groups. That is being examined in the context of the ongoing child care review, which will be taken into account in the spending review proposals, so my hon. Friend the Member for Regent's Park and Kensington, North can be reassured that the issue is being taken seriously by the Government.

My hon. Friend also raised the issue of the Cabinet Office strategy unit's report on London, which has been completed and is being considered by Ministers. A decision on publication is due to be made shortly. That is an ongoing process that will feed into the Government's strategy on London.

In conclusion, I thank all hon. Members who have taken part in the debate. If there are issues to which I have not had time to respond, I will be happy to take them up and respond to them afterwards. The debate has been extremely worth while and broad. I look forward not only to continuing to champion the cause of London in the UK economy, but to creating an environment in which other regions have the opportunity to share similar types of prosperity to those experienced in parts of the London region.