Examination of Witnesses (Questions 165-179)
MR KEN
LIVINGSTONE AND
MS MARY
REILLY
1 NOVEMBER 2005
Q165 Chairman: Good morning. This is
the third session in our ongoing examination of preparations for
the 2012 Olympics in London and I would particularly like to welcome
this morning Mayor Ken Livingstone and Mary Reilly, the Chairman
of the London Development Agency. You, I suppose, will play a
key role in what is the biggest task which is delivering facilities
on budget and on time, but can I begin by asking you what are
your long-term ambitions for London as a result of our hosting
the Olympics? What do you want the Olympics to accomplish in terms
of cultural benefits, sporting benefits, transport and regeneration
legacy?
Mr Livingstone: Well, it is important
to bear in mind that, for us, the Olympics is an add-on to a major
regeneration of the Thames Gateway and it has already achieved
its primary goal that led the Bid which is to focus the thinking
of government with the timetable. I suspect we might have saved
three or four years here in the roll-out and development of the
Thames Gateway with new housing and transport and employment opportunities
by having that deadline which will hang over the head of every
government and every mayor up until 2012. I see it as a huge regeneration
project, the first stage opening up the Thames Gateway, which
puts in the transport and then we build on to take the next stage
and the stage beyond that until eventually we are running across
the board as the GLA. Clearly with a development as substantial
as Stratford, you would have wanted more than just homes and offices,
you would have wanted some great cultural or sporting institution
and, therefore, for us, as it was for the Mayor of New York and
the Mayor of Paris, the Games drive forward regeneration of a
neglected area of the city and, in that sense, I do not think
there is any prospect that we would have achieved the decision
to go ahead and extend the East London Line to Croydon, Crystal
Palace and up into Hackney without the Olympics because it was
in the bottom 10 of the priorities of the Strategic Rail Authority.
We would eventually have got the decision to extend the DLR into
the lower Lea Valley and various upgrades, but the timetable of
2012 means we are doing it two or three years ahead, so, for London,
it is already a huge step forward before we get on to all that
will flow from the Games when they come. My business and economics
adviser was reporting yesterday on meetings with all the large
shops in Oxford Street. They already are thinking what they will
do to maximise the benefits that London can gain from it. I know
when I meet Jack McConnell and others further afield from London,
they also are, everyone is, gearing up to, "What can we get
out of this?" With the amount of wealth created from this,
literally most probably no part of the United Kingdom will not
have a firm which is contracted to provide something for these
Games and what we need to do is make sure, and the LDA is doing
a lot of work on this, that we manage the contracting process
so that small- and medium-sized firms are not squeezed out by
contracts that are too large for them to manage and that, I think,
is crucial. You may have seen a very good colour map of the levels
of employment in London about a week ago in The Guardian
which identified that that area around the Games is really the
worst area of unemployment anywhere else in Britain and one of
the worst in Europe, so we want to make sure as well that local
people get the chance to get the jobs that are coming. We have
invited tenders for the construction of the East London Line and
we have gone a stage further than any other tendering process
in Britain in specifying the employment of local labour and building
and a monitoring of that. In the past, a lot of big contracts
have been let with all the right warm words, but it just does
not happen and clearly the work the LDA is doing with the precedent
set by the East London Line tender must now be built in by LOCOG
and the Olympic Delivery Authority over the years to come so that
we get the maximum benefit for the whole of Britain out of this.
Q166 Chairman: You say that the Olympics
have proved a method by which you are able to bring forward your
long-term ambitions for that part of London, but in terms of the
specific benefits which will come from having the Games held in
London, what are the absolute key priorities which you can see
in terms of the long-term benefits?
Mr Livingstone: Well, the long-term
benefit is the community that will be there when the Games have
gone and clearly the sort of hi-tech employment and high-skill,
high-value-added employment that we broadly plan for this area
because there is no point London going down markets to compete
for jobs that have already left this country and will not come
back; you have got to have a setting of a framework that makes
it attractive. The real objective, and we could have had the sort
of problem where this could just have been a rather dull new town
stuck in the East End, but what we aim to do is to make this a
part of London so that people, when they come from the rest of
Britain or the rest of the world, who will wander around the centre
and the West End and Kensington will equally want to see Stratford
which will have a feel of modernity and dynamism. One can look
to parallels with Shanghai and I am going to China in April and
we are taking the model of the Olympics and we are taking a list
of the land that the LDA will have for sale and saying, "Look,
here is a huge development opportunity. You have emerging great
corporations which will be looking for bases in the West. Here
in London is a site so close to the centre and nowhere else in
Europe is there that potential and in a city that welcomes foreigners
and strangers quite uniquely compared with many cities in Europe
where that is not the experience". Therefore, I see the long-term
goal here of locking in the emerging economies of the world, Russia,
China, India and others, to see London as a sort of business and
finance services entrepôt for the whole of western Europe,
if not for the West.
Q167 Paul Farrelly: It is a very
interesting point, Ken, that you make in terms of focusing the
Government on the timetable. I am not a London MP, but I do live
in London, I live in Hackney, and clearly there are major regeneration
routes, and you have mentioned the East London Line. I would think
that lots of communities of London people potentially affected
by the projects in their area would welcome the Olympics, but
would not wish to see the dash for the Olympics trampling over
their rights to proper consultation for the preservation of things
which are important to their local communities, such as certain
items of heritage, and I know there is a live issue in Dalston
at the moment about that. What comment would you make on that
issue and what message would you give out to people in those local
communities?
Mr Livingstone: When the Government
established the Greater London Authority as a new institution,
it built consultation in to a level which is I think, if anything,
excessive. I can spend, and I do feel compelled to spend, so much
of my time consulting that I think we should perhaps shift the
balance back a bit. If ever we eventually build the West London
tram, which Alan Keen knows well, we will have spent about eight
years on consultations and public inquiries before anyone actually
starts work on laying the track for it, so we are not short of
consultation; it is built into everything. The LDA and the Greater
London Authority have good community engagement and you have in
this area the organisation Telco, a combination of trade unions
and churches which have come together, which made major interventions
in the last mayoral election and the one before that and has negotiated
a deal with the LDA and myself and Seb Coe about the way consultation
will take place and the involvement of local communities. Therefore,
I think we will not want for consultation in the years to come,
but we may want for a bit of speedy decision-making as a consequence
of it.
Q168 Adam Price: Turning to the LDA,
it is acting as a proto-ODA until the Bill is passed. Could you
just sketch out for us the role of the LDA pre the establishment
of the Olympic Delivery Authority and then post the establishment
and what responsibilities will remain with the LDA once the ODA
is up and running?
Ms Reilly: Certainly. The remit
of the LDA is primarily to acquire the land which is not already
in public ownership and which is needed for the footprint of the
Olympics and that will continue separately from the ODA. The second
remit that we have got at the moment is that there are contracts
that need to be let before the ODA is in place and they are for
infrastructure contracts which are in the process of being procured
at the moment, so, depending on when the ODA comes into being,
it will either be that the LDA will take on the contracts and
abate them to the ODA or the ODA will complete them. Then a third
remit, which ties in with the other questions and is much more
important and is where we are really focused on, is the benefits
of the Olympics. In the LDA's first corporate plan before the
Olympics were even heard of, this area of London was one of the
six priority areas, so, as the Mayor has outlined, the Olympics
was a catalyst to help regenerate that area faster than I think
we would have been able to do in normal circumstances. We are
very much focused, and have a long-term plan that is focused,
on the benefits to the people of London, particularly in the east
and south-east. Today, for example, we have launched a £9
million fund that is helping people with skills and helping SMEs
in the areas to know how they can win contracts in this whole
process. We will be primarily focused throughout the next 10 years
or so on the employment, the skills, the workforce that is there
and how some of the smaller businesses can benefit from the long-term
legacy, not just up to 2012, but to carry on afterwards.
Q169 Adam Price: As far as anyone
and everyone associated with the Olympics at the moment is concerned,
I think we are still in the honeymoon period, are we not, but
the LDA has been criticised in some quarters for a heavy-handed
approach. Why do you think that is?
Ms Reilly: I think there has been
a lot of vocal comment about this. I think that perhaps it was
difficult before we won the Olympics to have a straight dialogue
with some of the businesses, for example, because they just did
not want to have a dialogue with us and, quite rightly, we forced
them to do so, but we have listened to what they have had to say
and in fact the CEO met with them a couple of weeks ago and, I
think, has outlined a programme. We had a couple of independent
people there, and Michael Cassidy was one of them, to make sure
that the negotiations were fair on both sides and I have a meeting
with some of the businesses on 10 November to listen to them and
hopefully hear that there has been real progress because we want
to negotiate with these businesses and the people in the areas
so that they benefit overall from this Olympics process.
Q170 Rosemary McKenna: All of us,
as individual MPs in constituencies, are working hard with our
local authorities to make sure that constituencies throughout
the rest of the country benefit as much as London, or probably
not as much, but to make sure that we take advantage, but we are
also all London taxpayers, so we have an interest in that as well.
Last week at our session, the Secretary of State said that there
would be no limit to the potential liability of London council
taxpayers in the event of cost overruns. Do you believe, in principle,
that funding provided by London council taxpayers should be capped?
Mr Livingstone: Well, I have done
a deal with the Government and I intend to stick to the letter
of that deal. When we did that deal, it was a specific sum on
a Band D property of 38 pence a week, £20 a year for 10 years
and a two-year overrun and in the written agreement it says that
if this goes wrong, we will have to come back and review it. Clearly
at that stage the Government will have an interest in maximising
the income from Londoners and the Mayor, whoever it is, will have
an interest in minimising it and I would expect robust debate.
At the end of the day, you also have to bear in mind that, contrary
to what many of my enemies say, I do not rule like some dictator
at City Hall, but the Assembly has to agree the level of precept
on the boroughs. You can very well have a robust debate with the
Mayor and then find that a two-thirds majority of the Assembly
will actually say, "We think the Mayor has got it wrong".
Clearly Tessa cannot give you a binding guarantee that there will
not be something go wrong, but when Tessa and Seb, myself and
the others on the Olympic Board are taking it through, we are
focusing on trying to deliver it on time and to budget and we
will deal with it if there is a problem. There was a rumour back
in the summer that a nuclear reactor had been buried on the site,
and this was raised by my dear friend Bob Blackman on the London
Assembly with great glee. It turns out that they had a small academic
research nuclear reactor, about this size, and it got taken away
when the university closed. Anyway if something totally unforeseen
happened, we would deal with it, but then I see no great point
in myself and the Government having a long-running row about what
will happen when things go wrong rather than focusing on getting
it right.
Q171 Rosemary McKenna: So is it simply
a suggestion of yours that one alternative would be to use the
VAT and other tax receipts from the Games clearly to meet the
deficit?
Mr Livingstone: In these robust
discussions, I, certainly if I was still there and I suspect that,
if I was not, my successor also equally, would want to focus on
the question of VAT. Bear in mind that we will be acquiring a
large amount of land and some of it will be sold on immediately
to developers who will take some of these projects forward, and
some of the rest of it will wait until after the Games and will
continue to be sold, so we have no way of knowing now what in
eight or nine years' time after the Games have gone will be the
value then of the land we acquire now as opposed to the costs
of the remediation we put in, and I should imagine the Government
will focus on that as well if land values have accelerated beyond
expectations.
Q172 Rosemary McKenna: So would you
work with the DCMS then to put your case very forcibly with the
Treasury to suggest that there were areas where tax receipts could
be used?
Mr Livingstone: My relationship
with the Government is that 60% of my budget is a grant from government,
30% is fares and the council tax is 7%. Therefore, although the
inevitable focus is on this row about the level of council tax,
the most important discussions I have each year are about the
totality of that 60%. That varies by 1% or 2% and that swamps
any change that may be made in the council tax and I have to say
that when I was elected Mayor, the government grant to the Greater
London Authority was £2.5 billion and now it is £4 billion.
We have not had a government that is easy to get money out of,
but it has not been averse to responding to a reasoned case.
Q173 Rosemary McKenna: And probably
in the run-up to the Olympics, a lot more will be spent and it
will be spent for the benefit of everyone and hopefully the contribution
from the Government will be continued and you will be able to
capitalise on that.
Mr Livingstone: There is a big
change in this debate about London vis-a"-vis the rest of
the country. When I was elected I inherited a long-running row
and this was a local version of Mrs Thatcher's row with Europe
about, "We want our money back", in which council leaders
in London and London MPs said, "We're subsidising the rest
of the country and we want our money back", and, oddly enough,
given that the country has got the majority of the votes, this
seemed to make little progress. What we now demonstrate is that
if you invest in London, the Government gets a greater return
which, through tax revenues and job creation, benefits the whole
country. London will always make a subvention to the rest of the
country. We will argue about how much it should be, but it would
be unrealistic because if you saw the Financial Times analysis
last week, of the cities and regions of Europe, London is the
most productive by a margin of 20% over Brussels and by a margin
of 50% over the average. Inevitably, the richest place in Europe
has to subsidise the rest of the country, although we argue about
paying. I think the inability of my office to have a redistribution
of wealth from rich to poor Londoners means that we do not tackle
the sort of problems we have got in the East End as imaginatively
as we otherwise would. I would rather I had more mechanisms for
redistributing wealth in London than argue about what is a fair
share of London's economic capacity that goes into the nation.
Q174 Mr Evans: I declare an interest
as a London council taxpayer, as no doubt some of us are.
Mr Livingstone: You are safe in
my hands!
Q175 Mr Evans: Is it as bad as that!
Now I know how David Blunkett feels! Anyway, I am just wondering,
Mr Mayor, why it is, if we had not had the Dome, which was a complete
financial disaster, if we had not had the Scottish Parliament
building, which started off at £50 million and ended up at
£500 million, and the Welsh Assembly building as well, which
was very, very expensive with huge overruns, and we were told
by the Secretary of State last week that these were several huge
projects that were going to go on at the same time to build the
infrastructure for the Olympic Games, if it was not for all that,
then maybe I would not have the deep concern I have got now, that
the guarantee should be upfront to protect the London taxpayer.
I am not so optimistic as you. After it is all over, and we all
want to make sure that the Games are a success, but once the final
curtain comes down and we have had the firework display and everybody
feels good, are we still going to be feeling good in 15 or 20
years' time if we are still paying off the bill and that is why
I ask you, is it not right that the London council taxpayers are
protected now and that there is a cap put on them right from the
very beginning which would help perhaps to focus the attention
of those who are putting contracts in and running the show that
it should be on time and at cost?
Mr Livingstone: Well, I agree
with you, that the record on the Dome and on the Wembley Stadium
and Picketts Lock does not inspire confidence and they were a
big road block to persuading the majority of the IOC to award
us the Games. We did that and one of the things I was able to
explain to the IOC at great length when they came was that the
projects I had been responsible for had all been delivered on
time and to budget. The Congestion Charge was on time and to budget,
as were the major roadwork schemes that we have done around London,
and you will be glad to know that the extension of the Docklands
Light Rail to City Airport will open on time and to budget this
December. There is no reason why big projects have to fail. Some
fail in the private sector and some in the public sector. The
important thing is that you appoint world-class project managers
and, therefore, I have to say that this is why I employ so many
people who are not British, given that a long period of under-investment,
both public and private, in Britain in the 1970s, 1980s and 1990s
did not create the cadre of project managers domestically that
we have the right to expect. I said quite clearly to Seb and to
Tessa that I do not want to see anyone applying for the job of
Chief Executive of the ODA who has not been a major player in
delivering an Olympics and delivering it well and, no, we are
not going to entrust that job to some bright, young spark who
is setting out to prove themselves, but we will only consider
someone who has demonstrated the ability to deliver public and
private sector projects on time. That is the key and then keep
the civil servants off their back, and that is the other key,
let them get on with it, and I think there is a complete consensus
on the Olympic Board that it is not going to be micro-managed
in Whitehall.
Q176 Mr Evans: Well, that is reassuring.
Having said that, you mentioned the Congestion Charge and that
started off as a fiver and now people are paying £8 every
time they enter London, so there is a huge percentage increase
on that.
Mr Livingstone: That was a deliberate
political decision that I took. It was not a project overrun.
I just wished to discourage more people from driving in and it
worked.
Q177 Mr Evans: That does not surprise
me, but the fact is that if these people have the choice on the
Congestion Charge, in the main they will not, and they are London
council taxpayers. I am just wondering, did you at any stage moot
the fact that there should be a ceiling put on it because there
is already a margin there for a two-year overrun, so even though
people are giving assurances at the moment that there is no prospect
of it overrunning and indeed they intend to make a profit and
you have still built in a two-year overrun, what guarantees have
we got that that is not going to be extended or indeed the amount
of money that council taxpayers are going to pay is not going
to increase from the £20 average per council taxpayer?
Mr Livingstone: There are two
separate financial packages. There is the London Organising Committee
of the Games which will run and manage the Games and they will
get their income not from the Government or from me, but from
the merchandising, the ticket sales, the franchising, the TV rights
and so on, and they may make a substantial profit and we have
agreed about how that is split between Britain, the IOC and so
on. Then you have the Development Agency and some of what it is
going to do clearly, building stadia, is specifically to do with
the Olympics, but the underlying work of acquiring the land, decontaminating
the soil, undergrounding power lines, putting in the rail extension,
all this would have been done in order to open up the Thames Gateway,
and the Deputy Prime Minister has been arguing and, I think, Michael
Heseltine before him for a decade about the need to open it up.
It is really a process which began with Canary Wharf under Mrs
Thatcher. In the same way as with Athens in that they did not
have to put all the phases in, but they took the Games as an opportunity
to modernise their city from being a really rather difficult city
to manage to one that is now a clear 21st century city and a lot
of these projects have nothing to do with the Games, but they
would underlay what we were doing anyhow. I would simply point
out that as you get the contracting regime right, and quite clearly
both the public and private sector have often failed in this in
the past, you can deliver these projects on time and to budget
and that is what we are all focused on because I know I need to
get re-elected and if it is going wrong, I am not going to be,
and that is one of the benefits of the mayoral system, that there
is a clear line of accountability.
Q178 Mr Sanders: In relation to the
London Development Agency, is there not a danger that other areas
of London and other sports facilities in the capital will be significantly
neglected during the Olympic preparations?
Mr Livingstone: Well, you only
have to look at what we are doing at Crystal Palace where the
local borough council was considering closing this, and myself
and the LDA stepped in to take it over and, running in parallel
with the Olympic Games, although most likely the sports thing
will probably coincide with the Games and the wider park development
may take 10 years beyond that, we are concentrating in south London
on a major sub-regional sport and recreational facility. Both
in London and throughout the rest of the country, municipal and
private sport complexes have the chance to use the Games to upgrade
themselves. There will be 202 teams who will come to Britain,
all over Britain, in the weeks and months leading up to the Olympics
and they need to be based somewhere where they can train. This
will primarily be very much the work locally, I suspect, in brokering
deals. Whoever is lucky enough to get the teams of the great and
wealthy nations is clearly going to be able to upgrade their local
facilities on the back of the needs of those visiting teams.
Q179 Mr Sanders: But the LDA intends
to put aside £50 million per annum from 2008-09 for five
years to fund its possible £250 million contribution if costs
overrun. Now, does this mean that for each of those five years
you are effectively cutting £50 million from your usual budget
and, if so, where will those cuts be made?
Mr Livingstone: Mary will deal
with the detailed point, but the philosophy here is that the worst
poverty in London, perhaps the worst in Britain, is in the area
in which Stratford sits. The poorest council in Britain is to
the east, the second poorest to the north and what used to be
the third poorest to the south, although with Canary Wharf it
has moved up a little bit. Therefore, for the LDA this was always
our target long before and, I have to say, many people did not
assume we would win the Olympics until quite recently, long before
the Olympics was even a serious bid backed up by government. That
was the focus where the bulk of our investment was concentrated
because there is the land potential. You really cannot come along
and spend these sorts of sums of money in Croydon unless you are
going to flatten several thousand homes and start for a PFI. Here
are the sites and here is where investment will come and in London
I think people accept the concept that they will travel across
the city to work and they will move home from one side of the
city to the other. They are not very localised down in their boroughs
and they will take the opportunity to come. The East London Line,
when it is built, means that for people across south London, for
whom getting in is on an appallingly underinvestment-suffering
overland rail system, will have a good, modern, high-speed rail
link into the East End where these jobs and homes are coming,
so we see London as a total whole.
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