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London’s Economy

Volume 458: debated on Tuesday 20 March 2007

I am pleased to have secured this important and timely debate on London’s contribution to the UK economy. The number of unsolicited but helpful briefings that I have received emphasise the importance of the debate. There is not time to do them all justice, but I am grateful to everyone who wrote to me from a wide variety of organisations that I did not even know existed. That shows how topical the subject is.

In many respects, London is the great success story of the past few years. Its strengths are that it is a diverse, vibrant, open and outward-looking city. Hon. Members may have seen the prominent story in The Times last Tuesday which suggested that London is overtaking New York as a financial centre and is overtaking Paris as a cultural centre. That was not the first straw in the wind to that effect. London’s business and financial services, creative industries, retailing and tourism are all growing. World-class businesses have gathered in London to contribute to our high-growth economy. Forty per cent. of the UK’s export growth in 2000-04 came from London, mainly from the financial sector.

What benefits London also benefits the rest of Britain. Some estimates have placed London’s annual net tax exports to the rest of the country at £8 billion at the bottom of the range and other estimates are as high as £20 billion or more. The capital accounts for 15 per cent. of total UK employment and 18 per cent. of its gross domestic product, with productivity 27 per cent. higher than in the country as a whole. London produces far more in tax than it ever receives in state funding, benefits and services.

Does my hon. Friend recognise that the midlands of England are larger, have a greater population, make a bigger contribution to the economy, and are more significant in academic, cultural and sporting terms, so the special pleading for London that is about to start does not ring true to midlands ears? We must rebalance UK society away from the metro-centricity of which this speech is typical.

I was about to say that I thank my hon. Friend for his contribution, but I do not think I can, because I do not agree with what he said. He has not yet heard my speech and he is prematurely off the mark. The fact remains that the statistics speak for themselves: London is the economic powerhouse that drives this country.

The continuation of London’s success and the scale of its contribution to the rest of the UK cannot be taken for granted. We are reminded every day of the growing economic strength of the emerging economies of China, India, Russia and now Brazil; nor can we assume that historic competitors such as New York will not respond effectively to London’s success.

In an increasingly competitive global environment for investment, London must stay one step ahead of the game. That requires significant and continued investment in those areas in which the city is weakest: transport, housing and skills. It is also essential that resources are available for the capital to respond to emerging problems and their consequences, such as the challenging security environment and the real threat of climate change.

I shall not reprise the comments of the hon. Member for North-West Leicestershire (David Taylor), but I agree with everything that the hon. Member for Hendon (Mr. Dismore) has said so far. However, is there not also an issue—he may want to develop this—that London’s power is becoming almost overwhelming? In many ways, it is something of a city state within the UK, which I suspect is an issue that might be in the minds of his hon. Friends from other parts of the country. Could he explore that, as well as doing the right thing by the bankers of NW4 and the lawyers and accountants of NW7, who make up an important part of his constituency?

I simply say that although parts of my constituency are wealthy, some are very poor, and I shall refer to them shortly. The hon. Gentleman makes an interesting point. I certainly do not advocate a return to the city states of ancient Greece, nor a London nationalist or separatist movement, but London’s problems are unique in many ways and require special solutions that do not necessarily match with national policy across the board.

The starting point must be public transport, because the contribution of its network to London’s economic viability, and therefore the nation’s, is undeniable. London businesses consistently cite transport constraints, such as delays and overcrowding, among their greatest concerns. There are significant cost implications when people are late for work, because loss of productivity and lost business inevitably follow from unreliability. People arrive at work, or at home after the working day, stressed out from their journeys on public transport. In 2005, the cost of transport delays to central London workers and businesses was estimated to be £1.2 billion a year.

Sir Rod Eddington's study, which was published last December, emphasised the importance that transport plays in supporting a strong and growing economy. His report stated:

“There is clear evidence that a comprehensive and high-performing transport system is an important enabler of sustained economic prosperity”

and that

“the strategic economic priorities for long-term transport policy should be growing and congested urban areas and their catchments”.

I congratulate the hon. Gentleman on securing this debate, and, so far, I have enjoyed what he said. However, he touched a raw nerve when he mentioned overcrowding on public transport, and I am sure that he is right to bring that issue up early in his speech. There have been complaints about increasing overcrowding on journeys from Orpington, and the solution is not, as is sometimes said, more and more high-level investment. The Secretary of State for Transport recently promised another 1,000 carriages by 2014. That is an amazing promise, and went down like a lead balloon in Orpington. Short-term, relatively cost-free improvements can be made simply by running more carriages and having a licensing and franchise system that encourages licensees to do that. I would like the Government to pay attention to that short-term arrangement, rather than just to the long-term farragoes.

The hon. Gentleman’s comments are interesting. I do not know the particular problems of travelling from Orpington to central London, but I shall refer generally to the south-east and mainline rail links. He makes some important points, and I shall refer specifically to Thameslink, which serves my constituency, because similar issues arise.

The Eddington report supports my case, because London can certainly be described as growing, congested and definitely urban. Around 1 million people use public transport to get into central London on weekday mornings, and 6 million people use London’s buses on any given day. Last December, the tube carried 4 million people on a single day, which was a record for the network.

It is blindingly obvious that increased investment and consequently more reliable services with greater capacity would make a real and fundamental difference to the ability of London’s transport network to support the economy as a whole. Bus use in London uniquely has increased by 40 per cent. since 2000. The congestion charge has cut traffic and congestion, and a seventh carriage has been added to every Jubilee line train. Those improvements alone have contributed to a 5 per cent. shift from private car to public transport. That is unprecedented elsewhere in the world in major cities like London.

Much more must be done, however, to provide for the population and job growth that London will experience over the next 20 years. There will be an extra 1.1 million people and 900,000 jobs on top of the 760,000 increase since 1989, which is equivalent to absorbing the population of Leeds already, with Sheffield to follow. Public transport demand will increase from 10 million journeys a day to 12.8 million by 2025.

Transport for London has carried out an extensive analysis of this, and recently published “Transport 2025” on a transport vision for a growing world city. Unless London’s transport system benefits from increased, sustained funding over the coming years, the limitations of the current transport network will subject London’s economic development and its vital contribution to the country's economy to slow and inevitable strangulation.

“T2025” sets out the priorities for London’s transport network. The current position with the vital Crossrail project seems to be positive. The recent meeting in Downing street and the Prime Minister’s unequivocal support is encouraging, but it is essential that the funding package needed to deliver this robust and costed scheme is agreed as quickly as possible to prevent further hold-ups for this long overdue plan. It is vital that the House appreciates both the project’s benefits and its urgency. It is estimated that Crossrail will generate £31 billion in additional GDP, which in turn will yield around £12 billion back to the Exchequer. That investment in London will generate substantial benefits for the rest of the economy.

In the global competition for financial and related services, we must provide location options. Businesses want to locate where they can expand, and they will soon choose not to come here, or to anywhere in the UK, without Crossrail. They will decide instead to go to another global financial centre. In the meantime, central London office rents will continue to rise, and new offices will be refused planning permission because of the absence of any transport links. The costs of delaying Crossrail are estimated at £4 million each day, or £1.5 billion a year. It is vital that all elements of the scheme, including financing, come together, so that construction can get under way as soon as possible—perhaps even as early as 2008.

On the underground network, the public-private partnership must be made to deliver for Londoners. The full public-private programme can and will deliver significant benefits—not only modernised stations, but almost 30 per cent. additional capacity. The Northern line, which serves my constituency, will have a new signalling system and more of its track will be replaced, but it will be a number of years before the project is completed.

Last summer, I visited the maintenance crews working on the night shift, and the conditions in which they have to work—the heat and the dust—and the heavy labour that they undertake are amazing. What they are able to deliver—unseen and underground when the network is closed—is a real benefit to Londoners, and we ought to pay tribute to their work. I was very impressed by what I saw—by their commitment and hard work down there, unseen by anyone else. As problems have been resolved, however, new difficulties have arisen from, for example, the train maintenance contract. The trains were new 10 years ago, but the contract has tied up their maintenance in red tape, and the work is not done as well as it should be.

For Londoners living away from the Tube network, as some of my constituents do, dependent as they are on Thameslink, mainline rail is a vital part of the picture. The Thameslink 2000 scheme is vital to opening up the suburbs, and it must be funded when the comprehensive spending review is announced this summer. In the meantime, improvements can be made to the network, as the hon. Member for Orpington (Mr. Horam) said. One of our problems has been the loan of the special trains that are needed for the Thameslink service to other parts of the network, because if we had them back, its reliability and the service in general would significantly improve. We have had one train back so far, but 12 others should be returned.

There are a high proportion of national rail passengers in London and the south-east, and further spending must reflect their desperate need for extra capacity. Sir Rod Eddington’s report on transport spending priorities strongly supported that view. The T2025 programme should reduce journey times by 10 per cent., and when the wider economic benefits are included, its overall cost-benefit ratio will be 9:1. It is essential that the Government make the necessary commitment to that project and to projects that support it, so that London’s transport system can continue to play its key role in supporting London’s growing economy.

It is no secret that London faces a severe housing shortage throughout all key sectors: social housing, affordable housing and intermediate homes. Owing to the absence of urgent action, the shortage is becoming a crisis, blighting the lives of hundreds of thousands of Londoners who are condemned to live in homes that are temporary, overcrowded, unfit for habitation or, in many cases, all of the above. On top of the damage that such conditions inflict on the quality of life and on the health and the life chances of people living in such accommodation, they are seriously detrimental to the economic competitiveness of London. The shortage of suitable housing decreases the attractiveness of the city to inward investment, and it is pricing many key workers out of London.

The figures are stark: two thirds of UK households in temporary accommodation live in London. The 150,000 London households in overcrowded conditions represent more than half the national total. London has suffered more than any other region in the country from the failure—identified in the Barker review—to provide a new supply of homes to meet a rising population and decreasing household size. It has been exacerbated by the failure to refurbish and renew London’s housing stock, which is older than the average for the rest of Britain. I am constantly criticising Conservative-controlled Barnet council—the local authority for my constituency—about its snail’s pace progress with major regeneration schemes such as Grahame Park, West Hendon and the Spur Road and Stonegrove estates.

In the London plan, the Mayor of London proposes radical action to address the housing shortage. The plan shows that the capital has sufficient land capacity to build more than 30,000 homes each year during the next decade, and if the Mayor’s targets were hit, more than 10,000 would be social rented homes and 4,500 would be intermediate homes, almost doubling the current annual output of social and affordable housing. In making decisions on the allocation of national funding for housing, the Government must recognise the pressing need for investment in London’s housing stock, compared with the rest of the country. Nowhere else is there such a concentration of the problems of shortage of supply, unaffordable homes, overcrowding and unfit accommodation.

Unless London’s severe housing issues are tackled, the Government will be unable to meet their national housing targets. The Mayor has the political will to make progress, but without desperately needed additional resources from national Government, he will be unable to make real progress in tackling effectively the appalling and unfair housing conditions in which many Londoners are forced to exist.

Housing and transport are two key areas in which a Government commitment to support is urgently needed to guarantee the continuation of London’s vital contribution to the UK economy. However, there are other areas in which Government engagement is essential, and tackling poverty, low skill levels and high worklessness in the capital is one of them. London has the lowest working age employment rate in Great Britain at 69.7 per cent., compared with 74.4 per cent. nationwide, and worklessness in London is concentrated in households with children. In 2005, just 68 per cent. of London’s parents with dependent children were in work, compared with 78 per cent. in the rest of the UK. That situation contributes significantly to London having the highest child poverty rate in Great Britain. Some 39 per cent. of children—52 per cent. in inner London—live in poverty, compared with 27 per cent. nationally, and the rate is getting progressively worse compared with the country as a whole.

Some people see the suburbs as prosperous, leafy boroughs, as the hon. Member for Cities of London and Westminster (Mr. Field) said, but in my outer London constituency in 2005, 7,700 children—33 per cent. of all children in the constituency—were living in households dependent on benefits. Between 2000 and 2005, the number of children living in families receiving benefit in Hendon rose by 1,100.

I recognise—I hope that the hon. Gentleman will, too—that in my inner-city constituency, areas of great poverty exist alongside affluent areas. It obviously applies to Hendon, too. However, does he not recognise that in part, the benefit system’s complications, which have become manifoldly worse during the past decade with tax credits and the like, ensure that many parents find it difficult to return to work, because they know that they will lose their benefits? Housing benefit in particular makes such an important contribution to household income in London, and more so perhaps than in other parts of the country.

The hon. Gentleman makes a fair point, and I should not typify all his constituents by comparing them to people who live in Mayfair. Throughout London, the pattern is repeated whereby wealthy people live side by side people in extreme poverty.

The hon. Gentleman’s main point was his concern about the benefit system, but the system is not so much complicated as unable to recognise the London effect. Although the system has been effective at alleviating poverty in the rest of the country, owing to features that are particular to London, such as the high cost of living and, for those in work, the high wage structure, tax credits have not alleviated poverty as they should have. However, he is right to highlight the problem that tax credits have not delivered for London as they have for the rest of the country.

Furthermore, housing benefit can prove a barrier to people finding work because they fear losing their home as a consequence of being unable to pay the rent. However, I am concerned that some proposed reforms to housing benefit may work to the detriment of Londoners rather than to their advantage. The benefit system must be tweaked to reflect problems that are particular to London, and one could make a case for adding London weighting to the old-age pension. I shall not go down that route today, because it is not the main thrust of my argument, but London pensioners incur a higher cost of living compared with the rest of the country.

The policies that increase London’s employment rate support social justice and economic efficiency. Moving into work is the best escape route from poverty, and unemployed people represent an unused resource for London’s economy. Properly designed training programmes can help to tackle worklessness in London and, by improving the skills of people already in work, they can help people to progress in the labour market.

By addressing London’s high levels of worklessness, we could help to reduce poverty in the capital. To that end, the resources, targets and structure of Jobcentre Plus in London should be reviewed to meet London’s special economic requirements—so different from the rest of the country—as part of both the comprehensive spending review settlement and the Mayor’s skills and employment strategy.

We will not see real progress on the Government’s wide range of national policies and targets without effective action in London. Investment in London will help to ensure that the capital continues to provide its net contribution of billions of pounds to central Government, benefiting the UK as a whole, attracting resources and increasing the whole country’s competitiveness and productivity. London is the country’s golden goose. If it is to continue to lay the golden eggs from which the nation benefits, the investment that I have described must continue.

I congratulate the hon. Member for Hendon (Mr. Dismore) on initiating this important debate. As the Member for the Cities of London and Westminster, it is a pleasure to take this opportunity to highlight the importance of London’s contribution to the nation and to make some points that are important to its continued success.

The hon. Gentleman understandably—and quite rightly—did not focus just on London’s economic success, but I hope that he will forgive me if my speech is geared towards the importance of the economy. Not only do I have 70,000 constituents, but almost 1 million people come to work in my constituency every day. He made some important points about certain aspects of poverty and the high rate of unemployment in London, which I hope that the Economic Secretary has taken on board. However, I shall focus on the financial services industry and other industries that are so important to the wealth of London and, therefore, to this country’s continued economic success.

London now has the highest unemployment of any region in the UK. We also have the largest number of migrants to this country, an issue which it is often difficult to debate in parliamentary terms, who understandably come to the vibrant area of central London. One of the reasons why it is perhaps so difficult to get back into work is that we have quite a large black economy—its size is unknown. A lot of people are paid cash in hand, which is a strong disincentive to employ and train up many people in the indigenous population, who therefore remain unemployed. Also, a lot of people who perhaps lack the skills and aptitude to hold down a job live in social housing. They find it difficult to improve their lives for the reasons that the hon. Member for Hendon has set out and find it easier to remain unemployed if they thereby qualify for the scarce social housing to which he also referred.

There are some major problems in London. I endorse what the hon. Gentleman has said about the need for serious thought about a problem that was thought to be specific to the capital, but which, I fear, now extends beyond its borders. I suspect that many hon. Members with seats in the home counties—for instance, Essex, Kent or Hertfordshire—would recognise precisely the same problem of increasing polarisation. In order to live in many bits of London and the south-east, people need to have inherited property, to work in financial services or a related industry or to be so poor that they qualify for social housing. The group in the middle is for ever being squeezed. That polarisation has been an element of life in central London for many decades, but I suspect that it is now every bit as evident in Hendon, St. Albans and Stevenage. That raises major issues—of social cohesion, apart from anything else—that we shall all have to address going forward.

Hon. Members may be aware of a report commissioned by the City of London corporation entitled “London’s Place in the UK Economy, 2006-07”. It highlighted the increased importance of London’s wealth and its potential to generate tax revenue at a time when the overall UK budget balance continues to deteriorate, a point to which I suspect that I shall return not only today, but at some point in the next few days, as we debate the Budget in the main Chamber. London is widely regarded as a world city; indeed, many see it as “the” world city—the big global capital—and rightly so. However, the capital’s current standing across the globe reflects the fact that at its heart is a highly concentrated cluster of international business, whose beneficial effects are felt in many parts of the world.

However, it would be mistaken to forget the important contribution that our capital city makes rather closer to home. To paraphrase the hon. Gentleman, London made a net contribution of £13.1 billion to UK public finances in 2004-05, which is a figure that I believe has increased fairly steadily over recent years. Data published by the City of London corporation suggest that GDP growth in London stood at 3.9 per cent. in 2006 compared with 2.6 per cent. in the UK as a whole. Further data suggest that London as a whole contributes between 17 and 19 per cent. of UK Government revenues, depending on whether residence-based or workplace-based calculations are used, despite London’s population making up only one eighth of the country.

Financial and related business services have played a key role in the acceleration of the capital’s growth, since London is dependent on financial services to a far greater extent than any other region of the UK. The importance of financial services to London is underscored by the fact that more than 40 per cent. of the country’s financial services firms are based in London. Indeed, financial services now account for more than 9 per cent. of the UK’s GDP, compared with just 7 per cent. a decade ago and with as little as 5 per cent. in 1980. It therefore appears that the success of London’s City cluster goes hand in hand with the performance of the economy as a whole.

The UK fiscal position as a whole, relative to London, has deteriorated sharply since the turn of the millennium. In the fiscal year 2004-05, for instance, the capital’s net positive contribution to the UK current account was calculated to lie between £6 billion and £20 billion, so a mid-point estimate implies a net contribution of £13.1 billion, the figure to which I have referred. A strong case can be made that London’s tax export to the rest of the UK has helped to mitigate the impact of the increasing UK deficit, which reached £39.7 billion in 2004-05. Without the benefit of that substantial contribution to the Exchequer, the public borrowing requirement would be considerably greater, with stark consequences for public spending as a whole throughout the UK. Furthermore, London imported £110 billion of goods and services from elsewhere in the country in 2005, amply demonstrating that London’s success provides essential support to the rest of the UK economy. As the hon. Gentleman has said, if London does not succeed, the rest of the UK will suffer.

London occupies a uniquely competitive position in the UK economy. Its high costs are more than offset by other factors, making it an attractive location for internationally traded services. London’s high-value-added economy depends upon providing benefits for its highly skilled work force. London has a strong track record in attracting skilled professional and managerial workers from overseas as well as lower-skilled workers, who have filled potential labour shortages in the retail, catering, transport and other sectors and have consequently helped the UK to maintain a relatively liquid employment market. However, all the caveats that I mentioned earlier must be taken into account. It is a great worry that an increasing number of Londoners are being left behind, notwithstanding the efforts of central Government, London government as a whole and the City of London corporation, which plays an important role in Hackney, Tower Hamlets and Islington, in trying to attract from further afield not only the brightest and the best, but others to make their full contribution to the financial services sector.

In 2005 alone, 32 per cent. of London’s work force possessed degrees or higher education qualifications, compared with just over one quarter in the rest of the UK. That picture reflects the fact that London is competing internationally. London is truly a global capital and does not sees its competitors as—dare I say it, given the earlier intervention—Birmingham, Glasgow or Edinburgh, but as New York and Tokyo and, in the decades to come, if not already, Shanghai, Beijing, New Delhi and Hong Kong. London is one of an elite group of cities. New research commissioned by the City of London corporation has for the first time established an index of competitiveness, which tracks 46 of the world’s financial centres. That index—the global financial centres index—shows London and New York as the two global powerhouses, ranking well ahead of Hong Kong and Singapore. At present London is ranked ahead of New York in all five areas of competitiveness—people, business environment, market access, infrastructure and general competitiveness. However, the report highlights widespread concerns about the UK tax regime relative to its competitors.

It is also important that we take this opportunity to highlight some of the issues of broader infrastructure. We cannot be complacent about the skills infrastructure, and there are issues of physical infrastructure—in particular the transport infrastructure, to which the hon. Member for Hendon has referred. I should like to make a bid for serious consideration of Crossrail and other aspects of the transport infrastructure, without which London’s great dominance, which has been jealously guarded and created strongly in the past two decades, will begin to be undermined. That would be little short of disaster not only for our capital city, but on a broader basis.

Central to London’s ability to retain its competitive edge will be its cultivation of the knowledge economy. The capital is well served by its 43 higher education institutions, but more than ever the best universities compete globally for teaching, students and finance. This debate is not simply about higher education, but we must all face that important issue. Some of our very best universities are suffering as a result of global competition—not least for places, given the numbers of graduates from China and India coming through across the country. There is also a significant brain drain of some of the best academics, who are now going to US universities simply because pay and conditions are so much better. I hope that we shall give great consideration to setting free our best universities. Now a fee structure is in place, I should like there to be a much more flexible structure.

I am listening carefully to the cogent argument that the hon. Gentleman is making on behalf of London. Are not the significantly increased costs in London one of the other considerations in respect of students and lecturers in higher and further education? I think particularly of housing costs. I have been involved with a research student, now reaching 30, who has a doctorate and significant experience behind her. Yet she cannot even get on to the lowest rung of the housing ladder in London. Is that not a common problem across the capital?

It is very common. There are individuals who are happy to give money to their alma mater. As I have mentioned, there are 43 higher education institutions in London as a whole. It is perhaps easier for the better known institutions, such as Imperial college and the London School of Economics—two institutions in my constituency—to find entrepreneurs willing to sponsor junior research fellows in their 20s and 30s, who are some of the brightest and best brains and who will eventually get academic posts. However, the hon. Member for Edmonton (Mr. Love) has made an absolutely fair point, which, I fear, applies not only to academia but to areas such as medicine that are not ancillary to the financial services industry. It is one of the problems that needs to be dealt with, and all on both sides of the House will have great sympathy with the hon. Gentleman’s point.

In recent years, 26 per cent. of foreign students were attracted to London to study, bringing with them a contribution of an estimated £750 million a year to the UK economy. Although that is welcome, challenges remain. A high-productivity, high-cost location is not necessarily ideal for a university—for example, King’s college, the best placed London institution, is almost six times less well-endowed than Oxbridge. If London universities are to continue to provide the same opportunities for home-grown talent as to overseas students eager for a world-class education, we must ensure that they possess the financial muscle to match the most powerful institutions worldwide.

During my conversations with him, Sir Richard Sykes, the rector of Imperial college, has made it clear that he would like to attract more home-grown talent. However, the phenomenal difference between the fees that he receives from indigenous students and those from students overseas make it, to put it in rather brash terms, a bit of a no-brainer. To make ends meet, Sir Richard has to take on far more foreign students than he would ideally like to.

No debate on the contribution of London’s economy should go without mention of the efforts put into the promotion of financial services at home and abroad by the lord mayor of London and the City of London corporation. Their promotional role for the financial services sector is strengthened by the direct representation that City businesses enjoy on the corporation’s main governing body, the common council. As you know, Mr. Williams, and as I am sure the hon. Member for Hendon would also point out, the City is the only place in which businesses participate directly in the electoral process. Understandably, that has been a matter of some controversy. Obviously, I am a democrat—I voted for a fully elected House of Lords. If I did not represent the Cities of London and Westminster, I suspect that I might take a somewhat different view. As it is, I have seen how the system works, and it works well in the City.

As an arch-opponent of the City of London (Ward Elections) Act 2002, which introduced the reforms to broaden the City’s franchise, the hon. Member for Hendon may not wish to hear this, but I believe that those reforms have generally been pretty successful. About 75 per cent. of the eligible business electorate now register to vote. In his role as the City’s international ambassador for financial services, the lord mayor therefore directly represents the business community. It is worth adding that those activities, complemented by the work of the corporation’s offices in Brussels, China and India, are undertaken without any call on the public purse.

Hon. Members will surely agree that London’s continued prosperity depends on its infrastructure. City businesses require sufficient support to sustain growth; in particular, the availability of quality office stock must meet the pressures of demand if raising rents and falling vacancies are not to dent London’s competitiveness. The position of London as a revenue generator needs to be recognised and proper investment made. As I have mentioned, projects such as Crossrail will facilitate essential access to and business in the City and help to relieve the burden on London’s creaking public transport system, making travel into the business centre attractive and efficient. Those concerns must be addressed if London is to deliver an exemplary 2012 Olympic games worthy of the whole nation and, more importantly, if we are to build an infrastructure legacy that will ensure not only a spectacular show for three weeks in the summer of 2012—I am sure that it will be—but great benefits beyond then.

In conclusion, London is an asset to the UK, the European Union and the global economic world. At its heart, the City of London is the engine of the capital’s growth. We must ensure that the benefits of London’s success continue to be felt throughout the whole UK—particularly here in the capital—and we must keenly resist any threat to its prosperity.

I congratulate my hon. Friend the Member for Hendon (Mr. Dismore) on securing this debate. He rightly highlighted issues of housing, skills and transport as key to the future of London’s economy. Most of us would agree with most of the comments made by the hon. Member for Cities of London and Westminster (Mr. Field), who gave such a clear exposition of London’s economic position from his unique position as a representative of the heart of London’s economic and financial centre.

I want to highlight not only what London contributes to the UK but, as the hon. Gentleman intimated, the fact that it has a much wider role internationally. In London, productivity is 20 per cent. higher than in the UK as a whole. In inner London, which includes my constituency, productivity is 38 per cent. greater than in the UK as a whole. London provides 15 per cent. of the UK’s work force with jobs and nearly 20 per cent. of UK output.

We need to consider London in the international context; it really is a world city in every sense. As the Member for Hackney, South and Shoreditch, in which the Olympics will partly be based, it is important that I should mention investment in the Olympics, a significant contributor to the future and regeneration of part of east London, which we hope will create hundreds of thousands of jobs and housing places—in fact, we know that it will; the finances were pinned down last week. There will be investment in housing, jobs and skills for my constituents and many others in London and the UK. Although it is true that my constituents have benefited particularly from the Olympics, given that every £1 that they spend will be matched by £3 of taxpayers’ money and general investment in the area, business up and down the country will also receive a huge boost, as other sites are chosen to become training centres for the Olympics and other businesses up and down the UK get ready to bid for the many contracts that come out of the Olympics.

When we bid for the 2012 Olympics, it was clear that during previous Olympic bids there had been a debate about whether Manchester or Birmingham should also be allowed to bid. The International Olympic Committee made it clear that only a bid from London would be considered. That is a living example of the pull of London and reflects its position among other world cities. I do not decry the cities represented by other hon. Members, present or not. Other cities clearly have a role to play, too, but nothing can replace the pull of London. Sadly, my hon. Friend the Member for North-West Leicestershire (David Taylor) left before he heard me say that; perhaps I have saved myself some grief.

Much is rightly made of London’s financial clout and its role as a financial centre. The hon. Member for Cities of London and Westminster said everything that needed to be said on that. However, London’s creative businesses have not been mentioned so far, and they are a huge area of success and growth in our city and the country. My constituency is a hub of creative talent for individuals and businesses. We believe, although it is difficult to prove, that we have more artists in Hackney than in any other European local authority area. Some of the artists I deal with, both as a trustee of SPACE and otherwise, have suggested that there should be a tax break for artists. The mayor of Hackney, knowing the number of artists in Hackney, was not keen to reduce the local council tax and I am sure that the Government would not want to follow that route. However, there are other ways in which we can support creative businesses, which all add to London’s value-added status, as mentioned by the hon. Member for Cities of London and Westminster.

I refer the Economic Secretary to a report by the Mayor of London’s economic think tank, which was called “Creative London”. It highlighted a wedge from Shoreditch, in my constituency, out towards west London and Oxfordshire that shows all the things that make a creative city. I refer hon. Members to the work of the US academic Richard Florida and to his book “The Rise of the Creative Class”, which highlights the ingredients that are needed to make a fully creative economy. London has those ingredients. It has diversity—in my constituency, more than 300 languages are spoken. It has tolerance built on that diversity across the city. My hon. Friend the Member for Hendon can speak about that in his constituency, where he plays such an important role in community relations. London has 43 centres of academic excellence, which are also a major contributory factor. Good transport links, through airports and other means, help to make London that hub. Whatever other cities want to achieve, they will not take a long time to catch up with London’s regional status. However, London needs to remain internationally competitive if it is to remain a cash cow for the UK economy.

London is growing. By 2016, an additional 500,000 will live in London and it will be home to 8.1 million people. We are living through that growth. When we have difficulty getting on a tube or a crowded bus, that shows the strain on our infrastructure that the growth that we are trying to house in the London boundaries creates. If we want to see London retain its status as an international city, competing with New York, Frankfurt and other centres, we need the investment in housing and transport to continue.

I want to touch particularly on transport and talk a little about housing. Transport for London has proved to be one of the best elements of governance of London by Londoners. Investment in buses has seen London as the only city in the UK where bus use has increased at the same time as car use has decreased. It is important for the Economic Secretary to recognise that TFL has an AA rating and is a prudent financial manager. It is a body that has proved by its track record that it can invest and can raise finances to invest, as well as spend public money wisely. TFL’s 2025 plan—I shall not go into it in detail, as my hon. Friend the Member for Hendon has done so—has projected the impact of population growth in London. Under its current investment plan, which runs to 2010, we will see London going only so far. Thereafter, we must have a seamless transition to the next wave of investment, both from the Treasury and from private markets, as TFL has proven capable of obtaining such funding, or we will go backwards.

When I go to get on the tube in the morning, I often have to let three trains go past. That is because we are living through growth. That cannot continue if we want to see London compete.

The hon. Lady has just pointed out the wondrous record of Transport for London. Its iconic policy, the congestion charge, has been anything but a financial success. Indeed, the biggest criticism has been that it has raised some £900 million in the five years and one month since it was set up, but that most of that has gone on capital and administrative costs. It has not in any way been a great success, but rather a great disappointment in respect of the amount of money that might otherwise have been secured for other transport projects.

I do not want to digress too far on the congestion charge. We always knew that the congestion charge was an attempt to address many issues. Congestion was one; pollution and climate change were another. It was not intended to be a quick fix. It is a longer-term plan in respect of the money that it might raise and whether it will break even than something that will make or break in a short time. However, that is perhaps for another debate.

In order for London to maintain its competitiveness, we need continued investment in transport. Crossrail is particularly key. It would cut through 10 boroughs just outside my constituency, but it is nevertheless important to my constituents. We need to see full and proper extensions to the docklands light railway, which has, we would all agree, been one of London’s great successes. We need to do so not only because we need the transport improvements but because we need to see a proper tackling of climate change and CO2 emissions. We ought to be thinking ahead of the game. How seriously are other cities around the world taking climate change? London is beginning to gear up to tackle that issue, and it will become more of an issue as businesses locate here and consider their carbon footprint and the ethical nature of their business with a modern, savvy consumer.

Such issues are important for the rest of the country, too. A high percentage of rail journeys begin and end in London, and so all improvements benefit other citizens of the UK. We must not be seen to be saying all this as little Londoners. Clearly, my constituents will benefit from any further investment, but it will benefit individuals from the rest of the UK in their regular contact with London, too.

Another issue that has not been raised is the high population turnover in London. In parts of my constituency, it is up to 40 per cent. a year, with a general average of around 30 to 35 per cent. depending on how it is measured. We see that in other parts of London, too. We need to keep people in London. Census data clearly shows a flight approximately at the point when families need an extra bedroom and/or when their children reach the age of 11. Our schools are improving significantly to tackle that. Without making a point against the hon. Member for Cities of London and Westminster, I recall that in 2005 Hackney’s school results outstripped those of Westminster. We still have some way to go.

In that case, one might ask why the hon. Lady’s parliamentary neighbour, the hon. Member for Hackney, North and Stoke Newington (Ms Abbott), chooses to send her son to one of the constituency schools in my area—into the private sector, no less.

I never get between a mother and her son, and I would never comment on colleagues’ family matters.

In Hackney, we have seen an improvement in GCSE results. Six new city academies have either been built or are under way. We still have some way to go, as we do across London, but thanks to the investment of the Government in London and elsewhere we are starting to make a difference.

Housing is key. Two thirds of the UK’s households in temporary accommodation are in London. More than 150,000 London households are overcrowded, including 8,000 in the borough of Hackney. I see Hackney as the Ellis island of London, and possibly of the UK. People arrive from all corners of the globe and the UK and we need to keep those people in Hackney and in London if we are to see our city stabilise.

One of the most startling features of recent years has been the increasing decline in the number of new lettings available in the social sector. Does my hon. Friend agree that the only way to respond to that is significantly to increase the supply of new affordable accommodation in London?

My constituents would be keen to see that, particularly in respect of family-sized housing. I cite the example of Thomas Fairchild primary school in Hoxton, in the heart of my constituency, which is surrounded largely by dense council estates. I went to visit in July 2005, just after the general election. Of the year 6 group that was leaving the school, less than 20 per cent. had been there since reception. The people living around that school were not middle-class people with houses that they could sell to buy elsewhere. They were finding other ways to leave. Many were aspirant, keen to buy and to move to areas such as the constituency of my hon. Friend the Member for Edmonton (Mr. Love) where they could afford a home, but could not afford to buy a home in my constituency. We must ensure that we take every step we can to keep people in London, whether they are indigenous or immigrants, whether or not they work for big City firms.

I shall not repeat what my hon. Friend the Member for Hendon said about skills, but I endorse every word that he said. There are huge issues in Hackney, South and Shoreditch, but, given the time, I shall not go into all of them. Twenty-two per cent. of the residents of Hackney as a whole are aged under 16, and one third are under 24. The youth and energy of those people are key potential contributors to London’s future growth and stability, if we can keep them in London. I hope that my hon. Friend the Minister has heard what we have said today and will consider London kindly in the spending review.

I thank the hon. Member for Hendon (Mr. Dismore) for his excellent introduction of this debate. I was pleased that he mentioned that London has some of the poorest areas of the country as well as some of the most affluent. My hon. Friend the Member for Cities of London and Westminster (Mr. Field) made the point that some areas of London have the highest unemployment, as well as obvious wealth.

I vouch for what the hon. Member for Hackney, South and Shoreditch (Meg Hillier) said about London’s creative talent. I had the pleasure last Thursday of being present at the launch at the Hackney Empire of the English Touring Opera’s season, which certainly justified her claim of there being a high proportion of creative talent in Hackney. The English Touring Opera, which will go around the country, also makes the point that London is not a metro-centric body. It is a generous capital—it exports its talent to other parts of the country. The hon. Member for North-West Leicestershire (David Taylor), who, sadly, has departed—perhaps in good time, from his point of view—might bear that in mind.

The issue that I want to return to—very briefly, Mr. Williams, in view of your remarks—is transport and the point that the hon. Member for Hendon made about overcrowding. It is extremely distressing to stand out in the open, particularly in this weather, on a platform in, say, Orpington or any other station in south London, to find that the eight-coach train that one is expecting does not have eight coaches but six or even four, or that it is cancelled altogether and two lots of people have to get on one train. That causes problems.

The problem is the same in reverse when people are going home in the evening. We have heard about road rage, when people lose their temper on the road because of congestion. I have seen rail rage—or platform rage—at Charing Cross, when trains are cancelled and people are not told what is happening. Understandably, they are absolutely furious, and sometimes they take it out on each other and on the poor platform staff.

That does not mean that trains are not often punctual and very satisfactory, but problems occur far too often. If from time to time Members speak, as I obviously do, to people who work in the House of Commons, they will find that the constant complaint—the biggest complaint of all—is overcrowding and the conditions that people have to put up with to get to and from work. That is a dreadful state of affairs in a city as affluent as London is at present.

As we know, the situation led to an excellent campaign in the Evening Standard called “A seat for every commuter”. Unfortunately, as is usual with the Government, they responded not to the people but to the media. We had a response from the Secretary of State for Transport, who, as I said in my intervention on the hon. Member for Hendon, came out with a statement about 1,000 more carriages by 2014. My good friend Mr. Brian Cooke, who is the chairman of London TravelWatch and also a constituent—and therefore knows about commuting at first-hand—calculated that 1,000 extra carriages, apart from being seven years away, will provide only 80,000 extra places. I hesitate to say “seats”, because we know that these days “places” does not mean seats. One does not often get a seat on a commuter train. As he pointed out, given the expansion of London at the present rate, another 325,000 people will have come into London by then, so the plans of the Secretary of State for Transport are for overcrowding to get markedly worse. The promise is not for a golden future but a rather bleak and distant one. It cannot be taken at all seriously, and it is certainly no comfort to my constituents.

My plea to the Minister and his colleagues in the Department for Transport is for some short-term, quick-acting measures to alleviate the situation in the near future. The hon. Member for Hendon mentioned the fact that there is now a seventh coach on some underground trains. That improvement was effected fairly quickly. It is perfectly possible to change the licensing and franchising arrangements so that operators are incentivised to bring in more coaches when necessary. The arrangements can be changed. They were changed only a year ago, so it is not an excuse to say that they were inherited and cannot be changed, or anything like that. Furthermore, if there is a problem with platform lengths, it is also possible to do something about that fairly quickly.

I am not a fan of Transport for London, but its experts on the matter, which I clearly am not, have told me that short-term measures could be taken within a year or two to alleviate the situation that commuters in south London face. I am telling the Government that unless something is done fairly quickly, I and no doubt many of my colleagues will continue to nag them about this disturbing, everyday problem of life in London.

I, too, shall try to be brief, Mr. Williams. I congratulate my hon. Friend the Member for Hendon (Mr. Dismore) on securing this debate and giving his usual comprehensive account of the issue. Having tried previously to speak after him on a Friday, I am glad that he has left me at least four or five minutes to do so today.

I am also glad that there appears to be—we have yet to hear from the Liberal Democrats—a broad measure of support for my hon. Friend’s comments. I hope that the Minister in his response will echo the proposition that he made. We must put the uncharacteristically churlish comments of my hon. Friend the Member for North-West Leicestershire (David Taylor) down to second-city, or second-region, envy.

It could now be third-region envy. My hon. Friend the Member for North-West Leicestershire is not here to bait, so I shall confine myself to saying that if Birmingham and the midlands wish to be Barcelona to our Madrid, they will have to improve the food and the football somewhat. I would add that the other difference, of course, is that Catalonia actually pays for Castile, whereas in this case London pays for the rest of the United Kingdom.

I do not want to anticipate my hon. Friend the Minister’s response to the debate, but I am sure that he was aware, before my hon. Friend the Member for Hendon spoke, of London’s contribution to the UK economy. His response may be in part, at least to Labour Members, that our party is still a redistributive party. I do not know whether that is true, but certainly the London Labour party continues to believe that to some measure, perhaps because we are more aware of the great inequalities of wealth that exist in the capital.

In the brief time that is available to me, I shall not repeat points that other hon. Members have made but say that the consequence of what is happening at present is that redistribution is not working. The example of child poverty that was given earlier is perhaps the clearest instance of that. Fifty-two per cent. of children in inner London—39 per cent. in London as a whole—live in poverty, compared with 27 per cent. in the UK as a whole. That one stark statistic shows that the money that is generated by the capital is certainly not being redistributed within it. Beyond that, it is not economically efficient to run a capital city or any region on that basis.

The problems cross the whole of the Government’s social and economic policy, but I wish briefly to mention three issues. The first, which has already been dealt with extensively, is transport. From a parochial perspective, it is necessary to deal with the scenario set out in the Transport for London 2025 document of a possible increase in demand at peak time of 30 per cent. That could happen in terms of bus, overground and tube services and, of course, Crossrail, all of which affect my constituency. I have the pleasure of travelling every day on the District line and the set-up at Earls Court station, with Bakelite telephones and flashing Christmas tree lights, is more like a fighter command than a modern railway network. It is sometimes a wonder to me how the tube functions at all. Investment over the next 10 or 20 years is not just an optional extra, but essential if London is to continue to function on a daily basis.

I do not have time to say everything that I wish to say about policing, but it is a truism to say that London has additional pressures not only because of anti-terrorism measures and major events, but because of the general cost of policing, salaries and other costs, which are not reflected in the figures. We often have to fall back on the Mayor’s precept yet the Opposition hypocritically demand additional policing, while at the same time condemning every increase in precept made by the Mayor. To a large extent, that is because of a lack of fair funding from central Government to the capital.

My hon. Friend the Member for Hackney, South and Shoreditch (Meg Hillier) dealt with the issue of housing quite clearly and therefore I will briefly conclude by referring to that. Housing is the single issue that London Members would like the comprehensive spending review to address by providing an increase in funding for the supply of affordable homes—as my hon. Friend the Member for Edmonton (Mr. Love) said. The figures are eloquent in themselves: London has two thirds of households in temporary accommodation and half of the total national figure for overcrowding.

We are at a tipping point in London and if we wish it to continue to be a city in which rich and poor can live together side by side, as they have done over the centuries, it needs investment, particularly in housing and in the needs of the population in constituencies such a mine. That is the plea that we make to the Minister today.

You have missed a good debate, Mr. Hancock, led by the hon. Member for Hendon (Mr. Dismore), who has set out a case that almost all hon. Members have echoed. He made two central points. First, that London makes a wider contribution to the national economy and secondly, that the basic elements of its success are its openness to trade, investment and migrant labour, and the ability to develop clusters in relation to financial services and culture.

I happen to disagree with the hon. Member for Ealing, Acton and Shepherd's Bush (Mr. Slaughter) about the rather pungent but brief contribution of the hon. Member for North-West Leicestershire (David Taylor) on metro-centricity. Although brief, it was an important contribution, which reminded us of what everyone else may be thinking. I was reminded of that last week when I travelled outside London the day after the statement was made about the Olympics. The provincial newspapers were dripping with venom about the amount of money that must now allegedly be contributed to London. We need to be aware of that dimension to the debate.

I agree with the broad thrust of the arguments, but we need to be a little more self-critical about what is said on London’s behalf. I read the Oxford economic forecasting study on London’s fiscal contribution and it does not actually say what several hon. Members said it did about a net contribution of £13 billion. It says something rather different: that there are a wide range of estimates from £5.8 to £20 billion. The figure would be at the lower end of that if we looked at London residents as opposed to people who work in London and live somewhere else. All sorts of heroic assumptions are made in the report about how to allocate public expenditure and, clearly, there is a net contribution, but let us not dwell on that issue too much. When I lived in Scotland for some years, I was lectured on how Scotland supported the rest of Britain through north sea oil. I do not think that we should become drawn into the same kind of syndrome.

The second qualification to the argument is that we need constantly to remember is that there are vast disparities within London. It is not simply a matter of London versus the rest of the UK, as emphasised by the hon. Member for Hackney, South and Shoreditch (Meg Hillier) and other hon. Members. There are two kinds of disparities. The first is the co-existence of extreme poverty and affluence in and between boroughs. Indeed, in parts of east London, there is the extraordinary phenomenon of high levels of unemployment existing a mile or so from the most successful financial centre in the world. As someone who has lived in developing countries for a number of years, that situation strongly reminds me of the enclave economies of such countries where mines and commercial agriculture sit alongside impoverished areas. London has many of those characteristics.

I would love to take an intervention, but we are already behind schedule.

Secondly, differences within London exist in the enormous variations in funding support for different parts of London. There are parts of London that because of their deprivation quite rightly attract reasonable levels of grant, but as someone who represents a suburban area, parts of London at the other end of the tail of funding distribution also have a combination of private affluence and public squalor because of the lack of support for local government. When we talk about London versus Britain, such qualifications must be borne in mind.

Following on from points made by hon. Members, there is a danger of the institutions of London becoming excessively dependent on what I would call mega-projects. First, on public transport, I entirely agree with the hon. Member for Hendon and others who have spoken about the importance of Crossrail, which is extremely desirable for London. None the less, there is a real danger that a fixation with one massive project is overshadowing the large numbers of incremental projects that can be done quickly on the suburban network and on the London transport underground system, as the hon. Member for Orpington (Mr. Horam) rightly stressed. Such projects are relatively low cost and, in many cases, have no costs attached as they simply provide an extension to a franchise and give greater security to investors. I hope that Crossrail can co-exist among all that improvement, but there is a danger that the fixation of people in London government with one big prestige project that may happen in many years to come will crowd out the more mundane, but equally important improvements.

A second example is in relation to London airports, which is an issue of major concern in my part of London. Many of my constituents are airport workers and many residents are concerned about the environmental side effects. I am always being told that continued and large-scale expansion of London airports is essential to the London economy. Frankly, I doubt that. Slots for aircraft are allocated inefficiently and aircraft are often highly underutilised. Large numbers of people who pass through London are transit passengers and are not from other parts of the UK, but other parts of the world. It is obvious to me that such demand is as it is presented. There are massive environmental side effects such as noise, pollution and ground pollution. Most of the boroughs—Conservative, Labour and Liberal Democrat—in the relevant parts of London are actively campaigning against expansion. We need to bear that in mind when arguing for the constant expansion of infrastructure and facilities.

Thirdly, the hon. Members for Cities of London and Westminster (Mr. Field) and for Hackney, South and Shoreditch referred to the Olympics in positive terms. I do not disagree with that broad tone, but we have reached the point when the debate is becoming rather sour. One group of people are asking why we bothered with the games in the first place and another group are denouncing the others as professional cynics. That is not helpful. There are two propositions of which we need to be aware. The games could be a great boost to London or could be a disaster. It is not altogether clear that they will turn out positively and we need to focus in a practical sense on the difficulties. For example, it appeared this week that the London borough of Newham has produced a major report questioning many of the gains of regeneration, of which that area is supposed to be the main beneficiary. We need to consider what the problems are and why the design does not fit what was expected.

The other issue is that we made a bid for the Olympics on the basis of costs that were wholly unrealistic and that have been revealed to be much higher. Since the Economic Secretary is here, I will say that, at some point, the Treasury will have to explain why it signed off and gave a financial guarantee on the basis of such wholly unrealistic costs. We now have the real practical problem—not just general pros and cons—that London taxpayers do not want to pay more council tax. People have a strong and entirely understandable resentment against paying more through the lottery. Another good example was the chairman of the National Opera saying yesterday that it will result in cuts in the arts and therefore in culture, which is central to London. Taxpayers in other parts of Britain are saying that it is not right for them either. So who is going to pay? It is a real bottleneck.

The one lesson that has to be learned is that a tougher approach must be taken on the question of funding and on the venues that are chosen, including the media centre. It may seem a trivial example, but I heard the other day of a proposal—it is part of a package—to create a shooting range at Woolwich at a cost of £18 million that will be demolished three weeks later for a further £8 million, yet we have perfectly good international ranges within a few miles of London. Such extravagance is envisaged on a large scale. Someone—the Treasury is certainly involved—has to get a grip on it; otherwise there will be a complete draining away of confidence. That will do great harm to London and to sport.

With those qualifications, I thank the hon. Member for Hendon for saying what many think. I speak not so much a national spokesman but as a London MP. I am proud of the city. It has achieved much, and we want it to continue to succeed.

I congratulate the hon. Member for Hendon (Mr. Dismore) on securing the debate and on the way in which he opened it. I am the first Member representing a non-London seat to speak, so I may not seem so metro-centric as others.

I want to touch on some of the themes raised by hon. Members in this brief but important debate. The hon. Member for Hendon set the scene well when speaking about London’s transport problems. Its transport infrastructure is a constraint on the growth and development of London as a major employer and as a place to live. My hon. Friend the Member for Orpington (Mr. Horam) commented on some of the stresses on suburban rail services caused by the growth in passenger traffic into London. It has a ripple effect not only into and out of London, but even as far south, Mr. Hancock, as your constituency and mine. Long distance commuters from Portsmouth and Fareham travelling into London face increasingly cramped conditions because of transport developments and increasing demand in outer London as well as in the centre.

The hon. Member for Hendon was also right to mention London’s housing problems. Anyone who lives in London, even those like me who live here only part-time, is acutely conscious of the pressures caused by house prices and the affordability, availability and quality of housing stock. He also spoke about unemployment, which I shall return to later.

The hon. Gentleman highlighted a point which was also raised by my hon. Friend the Member for Cities of London and Westminster (Mr. Field). He spoke about the tremendous paradox that London has a high level of unemployment—higher than any other part of the United Kingdom—but also a high level of inward migration. Society faces the risk of polarisation with extreme wealth and extreme poverty living cheek by jowl. The hon. Member for Hackney, South and Shoreditch (Meg Hillier) has referred to the issues around social cohesion that flow from that.

My hon. Friend the Member for Cities of London and Westminster has rightly paid tribute to the work of the lord mayor of London and the City of London corporation in promoting London’s financial services sector. They promote not only the financial services sector in London, but the sector outside London, and they act as ambassadors for the sector on a global basis. It is important to recognise that London, as a global city, needs to build strong links with other parts of the world. We need to attract business into the UK as well as people into the UK. In debates about London, it is important to look outwards and to recognise that other cities and capitals are trying to attract the same business. We need to consider London’s competitiveness as a city and international financial centre and how it shapes up and compares with other centres in the world. I shall return to that subject in a moment.

First, however, I want to say a little more about unemployment in London. At 7.9 per cent. in the mid-point of last year, it exceeded the national average. It seems a contradiction that although London’s economy is growing faster than the UK economy, London is seeing such high levels of unemployment. Certainly we are seeing inward migration, as we heard from my hon. Friend the Member for Cities of London and Westminster, and anyone who has spent time at any of the international banks based in the City or in Canary Wharf will have seen the rich and diverse pattern of employment.

We need to consider the causes of London’s unemployment. One factor highlighted by the report commissioned last year by the City of London corporation was the skill levels of people in London. It found that the proportion of graduates living and working in London is much higher than in the UK as a whole. It was also evident from the report that the proportion of Londoners with few or no qualifications also exceeded the national average. I suspect that that low level of skills underpins the high level of unemployment in the capital. If we are to tackle the mismatch between wealth and poverty in London, we need to consider the skills of the population as a whole.

The report also highlighted the fact that the number of adults receiving training in London was below the national average. We clearly need to focus on improving the skills set of people who work in London, but we must also raise the aspirations and attainments of young people there. I have visited the City of London academy in Southwark, and I am sure that its programme will play just as important a role as city technology colleges, the forerunner of academies, in raising levels of attainment in parts of London.

Will the hon. Gentleman accept that one problem is the continual shedding of manufacturing and construction jobs in Greater London, and that the people who lose jobs in one industry desperately need to be retrained for the new jobs that are coming to the capital?

It is a pattern that we see throughout the country, and it is not limited to London. We have seen a decline in the manufacturing sector, and if people are to find employment, they need to be retrained. That focus is particularly needed in London given the relatively high level of unemployment.

I return to the competitive position of London vis-à-vis other world capitals. It has been a long debate and most, if not all, speakers have touched on transport infrastructure. I am sure that, like me, the Minister has heard the lobbying of employers in the City of London and Canary Wharf—and of hon. Members today—about the importance of Crossrail to London’s transport infrastructure. However, my hon. Friend the Member for Orpington and the hon. Member for Twickenham (Dr. Cable) were right to point out the importance of relatively small projects that could help unlock transport capacity.

The other factor that we face in maintaining London’s competitiveness and its contribution to the UK economy is the competitive threat posed by other financial centres across the world. For example, in the run-up to the Budget a number of business organisations commented on the lack of competitiveness of the UK tax system. When businesses are wondering where to locate their international operations, they will consider the competitiveness of the tax system. We have among the longest tax codes of any developed country, second only to India. In 1997, we had the third lowest rate of corporation tax in the European Union, and we now have the seventh highest. Such factors have an impact upon people’s perception of London as a place to locate.

Another issue, which is close to my heart and that of the Economic Secretary, is the competitiveness of the regulatory system of the financial services sector in London, and how it compares with other sectors worldwide. We need to be continually vigilant, because there are territories and locations that offer advantages and attractions to financial services businesses, if those businesses locate outside London. To the extent that that happens, or to the extent that such businesses locate themselves outside the UK, there is a detrimental impact on the UK economy as a whole. We might not be able to redress all such differences, but unless we are vigilant as to the tax and regulatory risks posed by other jurisdictions that seek to attract financial services business, London’s premier role as a motor for the UK economy will be under threat. We should be conscious of the threats to London’s status as a leading economic powerhouse not only in the interests of Londoners but in the interests of people across the UK.

I congratulate my hon. Friend the Member for Hendon (Mr. Dismore) on securing the debate and I appreciate the wide range of points that have been made. A common theme has run through most speeches, perhaps with the exception of that by the hon. Member for Twickenham (Dr. Cable), from whom qualifications seemed to come across more strongly than support for the importance of the London economy—though I may just have misheard him.

As has been said, London is vital to the UK economy as well as to the lives of people who live and work in it. It is right and proper that the Members of Parliament for London continue to make the case for it, but it is also right that the rest of the country appreciates its vital role both in job creation and investment and in its contribution to public finances, which I acknowledge.

It will be impossible in the limited time available to respond fully to all the points that have been made. I shall start with the comments made by my hon. Friend the Member for North-West Leicestershire (David Taylor), who gave some important context. We are indeed concerned with the national interest and with the jobs and prosperity of people across the country. In my view, the stability of the economy during the past 10 years has been an important contributor to the turning round of the employment situation throughout the United Kingdom. The narrowing of regional income differentials between London and the rest of the economy during the past year, as shown in the latest figures, is a strength for the economy and for society. The northern regions are catching up. However, an important part of the reason for that is London’s strength as a motor for growth and job creation, which benefits the rest of the country.

As a constituency MP in Yorkshire and as a former member of the steering group, “The Northern Way”, I acknowledge and support 100 per cent. the role of the London economy in the prosperity of the UK as a whole. As the Economic Secretary, I fully understand the important role of London and of the City in delivering jobs, investment and tax revenues. Like many MPs from different parts of the country, I have lived in London for more than 15 years, and I see myself in part as a Londoner. I fully appreciate the diversity and dynamism that is London today. My children go to a primary school that has fewer than 200 children but at which more than 28 languages are spoken—a small fact that testifies to London’s huge variety.

We have a capital that delivers £180 billion of economic activity—more than the economies of Sweden and Russia. Median weekly earnings are £540 a head—a fifth higher than for the UK in general—and the higher level of earnings is reflected in the job creation of the past decade, with 300,000 more Londoners in work, the biggest proportional rise in employment for any UK region. It is seen also in the growth of the City and in higher education in London. At the same time, as my hon. Friend the Member for Hendon pointed out, there is substantial disadvantage in London. It has the highest worklessness rate of any region.

The borough of Westminster has the ward with the lowest proportion of people on workless benefits but also four of the wards with the highest proportion of people on workless benefits, in one of which a staggering 83 per cent. of children are in families on benefit. That is a mile or two from the west end. Whatever we are getting right, which is a lot, we are clearly not managing to get right all our employment strategies for families on benefit and in poverty in inner London. That needs urgent review, and I hope that the Economic Secretary will reflect on it.

Given the shortage of time, I shall reflect on that point in detail after the debate. The point that I was going to make was related to the degree of worklessness, the fact that more children live in poverty in London than elsewhere in the country, the fact that there is more overcrowding, and the coexistence of those conditions alongside prosperity. That is a source of concern to any of us who care about cohesion and inequality. It is also partly an explanation for why London benefits disproportionately from public spending compared with other parts of the country. There is greater need, which results in greater delivery of public spending resources.

My hon. Friend the Member for Regent's Park and Kensington, North (Ms Buck) mentioned employment policy. There is no doubt that our employment policy and our skills policy, which is now strategically directed by the Mayor, need to be more finely tuned so as to tackle the issues that she raised. I hear the concerns of the hon. Member for Cities of London and Westminster (Mr. Field) about employment, but he should reflect on whether the abolition of the new deal employment policy is really the right way. His rhetoric was probably genuine. However, if he wants a serious discussion on solutions, he should recognise that an active employment policy enables us to meet the concerns of my hon. Friend the Member for Regent's Park and Kensington, North.

The point that was made about housing is well taken. Building more social housing must be a priority for the spending review, as must tackling homelessness and lack of affordability, which have been mentioned by a number of hon. Members including my hon. Friend the Member for Edmonton (Mr. Love). It is also important to continue to invest in transport, as the Government have been doing over the past decade. Let me say to the hon. Member for Orpington (Mr. Horam) that transport is not an area in which a quick fix is easy. Extending platforms and building new trains or lines takes a substantial time. Part of the reason why his constituents face overcrowding issues is that it will take time to turn round the substantial under-investment deficit with respect to the railways, the buses and the tube that existed for a number of decades. We have been trying, and we continue to try, to rectify that.

I recognise the points made on Crossrail by my hon. Friend the Member for Hendon. As the Minister with responsibility for the City of London, I have heard the arguments many times and I understand and appreciate them. The Government are committed to taking the Crossrail Bill forward and to doing everything we can to try to meet the challenge before us. My hon. Friend and others will understand that the project is a major one that will cost many billions of pounds. Finding a way to finance it that is affordable and sustainable is a challenge and would be so for anyone in government, including for us. Nevertheless, we take that challenge seriously and we understand the long-term consequences for London if the issues raised by Crossrail are not addressed.

My hon. Friend the Member for Hackney, South and Shoreditch (Meg Hillier) urged recognition of the important role played by Transport for London in meeting transport investment needs, and of the fact that TFL is now AA-rated. That is exactly why we are enabling TFL to borrow to such an extent to finance its transport plans. She is right to laud the Mayor for his leadership on transport, including public transport, and on the congestion charge. I was surprised that the hon. Member for Cities of London and Westminster criticised the congestion charge, given the achievements that I believe that the Mayor has delivered over the past few years.

As a former resident of Hackney, I agree with my hon. Friend about the dynamism and vibrancy of south Hackney and Shoreditch, which are well known. I am sure that they contribute to the productivity and performance of the London economy, both directly and indirectly.

I shall end by agreeing entirely with those hon. Members who stressed the importance of being vigilant in continuing to support the City of London’s competitiveness. The fact that in a recent survey from the City of London, London was ranked above New York as the financial centre of the world is not only a source of great pride for London and the UK, but a reason for us to be vigilant—