UK Economy (London)

Part of the debate – in Westminster Hall at 2:00 pm on 10th March 2004.

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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.