For the past six months I have been chairing the Lords’ Select Committee on the Olympic and Paralympic Legacy. And today, after 33 evidence sessions, hearing from 53 witnesses and taking written submissions from 67 organisations and individuals, we have published our report – with 41 recommendations.
So what are our main conclusions?
The Games themselves were an outstanding success, absolutely vindicating the decision by Tony Blair and Ken Livingstone to back London’s bid, as well as exceeding expectations and confounded the sceptics. That success was only delivered through incredible cooperation between the numerous organisations involved, the host Boroughs and virtually every Whitehall department. Since the Games however, the same political impetus and the imperative of a deadline no longer exist. As a result many aspects of the legacy are in danger of faltering and some have fallen by the wayside. There is a lack of ownership and leadership.
That is why we recommend giving a single Cabinet-level Minister overall responsibility for all strands of the legacy. Only someone with senior clout will be able to bang heads together across different departments, including Education with its role in school sport and funding, Health which is supposed to be getting us all more active and healthier, DCMS with its responsibility for the sports governing bodies – plus all the departments that should be working to deliver the economic benefits not only in London but across the UK.
In London itself, the Office of Mayor should be given unambiguous responsibility for holding and taking forward the vision for East London and the developments in the Olympic Park and the surrounding area.
East London has for over a hundred years contained some of the most deprived communities in our country. Too many still live in poor and grossly overcrowded properties or in temporary accommodation. Unemployment rates are among the UK’s worst and the skills gap means that local businesses cannot find the staff they need. Delivering the Olympics brought forward much-needed infrastructure improvements but making sure that all the potential new jobs and new housing are delivered will require laser-like focus and determination from the Mayor.
There is suitable land for housing in East London but it is not being used. One Borough says that the biggest problem is land-banking. In another, Barking and Dagenham, one site, part-owned by the Greater London Authority, has permission for 11,000 dwellings but only 300 have been built. There is much that the Mayor should be doing.
Stratford International has had £1bn of public investment to equip it for high-speed international rail services, but none stop there. It is time that the Transport Department persuaded the operators that at least some of their services should use the facilities, bringing in both travellers and business.
As for the promised “cultural legacy”, the term only appeared twice in more than 500 pages of written evidence and the only tangible thing mentioned by DCMS Secretary Maria Miller was the world tour of the inflatable Stonehenge that she described as “a fantastic way of bringing Britain to life overseas.”
As far as sports participation is concerned, the step-change improvement hoped for did not occur. If anything, the slow steady improvement seen since 2005 has faltered. Facilities at grassroots level need to be improved and we received much evidence telling us that the Coalition’s scrapping of School Sports Partnerships was a big mistake.
Although we hunted for White Elephants among the facilities created for the Games, we didn’t find them. But the unseemly squabbling of West Ham United and Leyton Orient football clubs over the Olympic Stadium was most unedifying. It is important that more effort is made to ensure that this national asset is put to good use with maximum possible community use, including possibly by the club that was unsuccessful in the bid process.
That is the overall lesson of the report: the London Games were a huge success but much more still needs to be done to ensure the nation gets the maximum possible return on its investment.
Two issues today highlight the way this Conservative-led LibDem-supported Coalition Government operates.
Fees of up to £1200 to bring an employment tribunal case are being introduced today. This is allegedly intended to prevent so-called vexatious claims from being brought. The reality is that for the first time since employment tribunals were introduced in the 1960s there will be charges imposed to deter those who have been badly treated or exploited by their employers. The fees discriminate against the weak and the low paid.
Less important, but symptomatic of the way this Government pays lip-service to engagement and consultation are a series of consultation exercises launched in the last few days with closing dates for response at the end of August or in the first week of September. Good practice would be that consultations should be open for up to three months – five weeks over the peak holiday period is designed to stifle responses. The consultations cover such matters as pensions fro retained firefighters, the housing transfer manual, and various notices under the Gas and Electricity Acts (and yes, I don’t know what these are about, but they are no doubt complicated and take time to understand their implications).
I am not surprised by the Tories, but I hope the LibDems are ashamed of themselves.
I have tabled a question for oral answer in the House of Lords this afternoon, as follows:
“To ask HM Government what proportion of the United Kingdom’s critical national infrastructure is owned by foreign-owned companies; and what assessment they have made of the benefits and disbenefits of that level of ownership”
I am sure I will receive a courteous answer but I rather suspect that what it will boil down to is (1) the Government don’t really know what proportion of our infrastructure is in foreign hands; (2) that they haven’t really got a policy on it; and (3) even if they wanted to do something about it they feel it is either too late or there is nothing that they can do.
Earlier this month the Government announced, in response to a critical report from the Intelligence and Security Committee, that it would be reviewing the role of Chinese-owned Huawei in the UK’s telecommunications and security infrastructure. This is welcome, if a bit late. I have been banging on about this for ages: for example here and here.
Six years ago the think tank Chatham House reported that
“as much as 90% of the UK’s critical national infrastructure is not government owned and a large proportion of that is under foreign ownership.”
Most of London’s electricity is provided by Electricite de France. Does anyone seriously doubt what would happen if it was a choice between switching the lights out in London or Paris because of some crisis?
In the last 10 years, Ferrovial of Spain has bought BAA, the operator of Heathrow and Stansted airports, Germany’s RWE has acquired npower, and Australian bank Macquarie has taken control of car parks by buying NCP.
German group Deutsche Bahn recently bought rail and bus operator Arriva, while ports company P&O, which owns assets at Tilbury and Southampton, was also bought by Dubai’s DP World in 2006.
This Government bangs on about the threat to British sovereignty presented by the UK’s membership of the EU, but they seem to be utterly silent on the implications for our sovereignty of having so much of our infrastructure controlled by foreign governments or its future being determined at the whim of foreign investors who are unlikely to have the UK’s national interest at the top of their priorities.
Very few other nations would be so sanguine.
The focus of that Eddie Mair interview was the question of Boris Johnson’s fitness for further office. There was no real discussion of how well he has actually done in his current job as Mayor of London.
In the earnest spirit of inquiry I recently tabled a question in the House of Lords:
“To ask Her Majesty’s Government what representations they have received from the Mayor of London in the last year on (1) health services in London, (2) housing provision in London, and (3) the impact of changes in welfare benefits on the people of London.[HL5797]”
The response I got was as follows:
“The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham): The Department of Health has held a number of discussions over the last year with the Greater London Authority, London Councils and the Local Government Association about the London Health Improvement Board. We recognise that there is potential for delivering health improvement services on a city-wide basis in London. The London Health Improvement Board has been meeting since July 2011.
The Localism Act conferred on the Mayor of London responsibility for housing, economic development and Olympic legacy in London, in addition to existing responsibilities over transport, planning and the police. Therefore, the mayor is responsible for housing and regeneration policy in London. The Department for Communities and Local Government has regular conversations with the Mayor of London and the Greater London Authority regarding housing provision in London. Over the last year these conversations have focused on a broad range of issues, such as funding and delivery of affordable housing, increasing investment in the private rented sector, getting surplus public sector land back into use and dealing with homelessness and rough sleeping.”
The answer is notable in what it does not say.
There is no indication that the Mayor has spoken up on behalf of Londoners about the state of London’s NHS and the piecemeal closure of services that is taking place all over the capital. I doubt whether the remit of the London Health Improvement Board covers the configuration of health services in London and I have asked another question to clarify this.
And there was no mention whatsoever in the answer (despite its specific inclusion in the question) of any representations made by the Mayor on the impact of changes in welfare benefits on the people of London.
Boris Johnson has made plenty of public statements about not being nasty to bankers and the iniquities of high tax rates but apparently has little to say about the cuts in welfare and housing benefits that hundreds of thousands of Londoners will face in the next few weeks.
I wanted to seek further clarification from the Government by asking:
“Further to WA 5797, does the absence to a reference to representations from the Mayor of London in respect of changes in welfare benefits on the people of London mean that there were no such representations”
but have been told that that would be against the rules.
Instead, I have asked again what representations the Government has had from the Mayor specifically on the subject of impact of changes to welfare benefits on the people of London.
I await the answer, but I expect I know it already: Boris Johnson is more concerned about the very wealthy and about big bonus bankers than those who have to rely on what is left of our social security system.
This morning the Public Accounts Committee published a coruscating report on the continuing problems that HM Revenue and Customs have in answering the telephone.
On Saturday thousands marched through North London to protest at changes in the services offered by the Whittington Hospital.
What links these two events?
The answer is a former car parts company, Unipart, that now sells its services in promoting “efficiency” to public bodies.
Unipart advises the Whittington Hospital on how to cut its costs and shed staff. One of the major proposals management there is implementing is to change the way in which the public can “interface with” the Hospital.
Excessive delays in answering the phone by HMRC are serious, but they are not usually life-threatening.
Answering telephone calls from patients and their relatives in a hospital may be.
The danger is efficiency proposals that work well in an industrial setting may not be suited to a public service on which the lives and well-being of people depend.
There is a debate going on in the House of Lords today on the economy. It was intended as platform for the new Treasury Minister, Lord Deighton, to strut his stuff.
However instead Labour’s Lord John Eatwell eviscerated the Government’s economic policy and its (lack of) growth policy:
My Lords, it is a particular pleasure for me to welcome the noble Lord, Lord Deighton, to the Dispatch Box and to congratulate him on his appointment to the Treasury team. It is always a special delight to see one’s former pupils do so well. When I marked his economic essays back in the mid-1970s, I never imagined—nor do I suppose did he—that we would find ourselves in this situation. I think it is appropriate to report that his essays were typically examples of excellent economic analysis, and I hope and believe that he will put those skills to good use in re-educating the Treasury. It certainly needs it.
Today, he has been placed in an extraordinarily difficult position. It is rather difficult to defend the Government’s growth record when there is none—growth, that is. The latest figures are truly awful, with no growth at all in 2012, despite the heroic efforts of the noble Lord, Lord Deighton, and his team at the Olympics.
Taking the longer view, since the Government’s spending review in the fourth quarter of 2010, when it might be said that coalition policies replaced Labour policies, the UK economy has grown by just 0.4% over that entire period. Over the same period, the USA has grown by 4.2%, Germany by 3.6% and France by 1.5%. Accordingly, while the UK economy is now still over 3% below its pre-crisis peak, the USA is 2.5% above and Germany is 2% above.
The question before us today is: in the situation in which we find ourselves, what is to be done? How can we get Britain back on to a secure growth path? Should we follow the recommendations of the Chancellor of the Exchequer that we stick with austerity, accepting his declaration that “Britain is on the right path”? Let us call this plan A. Or should we adopt plan B, following the advice of Adam Posen, former member of the Monetary Policy Committee, and particularly of Olivier Blanchard, chief economist of the IMF, who said last week,
“if things look bad at the beginning of 2013—which they do—then there should be a reassessment of fiscal policy … We think that slower fiscal consolidation in some form may well be appropriate”.
That is the IMF view on Britain.
The answer to our question, “What do we do?”—the fundamental issue in this debate—rests on a consideration of three issues. First, how did the Government get into this mess and are they tackling it in the best way? Secondly, what is necessary to restore the UK economy to growth? Thirdly, what is there to prevent us following this path of restoration?
So, first, how did we get into this mess? As the noble Lord said, the Government inherited the terrible economic consequences of the international financial crisis—everyone agrees about that. These consequences were and are particularly severe for a country as dependent on financial services as we are. But then the crucial question is: in the past two and a half years, have the coalition’s policies made things better or worse?
The previous Chancellor, my right honourable friend Alistair Darling, had been battling the crisis since 2008, and by the spring of 2010 he had succeeded in beginning to turn things around. Recovery was under way at a similar rate to that in the US and Germany, so that George Osborne inherited an economy growing at an annual rate in excess of 2%. He killed that recovery stone dead. He destroyed business confidence by preaching the coalition dogma of austerity and by foolish and demeaning comparisons with the plight of Greece and other eurozone countries without their own currency and exchange rate; he slashed public investment so that in the past three years the Government have spent £12.8 billion less in capital investment than Alistair Darling had planned; and, with savage glee, the coalition set about shrinking the state and impoverishing the poor. This is all justified in terms of the Tory manifesto commitment to eliminate the deficit in one Parliament—a commitment, by the way, which will not be kept, for the deficit is not falling.
Recent figures published by the Office for National Statistics show that public sector net borrowing in the first nine months of fiscal 2012-13 was about £107 billion compared with £99 billion in the same period last year—a rise of 7.3%. I repeat: the deficit is over 7% up on the equivalent period last year. So the answer to the first question is that the coalition inherited a very difficult but recovering economic situation and proceeded to make it much, much worse.
What should be done to turn the position around again and to set the economy on a new growth path or, to put the question in a more practical fashion, how can businesses be encouraged to invest? Firms invest because they are reasonably confident in the future demand for their products. Without demand, if they are shackled by a framework of fiscal discipline, as referred to by the noble Lord, it does not matter how much cheap money there is, as no one will invest. That is why monetary policy is not working. Interest rates can go no lower and the first positive announcement effect of quantitative easing has now worn off. Quantitative easing may be inflating asset prices and ruining pension funds but cheap money will not encourage investment when the Government are intent on slowing the growth of demand.
However, if there is a prospect of growing demand then, to invest, firms need finance and access to the very best skills and technologies to secure markets in a competitive world. Demand is the key to making all the measures that the noble Lord referred to as his fourth pillar work.
That is why my right honourable friend Ed Balls has proposed a temporary cut in VAT to boost family incomes, together with the boost to demand and capacity that would result from bringing forward infrastructure investment, including building thousands of affordable homes. Enhanced demand prospects would then be underpinned by a British investment bank to boost lending to small businesses, complementing fundamental regulatory reform of the banks. To sustain confidence there should be a compulsory jobs guarantee for the long-term unemployed and, further up the employment chain, investment in skills and in transformational science and technology. That is plan B.
Why cannot this be done? “Because”, cry the coalition, “it’s a policy for borrowing more when debt is the problem”, and we heard a similar statement from the noble Lord today. But hang on, at the moment, as we all know to our cost, spending cuts are resulting in a growing deficit. How can this be happening? The IMF has provided the answer and it, at least, has acknowledged its earlier mistaken commitment to austerity.
The answer lies in the relationship between changes in spending and the overall performance of the economy. This is measured by what, in the economics jargon that the noble Lord and I used to discuss, is called the multiplier. If a cut in government spending of, say, £2 billion results, for whatever reason, in a fall of output of just £1 billion, then the multiplier is a half. That is what the IMF believed the multiplier to be back in 2009. The share of taxes in output is about 40%, so if government spending is cut by £2 billion and output falls by £1 billion, tax revenues fall by about £400 million. The fall in tax revenues is much less than the cut in spending, and so the deficit falls by £1.6 billion. That was the policy that the Government thought they were implementing.
However, what if the multiplier happens to be bigger than that? Supposing that it is as large as 2.5, the cut in spending results in a fall in tax revenue of exactly the same amount. You can go on cutting taxes until the cows come home and there will be no change in the deficit at all. All that will happen is that the economy will be driven further and further into the mire of depression.
In acknowledging a previous error, the IMF estimated the multiplier to be a bit less than two, so a £2 billion cut in government spending will drive the economy down by about £4 billion and, when cuts in revenue are taken into account, the deficit will fall by only £400 million. Throw in a depressed European Union and you arrive at our current miserable situation: ever bigger cuts and a growing deficit. But the good news is that what goes down can also go up. What if government spending is increased by £2 billion and the multiplier, optimistically, is 2.5? The economy then grows by £5 billion and the increase in tax revenues pays for the extra spending; there is no extra borrowing at all. I repeat: increased spending results in no extra net borrowing. Plan B is a strategy to cut government spending. And there is more. The government cuts—particularly those disastrous cuts in government investment—not only reduce output now by cutting demand; as the OBR has pointed out, they also cut future output by reducing the real productive capacity of the economy.
As I was saying, there is more to it than that. As the OBR has pointed out, government cuts in investment cut future output by reducing the real productive capacity of the economy. This long-term loss of output brings with it a long-term reduction in tax revenue, in addition to the medium-term effect that I have just outlined. In other words, the Government are not just failing to cut the deficit now; they are increasing deficits for years to come. By contrast, if the IMF is right, the measures proposed by my right honourable friend will be substantially self-financing in the medium term and will stimulate tax revenues in excess of spending in the longer term. This point has also been argued by the Harvard professor and former US Treasury Secretary, Larry Summers.
Before we sign up to plan B, however, another issue must be confronted. Today, any Government’s finances can be devastated by a loss of confidence in the international bond markets. The noble Lord referred to this. After a particularly violent example of sovereign bond market hysteria, James Carville, the political adviser to President Clinton, famously remarked,
“I used to think if there was reincarnation, I wanted to come back as the President or the Pope … But now I want to come back as the bond market. You can intimidate everybody”.
Well, the bond market certainly seems to have intimidated the coalition. Whenever its destructive policies are challenged, it argues that unless the vice on Britain is tightened, the financial markets will lose confidence, interest rates will rise and any prospect of recovery will be destroyed.
There are three things wrong with that argument. First, no one is suggesting a spending spree. Plan B is a cautious expansion to begin the task of building the foundations for growth. Secondly, it is austerity that is now undermining market confidence. All three of the main credit rating agencies—Standard & Poor’s, Moody’s and Fitch—have put Britain on “negative outlook”, citing concerns over the weak recovery and the public finances.
Thirdly, let us consider the experience of the United States, which lost its AAA rating last year. Would you rather have our AAA rating and zero growth or the lower US rating and 3% growth in the last quarter? I know which I would prefer.
The noble Lord, Lord Deighton, outlined in his speech a number of desirable measures that the Government can take to help to build productive capacity—the structural measures to which he devoted the majority of his speech. However, the Chancellor’s commitment to cutting demand and shrinking the state—less Bullingdon Club, more Tea Party—is eliminating any significant impact of those worthy measures. The Government’s attempt to stimulate growth has been a failure; the Government’s attempt to cut the deficit is a failure; and, if informed predictions are correct, even the Government’s attempts to preserve Britain’s AAA rating in the markets will prove to be a failure.
The coalition is now responsible for the longest slump in the British economy in the past century—longer than the great depression—yet last week George Osborne said something truly chilling. He said:
“We can either run away from these problems or we can confront them and I am determined to confront them”.
What is it in the word “failure” that George Osborne does not understand? For the sake of this country’s economy, it is time for him to run away. He is the living embodiment of plan A and must accept responsibility for its failure. Perhaps I may suggest that an excellent replacement as Chancellor would be my former pupil, the noble Lord, Lord Deighton.”
There were a series of exchanges during Question Time in the House of Lords this afternoon on the Arctic and the implications of the melting of the ice cap. The implications are substantial – and not just because of the impact on global sea levels. There is the potential opening up of a new sea route: the North West Passage sought by explorers so assiduously for centuries. There is the potentially easier access to mineral deposits and the possibility of oil drilling as the ice recedes. The ocean (and this brings with it the rights to exploitation of natural resources) itself falls within the territorial waters of a handful of countries – principally Canada, Russia and Greenland.
So what is the strategy being followed to protect UK interests (indeed have those interests even been defined)?
Alas, the answer is not to be found in today’s Hansard:
To ask Her Majesty’s Government what is their assessment of the 2012 Arctic Report Card of the National Oceanic and Atmospheric Administration of the United States showing record-low sea ice extent in the Arctic Ocean during the past year.
As Boris Johnson prepares to use the platform of the London Government dinner at the Mansion House tonight to try and upstage David Cameron’s long-awaited speech on Europe tomorrow, unsubstantiated gossip reaches me that the Mayor is moving to reward another of those associated with the Evening Standard’s campaign in 2008 to unseat Ken Livingstone and as a result help him to win the election as London Mayor.
Veronica Wadley (then the Standard’s editor) is now the Mayor’s (paid)appointee as chair of the London Arts Council.
A little bird tells me that now the Mayor is poised to appoint Andrew Gilligan (then the Evening Standard journalist who wrote some of the articles in the Standard most damaging to Ken Livingstone) as his new (paid) advisor on cycling in London.
Interesting, if true…..
I have now had it confirmed.
A few hours after I posted about the “explosive” purchasing of the UK’s critical national infrastructure by the Chinese, there was a series of exchanges about the privatised water companies during Question Time in the House of Lords:
Does my noble friend believe that the people who privatised our utilities expected that within 10 years they would be in the hands not only of foreign administrations and foreign countries but actually of the Governments of those countries? We have denationalised here and renationalised from abroad. Surely the regulator should get a lot tougher on these people who are making absolute fools of people who have to subscribe increasing sums to the maintenance of essential services.
My noble friend makes a fair point, my Lords, but we believe in free capital markets.
My Lords, does the answer to the noble Lord, Lord Bradshaw, mean that the Government are indifferent to the extent of foreign ownership of our critical national infrastructure? Are they indifferent to the possible implications of that?
No, my Lords, we are not indifferent; we take these things very seriously. As I say, however, we believe in free access to our capital markets.
So now we know. The Government takes these matters very seriously, just so long as the national interest doesn’t get in the way of the free market.
This will not be news to those of you who are avid readers of China’s People’s Daily. However, an article in that paper on 4th January spelt out baldly what I have been saying for some time: Chinese interests are steadily buying up a controlling stake in Britain’s critical national infrastructure.
The article says:
“China’s investment in the United Kingdom will continue its “explosive” growth, with high-end manufacturing and infrastructure leading the way, a senior diplomat predicted.
“The UK is the most open economy, and also the most market-oriented,” in Europe, said Zhou Xiaoming, minister counselor of the Chinese embassy in the UK.
Chinese companies have been answering the call from some members of the European Union for capital.
In 2011, the UK was the third-largest EU destination for Chinese investment, following Luxembourg and France, according to the Ministry of Commerce.
China’s overseas direct investment in the UK in 2011 was $2.5 billion, it said.
But Zhou said the real figure was far more as Chinese overall investment in the UK experienced “explosive” growth.
“It is estimated that the Chinese capital that flew into the country in 2011 reached $6.5 billion,” said Zhou.”
Am I alone in thinking that any sensible nation state should be concerned that control over its critical infrastructure is steadily being bought up by another country?
There is no debate about it and the Government seems at best to be complacently ignoring it or more sinisterly tacitly encouraging the sell off.