UK Economy (London)

Part of the debate – in Westminster Hall at 2:42 pm on 10th March 2004.

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

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.