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Listening to the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander), I think that the good people of Parkhead will be over-visited, as I, along with the local Member of Parliament,my hon. Friend the Member for Glasgow, East(Mr. Marshall), will be visiting the area this Friday to talk about the specifics in the east end of the city.
London is the richest city in Europe, yet almost half the children in inner-city London still experience real poverty. That cannot be right. We all agree that it cannot be right. The city strategy, pathways into work, the new deal, the national minimum wage and investment in primary education are all about driving those children out of poverty and into opportunity, so that they can help break what is an all too common cycle in generations of families.
I shall respond to some points that hon. Members have made during our thoughtful debate. I hope that it sets the tone for our dialogue throughout the entire welfare reform agenda. I thank hon. Members for welcoming me to this new post.
My hon. Friend the Member for Nottingham, North made some points about local flexibility for Jobcentre Plus managers, and I shall take him up on his invitation to reflect on whether we have the flexibility right at local level. Our approach to local flexibility must be consistent. If we say that in city strategies, local people who know the local specifics should design a mechanism that helps to drive up employment and alleviate child poverty, it is right that we should provide opportunities for people to tell us what barriers exist in national and regional policies, structures or mechanisms as they roll out those strategies and make their expressions of interest. We will do what we can to remove as many of the barriers and working operations that those who submit well-founded expressions of interest say get in the way of their ambition to deliver a locally designed, effective way of finding people employment.
Several hon. Members made the point about qualifications. I have said this before, but the generation currently in education is the first for whom the global economy is the norm. People are no longer competing with the person in the same street, country or on even the same continent. It is a global competition. To equip those children and teenagers in the global economy, skills and qualifications are crucial. One sobering statistic is that 40 per cent. of lone parents who are out of work have no qualifications whatever. That is one genuinely worrying statistic.
My hon. Friend the Member for Glasgow, South-West alluded to how we provide an opportunity for those folk who have no formal qualifications, are not in employment but have the phenomenal responsibility of bringing up children. We must strike the right balance to ensure that they learn and acquire skills and qualifications, whether academic or others, to make them more employable in the global economy. He gave his own sense of that in terms of the challenge from eastern Europe.
A question was asked about the city strategy timetable. My hon. Friend the Member for Nottingham, North will receive over the next few days detailed guidance about the expression of interest. Some very good work is being done in Nottingham,
but I know that he accepts that if we are going to deliver on our collective ambition, we have to take that good work delivered by good people to a different scale and reach. That is the case for all cities that submit an expression of interest. We expect a delivery plan over the following three to four months. Our current thinking is to have 10 to 15 pathfinders in the first tranche of the roll-out. There is flexibility in that, too, because if there are more than 15 high-quality expressions of interest, we may go further.
I thank my hon. Friend for his compliments on the support that he received from officials at the Department for Work and Pensions. They will welcome his words, because they put enormous energy into the initiative, as did my predecessor, the right hon. Member for Barking (Margaret Hodge), who has now gone to the Department of Trade and Industry. She had a personal interest in the initiative. The appropriate level of support and guidancebut not interferencewill remain available for local consortiums that want additional support and to share best practice.
The hon. Member for Inverness, Nairn, Badenoch and Strathspey raised points about capacity in the health service and the attitude of employers. We are in constant dialogue with officials and Ministers in the Department of Health and elsewhere on the matter. We all share an ambitionit is shared across Government, so that there is no lack of will and determination to achieve itand we are engaged in detailed conversations about capacity.
As the hon. Member for Bury St. Edmunds(Mr. Ruffley) pointed out, if we are to reduce the number of incapacity benefit recipients by 1 million, supporting people in getting work is not all that is needed. We must prevent people from going on to incapacity benefit in the first place. That is a matter of working with GPs, primary care trusts, and, crucially, employers.
The initiative is not just a matter of employment opportunities and the changing of employers attitudes towards people on incapacity benefit and people with mental health problems; it is about working with employers to prevent people from slipping out of economic activity into the depression and lack of confidence that we heard described by my hon. Friend the Member for Nottingham, North, which leads them to leave the workplace and claim incapacity benefit. This is not just about getting people off incapacity benefit; it is about a sensitive approach to preventing them from going on to itsomething that I am sure we can profitably discuss in the next few months. I have already engaged in conversations about that with the national employment panel.
The hon. Member for Bury St. Edmunds raised points that also arose in other hon. Members speeches this morning. We expect that the national roll-out of pathways will largely be achieved in partnership with the voluntary and private sectors, with the proviso that he suggested that it should provide value for money and be effective. We think that working in partnership with local agencies will provide the dynamism, flexibility and spark that will help us with the national roll-out.
I have two things to say about the voluntary sector. First, now that we have greater ambitions for the voluntary sector and are asking it to do more, we
cannot ask it to do so on a cycle of annual budgets and annual contracts. It is not feasible, fair, effective or cost-effective, and it will not deliver on our collective ambitions. As we all know from our conversationswith representatives of the voluntary sector, when organisations are asked what they want to do first, they often say, My first priority in my one-year contract is to get a renewal for next year. My main role in week one is to scope next years funding plan. It is not reasonable to request the voluntary sector to work in that way, particularly if we are asking it to do more. I hope that the hon. Member for Bury St. Edmunds is reassured by the fact that the pathways contracts, for example, will build a three-year cycle, which will give a greater sense of stability.
My hon. Friend the Member for Glasgow, South-West gave his own interpretation of the point about vacancies in cities, but it is my understanding that the Department for Work and Pensions has published a detailed analysis. I shall look at it, and if there is a gap in the analysis I shall of course do as my hon. Friend suggested. As to contracting, external consultants are currently reviewing how we contract, and whether we do so in the most cost-effective and productive way. Once we conclude that work, I shall of course share it with hon. Members.
We have come to the conclusion of a helpful discussion. I congratulate my hon. Friend the Member for Nottingham, North again, and not only on securing the debate. He and my hon. Friend the Member for Glasgow, South-West have taken a keen interest in how we support those who are economically inactive, how we drive up employment opportunities and how we end the cycle of low aspiration in families. Cities are key parts of that. They are engines of economic regeneration and development and I thank my hon. Friend for securing the debate.
Dr. Vincent Cable (Twickenham) (LD): It is a pleasure to introduce this debate. I suspect that we will have quite a few debates on the financing of the Olympics in the next six years. It is appropriate to visit the subject now, because we are getting past the stage of general concept and into the practical, gritty reality. The Olympic Delivery Authority has been established and the chief executive of the London Organising Committee for the Olympic Games is now in place. There is also the public inquiry into the site, and people are beginning to talk seriously about funding.
In the past few weeks, David Higgins, in almost the first words that he has uttered in his capacity of chief executive of the ODA, has suggested that the infrastructure costs would be not £1 billion, as originally thought, but £3 billion. It was not clear exactly what those costs referred to, but the implication was that the man running the show has a much more realisticand pessimisticpicture of costings than has hitherto been portrayed.
Also, the Mayor has indicated in the past few days that he might have to acquire land, at considerable costpessimists have argued that an equivalent of possibly double the London council tax contribution will be needed, which is not something that was considered previously. I do not know what the truth is on those itemswe shall come to questions about that laterbut costings are now crucial and the issue of a properly financially disciplined games needs to be firmly set out.
I share the all-party consensus that hosting the games is potentially good for Britain and good for London. We should support the games and ensure that they are a success. Success is not just about sport but about funding and the wider economics. My other motives for approaching the issue are several, the first of which is that I represent a constituency in south-west London.
I was surprised and a bit taken aback by the strength of feeling that I encountered on the doorstep in the past few weeks from people who had realised for the first time the extent of the council tax increases that they facebecause of the nature of property valuations in London, many are nearer £40 than £20 a year. It is not so much the cost, which I guess most people can affordat least at the upper end of the income scaleas the feeling that things are open-ended and there is much more to come.
In trying to justify the games and explain things to my constituents, I appreciate that their response is not just a grumpy reaction to paying for the games. Twickenham is already a sporting Mecca and we are proud of that. There are the usual frictions associated with stadium communities, but we are proud of our association with rugby union. However, the key thing about the sport is that its big eventsfrom the World cup down to internationalsare self-financing. It does not depend on largesse from London or the Government. Indeed, one of the gripes of rugby union is that corporation tax has to be paid on its profits, just as if it were a company, and the surpluses go to the
Treasury, not back into grass-roots sport as they shoulda point that I have made to the Minister and the Chancellor.
We now have another big spectator sport in Twickenham. As a fellow Yorkshireman who grew up with rugby league, I know that the Minister will be pleased that Twickenham now boasts a rugby league side that sits above the mighty Wigan in the premier league. Like rugby union, however, rugby league is a self-financing sport and does not depend on subsidy.
We have also had bad experiences locally of national funding of sport, which has jaundiced an awful lot of peoples thinking. I suspect that the biggest participant sport locally is swimming. We have one public swimming pool, which is open and heated. For my first five years as an MP, I battled with Ministers and Sport England to get some support from the lottery for the pool. Initially that was ruled out on grounds of pure dogmain no circumstances would the lottery support open poolsbut, with the help of the then Sports Minister, we got the fatwa lifted. However, we were then told that although the pool was an admirable project, which would serve many thousands of people and was no longer barred on principle, Sport England did not have enough money, so we had to go for a cheaper patch-and-mend solution. Unfortunately, a few months after the announcement we were told that there were hundreds of billions of pounds available from the sports lottery for the Olympics. I think the Minister will understand that a lot of my constituentsthe tens of thousands who use this community facilityare a little jaundiced when they hear about the way in which the Olympics are being funded.
My final local point is that, like all communities, we have local athletes of whom we are very proud. Unfortunately, in the case of Twickenham, the most celebrated name recently has been that of the gymnast Ben Brown, who publicly announced that he was no longer able to continue training for the Olympics because there was no support for him. I know that the Chancellor has subsequently come forward with a handsome sum of money, but I think it was too late in his case.
I paint this picture because I want to try to convey to the Minister the fact that in my area, as in many parts of London, let alone other parts of the country, there are mixed feelings about the way in which the Olympics are being funded. There is a general sense of pride and optimism, but also grumbling. I am anxious that the grumbling should not become anger, and to that end we must ensure that things are properly managed financially.
A second personal reason for wanting to introduce the debate is the work that I did before I became an MP. I was involved in the oil and gas industry, with projects that were often as big as the Olympic games. In the private sector, no less than in the public, there can be massive errors and cost overruns. I have recently been reading about the travails of my former company in its projects off Sakhalin island in Russia, where costs are several hundred per cent. more than budgeted. In the private sector, there are disciplines to deal with that, which we used to call scenario planning. Managers are forced to set out what could happen rather than what they would like to happen and think will happen. In the
funding of the Olympic games, I do not sense a hard scenario planning discipline. Are people looking at worst case scenarios, budgeting for them and preparing for the worst possible outcome, not in order to knock the games or undermine them but to be hard-headed and ruthlessly realistic about the prospects? That is my background and why I have come to the debate.
We are all concerned with trying to make a success of the games. Success is about money as well as sport. As the Minister knows, recent Olympic games have a mixed history. Some have been unambiguously successful: Seoul, Los Angeles and probably Barcelonaalthough there has been an argument about the legacy of the buildings thereare normally included in that category. Some have been commercially successful, although perhaps not successful in sport: Atlanta is the obvious case. Some were disasters, some for purely political reasons: Moscow and Munich. We have had commercial disasters, of which Montreal is the obvious example. Sydney massively overran and, most recently, in Athens costs escalated from £2 billion to £8 billion in broad global terms, and there is continuing anxiety about how Greece will cover that. We clearly want London to be at the top end of the range, rather than the bottom.
In order to try to analyse the problems, I have been trying to get a handle on the costs of the games. One of the difficulties is that quite apart from the big document that the costs are contained in, they are being presented in many different ways. Revenue and capital are also mixed up, there are differences between cash flow and balance sheet accounting and all kinds of conventions are being used, so it is difficult to get a handle on the costs that we are talking about and how they are being set off against revenue streams. In simple terms, so we can talk from a common base, my understanding is that the cost of the Olympics can be roughly put into three main categories.
First are the operating costs of £1.5 billion, which are predominantly commercial and are covered by TV rights, tickets and sponsorship, although there is an explicit Treasury guarantee on that component. Secondly, there is £2.4 billion in funding from the lottery, London council tax payers and the London Development Agency for the villages essential infrastructure, the transport, the stadiums and the security costs. The third, slightly ambiguous bit includes elements that were to be funded anyway, such as the Lea valley development and the village, which was originally seen as a purely commercial project, but which might not be now, given the Mayors comments. It also includes the £7 billion envisaged for transport, which may or may not be necessary, but which would be desirable. We therefore have a rough range from about £4.5 billion to £12 billion, depending on what we do or do not include.
The big challenge for the organisersthe Government are, of course, centrally involvedis how to ensure that the costs do not explode as they have in other public and private sector projects. I am sure that the Minister is fed up to his eyeballs with all the pessimistic stories about previous public sector projects, but what amuses me is that people always choose the Wembley stadium project as a bad example, when in fact it has been pretty successful compared with many other projects, because the cost overrun is
only 20 per cent, the project is overdue by only a year and almost all the extra costs have been borne by the commercial partner, Multiplex. That is rather a good outcome compared with many other projects, such as the Jubilee line, let alone real horror stories such as the Scottish Assembly or the British Library, which is probably the ultimate disaster case, having cost 10 times the original estimate and been 10 years overdue. Clearly, we are not heading down that road, but a lot of discipline will have to be exercised if we are to get close even to the outcome of the Wembley project, although of course the Government and the organisers cannot allow such an outcome, because the Olympics must be delivered on time.
The central problem is that the organisers must ensure that the project is delivered not only on cost, but on time. Some pretty sophisticated thinking is going into understanding how we can improve on previous public sector experience with big projects by drawing on best practice, as happened in the case of theT5 terminal, which is the model that is now being used. The central problem, however, is that although the Government, the Mayor and the people who will be operationally responsible are thinking about best practice, the people in the construction industry are also learning from experience. People do not get to be the chief executives of big construction companies by being Mother Teresathey are hard-headed people and they have learned the lessons. Companies do not want to be the next Multiplex, so they will put in very high bids for contracts that involve rewards for coming in under cost and penalties for going over costnobody will take the risk of overshooting. When the bids come in, I suspect that we will be shocked by how big they are, and Mr. Higgins has perhaps been preparing us for that.
I want to set out a long series of questions. I hope that the Minister can answer them and that they will trigger discussions among colleagues in the Room. I think that they will form the basis for a process of questioning and public accountability in the months and years ahead. First, can the Minister explain what Mr. Higgins meant? Which infrastructure costs was he talking about? Was he talking out of turn or was his estimate of the cost escalation sensible and prudent?
Secondly, and related to that, when will the KPMG study on the cost of the Olympics be published? What is the Governments estimate of construction cost inflation? We do not need to get such information from an expensive commercial consultant, because it is presumably available to the Bank of England and the Treasury. According to unofficial estimates, cost escalation is about 7 per cent. a year, rather than 3 per cent. a year, but is that correct?
Leading on from that, once the KPMG study has been finalised, who in the Government or the ODA will be responsible for monitoring and modelling the construction industry over the next five to six years? I ask that because an awful lot of work will be going on. I think that the hon. Member for Cities of London and Westminster (Mr. Field) spoke about this in a recent debate. Although the transport projects, the London Gateway project and the bridge are complementary to the games, they are also competing with the games for
construction raw materials and labour. Who will monitor supply and demand in the construction industry? Has anyone got a grip on that? Presumably it is not the Department for Culture, Media and Sport. Is it the Department of Trade and Industry or the former Office of the Deputy Prime Minister? Is anyone in Government or involved with the project considering the overall flow of supply and demand in the construction industry and how that will affect costs as the project rolls forward?
There is a question about new items of cost. There is the possibility, raised by the Mayor, of the compulsory acquisition of landof London buying land that was hitherto assumed to be part of a voluntary, purely commercial exercise. Will that happen? I do not know what the risks are, the current state of play or the Governments assessment of it.
There is a series of questions about how the ODA and the various partners to the Olympics will deal with the pressures that I have described. One question is about how they will deal with issues of design. There is clearly a big difference of strategic focus betweenthe Mayor and Lord Coe. I am not a great fan of the Mayor of London, but I believe that he said the appropriate thing for an elected politician when he said that London
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