London’s Economy

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.