The London News Debate Our Economy

London - arguably the capital city of the world with an economy built

on financial and other business services. Know where in Europe can

match the money-making formula which you will find around here.

The city is absolutely definitely a prize asset. But the capital has

problems, too. We have become dependent on the risky business of

banking. And we find ourselves with too few jobs in other industries.

There are not enough jobs to go around. London is at a turning

point. The growth and success it has enjoyed for decades can no

longer be taken for granted. It is no wonder that at a difficult time,

people are asking a difficult question. What shape do you want

Tonight, we are at the Museum of London in the centre of the Square

Mile. We are going to have a discussion you do not normally here.

We are dispensing with the usual chat about our economy. We are

going to ask how we want our economy to evolve over the next two

decades. You do not need me to remind you what has dominated over

the last two. Let me start by asking you, do we want more of the

same? I am Nicola Horlick. I have been a fund manager for 29 years. I

am taking part in this programme because I feel very strongly that

somebody does need to stand up and defend financial services and

banking and there seemed to be very few people who are prepared to do

that. Just looking at the statistics, we cannot do without

financial services in this country. The city is absolutely deaths --

definitely a prize asset. London relies on the financial sector.

Virtually every major bank in the world has some sort of office in

London and it does employed a huge number of people across the south-

east. We have to compete on a global stage and make sure we

safeguard that industry and protect it and encourage it to grow further,

rather than trying to undermine it. Encourage it to grow further,

rather than undermine it. Nicola, is there really potential for the

city to grow more? I thought it had outgrown itself over the last ten

years. It ends than flows because we have our ups and downs and

markets. When it goes down people sadly lose their jobs. Overall, I

believe it can grow further because there are places in the world which

are growing. They are buying financial services. Their companies

are growing. They need to be financed. People will save more in

the Far East as those economies evolve. I'm a fund manager. I'm

best people's savings and that is an industry with that will grow as

wealth grows around the world. Philippe Legrain, you're an

Economist. Financial services, could it be yet bigger? It could be

but it shouldn't be? The city needs to be simpler. It needs to be safer

and no longer subsidised by the tax payer. That means it needs to be

smaller. London is overly reliant on a dangerously unstable activity,

a large part of which involves at extracting value. That is

particularly true of fund management. Fund managers capture

most of the gains from the funds which are invested with them.

both agree it is possible for the city to grow. Let's ask Owen Jones

whether it is desirable. You wrote Chavs - The Demonisation Of The

Working Classes. Do the benefits of the city trickle down to ordinary

Londoners? Absolutely not. London has become one of the most unequal

cities on the face of the planet. It is a stunning division of wealth.

The top 10 % of Londoners are now worth 273 times the bottom 10 %. If

you go to Tower Hamlets, you can see the Grand spires of Canary

Wharf, huge pockets of affluence and gentrification surrounded by

massive amounts of poverty. Tower Hamlets being one of the poorest

boroughs in the country. It is not creating jobs and wealth for many

average Londoners who are living in some of the worst poverty in the

entire country. Jane Ellison, Conservative MP for

Battersea? Why do not agree with that picture. There are people

earning a lot of money but what everyone forgets is the city is

supporting lots and lots of people who are doing jobs which are not

financial services or telephone- number salaries. A lot of people in

my constituency work in mid-level jobs which are support services, IT,

marketing. The city is just far more than the people we see

dominating the headlines. Let's get some views from our audience.

Although the city has helped London, it is clear that we have a mixed

economy. For far too long we have had services. You have had loads of

people lose jobs, not all people who work in financial services earn

millions of pounds. I recall when everything crashed. Loads of people

did not have a job the next day, with their ground -- their brown

boxes. Now loads of money has been invested. I work in the public

sector and loads of people lost their jobs that way. We need to

have a mixed economy. The we are going to come to that very point in

a few minutes. Patrick Nolan from the Reform think-tank. I need to be

careful. There are some parts of the financial sector which may not

have performed properly and we are doing work on Regulation but

actually, financial services are important for all sorts of things.

If you are manufacturing and selling to overseas markets, the

time you agree a contract and the time you get the money, they can be

a difference in which case currencies can move. You need to

protect yourself against that. Nicola mentioned insurance. We

cannot see it as a zero-sum game. Diane Abbott? We need to

distinguish between that kind of city activity which is about

investing and people who were just gambling with financial instruments

and blew up the economy. It is all about balance and the sort of

London we want to see. I am a huge admirer of Nicola but you cannot

just have a London that is just for the very rich. We want to provide

opportunities for everybody. The city does not provide many jobs for

people in Hackney. Just to come back to a point bite your

constituents. The minimum wage in this country is �6.08. To have a

London living wage which the Mayor supports, it is �8.30. The service

sector which is massively expanding, people are nowhere near the London

living wage. They are living in poverty because the jobs are not

that. You are presenting a very extreme picture. Absolutely not.

You're not talking about hundreds of thousands of people in the

middle who won neither very poor and I take your point about the

London living wage, or extremely wealthy. There are a lot of people

in middle whose jobs are very important and are working very hard.

You do not improve London's economy by destroying one of its prize

assets. Diane is right took a what it does in the future. I think that

is an interesting discussion. Malik -- Shiv Malik, a book about -

- author of Jilted Generation. Is there a business model which London

has been pursuing, lots of wealthy people buying up bits of central

London, is there a consequence for ordinary Londoners? Absolutely. If

you're young and you live in London, you find yourself paying out 50 %

if not more of your wages on rent. This is because we have a massive

housing shortage in this country but especially in London. And of

course, it is the rich who have been able to buy up lots of

property in central London. They see it as a way of investing their

money at a lower tax rate. So there is a connection between the city,

the role that London has carved itself in the world and the fact

that young people cannot afford a home? Exactly. We do not build much

in London. When stuff has brought in from outside, it exacerbates the

problem. Patrick Nolan, I want your view. We cannot continue with the

idea that making rich people poorer will make us better off. We are not

going to get a higher minimum wage if the country is poorer. If we

have a well-functioning financial sector and people performing well

and succeeding in the global market, we will be rich as the country. If

we are richer we will have a stronger tax base and more

resources for things like a minimum wage. We have got to reform the

housing market. We should not make the country poorer to try and fix

the housing market. By building houses we are creating an economy.

Stunningly, it is not being done. What we need to do, you can see how

an economy gets completely skewed if there are incredibly rich people

at one end because you do not have the distribution going on that you

need to create the jobs in other services. You end up with a Gucci

economy or Ferraris being brought up at one end but nothing happening

at the bottom which is what you want. You want people throughout

the economy with some capital, some expenditure to go out there and

boost the economy more widely. you have a living wage, poor people

have more money in their pockets, they are more likely to spend it.

If you give it to rich people they are more likely to save it. We can

stimulate our economy with the living wage. There are not fairies

printing money. As a country we have to earn away. -- earned our

way. You seem to be forgetting,... A large part of the economy's tax

base. It amounts to �100 billion a year. We are paying for the banks.

They are not paying for us. That is a complete myth. I want to get a

couple more thoughts from the audience. If you want to join the

conversation on Twitter, used the hashtag # BBC London. Let me take

the gentleman in the blue sweater. The Olympic village has been built

with taxpayers' money. �900 million was spent on building the village.

It was sold to a rich Consortium for �600 million. That could have

been given to Newham Council, to Hackney council, to pass on to the

homeless in those areas. It was desperately-needed by the homeless.

And what happens? It is given to the rich. It is subsidised by the

taxpayer. It is totally rubbish. That is what is happening. We are

subsidising, the poor people are subsidising the rich. It has got to

stop. OK. I want us to move on. Before we

do, I want to reflect on the business model that we are talking

about. Over the next 20 years, seeing the city, the professional

services surrounding the city, not just financial services but legal,

accounting, consulting, advertising, seeing that section grow and

probably seeing the most -- most of the rest of London, people whose

jobs are serving that, making their sand ridges, building and design in

their homes. How many of you, this is completely unscientific, but I

am interested in the mood of the audience, how many of you think

that would be a perfectly good model for London, to see more

growth in the professional and financial services sector? How many

people think that would be a good London may be very dependent on the

financial services but it wasn't always like that. In the 1950s,

factories accounted for 40% of the capital's output and now it's down

to below 3% and no where is that story more clearly told than in

Dagenham where car production used to employ many many thousands.

are so many unemployed in this area alone there's not enough jobs to go

around. Ford has not benefited me at all. I have applied for their

three times. They want qualifications. The rich are

getting richer. You will be sorted for life. You have mums and dads.

Of the people have not got anything and it's hard, you know. I am a

mechanic by trade. I am willing to work. Friends of mine, in this

local area, it's definitely going to get tougher. Shiv Malik, voices

of youngish Londoners there. People who want jobs, probably not in the

City. Blue collar jobs, factory jobs. Do you think factories are

ever going to be viable in London again? Of course factories are

going to be viable throughout the country. In London, I guess it's

really a question of rates and how far, you know, businesses are

willing to expend on kind of you know, on rent and stuff like that.

But the question really for young people is for the last sort of ten

years or so, even longer than that, they've been sold a kind of lie in

the end. They've been told you know, education, education, education.

That's the way to go. But Shiv. Shiv. Shiv. Shiv. Yeah. What about

these young Londoners from Dagenham? They didn't go to

university. They're not burdened with student debt. What about them?

Do you think London can provide, and what sort of jobs would you

like it to provide for them? Well, I think, I mean, this is really the

nub of the question for many politicians across different

political segments. It's pretty difficult. What we haven't been

able to clearly create is the sort of jobs where, you know, people

across the spectrum can come in to them. And it's a really very tough

question. London will never become a manufacturing centre. No. As it

was. I remember, I mean, the reason you have so many West Indians

living in places like Brent and Hackney is cos those were once

centres of manufacturing light engineering. But we could invest

and produce green jobs. We could put money into house building and

that creates jobs which many young Londoners could do. And we could

also invest in the public sector and that produces jobs. There is no

reason why London should have very rich people like Nicola, who I love,

and then people on benefit. They've got to have jobs for ordinary

Londoners and their children. the middle you're concerned about.

It's the middle. Owen Jones. It's exactly that point. What happened

in the 80s and the 90s were these middle income skilled jobs were

sucked out of the economy, both under the Tories and New Labour.

Now what we've seen in Germany, they've got an industrial strategy.

So they caught the high tech boom and then they caught the renewable

energy boom. We're not talking about going back to a 1950s factory

skyline. We're talking about creating green collar, skilled jobs.

In London? Absolutely. Absolutely in London. By building houses, but

green collar jobs which give those sorts of men and women, skilled,

secure employment which is well paid. Jane Ellison and Patrick.

Well, I do actually have a very successful manufacturing company in

my constituency which is surprising in a place like Battersea. But

where they've been successful is they're very high tech. They're

exporting all over the world. I mean, they're exporting technology

to the Far East which is fantastic. But I think it's very unlikely to

get is industry that's very heavy on land use and all that sort of

thing. This is quite a small site but very high tech. And I think

there is potential there because being close to export markets,

being close to the City, dare I say, and all of that, the international

aspect of London is actually good for this sort of company. I mean,

when we talk about manufacturing we've kind of got to understand

what's happening in the bigger picture. Back in New Zealand, I

worked for a Labour government as an advisor to a front bench

Minister and we had a lot of problems. Similar problems with our

manufacturing sector in the sense that we were losing a lot of jobs

there, because what's happening with manufacturing over the last

couple of decades is that when transports become cheaper and it's

been easier to communicate with suppliers overseas, the supply

lines have been broken up. So manufacturing plants don't have

to... You don't build the entire car in a manufacturing plant any

more. You just build a part of it. So manufacturing has fundamentally

changed and we actually have to have a different type of

manufacturing if we're going to have manufacturing in London.

look at Germany, they kept their manufacturing base far better than

we have. And, actually, if you look at our youth unemployment rate,

it's hurtling towards a quarter. In Germany it's 9%. They've got

apprenticeships, supported by the employers. They've gone for two

years, which actually give these middle income secure, skilled jobs

to young people like that. Mike Tuffrey, you're a Lib Dem member of

the Greater London Authority. You're a Lib Dem on the London

Assembly. Absolutely. And we've got 400,000 people unemployed now and

that number is rising. You're right, the economy has been hollowing out,

so there are these top level financial services jobs. And there

are lots and lots of low paying, very flexible temporary work. And

the question is, in the middle. And I agree with those who are saying

light industrial, processed, food processing, waste. Why are we still

sending our waste and burying it in Essex? Why isn't that being re-

processed? Where are you going to put it in London for goodness sake?

No, you reprocess it and re-use it and there are already plastic

recycling in Dagenham. We should have more of those. We need to

change our wastes policies. We can create good jobs for people in the

middle if we plan to do so. We need to have a multiplier effect of the

local economy but not centralised. We have moved to a city to the

Docklands. We can move Potter financial-services and tertiary

sector industries to different areas of London which have a knock-

on effect on local businesses as a result of it, and how much better

distribution of wealth, accordingly. A gentleman over here. You showed a

clip about the youngsters in Dagenham. I just happen to be from

the automotive industry. Manufacturers really realise growth

is in the services sector. think there's more jobs in

mechanics than the workshops? Absolutely. In the after-sales and

the service sectors where there have been body shops, mechanics,

stimulate growth, bring the youngsters in for apprenticeships

programmes and get them to Buddy up and use the. I want to bring John

Burton in here. We have a missed opportunity with a larger and

unemployed youths we have in this country and the lack of housing.

And all these private companies profiteering off public money. Why

is that happening? Because the politicians are being backed by

them. Construction is the point I was making. We have got some

fantastic infrastructure projects, all of them public and private

funded. We had got our stations being rebuilt. London will create

an enormous human capital of expertise in the skilled

engineering jobs. The building houses, too. Your government has

decimated the social housing budget. Well, that's not true but let's

look at the construction sector. Let's look at the construction

sector. They are rich with apprenticeships. Many of those

public sector contracts go with conditions of employing

apprenticeships. In theory, something like the Olympics should

have brought thousands of jobs to Hackney. But in practice, what we

found was that people in those adjoining boroughs got very few

jobs. But Diane, we're talking about the future, so let's learn

that lesson and get it right in the future. Yeah, but let's learn the

lesson because it's one thing that's going to be a big

infrastructure project. It's another thing for guys like those

guys you saw in the film. Engineering jobs. These are good

skilled jobs. They're equivalent to the kind of things they were

talking about. Don't talk it down. London will be the expert at some

of these skills over the next 10-15 years. Shiv Malik. You know, you go

to work and then you go home and if your disposable income at the end

of that, because your housing costs are very expensive is so low, then

suddenly the work doesn't look so attractive. That's one aspect of it.

So it's a whole economy. But the other aspect is we haven't actually

asked well, what kind of work do we really want, you know young people

to be doing. What kind of work do we want to see in this country?

There's something a bit more fundamental about that. Right. We

need to move on. We need to move on folks, I'm sorry. We've got a lot

to get through in this programme. But it doesn't have to be factories

or finance. Can we get growth from other new businesses and sectors?

The capital is always reinventing itself and you don't have to go far

from here to see young Londoners, striving to find the next big thing.

It's a hugely exciting time. We set up a company as a care working

office space. To fund start-ups. They are early stage are just

getting off the ground, anything enabled by technology and mostly

related to the internet. The potential of what the companies are

building is enormous. It creates some jobs. It's not the same as the

Toyota a but the growth rate in two years and hiring people from

different backgrounds is significant. A lot of investment is

coming into this area as well. There's going to be a tax revenue

and incentives for young people to get involved in the job market. The

impact of Facebook on the US economy with its value estimated to

be $100 billion, there is no reason why we can't build a business is

more successfully here in London. Right. Eileen Burbidge, a lovely,

up-beat, positive video. I'm sure we'd all love to have Facebook in

London, probably employs five people. But it would be great to

have in London, wouldn't it? What do we do? I don't think anyone is

going to disagree we want more of that. What do we need to do to get

more of it? I think we need to encourage young people and she was

talking about this as well, to sort of use their skills and what

they're using actually day to day and realize that they can actually

start finding jobs and employment that actually leverage those kinds

of skills and those interests. lot of what London has done in the

past is attract entrepreneurs here, they come here to set up a business.

Are we still an attractive place. Can we be a more attractive place.

Are we in danger of throwing it away by 50p tax rates and talking

about business in the ways we do. London is still hugely attractive

and I think that's something that's been brilliantly leveraged actually

over the last couple of years and what's happening with the Olympics

and also the government sort of putting new attention on what's

happening in East London, all the way out to Statford with the

Olympic City and everything they're sort of terming Tech City or which

used to be known as Silicon Roundabout. It's multicultural.

There's great talent to hire from. It's very attractive to hire people

from the continent, from America, from North America. So you can get

a great sort of diversity of talent to address global opportunities and

create global businesses online. Does anybody think it's a good idea

to add new set-up. But does anybody call them here who calls himself an

entrepreneur? The gentleman at the back. I have a chain of opticians.

I and the retail face. I'm with staff who are struggling day to day

and we talk about, yes, entrepreneurship, stuff like that.

We can be wishy washy. We need services, we need retail business

and yes, we need the ability to start up. I'm very much for

financial services. It's important. But the banks in Britain are so

conservative in their thinking of venture capital. That's why people

go to other countries like the States something like that as well.

And that is what we need. We need more help in terms of finance, all

the way through. I think we're back to the banks. I think I need to

call on Nicola Horlick to give us a quick comment on that. I think it's

true of banks all, all over the world, you don't generally, when

you start up a business get money from a bank. And, in fact actually,

if you look at how a lot of people start their businesses, they often

borrow money on credit cards, which is terrible, but that's how it is.

And I think the important thing is to encourage individuals which you

can do through the tax system, to invest in businesses. And the

government actually has been doing that by increasing the benefits

that high rate tax payers can get for investing in new businesses. So

I'm really hoping that over the next few months we're going to see

the benefits of that with more, higher, net worth individuals

investing in new businesses. Because that's exactly what banks

are supposed to do. They're given a licence to basically give money to

businesses and if they're not doing that, what's their utility?

what does a bank do? A bank takes deposits from people who have cash,

who tend to be older people and it then lends. To who? It's got to

measure the risk. I'm not a banker, but that's what banks do. So the

point is, if they take huge risks... They don't actually do that.

They're more likely to lose the money. In an advanced capitalist

economy, they create credit. No, look... This is the licence that

they have. Look, new businesses We do not want companies to have a

Based on the fact they are talking about small businesses, and

thinking about the youths, so many of them are out of work. You go to

uni, you have a degree and a Masters and you come out of

university and he did not have a job. At the end of the day, the

banks are not helping the young people, even if you do not get

employed, at least you should be able to go to banks and get me to

start your own business. We have been talking about lending to small

businesses, we have to understand what got us into this mess and part

of that was very loose lending. But we also have to understand the

serious problem this country house with debt. And in particular, we

have to understand that these cuts, which everyone will agree are quite

hard, we have to do because we are spending so much money on servicing

our debt every week, that there is a real risk to the economy here.

You are contradicting yourself. am going to move on.

We have talked about the city, the finance is, the entrepreneurs, we

have talked about the need for jobs. Let's talk about those who are more

socially excluded. We have an amazing economy but it has pockets

of real deprivation -- deprivation with poverty too much for the rest

of the country. How do we re-engage with folks who have lost touch with

the labour market and risk becoming alienated. Here is one scheme which

is helping young people find a fulfilling role.

We are there exterminators and we are a group of young people running

a business together. We have been set up by the Active Change

Foundation. We are a pest control company. It is young people now

have been in the youth centre who have been up to no good on the

streets. It is going to be really a life changed. It is really hard to

look for a job at the moment. ended up getting involved in a gang

and saw a lot of things I did not want to see. It is hard, very hard.

This is our launch celebration to say yes, we are here now, can you

see us? We are trained and qualified. I believe this is my

only way out to change my life around. This is a huge life changed

five number of us here. It is giving us the stepping-stone.

Exterminated as it is a great example of what can be achieved

when people sit down and talk about opportunities they can give to

young people. The rat catchers of Waltham Forest,

the exterminators. We have a couple of them here. Assad, tell us what

you think you would be doing it you had not been given help to create

this business? I would be doing what I do to make my money,

basically. It would not be legally. There are many ways to make money.

It is all about money, I will be honest with you. I would do

whatever it takes to get that money. Assad, you have this in common with

Nicola, it is all about the money. Hanif Qadir, you run the Active

Change Foundation. The key word is active. You put a lot of effort

into creating a project like this. It helps a few youngsters.

Absolutely. It goes back to that gentleman who said you have to find

individuals Andy have to inspire people to bring them down to the

grassroots level. Is it is a lot of work, it is very expensive, can you

help everybody on the estate? not big money, it is more money but

it is with an initiative. A bit of hard work. It takes a bit of hard

work to work with the young people. Look at the gaps. It is about

filling the gaps in the market. do we feel about putting in

resources to help younger Londoners who are deprived. Patrick Nolan,

you tend to be sceptical about schemes? The important thing to

understand is it is not just the government's job. The discussion

before told about what the government should do and the

assumption that they should spend more. It is not just that the

government. It is a families and it is about communities and it is

everyone saying of the right thing and for example, teaching their

children to be more financially literate, to understand how they

need to work at school. If you look at the UK... I understand what you

say but in reality it is different at the grassroots level. Some

people have not got a chance in life and some people have not got a

family background to give them support. That is reality. The

majority of young people in this country who are socially excluded

do not have that support mechanism. The government is not going to help

with that, we have learnt that. you get government funding? We get

funding to prevent gang crime and extremism. We can stop them from

being criminals and extremists but what are we going to do with them?

This is an initiative. We put money together, 10 ground, that is all it

cost to give six people a chance in life. -- 10 grand. We have not told

about what employers can do to help small businesses or the sort of

social problems. It is not just a question of what the government

should do. Too often we say it is just a problem for the government.

I have not said anything about the government. They are not equipped

for this problem. Bottom line. few thoughts from the audience

about how much help should be given to people from the States.

gentleman over there said it is not about the government. It is about

the government. When the government are making women work longer hours

so they are not there to help look after their children, that is the

government's job to ensure they are looking after women and providing

back-up for mothers and have enough time to be there with their kids.

They are also pursuing low income families on to the outskirts, so

they are removing them from the Prime area to the outskirts where

there are no jobs. You are causing more problems for the other kids

who are surrounded by other people who are not doing anything or

providing them with any sort of influences apart from crime. So it

is the government's job, OK, that is why you are then power to do

your job, OK? These people, people have to take more responsibility

for themselves. Let me give you one example. You have to take

responsibility. Let's let Patrick finish. We are talking about all

these problems and another one is financial literacy and people

getting into high levels of debt and pay-day loans. The second most

taboo family -- to be subject in families is finance. If people are

not willing to talk about these things then they need to look at

themselves. They need to start taking more responsibility. On the

social excluded, micro initiatives like those are fine. But in the end,

you cannot create jobs out of thin air and government has a role in

putting money in people's pockets, in creating the general conditions

where small service industry can thrive and for government to walk

away and say, people are not financially literate, that is very,

very unfair. I'm not having a go at you, I make a point about the

government's role. I would like a few more comments from the audience.

The 20 cent of Londoners in -- 20 % of young people do not have an O

level. The system has let them down. There are enterprises out there,

socially concerned entrepreneurs who are prepared to create jobs. I

have done this for years. Created jobs for people you are not

qualified very well, who are inarticulate who are not able to

get a job. There are lots of us. We need assistance from procurement

agencies, local councils, to buy services locally, not from big

highly capitalised companies. have had quite a journey, ladies

and gentlemen. We have talked about the house, perhaps not and the

people in the middle. Here is a last question for year. I'm

interested in where the optimistic about the next 20 years. The city

will progress and be more affluent and hope fully and possibly more

equal. How many of you are optimistic about London over the

next 20 years? How many would say you are pessimistic about London?

You are split. I am not going to count hands because it is

completely unscientific. It looks about 50-50. May be slightly more

optimistic. Ladies and gentlemen, that is it. We have to draw to a