The riches of London


           Many of you have pointed out in your responses to yesterday’s blog that London has always been richer than the rest of the country. There have always been rich people who want to congregate near to the royal court or to the seat of government, rich people who want to enjoy the culture and society of a large city, people who come to London as it is by far the best known city in the country. There used to be many Englishmen who did well out of royal favour by being at court.

          London has always been more than the capital, drawing benefit from that. After all, Washington and Brazilia are governing centres, but they play poor second fiddles to New York and Rio. London has managed to be a large commercial and business centre, as well as a capital city. It used to have a great deal of industry. As a contributor has reminded us, 1930s London saw flourishing light industry in iconic buildings along the great arterial roads into the centre.  It was the UK’s number one port, with plenty of wharves and port related industry and distribution. It lost its lead to better located places with deeper water  like Felixstowe and Dover. Industry declined or migrated.

                More recently it has transformed itself into primarily a business services and financial service centre. Indeed, so successful has this development been, that on most measures it is the best of all such centres in the world, or runs as joint top with New York. It also sports an important media, fashion and cultural hub, and offers great facilities for leisure and tourism. In other words, London the port and London the industrial centre have passed over to London the world business centre. London has reinvented itself, has moved with the times, has allowed thousands of entrepreneurial changes to completely transform the landscape and the nature of the jobs on offer.  

             Instead of much of the UK being proud of London, and enjoying her success, it all too often produces jealousy or demands that London be taxed  into changing her ways. Jealousy is a powerful political emotion at the best of times. It can become an all crushing political emotion at times of stress or recession. The current jealousy of financial services, banking and the leading centre of them in the UK is driven by the fact that rewards now are so much higher relative to the rest of the country, than were the rewards of the light industry and port activities, as well as of the smaller business services of previous eras. I of course agree that the banks should not have been bailed out, and that bankers in bail out should not be paid large salaries. Most of the financial services industries and other business services sought and received no bail out, and paid good incomes out of their own revenues and profits.

              Today the same money will buy someone a bedsit flat in the centre of London as buys a five bedroom detached house in my constituency just 40 miles out of London.This is a bigger gap than there used to be in property values.  The latest Sunday Times Rich list shows that a person now needs to be worth more than £72 million to qualify  in the top 1000, whereas the top 100 in Scotland goes down to £50 m and the top 250 in Ireland to £33 million. All these figures are considerably higher than a decade ago, whereas UK GDP is still 4% below the 2007 peak. The level of income of the top 50 has risen from a minimum of £600 million ten years ago, to £1400 million today.

                  726 of the top 1000 made their own wealth. The rest inherited. There are computer entrepreneurs, fashion success stories, popular artists and musicians, hedge fund founders, and industrialists.  London and the south east accounts for 529 of them , including all but one of the top ten. The only one not in London in the top ten, the Duke of Westminster, owes much of his fortune to the 300 acre family Mayfair and Belgravia estate.

                  The picture we see of London through this snapshot is of a world city attracting some of the richest and most entrepreneurial people there are. Because there are now world brands and world markets for successful artists, footballers and the like, they make so much more money. London acts as a magnet for talent and cash. It then becomes very dear for anyone on a  normal UK salary. Does the UK wish to carry on hosting the world’s rich and successful, or do we wish to turn our back on London’s success as a world city? Is dislike of riches a necessary driver of policy in a democracy? Should it be directed against pop stars and footballers as well as against hedge fund managers and top lawyers?


  1. norman
    April 30, 2012

    Nice place to go for a weekend but you wouldn’t want to live there, has always been my opinion of London. Although that’s true of every city, being a country bumpkin.

    For people brought up in a city I imagine if you have the cash it’s a lovely place to live. Like everywhere else if you don’t then it must be a struggle, moreso even seeing riches all around. But the opportunities are there and what better motivation so why anyone would want to try and dull that motivation with taxes, regulation and envy is beyond me.

    1. stred
      April 30, 2012

      Norman. I have to stay in London weekdays at the moment. It’s a dump and I look forward to getting home at the weekend. It is ridiculously expensive and ugly outside the middle part. Transport is a joke. The Councils are run by overpaid incompetents. The only thing positive is that Londoners seem, by in large to be tolerant, helpful and friendly. It is the only place I have found where other men will offer to help each other to load something heavy in a B and Q car park- other customers, not staff of course as they have to follow the elfin.

  2. alan jutson
    April 30, 2012

    The simple fact is to live reasonably in London you need lots of money.

    To visit London you need to be within easy travelling distance, as staying overnight is also very expensive.

    If you can travel easily (bus pass helps) then you can enjoy London on a budget, plenty of museums, walks along the embankments (both sides), Canary Wharf, the interesting Parks, and many other attractions which cost little.
    The Clipper service is also excellent (daily rover ticket for unlimited travel)
    There certainly is a buzz about the place in many areas like Covent Garden, St Catherines Dock, Butlers Wharf, although move away from the better known tourist areas, and some places are still grim.

    Not a place to try and survive for long without money, or the legal means of getting it.
    Yes higher salaries are paid for working in London, but travelling into the City is also expensive in both money terms, and time taken.

    1. lifelogic
      April 30, 2012

      Surely you pays your money and takes your choice. London suites some, others not. It suites some when young or at certain stages of life, but less so perhaps when old (unless you are ill and need to be near your Harley St specalist). If you are single and do not need much accommodation and can shop around it is not even that expensive. You do not need a car and lots of museums, parks, concerts and such are totally free. Just carry a bottle of water and a sandwich with you.

      If however you have lots of children, who need a good education and you need a big house then you do have to be rich, or happy to live in a dangerous drugs gang warfare area or be on benefits.

  3. Richard1
    April 30, 2012

    The Government – inc Conservative ministers – continue to indulge in glib statements of desire to ‘re-balance’ the economy away from financial services. Having a world class financial services sector in London is an unqualified good thing for the UK, so long as it doesn’t come with huge and undefined liabilites. We should welcome the UK’s strength in financial services. Seeking to disadvantage this sector (a foolish Catholic bishop is the latest to do so) will do nothing for anybody.

    1. A Different Simon
      April 30, 2012

      Richard ,

      We don’t seek to disadvantage it .

      We subsidise it to the hilt with taxpayer provided deposit guarantees provided at no charge . We sacrifice the real economy to life support the finance sector via zirp .

      The danger of subsidising some sectors of the financial services industry so heavily is that they will become unable to compete internationally and go the same way as previously subsidised industries like British Leyland .

      I accept that some sectors of the London financial services industry such as Insurance underwriting , retail banking , some sectors of investment banking are World Class .

      Unfortunately the sector is far too big and so the rest of it just acts as a drag on the real economy .

      It doesn’t help that our parliament is based in London and is completely captured by financial services . If we want to reinvigorate the provinces how about moving the parliament to Birmingham ?

      Look at the amount of help the Govt gives the financial services industry at the expense of it’s citizens .

      The rules regarding private pensions and annuities which are decided in Westminster are devised to further subsidise the industry and bugger the poor plebs who work in the real economy .

      The Govt allowed the financial services industry to puff up asset prices and flood the market with credit to enslave it’s own citizens .

      I’m sorry but implicit assertion of this article that there is anything that the real economy can do to fight back against the parasites that bleed them dry is flawed .

      Reply: One of the bizarre parts of some critics here of London is to blame London for the failure of RBS. I seem to remember RBS is a Scottish bank, that has its headquarters in Edinburgh. Northern Rock, the other main casualty, was a North eastern bank. I suspect it was the non London base and origins that made the last government keener to bail them out. How would they have treated the Chelsea or the Kensington if there had been motgage banks with those names in trobule?

      1. A Different Simon
        April 30, 2012

        I’d add that there is an almost unitary correlation between the industries which do well and the origins of your political class .

        If your political class has an engineering background then your real economy will be strong .

        1. Richard1
          May 4, 2012

          One thing the Soviet Union always boasted of – with some justification – was the quality of its engineering education. Eastern Europe under communism was awash with engineers. What matters is free market policies, whether leaders have degrees in engineering, Greek or nothing makes no difference.

  4. Graham Swift
    April 30, 2012

    Thanks to the Liebour party which has created a country envious of those who are talented and successful , other than pop stars and football(ers-ed) , our national decline will accelerate. The Welfare State has created a nation of ‘ Something For Nothing ‘ parasites , consequently Liebour voters. The Liebour party’s policies are all motivated by three fundamentals : Greed , Envy & Malice.

  5. colliemum
    April 30, 2012

    Envy has never been a good driver of policies. History shows that political systems which try to distribute riches, i.e. taking them away from the top and giving to the bottom, makes everybody much poorer, except for the new ‘elite’, the Nomenklatura.

    However, looking back at Great Britain, there used to be cities which were nearly as ‘rich’ as London: Manchester, Liverpool, Birmingham for example, all with a proud tradition of civic involvement. On a smaller scale, there was also wealth and proud civic giving in Bristol, Newcastle, Glasgow, Cardiff. The Victorian civic buildings are a testimony to that.

    So why does it look to be so impossible to make these places more prosperous so that they can again start to rival London?
    I suggest this is due to a sort of herd instinct by the more ‘fashionable’ service industries and their leaders, who seem to think of ‘London’ as a brand, a must-have.

    It doesn’t have to be this way. In Germany there are several rich cities who have their competitive advantage over Berlin: Frankfurt, Hamburg, Munich.
    Perhaps we need to re-think the drive to centralisation so evident since WWII – and perhaps we need to think about ways to revive civic pride in the other big cities.

  6. Brian Tomkinson
    April 30, 2012

    Two days blogging about London. Is this the only place your party has any hope of success on Thursday? – a sad reflection on two years in government.

    1. Brian Tomkinson
      April 30, 2012

      Strange how critical comments seem to get stuck in moderation.

    2. A Different Simon
      April 30, 2012

      I have some sympathy with your post .

      Whilst I have respect for John , I’ve found the last two articles completely crass and insensitive .

  7. Lord Blagger
    April 30, 2012

    Since Scotland gets to decide on independence, why shouldn’t London also get the vote?

    We could get rid of lots of areas that are a drain on our resources.

    Ah yes, the electorate, we can’t allow them to make a decision.

    1. lifelogic
      May 1, 2012

      “Ah yes, the electorate, we can’t allow them to make a decision”.

      Unless of course the powers that be are are sure the decision with be in the “right” direction – which they can arrange by framing the question, asking at the right time and offering suitable bribes to the region should they get the answer right.

    2. uanime5
      May 1, 2012

      Were London to become independent then it could no longer function as the capital of the UK and Parliament could not longer function as the Government for the UK. Also as London is surrounded by England London can expect to pay heavy taxes for any of the services that go through the England (rail, roads, etc) or come from England (power, water, etc).

  8. Mactheknife
    April 30, 2012

    I dont know anyone who is jealous of London’s success or of the salaries on offer – even to the financial sector. There is an old saying that money attracts money and herein is the problem. The investment in London from private individuals, corporations and the government is disproportionate when taken as a whole.

    I think some of the issues lay with both central and local government. Government want their “cut” i.e. taxes, rents and rates from businesses. We also have planning laws designed to make things difficult for everyone. Its time some radical decisions are taken.

    For example, in my town we have lots of brownfield land from old industrial use. Whilst the local authority has big plans for development it still wants developers to stump up substantial amounts for the land and to include “sustainable” and “affordable” elements to the design i.e. they want cheap housing built which they can rent out without paying for it themselves.

    I have argued with them and put the case that this land should be given free (yes free !!) to developers in return for investment and incorporating social elements they require. This of course has fallen on deaf ears.

    I believe this type of approach would make commercial developers and employers invest in the regions more, where of course empolyers would have the benefit of lower cost burdens than in the south east.

    1. A Different Simon
      April 30, 2012

      “I think some of the issues lay with both central and local government. Government want their “cut” i.e. taxes, rents and rates from businesses. ”

      And so long as the Govt gets it’s cut it’s perfectly happy to turn a blind eye to the damage which the financial sector does .

      So short term .

  9. Caterpillar
    April 30, 2012

    I’ll quote myself from yesterday then,

    “… (how) can the UK create another global city?”

    1. lifelogic
      May 1, 2012

      Simple give, say Birmingham, the power to fix its own laws & taxes at say 20% max and let it leave the EU, have no IHT, CGT or VAT, introduce easy hire and fire, deregulate and watch it grow like Hong Kong in no time at all.

      1. Caterpillar
        May 1, 2012

        Now that might well be an enterprise zone.

  10. Sally C.
    April 30, 2012

    So much of the apparent wealth in London is based on credit. If we had more normal interest rates, instead of the current absolute historic low of .5% base rate, some of that credit would have been extinguished and house prices in London would not be at record highs. We are in a slow motion depression with credit been extinguished faster in the periphery than in the centre. Because we have record low interest rates some people are fooled into thinking that as long as they invest in the economic hub of the country, their investment will be fine, so they are still taking out new loans to buy property primarily. However, any retailer will tell you that times are tough.
    London property prices will continue to propelled upwards, for the moment, by these extremely loose credit conditions, courtesy of the Bank of England. London will also see a boost from the Olympics, however thereafter it may be a different story. Already the majority of house sales at the luxury end are to foreign buyers.

    If Jim O’Neill is appointed Governor of the Bank of England, I will scream. He is the archetypal champagne socialist and had no foresight about the financial crisis.

  11. Damien
    April 30, 2012

    The great attraction of London is that no one is ‘out of place’ and even on a modest budget it is possible to live a healthy social life. London has a wonderful array of the finest museums and galleries, many of them with free entry. They are evidence of the wealthy benefactors who inhabited London over the years.

    The new wealthy have improved London’s crumbling stock of heritage property that is a public amenity in itself. Many people enjoy wandering around the streets of Chelsea admiring the manicured gardens.

    The City of London has only a resident population of 9,000 residents yet has an impressive 100 churches inside the square mile. They are immaculately maintained and many have open their squares and gardens to the public. The city workers have generously and consistently funded the upkeep of these historic buildings which are open to the public everyday. Often on a Sunday people come from all over London to attend the packed services at St Helen’s Bishopsgate.

  12. oap
    April 30, 2012

    The UK should celebrate the fact of the success of London. It is a magnet for the ambitious in many walks of life – professional and creative. If London did not exist the brain drain would be even greater than it is.

    It is entirely feasible for clusters of skills to develop elsewhere, as they have around universities such as Cambridge, Oxford, Southampton and elsewhere. But it does require risk takers with drive and ambition and an absence of hand of state regulation, taxation and, worst of all, the political mentality that it can pick winners.

  13. Iain
    April 30, 2012

    London has brought in some of the worlds richest as well as some of the worlds slums.

    I would happily not have either and feel it is still our capital.

    If London is a world city then it can’t be our capital, for a capital should represent the country.

  14. StrongholdBarricades
    April 30, 2012

    If you strip out ‘London Weighting’ from wages, would that actually mean house prices would stabilise for a while?

    If the capital really is the place to be, why does it need an additional allowance?

    1. StevenL
      April 30, 2012

      Most council workers use the London weighting to buy a season ticket to get to work and back. Very few people who work in central London councils actually live in central London. Only Londoners who have inherited central London housing, Londoners in social housing and younger folk staying in dorm room accomodation can afford to live there on a council salary even with the extra £4k.

  15. Matthew
    April 30, 2012

    No, it’s a sad reflection of the times that the question needs asking!

    Envy is a destructive, corrosive emotion. As someone famous once said, it’s the only one of the deadly sins that won’t give you any fun at all.

    London is working, so leave it alone, indeed further encourage its success.
    London helps to support much of the UK, by its tax revenues, image what the UK economy would be like if the “City” migrated to Frankfurt or Singapore?

    We need to get the climate set for the greater UK to develop industries again.
    You have to feel sorry for the kids leaving school today, they haven’t had the benefit of grammar schools that so helped our generation, then they don’t have the benefit of there being a big enough industrial base for them to step into a career.

    1. uanime5
      May 1, 2012

      I can’t recall sloth being fun.

      Given that the City only contributes 2% of GDP the UK will be able to survive without it. The other 8% of the financial sector is the useful banking which can’t migrate.

      The majority of those helped by grammar schools were the middle class, not the average person.

      Reply: More wonky numbers!

  16. D K MCgregor
    April 30, 2012

    A glowing tribute to London , but been there oft times , it really does not feel like my capital . It is a Disunited Nations of a city full of ethnic and class divisions ,(which contains risks-ed) Remember that whilst we may derive some financial benefit from the City , that does not mean we endorse all of its excesses.

  17. Robert Taggart
    April 30, 2012

    Wishing our provincial metropoli could follow suit – although there be only so much finance to go around.
    Blighty has so much untapped potential in its big cities – could it simply be the poor calibre of local politicians (particularly Liebore – who dominate such places) – who hold their places back ?
    Now there be a challenge for the Tories – how to win back the cities – without selling-out your principles.
    Impossible ?

  18. Acorn
    April 30, 2012

    If you do nothing else today, read Allister and Tim. Keep in mind that a lot of people have nothing else to do today except whine on in the media, but solutions to the UK problems will be hard to find. Boris for president of England I say. If ever we needed a charismatic leader with a clear marketable ideology, it’s now. (If coalition cock-ups lose him the election there will be trouble). I have just listened to BBC radio. The presenter wanted listener comment on which is more socially acceptable today, to be bi-sexual or a lesbian!!! It is so sad to witness a nation being destroyed by its own ignorant media. . .

    1. Johnnydub
      May 1, 2012

      The Tullett Prebon document is spot on… However what is clear from it, is that a proper capitalist reformist agenda needs to be created and then sold to the public.

      However we have a nominally Tory party that just wants to carry on with Blairism – which as we know has already failed. The left just knee jerk hate them and the soft C conservative voters (otherwise known as England minus the inner cities / north) justifiably feel betrayed.

      And in the meantime the economy will just limp on, the deficit won’t get properly addressed (2.5% growth – you’re having a laugh) and labour will win the next election.

      What an utter disaster for the future of the UK and our children….

  19. MickC
    April 30, 2012

    Riches can still be achieved by gaining favour at court.

    However the court nowadays is not the royal court, but the one we vote for every general election, which then proceeds to act in a royal manner, imposing burdens on us peasants, and granting themselves and their acolytes considerable (and profitable) privileges.

  20. Neil Craig
    April 30, 2012

    That it is necesary to go to Washington/New York & Brasilia/Rio to find places where the capital is not the main city su[pports my point about the way bgeing near the democratic centre (or Royal court) attracts wealth, Both Washington and Brasilia are artificial entities st up purely to be capitals. Without that they swampland on the Potomac & jungle respectively. I will grant that if the capital of Britain were relocated to Strontian in the Scottish highlands it would not quickly rival London in size though I think it would quickly become the head office of a lot of businesses.

  21. Liz
    April 30, 2012

    There is jealousy of London within the EU too – the proposed transaction tax is but a crude attempt to bring London to its knees, whatever the consequences for Britain or the EU itself.
    It is not only national pay rates that need to be adjusted regionally – benefits do too. The benefits cap of £26,000 net acts as a greater disincentive to work outside London – providing as it does a more comfortable lifestyle than those in work can often obtain.

    1. Bazman
      April 30, 2012

      Maybe their should be regional benefits for London, paying less to Londoners as there is so many jobs available? It’s interesting that many of these jobs pay minimum wage in London, so much for lifelogics fantasy that more jobs would somehow produce competition for employers to find employees and this would push up the rate. If you believe this then you are brainless.

  22. forthurst
    April 30, 2012

    Entrepreneurs succeed when they exploit the market. That exploitation may be to rectify a failure of the market to supply a particular good or service either at all or in a more efficent way. When an entrepreneur does this and is successful he deserves to be congratulated and possibly even regarded as a role model. However, when that market failure is as a result of the abnegation of politicians in their duty to ensure a level playing field or to detect and punish or co-operate in the punishment of conspiracies against other market participants or owners or the actions of thieves and worse, then we all have right to be concerned. Furthermore, if businesses which are not remotely world class, are able to grow hugely in some countries as a result of gross protectionism or when some countries simply prevent foreign takeovers, then we must also ask why our politicians continually allow businesses from those countries to acquire important industrial and other assets in this country.

    The market exists to supply goods and services at genuine market clearing prices, not to enable spivs to make inordinate amounts of money through market abuse or the operation of monopolies. The role of politicans to ensure this level playing field is central and the total failure to attempt to detect serious fraud perpetrated by American financial operations is both extremely reprehensible and of great concern to those with insight.

    Politicians on the whole are not much interested in the wealth creation process otherwise they would not continually focus on individuals and activities which are of minor signifcance to the needs of the economy as a whole. I suspect that most of them could not even read a balance sheet so they would prefer to buy properties and ensure an ever increasing capital and income stream from them than to invest in the businesses on which this countries future depends. How can we expect such people to ensure our success as a country against ever increasing international competition?

  23. Susan
    April 30, 2012

    That seems to be a rather rosy picture of London. In actual fact London should be doing much better than it is. If a Global Capital with a large financial sector and many of the other advantages already mentioned cannot do well then there is little hope for the rest of the Country it represents. The rest of the UK, I suspect, had very little interest in how London earned its money until the banking crisis. It is the Politicians and media through constant banker bashing and highlighting how much was earned by high earning professionals in London compared to the rest of the UK who actually caused the problem. It is therefore natural for the public living in areas outside London, to wonder why they are made to feel the pain for the financial crisis caused, they are told, by these people living within the Capital. The truth of course is rather different.

    Having lived in London, not all the areas share in this golden economy, there are pockets of deprivation and worklessness which are equal to, if not worse, than anything found outside the Capital. These places are more likely to be the source of trouble for the future than the rest of the UK as the gap between rich and poor becomes more apparent.

    However London has its own problems coming down the line, which may see it lose a great of its status in the future. Increased regulation, transport and tax issues as well as the damage done to its reputation from the financial crisis may see London as a less attractive place to do business in the future.

    It was very easy for London to change direction when it needed to and become the financial centre it is now, it is an idea setting for Global activity. It is not so easy for other parts of the UK. Some areas of the Britain have been completely ignored by Governments because there was no political advantage to be gained from helping them to grow. Government money has been used in other areas but has tended to produce more public sector jobs than real investment in the private sector for growth. Poor education standards in the UK have seen children leave school without the skills needed to go into the work place and years of benefit dependency in some areas have destroyed the work ethic. There also seems to be a reluctance by the British to move from the area where they were born to seek work elsewhere. This is not true of other cultures.

    Governments of the UK did not look to the future and see that there was a need for Britain and its people to change to be able to compete in the changing World.

  24. David Hope
    April 30, 2012

    London has certainly become a magnet and I (as someone in and from Leeds and Sheffield) do not begrudge those who have set up businesses there and done well.

    As far as finance is concerned though, my sympathies to the Austrian school makes me feel that a lot of the recent growth is strongly related to the fact that it has also benefitted a lot from new money. Firstly the cheap credit of the last 15 years and then the vast amounts of quantitative easing. Where new money is created it can benefit those at and close to the source at the expense of those further away.

    One should not get angry at bonuses so much as ask how it has come about that much of London’s finance industry can afford to pay so much without going out of business! It doesn’t suggest markets are working naturally.

    The other issue I would take is that often is magnetism is not just pulling in those from abroad but from the rest of the UK. There is no doubt there is a brain drain issue, I can see it from the number of colleagues who went there after uni because there were few jobs further north. In some ways this can’t be helped, it is not london’s fault and the remedies are probably things like more powerful regional government that can make it’s areas very attractive to business.

    It is however inexcusable for me that there are pushes like the government’s london tech city initiative. Where places like Cambridge have done well of their own accord in this one sector it does not seem right that government is putting money in to grow this area in London, a place that is hardly struggling!

    I do very much like London and may work there myself in time, but I think one must ask how such imbalances have occurred and more importantly (as I think you are trying to) , how we might correct these balances in a positive way, that doesn’t just involve tax.

    Reply: QE has helped the UK public sector, not the City. All the money has been spent on buying up goevrnment debt to keep the interest rate low to keep the total interest cost of the public sector lower.

    1. lifelogic
      April 30, 2012

      QE has helped the UK public sector – to continue its suffocation of the private sector I assume.

    2. Caterpillar
      April 30, 2012

      Comment on JR’s reply,

      I agree with the public sector motivation to QE and perhaps I have this wrong, but;

      Are the gilts that the banks sell to the BoE at an inflated price, thus a profit to the banks? Also what can the banks borrow at before they lend to the Govt … another margin? Isn’t this because the BoE doesn’t lend straight to the Treasury, and as such one of the arguments for bank bonus taxes (and hence banker bashing)?

      1. Denis Cooper
        May 1, 2012

        The Bank of England entered the market as a major new purchaser of gilts, in fact it became the only major net purchaser. Private investors who were looking to reduce their holdings of gilts would have benefited greatly from the uplift in market prices at which they could sell, while there would have been a smaller benefit, a margin, for who participated in both the Bank’s reverse auctions to buy up previously issued gilts and the auctions and other offers to sell new gilts which the Treasury’s Debt Management Office continued to run in parallel. In his letter to King authorising the use of “central bank money” to buy previously issued gilts, Darling made it clear that these “asset purchases” by the Bank would not in any way affect the Treasury’s existing plans for the issuance of new gilts; that was a clue to what was intended – what became known here as the “money-go-round”. Obviously the “money-go-round” would not have continued to turn unless the wheels were lubricated, ie to rather mix metaphors unless those riding on it would make at least a small profit with each turn.

    3. David Hope
      May 1, 2012

      A fair point though did not some of the Asset Purchase facility go on commercial paper and corporate bonds. I suppose in this area the Fed was a lot more active where I think the law meant it couldn’t just buy its own debt. Also Mario’s cheap loans have benefitted banking, or simply saved it from collapse. Plus the finance sector benefitted significantly from the various loans and bailout facilities of 2009.

      Anyhow whilst my example was probably not the best my point really is that a proportion of london’s success in recent years came from being close to the source of money creation. We must be careful now not to widen the gap further by having high taxes and inflation which hurt the private sector in the rest of the country in order to benefit the city and the government.

      Reply: ONly £1 bn of the first tranche and no more thereafter was corporate debt.

  25. Phil Richmond
    April 30, 2012

    John – As someone who has lived in America for 10 years it dismays me that in Britian the only debate is about “fairness” i,e making the poor richer at the expense of making the rich poorer.
    Most people outside of the Lib/Lab parties & the BBC know this to be a fallacy. What dismays me even more though is that your party which before Cameron used to be Conservative is now signed upto this pathetic politics.
    I will for the first time in my life vote UKIP instead of Conservative on May 3rd. Be prepared for a shock that day!

    1. lifelogic
      April 30, 2012

      Most people outside of the Lib/Lab parties & the BBC know this to be a fallacy – even a few perhaps 50 in the Tory party too.

  26. javelin
    April 30, 2012

    Prime Minister said Europe was not “anywhere near half-way through” its currency crisis.

    lets face it he’s going to be told to stop talking down the Euro, whereas in reality he’s talking it down.

  27. Rebecca Hanson
    April 30, 2012

    I left London because there were too many people there pursuing very narrow interests which would clearly be counter productive in the longer term.

    Remember ‘Masters of Nothing’ John?

  28. lifelogic
    April 30, 2012

    I would much rather see £100M in the hand of a self made individual living in the UK than have it in the hands of the state to be wasted on the usual political nonsence or given to the PIGIS or spend to buy votes or to encourage fecklessness.

    It clearly does far more for the country that way than green bling, windfarms and more bureaucrats ever will. The more rich the better for all.

    1. Bazman
      April 30, 2012

      Not if they treat London like a second holiday home it is not.

      1. lifelogic
        April 30, 2012

        What is wrong with that? It creates jobs tax revenue and does no harm.

        1. Bazman
          May 1, 2012

          What are the problems with holiday homes? I am not going to explain that one to you. There are no problems? You are dreaming again.

  29. ll
    April 30, 2012

    We just need to tax everyone as lightly (not just the nondoms), fire half the state sector and then everyone would be better off. Even those fired would be more satisfies doing somthing more useful.

    1. uanime5
      May 1, 2012

      Somehow I doubt everyone will be better off it half the teachers, police officers, doctors, nurses, and social workers were fired.

      1. lifelogic
        May 2, 2012

        Those mainly are not the ones I would fire. 50%+ are doing nothing useful at all and many of those you mention could be in the private sector paid for by consumers of their services.

  30. Martyn
    April 30, 2012

    “…or do we wish to turn our back on London’s success as a world city?”

    Certainly not, though of course France and Germany see it quite differently and wish to reduce its influence, not just in Europe but also globally. Meanwhile, of course, using it as a cash-cow to help prop up their master plan for the EU to morph into the US of EU.

  31. William Cowburn
    April 30, 2012

    Here in Lytham St Annes I have seen great changes since started my architectural practice in 1959. At that time the town had a large branch of every UK bank and a reputed 5 millionaires lived here, all self made men, who controlled their empires from here. the change has been because the centre of power moved to London and decisions were no longer made here.
    Why did this shift in power come about? It seems to me to have occurred because the control passed to the pension funds. Due to successive government taxation and strikers’ actions these millionaires wanted to sell up and make their money safe in other investments, not any longer in their own businesses. At the same time the huge increase in the need or desire for pensions was growing; these funds wanted investment opportunities and so bought out the millionaires, thus transferring the control of the wealth to London. The funds wanted to be in London so they could lobby the government.
    Hence power shifted to London. I believe this also occurred in many other parts of the country, caused basically by increase in government control over more and more aspects of business life.
    It is useless to criticize London; we should accept this city’s preponderance and work for more
    freedom. Only then can true competition between cities come about.

    1. lifelogic
      April 30, 2012

      Indeed good old Lytham and its fine golf courses and wind mill. We need each region to set its own tax levels, set its priorities and get some real tax competition going.

  32. Demetrius
    April 30, 2012

    There was a time when most of the money and activity of London went back to other parts of the Atlantic Isles and circulated within them. Today most of the money within the London economy goes out of the UK one way or another. Some of it goes as normal economic activity a lot doesn’t. London is now probably the money laundering, corruption and tax evading centre of the world and many of its population do not see benefit from it and neither does the rest of the UK. Take the Westminster blinkers off, John, and just look around you.

  33. outsider
    April 30, 2012

    Dear Mr Redwood,
    We should not conflate egalitarian resentment of “London”, wealth and success with the age-old hostility between farmers, manufacturers and entrepreneurs on one side and merchants, traders and bankers on the other. These producers have every reason to feel aggrieved when the middlemen bring down the economy but continue to prosper while the producers suffer.

    A successful country needs stronger growth in regions that have become poorer as a result of industrial change and so many mistaken policies of the past. Yet we continue to boost London at the expense of the rest of the country.

    Take one example we can do something about. Our biggest planned infrastructure project is HS2, part of the mandated European transport network designed to bring outlying regions closer together. Yet the Government’s plan is for HS2 to be based at a different London station from HS1, the fast link to Paris, Brussels and soon Germany. After spending £28 billion plus, you will not be able to ride from the Continent to Birmingham or Leeds without packing up your laptop, disembarking, carting your luggage to a different terminus half a mile down the road and starting all over again.
    Please, Mr Redwood, I realise that you probably cannot stop the whole mal-investment in HS2 but MPs can insist that HS1 and HS2 join up in direct services between the Rhineland, Paris, Brussels and our great Midlands and Northern hub cities, rather than reinforcing the supremacy of London at their expense.

  34. uanime5
    April 30, 2012

    I find very few people object to London being successful. What they object to is London sucking up most of the business investment, then condemning everywhere else for not pulling their own weight. You can’t have one part of the UK getting most of the investments and expect everywhere else to somehow keep up.

    Personally I feel it’s a major problem if living in a city in the UK is unaffordable for most of the people who work in this city, especially when this city contains the Government which is meant to represent the average person. The UK should focus more on improving the whole of the UK rather than creating a small playground for the wealthy.

    Also the problems with long delays at Heathrow may lead to the wealthy boycotting the UK:

    and it seems that the low growth in the UK is due to the Government’s policies, rather than the fault of everything else:

    1. A Different Simon
      April 30, 2012

      Nice to be able to agree with you for a change .

    2. Johnnydub
      May 1, 2012

      “The UK should focus more on improving the whole of the UK rather than creating a small playground for the wealthy.”

      Well the first way this could happen is to stop the public sector crowding out the private sector in these regions. How is this going to be achieved without you, the Labour Party, the Unions and BBC going apoplectic?

      1. uanime5
        May 1, 2012

        Given that the private sector operates best when there are large numbers of people with money to spend and invest increasing the public sector and reducing unemployment in these regions will create more opportunities for private sector businesses.

  35. John Schofield
    April 30, 2012

    The banks make ‘loans’ of money which they create out of nothing. There is, therefore, a continuous flow of money back to London as repayment and interest because that is where the banks are based. This gives London an advantage. We should create a level playing field by banning fractional reserve lending and giving the BOE sole responsibility for (debt free) money creation. The money to be spent by the government of the day. Banks unable to survive should be allowed to die.
    We would find that the provinces are just as enterprising as London.

  36. Denis Cooper
    April 30, 2012

    Geography comes into play here, because the riches of London expanded greatly through privileged trade connections with the continent, not only but notably through Calais.

    When Dick Whittington heard that the streets of London were paved with gold, one reason was that Calais was then part of England, and even sent representatives to Parliament in London; not mentioned in the pantomime tale is the fact that Whittington himself became not only Mayor of London but also the Mayor of Calais.

    Given that there is a global market for all kinds of financial services, and that over the centuries the City has established itself as a pre-eminent centre, it would be a stupid dereliction of duty for the government to fail to do everything it can to protect that position.

    That will mean fighting against some of our European “partners” who wish to see it destroyed, apparently in the case of the French government even setting up a named secret project – “Spartacus” – for that purpose:

    It doesn’t mean that the City should be unregulated, or that we should all pay for the mistakes made by private banks in order to protect their investors, or that the requirements of the City should be allowed to dominate everything in the rest of the country and the economy, or that those living in and around London and benefiting from its prosperity have any right to look down their noses at fellow citizens living in other, less favoured, parts of the country.

  37. StevenL
    April 30, 2012

    When we talk about poorer regions being in a ‘single currency’ with London, I think we also have to remember that the manufacturing regions were locked in a single currency with a major petroleum exporter during the 1980’s and 1990’s. Is there any ‘petro-currency’ state where they have thriving industries manufacturing goods for export?

    Also, when we account for how much tax ‘London’ generates, is this skewed in any way by the fact that so many registered offices are in London? Are companies payroll taxes accounted for in the city where the worker works or where the company is listed? Ditto for VAT and corporation tax?

    I would still question the wisdom of allowing prime London land to be used as a tax-free market ‘safe’ assets market for foreigners. But these decisions are all taken by senior politicians and bureaucrats with extensive personal interests in London land prices.

  38. Christopher Ekstrom
    April 30, 2012

    In London you have false prosperity & a patheticly misplaced sense of pride: and the cherry on top? (references to Ken Livingstone and religion deleted-ed) Wake up, Mr. Redwood.

  39. Bazman
    April 30, 2012

    There is a lot of seriously rich people in and around Cambridge who have left London which is only an hour down the M11. The smart money though is heading in the direction of Bedford Just up the M1 which does not suffer from the problems of Cambridge which are similar to London. People traffic, parking, house prices and tossers. Milton Keynes is also a good rival for London with now some very good road links and a great place to live and work so I’m told. The missing link is from Cambridge the ‘golden triangle’ would then be complete.
    A1, M1, and M11. Forget the A14 nightmare.

    1. Caterpillar
      April 30, 2012


      It is the rail as well as the road links. MK to Euston in 35 minutes, Bedford to St Pancreas/Faringdon 50 minutes to 1 hour. Obviously this is happening in other areas (on the first time buyer list) as well. Transport is a means to break the monopoly on home/land owners of London {and the politically opportunistic market distortions of key worker housing, local authority housing …which are not correcting market failures as transport does} alongside labour supply.

      Not just to Bazman,

      Anyway rail is filling up, including with freight and if the Govt doesn’t bring forward HS2 (and possibly tweak the order of delivery) it will be rather unhelpful. Linking Birmingham particularly Birmingham International to the City and to Heathrow ought to be paramount. The travel times will be similar to the times above and additionally aid freight expansion on the west cost main line. My own view is that the UK is approaching the scale where it could develop another global city. I do think that Birmingham-Coventry-Northampton (BCN) does have some chance in this direction (being towards the top end of Brunet’s old Blue Banana, just above MK). I don’t think the time is right for a Birmingham Mayor to lead this – not only because of the non-defined powers but because the center of gravity and ‘borders’ are not yet well enough developed. There are huge arguments that would need to be overcome; at the tourist level Stratford-upon-Avon/Warwick&Kennilworth castles alone are insufficient, but pulling out some of the galleries/museums or rehousing some of their contents in BCN could contribute. The link of Aston and Warwick universities to start-up, health and engineering businesses in the area is not at the Oxford-Cambridge-London scale of influence, but is growing. I guess that misdirected policy on educational visa restrictions may have limited the next tier down. The Birmingham International runway extension will allow for the direct connections to China, which as well as the inward investment has a v. small but growing population (again – study + work + lower salary cap visa policy may have been helpful). The delay in HS2 and the nimby/countryside arguments need to be overcome – the BHX to the City and to Heathrow are key (to bidirectional agglomeration). Using the green along the M6 to M1 would probably cause arguments, equally there are parts inside Birmingham that really need to be knocked down and re-greened, this would have a perceived problem of hitting some history and particular ethnic/age/class communities {real care needed}. The population density (Birmingham ~4000/km sq c.f. Inner London at ~9000/km sq) and total population (Greater London ~ 8 million c.f. West Midlands Conurbation ~ 2.2million, B’ham Metro ~ 3.5 million) may still be insufficient, but acceleration of this with a change in direction of the currently forecast ethnicity/age/class demographic would be a good monitor of success.

      Etc., … little point in me continuing, it isn’t going to happen!

      1. Bazman
        May 1, 2012

        Took the truck into Brentford today. Why live in this area or others like this when you can have a higher standard of living with less traffic, people, pollution, hassle and a larger house with a garden further out? Just asking.

  40. Remy Kelvin
    April 30, 2012

    Riches of London should be shared by the poor as well. Thanks for a nice post.

  41. Jon
    April 30, 2012

    Jealousy is powerful and fools the masses. We had a Bishop in Scotland the other day calling into question our morality! He spoke about peoples pensions and savings and then proposed teh financial tranaction tax which is a daily tax on those very same pensions and savings. How dare he talk of morality without explaining why raiding peoples pensions and savings with a daily tax. The average private pension fund is £37000 which will buy an annuity of just £1800pa.

    Today we have Milliband declaring war on excessive pension charges. A 1% charge on stakeholer type pensions has a break even estimate of around 16 years for the provider. A lot of that cost is the regulator. Many schemes are way below 1% charge and many workers in the industry have not seen a payrise at or above inflation for 15 years. Jealousy and pantomine will mean the industry will all but reject the average person as there is no profit left. I’d like to see him first propose the same margins for his beloved civil service.

    London’s not bad, the further you travel away from it the more bigotry and ignorance there is.

    1. A Different Simon
      May 1, 2012

      What inflation adjusted annualised return after charges might someone who is paying into a stakeholder pension expect over the next 30 years ?

      I’d hazard a guess that at best , about 2% in real terms . To get more than this will require the investor to take some risk .

      So someone who invested X now might expect X *(1.02 to the power of 30) = 1.81X in 30 years time . (if things did not go wrong) .

      Nobody is going to put there money away for 30 years for a return like that unless they are compelled or massively incentivised by tax breaks and employer contributions which are sleight of hand which generally does not exist in the private sector .

      This is somewhat poorer than the public sector SCAPE notional performance ; X * (1.035 to the power of 30) = 2.807X .

      Ie the public sector pension is giving a 55% better investment return over 30 years . Guaranteed no matter what goes wrong with the economy .

      I don’t know how Unite can spin this as “Fair Pensions for Everyone” .

      Perhaps the only chance of worthwhile returns is for everyone , public and private sector to take more risk .

  42. Will J
    April 30, 2012

    Among the most lucrative professions are those in finance, law, and in and around government. Almost all of these are based in London. There are few other places in England where the ambitious or talented can go. You haven’t accounted for how much of London’s prosperity is the result of concentrating the talent of the country. Of course London should support its provinces – they are its lifeblood.

    As for the present popular discontent with financial services, it does need to be remembered that many people perceive (correctly) that it is not just the bailed out banks but the whole industry that is culpable for the financial crisis, because of the appalling culture that had developed within it. The simplistic, misapplied mathematical formulae, the shoddy sales practices, the endemic short-termism, the woeful failure to recognise and avoid asset bubbles. The list goes on. We can talk about regulation till we’re all tied up in red tape but no regulation can make good such a morally bankrupt industry.

    Society is never happy with and only tolerates at the best of times the fact that a few very bright and not a little bit ruthless people are able to make unseemly amounts out of the disproportionately lucrative craft of trading money. But when that only half welcome trade, which we are repeatedly assured secures economic growth, in fact manifestly and catastrophically produces the opposite, well then half welcome quickly becomes not welcome.

    I think some recognition of the culpability of the financial services industry as a whole, and thus some humility and the need for a radical change of culture, is in order when discussing this topic.

  43. Lindsay McDougall
    April 30, 2012

    “I of course agree that the banks should not have been bailed out.” Good, then you will appreciate that taxpayers will not be content until we have got our money back with interest – for the avoidance of doubt, that means a decent rate of interest in excess of inflation, not the poxy 0.5% that the Bank of England deems appropriate.

    Other than that, carry on London. It’s good to see that somewhere is a success.

    1. A Different Simon
      May 1, 2012

      Lindsay ,

      I hope you are ready for a long wait because it would take decades for the banks to make that money through legitimate business activities .

      No doubt they will be coming back for more handouts a long time before that happens .

      The only way we are going to see it before then is if they are allowed to stiff their customers – ie the man in the street and small businesses .

      1. Lindsay McDougall
        May 2, 2012

        What I really object to is that banks that did not hold out their begging bowls to Gordon Brown are treated just as roughly as those that did. Bob Diamond’s bonus is rightly being questioned by Barclay’s customers. However, it is no business of the government or the EU.

        1. Lindsay McDougall
          May 2, 2012

          And shareholders

  44. davidb
    April 30, 2012

    I dont really like the place. I felt out of place on those visits I made as a tourist. It can be expensive – nicer hotels especially – but visitLondon do show you how to do it relatively cheaply. It is a very beautiful city. The architecture in many of the central bits is often a joy to look at. You can see the wealth if you visit Paris at the same time. London is shiny bright compared to the French capital. I last stayed in Little Venice in the house where Alan Turing was born. I had a nice time. I saw a version of Cyrano with Stephen Rea inexpensively at the National Theatre. But I didn’t much care for the locals nor for that “strange town” ( c The Jam ) dont know dont care and I gotta go now attitude amongst the inhabitants.

    I prefer Amsterdam or Berlin myself. But I do concede that the money is made in London that the rest of us spend.

  45. rose
    April 30, 2012

    The City of London has its own representation in Parliament, thanks to a special Act, which other city centres could well do with now. Too often the city centres are abandoned to binge drinking and general neglect, used and abused by tens of thousands every day and night, and cared for by very few. Perhaps mayors could address this problem, as concillors only seem to care about their own wards.

  46. Derek Emery
    May 2, 2012

    I do not know why London does so well but it probably to do with the concentration of virtually all political power there which has lead to commerce being increasingly centred there (for lobbying purposes?)

    What I find interesting is just how little the London wealth factor extends to the North. Even by Milton Keyes (51 miles) unemployment is noticeably higher at close to 5% and by Northampton (60 miles) the London wealth ripples have almost died away completely with unemployment at over 8%.
    Birmingham and the West Midlands (around 100 miles) are totally outside the tiniest northwards ripples of the London wealth effect. Birmingham and Wolverhampton occupy two of the four worst places for unemployment rates

    I find totally unreal to expect that HS2 will have the slightest effect on the West Midlands economy as the Midlands are 50 miles too far from London to benefit in any case. Only the richest company executives will be able to afford HS2. Most ordinary people I know cannot afford to travel on Virgin trains so use the slower far cheaper operators and many use buses to be affordable.

    Likewise it is totally unbelievable to expect that an extra layer of politicians in the form of a Birmingham mayor and his minions will change anything for the better. Hardly anybody I speak to expects anything positive for the public from either of these two political initiatives.

    I am convinced that is by any unlikely mischance Birmingham did well for growth it would be instantly killed by government as happened decades ago when Labour placed limitation on Birmingham office space on fairness grounds as other cities were not doing as well and they wanted growth in these instead.

    Since the three main parties are now left of New Labour there is no chance of growth in Birmingham. See how expensive office space works against development in Birmingham

    ……So in 1990 the Uniform Business Rate (UBR) was introduced with national rate-setting and with revenues accruing to central government. There was one exception, however; the City Corporation (self-evidently not anti-business!) was
    allowed to add its own ‘precept’ to collect its own revenues.

    Thus from 1990 there has been a strong and entirely transparent negative fiscal incentive for any local government in Britain, except the City of London, to permit any commercial development……

  47. Stephen O
    May 2, 2012

    It is not good that so much of the UK’s economic growth is concentrated in London, but the problem is not that London is growing too fast, but that other areas are growing too slowly. It is not a zero sum game and anyway the other regions are competing as much or more with other countries than with London for jobs and business.

    London through transfers makes other regions richer than they would other wise be and is far more a help than a hindrance to their growth. Still much of London’s strength comes from being a global city, with a strong international service sector. Given we are looking to diversify the UK’s economy, the other regions should be looking to grow in new businesses.

    One thing that really worries me is that it is far easier to damage existing business than to develop new business. Politicians with an agenda of rebalancing the UK economy will likely achieve cuts in London’s growth, but little or no extra growth in the regions, so just end up harming the UK economy overall. You hear a lot about measures which might hurt the City (but do nothing to safeguard taxpayer’s money) and next to nothing on new proposal to help the regions grow.

    I think I have seen more suggestions in the comments above for positive measures to grow the regions than I have heard from the government. One of the more obvious ones is to try harder to leverage the UK’s world class universities to generate new types of business in the Midlands.

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