Appendix 1
Economy Committee - 21 June 2016
Transcript of Item 10 - London’s Economy
Fiona Twycross AM (Chair): Thank you. That brings us to today’s main item, a discussion about London’s economy.
Before I introduce and welcome our guests for today, I would like to clarify that due to the fact that we are still in the pre-referendum period, we will not be covering issues relating to [the United Kingdom’s membership of the European Union]. We have tried to clarify ways in which we could have a discussion and it has also been clarified that we cannot go into closed session should we stray into matters European. Hopefully, we will still be able to have a meaningful discussion about London’s economy, but please bear with us because we understand that the Electoral Commission has been very clear about its expectations of this Assembly.
I would like to welcome - with that proviso - our guests today. I am delighted to welcome Lord Adebowale, Chair of the London Fairness Commission; Graham Fisher, Chief Executive of Toynbee Hall - thank you for coming - and Richard Brown, Research Director for the Centre for London; Laurie Heselden, Campaigns and Policy Officer for Southern and Eastern Region, Trades Union Congress (SERTUC); Colin Stanbridge, Chief Executive of the London Chamber of Commerce and Industry; Matthew Waite, Senior Economist from the Greater London Authority (GLA); and Clare Ludlow, Director of Innovation from the Timewise Foundation.
To kick-start the session, Matthew is going to give us a short overview presentation on London’s economy, after which we will start a discussion among Members and invited guests.
Matthew Waite (Senior Economist, GLA): My name is Matthew Waite and I was asked to give a presentation on an overview of London’s economy to help inform the work of the Committee going forward. To do that, I will spend a little time outlining the broad economic forces impacting on London’s economy in order to better understand the context in which London’s economy operates. I will then show what this has meant for London’s economy before moving on to some more practical - if you like - issues that face London’s economy as a result of this analysis. Given the time [available], most of this will be necessarily brief, but hopefully I will be able to answer any questions on the thrust of the presentation at the end.1
Looking at where London is today and how it got here, globalisation has been a big - if not the biggest - driving force. By “globalisation”, I primarily mean the increasingly integrated and interconnected nature of the international economy, a state that has arisen in large part by huge increases in trade over time. Trade is important because, at its simplest, it increases the size of the market that businesses can sell into and that is important because, the bigger the market, the more economically viable it is to focus on specialised products or services. As a result of globalisation, there has been a structural change in the UK and world economies with resources moving from less productive uses to more productive uses.
This chart [Slide 2] highlights the structural change seen in London’s economy over the past four decades or so. In the big picture, the bottom line is manufacturing, production and utilities. There was a fall in manufacturing, construction and utilities employment over the last four decades. The top line is professional and businesses services. There has been a big growth in professional and business services.
1 A copy of the presentation is attached at Appendix 2 to these minutes. 1
[Slide 3] As a result of this force towards specialisation, London currently specialises in business services, financial services and some other service sector activities. This chart shows what we call the “index of specialisation”. That is how much employment occurs in London as compared to Great Britain as a whole. If anything is on the red line, it means that London looks like the rest of the country and looks like Great Britain. Anything to the right of that line is an area that London specialises in and where London has more employment than the rest of the country. Anything to the left of that line, London has less employment than the rest of the country. The top right-hand corner shows you that financial and insurance activities are the most specialised area of London’s economy with more employment in London than the rest of the country. Also, specialisations in information and communication, professional services and real estate are other areas of specialisation. The vertical axis tells you the relative size of that sector in London’s economy in terms of its output. Not only is financial and insurance services the most specialised area; it is also the biggest area of London’s economy in terms of its output, accounting for about a fifth of output. Those other three specialisations - information, professional services and real estate - account for about another two-fifths of London’s economy in terms of output. Perhaps what this chart shows, unsurprisingly, is that London is not specialised in relation to the rest of the country in what might be considered more land-intensive uses like agriculture and traditional manufacturing, for instance.
[Slide 4] Some of the specialisations are internationally competitive specialisations, things like air transport, film, TV, music, finance, legal, accounting and advertising, all of which have a significant concentration in London. Some of these internationally competitive business services concentrate very significantly in London with this chart showing you the share of employment in London compared to the rest of the country. In some of these sectors, over 50% - or more than half - of the country’s employment is located in London.
This sectoral specialisation has also to a degree manifested itself in a spatial specialisation or concentration and so particular and many functions of London’s economy tend to locate in particular areas of London, primarily central London. That is because central London offers a number of things that cannot be found in combination in many other places. Central London offers very good access to a large pool of highly skilled labour. It offers good access to complementary inputs, like finance houses putting together merger deals, say, and having access to legal services, audit services, management consultancies, accounting. Many businesses located in central London want to be near one another, as evidenced as many of these surveys, as shown on this slide. [Slide 5]
[Slide 6] One of the reasons businesses are attracted to London is the access to staff that London offers. This map shows the number of people who can get to the particular highlighted ward within 45 minutes by public transport. It shows that at least 2.5 million people could get to the dark-red areas within 45 minutes. That illustrates both the attractiveness of central London to businesses particularly reliant on labour and also the impact of the public transport system on business location decisions. The transport system’s ability to pull a large pool of labour into a relatively small space provides central London businesses with the opportunity to locate close to one another.
[Slide 7] As a result of all these factors, there is a big concentration of employment in the centre of the city. This chart shows the number of employees per square kilometre. This concentration drives significant - what are called - “agglomeration economies”, benefits that extend to the wider economy beyond those benefits that derive to the individual firms themselves. Such agglomeration benefits support economic activity in London by providing firms with access to high-skilled labour, a range of complementary input and output markets and the benefits of spill-over effects such as the speedy diffusion of innovation and knowledge. These economies further underpin London’s international comparative advantage, with research suggesting that the areas in
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which London specialises - financial and business services - are those areas that benefit most from agglomeration economies.
This competition for space at the centre of London puts upward pressure on the price of land and means businesses have to be very productive and competitive to survive. [Slide 8] This chart shows the Office for National Statistics (ONS) measure of productivity across the regions of the UK and shows London is over 30% more productive than the UK average. Globally competitive activities that require a large pool of highly skilled labour and need to feed off one another tend to do business and tend to locate in the centre of the city, while other sectors, specifically those serving more local markets, which therefore need to be located near consumers - things like retail, health, education and local government - tend to have their employment spread much more widely across London.
This international competitiveness means, on many measures, London has a very successful economy. For instance, London exports a significant level of services to the rest of the world. [Slide 9] This chart is drawn from our work on the London Business Survey. It is estimated that London exports around £147 billion and accounts for a significant share of the UK’s service exports. London provides a significant injection to the UK economy as a whole through trade, a situation that is very different at the national level with a trade deficit.
[Slide 10] London’s economy has been growing more quickly than the rest of the country for the past couple of decades or so. This chart shows quarterly growth in London’s gross value added (GVA) over time as compared to the UK as a whole. London is the red line; the UK is the blue line. It shows London has tended to grow more quickly, particularly since the downturn in 2008 and, pre-downturn, London used to be more volatile, growing more quickly but also contracting more than the rest of the country. That is something that we have not seen since the downturn.
[Slide 11] As a result of that faster growth in general, London now accounts for over one-fifth of the UK economy. It has grown from accounting for under 19% of the UK economy in 1997 to over 22% now. It is actually a larger economy than many European countries.
[Slide 12] As the previous slides have shown, London has grown more strongly than the rest of the country since the downturn and this has resulted in London’s unemployment rate falling quite significantly to about 6% now, down to levels seen for quite a period of the last decade.
[Slide 13] Similarly, London’s employment rate has increased to its highest level since this particular measure began in 1992 at over 73% now. That means that over seven in every ten working adults in London are in employment.
From all that, you might be forgiven for thinking that there is no problem with London’s economy, it is internationally competitive, it is growing well, employment is high, unemployment is low and there is not a problem, but not quite, I am afraid.
[Slide 14] London’s attractiveness to people and businesses means that many businesses and people want to locate here. The downside of that is that it causes significant congestion and increases costs. For example, evidence of London’s attractiveness to people can be seen in the population figures. We have seen significant growth in the past few decades in London’s population, which has put significant strain on, for instance, London’s public services like schools and health provision. In addition and in combination with London’s attractiveness to international investment, there is a strong demand for housing in London and housing costs as a result are very high, with a knock-on impact on the costs for other types of land use. London’s 3
attractiveness to businesses has meant strong growth in employment and, as a result, there is a significant strain on London’s transport system, both public and private transport. Congestion also leads to other costs like noise, pollution, pressure on green space and, in some instances, crime.
[Slide 15] Investment in infrastructure is necessary to ensure London’s future growth is achievable and, hopefully, sustainable. Infrastructure investment in a range of areas is required. This chart is taken from the London Infrastructure Plan and gives an indication of the range and scale of infrastructure development both physical and social - including schools and hospitals, for instance - that would be required for London to continue to build upon its economic success.
[Slide 16] Unless such infrastructure investment occurs to ensure the costs of congestion are effectively managed, then London risks losing its international attractiveness and its international competitiveness. If there is insufficient investment in infrastructure and services, London will become less attractive to people as a place to work and live. That will result in businesses finding it more difficult to employ the staff they need. Businesses will ultimately find the costs of operating in London escalate and some will decide that the costs of doing business are too high and they will leave. If that happens, London’s positive agglomeration benefits begin to be eroded. Ultimately, London’s international comparative advantage in a number of areas could be lost, causing a loss of business and jobs. Those jobs, particularly the international-focused ones, will likely be lost to other international locations, not the rest of the UK, because the rest of the UK does not tend to offer the agglomeration benefits that we get in London. That is a major part of the Draft Economic Evidence Base2 that we published recently and the implications for strategies going forward. If we do not manage growth effectively, we risk London’s international competitiveness, which would be a loss to the UK as well as to London.
Beyond that, there are clearly issues around how London’s economy, both at the moment and in the future, works for Londoners. There is much more on this in the Draft Economic Evidence Base and we will continue to work on it, but given the time I would like to focus on one aspect of this, which is housing and its impact on the disposable income of Londoners. [Slide 17] This chart illustrates how housing in London has become more unaffordable over time by showing the house price-to-income ratio over time and the fact that that ratio has risen to its highest level ever.
[Slide 18] This chart - the final chart, you will be pleased to hear - shows the income position of Londoners as compared to the country as a whole. It is worth dwelling on this for a moment because, ultimately, all the GVA figures, productivity and the rest of it are crystallised to a large extent for people in their standard of living and part of that is dependent on their income and what they can achieve with that income. This chart shows how much gross income a household receives - income from earnings, benefits including Housing Benefit, other sources like pensions - and it then shows what that income looks like for an equivalent household. If you move from the far left column, which is gross household income, the next column is equivalised income and it accounts for different household size. What does the income of an average two-couple household look like? The next column takes off taxes - income tax, National Insurance, council tax - from that gross income to get a net income. The final adjustment in the ‘AHC’ (after housing costs) column is to take off housing costs. That takes off rent, mortgage interest payments and some other housing-related costs. Then, on the vertical axis, the information is split by decile and so for each 10% of London households as ranked by income.
What the chart shows is that, once we account for housing costs in London, the lowest four deciles - 40% of those living in London - have a disposable income below that of the rest of the country. At the median - the
2 Available on the GLA’s website here: http://www.london.gov.uk/business-and-economy-publications/draft-economic-evidence- base-2016 4
blue highlighted figures - or the halfway point, there is almost no difference with £398 versus £390. If you accept that there are higher costs of living in London as compared to the rest of the UK, the situation is likely to be worse than the position shown by the figures here with, arguably, the majority of people having less disposable income in London when compared to the rest of the country as a whole. That illustrates the difficulty of living in London for many people and highlights the challenge of making London’s economy work for Londoners.
Clearly, this is related to lots of other issues around making London’s economy work for Londoners. For instance, this relatively low income results in London having relatively higher levels of poverty, particularly child poverty, when compared to the rest of the country. It also, in part at least, results from many people being in low-paid work with pay differentials between London and the rest of the country being lower at the low-paid end than at the high-paid end. Where competition for work - particularly at the low-wage end - is so fierce, Londoners with low skills or low qualifications tend to do worse than their counterparts in the rest of the country.
Unfortunately, I have not time to cover all of these issues or others in this presentation, but your discussions will cover many of these today and in the future. I realise that I have covered quite a lot of ground there and only really scratched the surface in terms of the issues to be addressed with regards to the London economy and I have probably gone over my time. However, hopefully, that gives you some context for how we at least see the forces impacting on London’s economy and will help your discussions, but I am more than happy to answer any questions that you might have now.
Fiona Twycross AM (Chair): Thank you.
The only point I wanted to raise particularly was the point you made about the fall in manufacturing because it was one of the things we looked at as a Committee last year. How much scope is there for reviving manufacturing in London as an area of growth?
Matthew Waite (Senior Economist, GLA): The issue to a great extent comes down to the type of manufacturing you are talking about and its needs. If you go to extremes and you have traditional manufacturing, car manufacturing or something like that, which needs a huge plant, masses of land and things like that, the prospects for that are pretty low because of the cost of land and the need to cover those costs in whatever you are delivering. In terms of new or less traditional manufacturing and certain types of manufacturing, there probably is more scope to do things in London, but a lot of this always comes back to the land costs and how much you would need to earn from that business to be able to pay for the cost of being in London versus somewhere else in the country.
It was quite interesting when we did some work with a firm called Trends Business Research, which looked at different firms over time, to try to get at which types of firms and which sectors were being moved out of London’s economy because of the high costs they were facing. I had expected it to show that manufacturing was the main one that was moving out and it did show that a lot of manufacturing was moving out, but what it also showed, which was quite interesting, was that a lot of manufacturing was moving in as well. There was inward migration to London for manufacturing as well as outward migration. It was outweighed by the other side, but the fact that there were firms still entering London was quite interesting and more encouraging.
Fiona Twycross AM (Chair): Thank you.
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Shaun Bailey AM: Is this reduction in manufacturing in London at a greater pace than the reduction in the UK? Is the UK going one way and London going the other?
Matthew Waite (Senior Economist, GLA): No, the trend is across the country, but it has probably been faster in London and earlier in London than in the rest of the country. London lost a lot of manufacturing very early on compared to the rest of the country and now the rest of the country is losing more manufacturing than London because, in a sense, London has less to lose. Some manufacturing in London has ticked up in the last five years or so, particularly food manufacturing, which has seen quite a big [relative] increase. It is just that other components within that bigger manufacturing sector are still declining and so it does not really come through in the figures that much at the moment.
Shaun Bailey AM: Is it London businesses moving out of London to compete internationally or just to compete with other UK firms or is that irrelevant?
Matthew Waite (Senior Economist, GLA): I am not sure that we have the evidence to show that. The closest we get is the Trends Business Research work, which showed more firms leaving London than entering London and more firms particularly leaving central and inner London to go outside of London. We do not have the detail to know whether that is international competition or competition within the UK.
Shaun Bailey AM: Thank you.
Fiona Twycross AM (Chair): I would like to open the floor up now to our other guests. Just to start off with, I have a more general question on the fact that while on paper London’s economy has seemingly recovered well from the financial crisis, we know that the benefits have not been universal. Are there comments from our panel on what you see as the key challenges going forward? I will start with Lord Adebowale.
Lord Adebowale CBE (Chair, London Fairness Commission): Thank you for inviting me to this meeting. I chaired the London Fairness Commission for a year. Is it worth me just telling you how we went about the work?
Fiona Twycross AM (Chair): Very briefly but I am mindful of the number of people we need to bring in--
Lord Adebowale CBE (Chair, London Fairness Commission): In a nutshell, we talked to Londoners about their perception of fairness rather than just pursuing a narrow debate about poverty, although poverty and the concept of inequality were quite important.
We were quite positive in our approach. London, as has been said, is a very successful city, thriving, busy, all of that. Our work took three phases. We spent a lot of time talking to Londoners. I calculated that we must have talked to over 6,000 over the course of the year and we have had lots of focus groups with specific Londoners, in particular young people, elderly people and people from black and minority ethnic (BAME) groups.
In a nutshell, more than half of Londoners felt that their wages were not a reflection of the work they do. That was particularly true for women more than men. In particular, on the notion of fairness - which I found worrying - the people who found that London was the most unequal and most unfair in terms of their experience and their prospects were the young BAME people, which, given the demographics, we ought to be concerned about. The majority of those polled told us that their wages have not kept up with the increasing 6
costs of living, which was reflected in some of the presentation. There was huge support for a higher minimum wage for London at 70%.
The issue of insufficient affordable housing was a massive issue in every discussion that we had. We now require over £77,000 a year to afford the most basic house and that is not including the deposit. It was a tale of low pay, rising costs and pay inequality. The housing position was particularly interesting in that even people in their 50s who had accommodation, particularly in outer London, were as concerned about the cost of housing and the stability of housing as the young people who were facing the challenge of housing in terms of both the proportion of their income that was being spent on housing and also the instability of that housing. I came across cases where young people were having to move nine or ten times during the course of a year.
Throughout the year, if I were to summarise the perception of London that came across, it was that we have more billionaires in London than virtually any other major city in the world with about 70, which is a wonderful thing, I am sure, but it is a playground for the rich. If you are wealthy, you can do almost anything in this city, which is why they come here. If you have a middle income, a mortgage and maybe a couple of kids, it is a treadmill. Your disposable income, as has been said, is challenged, the costs are rising and you are working hard to keep your head above water. If you are poor and on low wages, then London is a warehouse. We need people to come in and do the things that keep the city afloat, but housing costs, travel costs and childcare costs are massively disproportionate and are heading in the wrong direction.
We made a number of recommendations that relate to the kinds of things that the Mayor could either campaign for or do. One of them looked at this issue of philanthropy and the fact that we do have some very wealthy people in London. If you look at the challenges facing London - housing, access to jobs and careers for young people - we coined a phrase that we are heading towards a “Peabody moment” with reference to George Peabody [19th century American-British philanthropist], who invested the equivalent of £14 million in social housing, which created an income stream and triggered huge investment by others in the creation of social housing. We felt that rather than piecemeal attempts to raise charitable income, we should focus on a single issue - it could be housing; it could be children needing care - and that we raise a substantial sum from a chunk of these very wealthy people and actually solve the problem. We would be starting to eat the elephant piece by piece rather than trying to spread it. That was one of the recommendations.
Another was that the high cost of living in London needs to be addressed head-on, looking at how employers could help with childcare costs, looking at the average costs of letting agents’ fees and charges, and working with banks. We looked at something called the Link consortium to raise awareness about the number of fee- charging cash machines, which again affect poverty coming across, and tackling debt through greater us of community finance measures and building on those.
It is time for a higher minimum wage in London. The London minimum wage should be raised to £9.70 an hour. We did a lot of research into what that figure should be. The Mayor should lobby the Government to set a legally binding London minimum wage.
We looked at protecting homes for Londoners using the Housing Fund to get truly affordable housing because affordability, of course, is defined as 80% of market value, which, frankly, few people in this room could probably afford. We needed something that was truly affordable at 30% of household income rather than 80% of market rent. We had some radical solutions around suspending Right-to-Buy for five years. The point is that these things, whether doable or not, are about recognising that action needs to be taken in the short term, either campaigning or pushing what levers we have to reduce the cost of housing for those people who need it most. We need a fairer deal for renters. The graph that shows people purchasing housing and people 7
renting has crossed, basically. We need to look at longer-term tenancies to provide greater stability, mandatory registration of landlords - which we know is a policy of the current Mayor - and undertaking a review of the enforcement of quality standards. Of course, there is the notion of more homes for London through a dedicated grant funding programme to local authorities to bring empty properties into use - we have found that there are still many - and the introduction of a tax on land in London with planning permission that has not been developed within three years of permission being granted.
We also looked at property tax and we looked at the notion of pay ratios. Again, when people do not feel that they are being treated fairly, it does affect productivity and their willingness to work effectively. One of the things that people repeated time and time again was the distance between what they earned and what the people at the top of the tree earned and the transparency in pay ratios between those at the bottom and those at the top.
I just have a couple more things. “A fairer chance for every young Londoner” was really an ambitious but doable notion that every young Londoner, having reached a certain age, receives a welcome pack from the Mayor that says, “Welcome to London. You are a citizen”, and in that pack there is the key information about what they need and how they can access it. We found many young people just did not know. Not knowing is, basically, quite worrying and quite dangerous.
We have also started to do work on a “fairness index”. We noted the work that [Charles] Booth [British social reformer] had done in the 1800s on the poverty line. We think there should be a “fairness index”, something that all Londoners can see and can measure the impact of policies on the notion of fairness. Although we are living in a prosperous city, we are also living in an unfair one.
Fiona Twycross AM (Chair): Thank you. We will come back to some of those themes later on. Graham [Fisher], if it is all right, we will bring you in a bit later on because you are exploring similar themes. Richard, could you comment on what you see the key challenges are? We will try to keep this bit quite succinct, thanks.
Richard Brown (Research Director, Centre for London): I would just endorse an awful lot of what Lord Adebowale said, but I am not going to repeat it, you will be relieved to hear, because he said it much better.
There are three big challenges, then. One is the challenge of skills. We have a relatively slow-moving skills and training system. We have a population that is changing very quickly. I will check my numbers, but about 58% of Londoners are now educated to degree level or National Vocational Qualification (NVQ) 4 level, university-ish level, compared to 39% ten years ago and compared to 42% across the UK. That is an extremely high-skilled [workforce]. About 60% of the London workforce is up at those higher levels. That is great for attracting those good firms. The challenge is that people at much lower skill levels are squeezed out of what might previously have been seen as medium-level jobs in London. For mid-level administrative jobs, jobs like that, which are already in decline anyway owing to long-term trends, there is a real challenge as to how people can move up the skills ladder and can get the skills they need to get the jobs we create over the next years. They will be professionalised and associate technical roles, particularly in information technology (IT) and other tech industries. It is about trying to get the right skills in London. At the moment we have a nationalised skills system and there are a lot of competing local interests. There is a real role for the GLA in taking more of a lead and making sure that the skill system can be more responsive to London’s future needs because the growth we are getting is not necessarily from traditional growth sectors.
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The second challenge is about space. Rents have been pretty steady in the West End and Canary Wharf. The interesting this is that although rents have been shooting up in areas on the city fringe - areas like Shoreditch, which has seen a 24% rent rise in the past year, and slightly lower levels across the city fringe - the areas that have seen most growth in new start-up types of businesses, some of the engines of the economy, are the areas where rents are pushing up highest.
Fiona Twycross AM (Chair): Rents for commercial space?
Richard Brown (Research Director, Centre for London): Rents for commercial space, yes, sorry. People are moving on to space in other parts of east London. Croydon has a big growth in tech, for example, and it is an area that we just happen to have done some work in. The challenge of maintaining space not just for the successful firms that can compete in the context of high London rents but also for start-ups and scale-up business, again, where a lot of the growth has been coming from in London. How do we preserve space for that?
The challenge on the other side of that is demand for housing and in particular outside the Central Activities Zone, which some London Councils figures suggest has already lost one million square metres of commercial space through permitted development permissions.
Fiona Twycross AM (Chair): In London alone?
Richard Brown (Research Director, Centre for London): In London alone. That was from some research that London Councils did about a year ago. Space is a big challenge.
You mentioned manufacturing. We did some essays recently on technology and there is an interesting way in which new technology is bringing together what were previously separate functions - such as the design studio, the manufacturing shop floor and the retail premises - in some of these more bespoke types of manufacturing premises, particularly in east London. The type of premises that those firms want to move into are quite easily lost at the moment. The challenge of just retaining a mix of different types of commercial space in London is a big one.
The third challenge is congestion. We know that our congestion is up to 2005 levels or pre-Congestion Charge levels - 2003 was the Congestion Charge - and it is forecast to carry on growing. Anecdotally, people suggest that that is driven - sorry, bad pun - partly by “Uberisation” and partly by white vans doing local logistics because of online purchasing, but that is a challenge. It was a big challenge when Ken Livingstone [former Mayor of London] came to power in terms of business competitiveness and it is starting to cause a real problem for London now. Of course, that is mirrored, as Matthew [Waite] said, in public transport.
Those are the three big challenges. The challenge - again, not wishing to repeat what Victor [Lord Adebowale CBE] said - is also particularly for that middle-income group in London. We have talked about them being “endies”. We have tried to coin a new acronym: employed but no disposable income or savings. These are the people who essentially run the city and the people earning between mid £20,000 and mid £40,000. Previously, you would come to London, you would work hard, you would get a foot on the housing ladder and you would make it. These people are not managing to get that foot on the housing ladder. We have talked about them being not so much squeezed but also trapped.
Fiona Twycross AM (Chair): Thank you. We will probably come back to that a bit later on. Thank you.
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Laurie Heselden (Campaigns and Policy Officer, SERTUC): Thanks. I have a quick word. SERTUC is the regional Trades Union Congress (TUC) that is responsible for London. Trade unions have about 800,000 members living and working in London, but we try to represent the interests of all working people in London and their families. We are utterly committed to there being successful businesses because, if there are no successful businesses and public services, then people will not have good jobs.
I completely endorse all of the comments about loss and threats to employment land. As we seek to solve the housing problem, there is a direct threat to employment land and that has been eloquently expressed already.
I have a couple of words about manufacturing. The sector has suffered a lot in London, perhaps not as much as the statistics say. The way that manufacturing has developed in the last few years is that sometimes the ancillary services associated with manufacturing - design, marketing, payroll, etc - have been outsourced and that has hit the number of workers that it looks like the sector actually employs. Certainly at the TUC we have no desire to try to reinvent the past, but because manufacturing jobs tend to be high-value and high-paid and are “sticky” - in the sense that once a manufacturing company has made an investment, it tends to keep doing that for 15 or 20 years - and other types of business can be quite transitory, it is a sector that is worth supporting in London. That is particularly in the sense of spin-offs from universities and other high-value types of stuff. That is worth looking at. It is more important to London’s periphery in terms of employment and is a part of the economy in London that needs and deserves more support.
I have a quick word about labour market resources. All the stats show that employment rates in London have grown and grown. We have fewer people unemployed and we have quite low levels of unemployment. However, the pure sense and meaning of the words ‘full employment’ means that people’s working time is fully employed and their skills are fully employed. We have a high degree of underemployment in London. That is either by people working part-time who would rather work full-time or by people who have higher skill levels working in lower-skilled jobs. It is certainly true that women’s access to the labour market is less complete and, for any BAME person in London, the level of unemployment is twice as high as for a white citizen and they are less likely to be using their skill levels. We are not using all of people’s skills yet.
That feeds through to a lot of stuff in the presentation around the issue of whether the London economy is delivering for all London workers and the quite shameful increase in the level of in-work poverty that we have seen in London.
Fiona Twycross AM (Chair): We are going to come on to that. Shaun [Bailey AM] is going to ask about in-work poverty later on in the morning.
Laurie Heselden (Campaigns and Policy Officer, SERTUC): I have some quick threats, if I can. Successful businesses in London depend on there being successful public services. There are real issues around, for example, the funding of the National Health Service (NHS), which is under immense pressure and the level of gross domestic product (GDP) spent on the NHS is proposed to fall quite radically.
There are issues for businesses coming around the corner with more and more online retail. We have seen the damage on the high street and on jobs. I keep reading about robots and the use of artificial intelligence and the impact that that is going to have on some of the sectors in London that have been quite successful in the past, like law, where some of the roles that are currently done by people will be done by technology in the future and jobs lost.
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The last word - and this is a global threat - is about London’s business reputation. It is often very good, but we see too many instances of media stories and businesses getting a bad reputation. That is coming through with British Home Stores (BHS) and attitudes to greed, for example, and whether the companies that are based in London are seen to be paying their fair share of taxation, and then issues around whether employment standards are respected. That reputational image is very important for London’s businesses.
Fiona Twycross AM (Chair): Thank you.
Clare Ludlow (Director of Innovation, Timewise Foundation): I want to pick up on one point. London, as we heard, has lots of jobs available, but it is the inclusiveness and fairness of the jobs market. Laurie [Heselden] mentioned - and I believe Richard [Brown] did - this idea of ‘in-work poverty’. There are a lot of people working and not earning sufficient to maintain a decent lifestyle in London.
The Timewise Foundation’s point is that it is not necessarily always about skills but that there is something about the structure of the labour market. In fact, if you want or you need to work part-time or with flexible hours, perhaps if you have children or caring responsibilities or a disability or if you are recovering from a long-term health condition, then London is the worst place to find a good-quality part-time or flexible job. We recently commissioned an index: if you want a reasonable wage over £20,000 full-time equivalent (FTE), only one in ten jobs advertised has some sort of part-time or flexible element to it. That means that across the country - and I do not have particular stats for London - about 1.5 million are locked out and trapped in lower-paid jobs and are unable to progress and earn decent wages because the structure of the jobs market does not enable them to do it. That is a point that I will pick up again in more detail and things that we can do about that when we come on to talk about the pressure.
Fiona Twycross AM (Chair): Thank you.
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): The London Chamber of Commerce is the largest business organisation in the capital. We represent all sizes of companies from British Airways and the banks at one end to sole traders at the other. We match the business demographic. Matthew [Waite] will know better than I, but something like 86% of London’s companies employ fewer than ten people or something like that and that is roughly what we are at as an organisation. We hope that our work when we survey our members is representative of business as a whole.
I have just a word on the economy. We do the Capital 500, which is a business survey, with ComRes every quarter. The first quarter of this year showed great increases in confidence in employment, in training and in export orders, but overall confidence in the economy had dropped to record lows. I know I am not allowed to talk about a particular event happening this week, but we believe that that perhaps is one of the reasons that that is the case. It is rather worrying that businesses say, “Things are going very well except we are very pessimistic about the future”.
We have since the election of the new Mayor published Towards a Greater London, which goes into the sectors that we believe are important to creating successful businesses. I could not agree more with Laurie [Heselden] that successful businesses are the key, hopefully, to people’s wealth and wellbeing. At the top of our list is fixing the housing crisis. We have done a lot of work over the last couple of years. It is becoming a real business problem and 48% think insufficient housing is a barrier to business success, ie recruiting the teams we need. We have various individual things that we can go into on that, but one of the areas that does not quite get the attention that it deserves is the private rented sector and we believe that that will play a significant part. We also believe that we need to have an agreement with the new Mayor and the various developers 11
about what “affordable” is and what the level of affordable should be. There is no doubt that developers understand the need for affordable housing. It is a question of what is affordable in terms of the construction costs, etc.
Close the skills gap: one of the areas we feel is a barrier to building 50,000 homes a year is the lack of skills. We did a pipeline survey about a year-and-a-half ago with the help of KPMG and the Manchester Chamber of Commerce, which have developed a way of judging this. Our discovery was that across the skills levels for housing we were 20% down; there was a 20% gap. That makes it almost impossible, we believe, to build those 50,000 houses, even if we can find the land, even if we can find the land, even if we can find the money, because there will not be the people to actually do it.
Fiona Twycross AM (Chair): Kemi [Badenoch AM] is going to ask a bit more about that later.
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): Across the board, in our latest survey, one of the negative bits was the inability of London firms to recruit the right skill level.
We believe the digital infrastructure needs to be improved. One frightening statistic for us in our latest survey on this is that 24% of the 500 businesses we surveyed about the digital infrastructure had no online presence at all, no website, no Twitter account, nothing. They have ignored it. They are surviving, but that seems to be a huge figure. A quarter of London’s businesses, if you were to project that, do not have any online presence. That needs to be addressed because it strikes me that, going forward, any business without an online presence is going to have a huge problem.
Transport has always been in the top three of the worries of business and, we believe, the transport infrastructure across the board. Crossrail 2 is a highlight. We were one of the first organisations to make the case for Crossrail 1. Our first report on that was in 1974 and so it is a huge success for the London Chamber of Commerce that in two years’ time we will have achieved it. We hope that it will take much less time for Crossrail 2. We seem to have gone into a black hole when it comes to airport capacity. It is something else that we agree with the TUC on. Airport capacity is incredibly important. As an organisation we do trade missions and, actually, they are vital to the success of overseas exports.
Finally in the five bits - and it is all on our website if anyone wants to go to the detail of this - is that we believe the new Mayor should keep up the demands on the Government for fiscal devolution. The London Finance Commission, which we took part in with Professor Travers [Professor Tony Travers, Chair, London Finance Commission] and endorsed all its findings, was a great piece of work. It just needs to be put into practice and we need to keep up the pressure on Government. It appears to us and it appears to me personally that after the Scottish referendum and the huge enthusiasm for devolution, it has gone cold, especially in terms of London. We think that perhaps we need to revive the London Finance Commission. We certainly need to keep up the pressure.
Fiona Twycross AM (Chair): Just before I move on to Joanne’s [McCartney AM] question, I have just a follow-up to you, Colin, which is around whether London’s economy is overly dependent on the financial services sector. Is that a valid concern?
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): It is fashionable to say that it is, but it is also one of the great successes of London and one of the reasons the London has done so well has been the growth. There was a time in the mid-1980s when London’s population was declining and
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the economy was down. Then we had the “big bang” and we had the explosion of the financial services and the success of financial services. It is all too easy to say we are over-dependent.
We would love to see greater growth in other areas. In fact, in my previous life, I worked in television and we prided ourselves on the ability to be - at the BBC and ITV - creating the best programmes in the world, but we failed miserably to create any big success stories in terms of business in that. The greatest success story, obviously, is the BBC, one of my former employers, but it strikes me that we talk a lot about things like tech and in my earlier years about media but we have failed to achieve that, whereas in financial services, boy, have we achieved. Therefore, we would counsel that when criticising it and saying it is too large, we should also understand that it is a huge part of the London economy.
Of course, ‘financial services’ includes a whole array of things that people do not think of. People think about bankers and sort of thing, but there are also huge ancillary services, especially in the City itself. There are lots of small companies doing very highly detailed work that help the financial services. The tech benefits from the investment that those banks and those financial services will put into it. You can overdo your criticism of financial services.
Fiona Twycross AM (Chair): How can the new Mayor build on the growth in this area?
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): We have laid out the various areas like making sure that we have the right infrastructure, but skills are the key and increasing the skill levels of London.
We also believe that, whatever happens this week, London will need to bring in people from outside London. It is one of the great strengths of London. Four years ago we were celebrating the huge diversity of the London population at the time of the Olympics, quite rightly, and now somehow the debate seems to have turned around completely on this matter. We believe and I certainly believe that the strength of London comes from the fact that we have this diversity and that we are all immigrants. I am an immigrant. I suspect most of the people in this room are immigrants. That is one of the huge benefits from it, but we need more and we need the skills that those immigrants bring.
We have proposed a ‘London visa’ to be able to bring in the right skill levels from wherever, whether it is Europe or the rest of the world. Skills are the key.
Fiona Twycross AM (Chair): Thank you. That was very helpful.
Joanne McCartney AM: Could I start with Victor [Lord Adebowale CBE] and Graham [Fisher], if I can? I want to talk about how we create a more accessible and inclusive labour market. Victor, in your opening, you talked particularly about young people, particularly young BAME people, having difficulty accessing the employment market and also gender as well. Accepting that, could you just tell us a little bit about what you think the solutions are and particularly what the Mayor could do to make this a more inclusive labour market?
Lord Adebowale CBE (Chair, London Fairness Commission): In that, I agree with my colleague from the business world. It is not a skill shortage; it is access to the means by which you might get the skills and the perception that those routes are closed to you. Time and time again in our discussions, young people, particularly young people from the BAME communities, felt that access to the routes by which they might do that is not available.
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One of the recommendations that we made was that we need to increase the knowledge of what is available to young people and we need to do this en masse. It is perfectly possible to engage young people if you make communication with them in three ways: one, directly through schools; two, in writing with this notion of a letter from the Mayor; and three, using the power of the internet to give them access to a personal package that responds to their needs. That would increase young people making contact with potential employers and matching. We want to use the power of technology to create a network between those young people who want to work - and most of them do but they feel they cannot and do not have access to the routes to the jobs - and the employers who need those young people to learn the skills.
I should say on the notion of ‘fairness’ that I found the notion of ‘unfairness’ - the notion that if you are born into the right family and you have access to the right networks you will get in, as opposed to being born into the wrong family - was very powerful amongst young people. It does have a psychological impact on their ability to see themselves as useful citizens.
Graham Fisher (Chief Executive, Toynbee Hall): Certainly, just to reinforce that, the other thing that came out very strongly was just how dysfunctional the employability system is in London. It is a little bit of a “postcode lottery” in the way that people who are not in education, employment or training can access support. We had a very strong message that there was a big opportunity for the Mayor and the GLA to do something quite strategically different --
Joanne McCartney AM: Is that in terms of careers guidance or is it something different?
Graham Fisher (Chief Executive, Toynbee Hall): It is careers guidance; it is employability support; it is the whole industry, really. It is quite a big industry and often funded through the Department for Work and Pensions or the European Social Fund. It is very confusing. We heard time and time again from young people that it is just fundamentally unfair because trying to find your way in - and this is also true for some adults who perhaps are disadvantaged in the labour market - just does not work. We need to try to find a much simpler system with a common entry point and everybody having the same opportunities, as opposed to having very different opportunities if you are in, say, Tower Hamlets or maybe in Redbridge. We need to try to get that to work better. That was very strong.
Joanne McCartney AM: Clare, I do not want to talk about in-work poverty yet, but you talked a little bit about some of the gender disparities for women. Would you like to expand on that and what the Mayor could do to make sure women in particular can access the labour market?
Clare Ludlow (Director of Innovation, Timewise Foundation): We are talking about access and also progression within the labour market. It is not only just getting in for women with caring responsibilities - or anyone with caring responsibilities - but also progressing.
There is some ground already being done but the new Mayor can, first of all, lead by example. The GLA is an employer. So often we talk about employers being out over there, but in actual fact as an employer the GLA could, first of all, advertise its jobs as flexible or part-time and lead by example.
The second thing the Mayor could do is to use the sphere of influence. City Hall has a supply chain and has influence with a number of businesses. It can use its influence - making a job available as part-time or flexible at the point of hire is the key - to say to businesses, “This is the way to do business. This is good”.
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Timewise is currently running a campaign called Hire Me My Way to tell businesses to do this and to educate businesses on how to advertise and promote jobs that are part-time or flexible. Both the TUC and the British Chamber of Commerce are backing that because they realise that not only is it good for an inclusive and fair labour market, but it is also good for business. It is a win for business in retention, attraction and also increased productivity. Does that answer your question?
Joanne McCartney AM: Does anybody have anything extra to add?
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): It is just about schools. We have just started a schools project, as have many chambers of commerce up and down the land, because there is a growing - and it has been growing for many years - feeling amongst employers, especially small employers, that the education system does not produce the sorts of soft skills that many employers want and, more than that, it does not prepare pupils for the real world of work, what work might be and what going into business might be. It is beholden on businesses to do more. We are trying to get our members to go into schools to talk about the skills needed to get the job and also what work is, what business is, what the great benefits are, what the great fun is and all of those sorts of things, which we do not think is in schools.
To be fair to the schools, when we launched our construction skills report, we had this debate with Nick Boles [MP, Minister of State for Schools]. Schools and education establishments are judged on their exam results. If you are a headmaster/headmistress, it is what you are judged on. We believe that, yes, of course that is vitally important and, as a father with children going through A-levels at the moment, I have been saying over and over again how important it is. However, also, schools should be judged on the long-term outcomes for their pupils and where they end up. If there was some measurement of that that schools were judged by - not in a judgemental sense - which was part of the success of the schools, then the headmaster/headmistress would have a reason to think that getting businesses into schools, talking to businesses and trying to enthuse their pupils would be something that they should be doing on a regular basis.
Joanne McCartney AM: We are going to come on to schools later, but can I just challenge you back, if I can?
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): Yes, of course.
Joanne McCartney AM: We have heard about the difficulties for BAME youngsters getting those opportunities. Does the Chamber of Commerce challenge its members go into, perhaps, schools with a high proportion from BAME communities and to look at that?
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): Yes. With our schools project, that is exactly what we are doing. We are not going to do it in Chiswick. We are going to those areas. When you look at it, some chambers of commerce can go into almost every school in their area, but that would obviously be impossible for the London Chamber of Commerce to do and so we will be targeting those schools in areas where just those sorts of problems exist. That would be my view. We would like to expand it to everywhere if we possibly could, but that is where we would start.
Joanne McCartney AM: Thank you.
Shaun Bailey AM: I would just like to ask a question to Lord Adebowale and Graham Fisher about a comment they made about the fairness of access to the labour market and knowledge of that market. We did
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have a universal system, which was called Connexions, which young people universally hated and did not provide them with anything --
Fiona Twycross AM (Chair): No, they did not. Sorry, I was just disputing that they universally hated it.
Shaun Bailey AM: My knowledge of that is that they universally hated it. Certainly it was deemed not to be effective. That is an opinion, though. What I am asking is: what could the Mayor do differently?
Lord Adebowale CBE (Chair, London Fairness Commission): I could tell you. I would dispute that fact. I was involved with the New Deal programme and then I have been involved with the UK Commission for Employment and Skills. I know a lot about young people’s attitudes to these schemes.
There are four things that the Mayor could do and, indeed, support. The first is that we need a single London portal for young people. A partnership with employers and businesses could create something truly exciting that gives young people tasters and opportunities - internship opportunities as opposed to just knowing and actual job skill opportunities - with mass information to support that portal, which is not something that we have done before in London.
The third thing that the Mayor could do is to support a scheme that marries up the need for skills with the young people who want to work in those industries in a much more structured way. Graham [Fisher] is absolutely right. That is what we found across London: the lack of consistency in that approach.
The fourth is to lead by example. The GLA could do more as an employer to lead by example. If you do those things, we will get young people looking up.
Caroline Russell AM: I have been speaking with a lot of young people - I was speaking with young people last night at Finsbury Park Mosque - about opportunities available to them and, very often, there is a perception that apprenticeships are not going to allow any progression. I am just wondering if anyone can say anything about what the Mayor can do to ensure that the opportunities open to young people are real opportunities where there is a chance to learn and to progress.
Lord Adebowale CBE (Chair, London Fairness Commission): There is some truth, actually, but you do not need many bad experiences of apprenticeships for that to spread and become the norm. If you had a single London portal through which every young person could access information, employers would benefit from being associated with that portal and being associated with the support of the Mayor. You could then have a standards agenda and the apprenticeships being advertised and supported on that portal would need to meet a standard for the wages paid, the numbers of hours of training and progression into careers. That is what is required. Young people are not anti-apprenticeships; they are all for them. What they want is to know that those apprenticeships are of an appropriate quality.
Laurie Heselden (Campaigns and Policy Officer, SERTUC): I have three quick things. Young people talk to other young people. They have brothers and sisters and friends. The first issue is apprenticeship pay. The statistics on the proportion of apprentices who do not even get paid the National Minimum Wage for apprentices are horrendous to the point that the Government was researching it and then stopped publishing it. They talk to each other and so that is a negative factor.
On the quality of apprenticeships, they are increasing and they are incredibly important and we want to support them. However, that needs to be ramped up and up. There is an advert at the moment on the TV 16
about someone getting a degree through an apprenticeship in an engineering firm. That is great, but there is not nearly enough of it. There is a lot - too much - about apprenticeships that are pretty thin on quality. I am not being abusive to people who work in hair salons, for example, but there are a lot of hair and beauty apprenticeships that are not of good enough quality.
Something the Mayor can do is to use the procurement programme to drive high-quality apprenticeships. It is a scandal that for the constructions skills courses that are being taught in London - picking up Colin’s [Stanbridge] point - it is incredibly difficult for people on those courses to get a placement in a construction firm on a site, which they need to do to finish their apprenticeships and get entry into the industry. Clearly, with the amount of building that is going on in London, there is public finance and those kinds of opportunities ought to be ring-fenced and built into the system. If that were to happen, it will start to build that employment progressive uplift escalator that we need in London for Londoners.
Shaun Bailey AM: My question is about in-work poverty. What more could the Mayor do to address in-work poverty? Listening to the brief and coming from where I come from, it seems to be an issue for most Londoners beyond employment. Employment is not impossible to find, but decent employment is now the issue.
Laurie Heselden (Campaigns and Policy Officer, SERTUC): The first thing is to enforce the existing employment standards that live in London. There are far too few inspectors, for example, enforcing the National Minimum Wage and the other issues. They have had their resources cut a lot in the last few years.
The second thing is to use, again, the procurement programme to help to force up good employment standards and decent pay for those lower-wage jobs, if you like.
The London Living Wage is a very important policy programme. The GLA Economics research document this year that went with the last increase in the rate estimated that 30,000 workers have benefited from the Living Wage. However, the number of Londoners who get paid less than the Living Wage is more than 700,000 and the proportion of part-time workers who get paid less than the Living Wage is 50%. There is a huge amount to be done about using the London Living Wage to drive up standards.
At the TUC we have other things that we believe in. We think that there should be much more support for collective bargaining and much more support for sector wages councils, which is the sort of thing that has worked in countries like Australia and Germany to drive up employment standards and pay levels in sectors that unions, frankly, do not organise very well in such as retail, hotels and hospitality.
It is a very important agenda. It is interesting how quickly things seem to have become worse in terms of poverty levels in Britain and in-work poverty. It is a whole-system thing. It is not, “Do this, do that and fix the problem”. It is a matter of turning the whole system around over decades.
We have had a good description today of the London economy. Something that perhaps came out if you look at the right slides is how some of the headline statistics about London’s wealth and the level of productivity come out of the success of the City and inner London. However, if you look at the outer London boroughs, very often they look much more like the rest of Britain. Part of addressing in-work poverty is about making the outer London boroughs equally successful whilst the inner London boroughs, in a sense, look after themselves a bit.
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Shaun Bailey AM: Can I address this same question to Colin with a slight spin? Is there a tension for businesses about supporting that wage and about increasing it?
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): There is no excuse for any business that does not pay the National Minimum Wage. That is something that has to be done.
However, when it comes to the London Living Wage, we have always taken the view that good employers will want to pay their workforces the best they can but that there will be economic difficulties for those specialist smaller companies. It is a bit like when you were talking about apprentices before. It is incredibly difficult for smaller companies to do. If you have four or five people in a business and you take an apprentice, it is incredibly time-consuming. The same is true in terms of the economic viability of those smaller companies.
It does become very confusing for many businesses to say “the National Minimum Wage” and “the London Living Wage”. If we are going to say it, we ought to decide which one we are going to go for because it can be a difficulty.
You would not expect me to say anything else: the success of the businesses will be, hopefully, the successful remuneration for their employees. The more we can do to make businesses more successful, hopefully, will decrease in-work poverty.
Lord Adebowale CBE (Chair, London Fairness Commission): Can I just suggest that that is not necessarily proven by current experience? We did some research on this. We asked Tooley Street Research to look at the London Living Wage. Whilst there were often fears about the effect on the economy, even if you were to increase the London Living Wage, you would decrease poverty - that is a given - and you would increase the amount, even if you took away the in-work benefits associated with that. The story of London currently is that certain companies are doing very well but that has not necessarily led to a decrease in poverty.
The Mayor has to argue for better income for the poor, as well as doing his best, because it is not just a question of income; it is also a question of costs, housing costs being a major contributor to poverty. On this issue, some intervention is required. Simply leaving it to the market has been proven to not work.
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): What would your intervention be? What would you do?
Lord Adebowale CBE (Chair, London Fairness Commission): We have argued in our report for a recalculation of the London Living Wage to take account of the increased costs.
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): Would you make that the National Minimum Wage as well as the London --
Lord Adebowale CBE (Chair, London Fairness Commission): No, there is the Minimum Wage, which is nationally enforced, and we would agree with our colleagues from the unions that that should be enforced. However, we accept that London has higher costs than many areas of the country and, as many employers have acknowledged, there needs to be a London Living Wage. We have a National Minimum Wage, which everybody should pay, but in London, because it is a singular economy, there ought to be a London Living Wage that is higher because we have a particular problem with poverty.
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I should add that one of the issues - and this is particularly the case for young people - is the perception of massive growth between those at the top and those at the bottom, which does affect people’s ability to feel that they are part of London’s success.
Fiona Twycross AM (Chair): We could have a whole separate discussion about the National Minimum Wage versus the London Living Wage, but we will probably park that slightly for a moment. Richard, you have been indicating to come in.
Richard Brown (Research Director, Centre for London): I have just two other points in terms of helping people in work poverty. Transport costs are a big issue. They came up in our “endies” report, Hollow Promise, particularly as people are being moved further from the centre of London. As the outgoing Commissioner for Transport, Peter Hendy, said, the poor people are no longer living around Hackney and Islington; they are probably living a lot further out and so travelling into London is a big cost. We have some of the highest transport costs. There are some schemes and we do at the moment, for example, subsidise travel for older people. Whether that is the right group to be targeting for free travel --
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): Some of us feel that it is the right group!
Richard Brown (Research Director, Centre for London): -- particularly when some of those people are perfectly well-off if they are still living in London, whether one could find some way of reattributing some of that to young people trying to get into jobs and trying to get into --
Lord Adebowale CBE (Chair, London Fairness Commission): I would support that because one of our recommendations is very clear. There are people who are older and quite wealthy who are getting free travel and, actually, people who are very poor and young who are not.
Caroline Russell AM: There is a good reason that benefits everyone for continuing with the free travel for older people, even for those people who are better off. The people who are better off are much more likely, if they do not get that free travel, to just keep using their cars, adding to the congestion and all the other costs to the London economy. I absolutely support free travel or more affordable travel for young people, but it is quite a complicated issue. There are unintended consequences.
Lord Adebowale CBE (Chair, London Fairness Commission): It is not that complicated. They can afford cars, and the people who cannot afford cars cannot afford --
Caroline Russell AM: We do not want them using their cars, and there is a lot of evidence that shows that well-off older people do not use their cars and they do use more public transport.
Fiona Twycross AM (Chair): Yes, and we are straying into another committee’s work. Yes.
Richard Brown (Research Director, Centre for London): Sorry, I am using that more as an example. My bigger point is that with electronic ticketing and with pay-as-you-go, we can do a lot more sensitive approaches, too. We need to because of demand management, anyway, in the transport system, to think how we manage different people using transport at different times of day most effectively. There are only so many new Tube lines we are going to build.
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The other thing we mentioned in our report, which I will just mention briefly, is allowing people to use spare rooms and the Government giving them some tax breaks on Airbnb or renting out. If people do have spare rooms and if they do have spare assets, allowing people to make a little bit of money on the side without penalising them is another thing that should be approached. Beyond that, we are into the tax and benefits system and it is hard for the Mayor to do a great deal there.
Andrew Dismore AM: I just thought on that one that it would be political suicide for anyone to try to take away the over-60s free travel or even means-test it. You would certainly be out in the next election if you tried it.
Can I come back to something that Laurie said before I go into any more detail? You talked about sector wages councils, and presumably also the old days of fair wages resolutions and that sort of thing. That went out in the 1980s. Has that not really been overtaken by events with first of all the National Minimum Wage and also then the argument about a London Living Wage? Is that not effectively a replacement for what was the fair wages resolutions and sector wages councils we used to have? The places you are talking about - sector wages councils - are those grey areas where we have the problem of low pay, which the National Minimum Wage and then the Living Wage is designed to tackle. Hospitality, for example, you talked about. Is it an old concept?
Laurie Heselden (Campaigns and Policy Officer, SERTUC): The old concept from the trade union movement was that we did not want any of this stuff getting in the way. We did not want a National Minimum Wage to start with because we thought we would try to sort out the world by collective bargaining. For modern rights and modern workers in the 21st century, particularly in a modern city like London, we are realising that there are better ways of catching and skinning this bear. Workers who work in retail and workers who work in restaurants, hotels and catering are not going to achieve fair wages at work just by joining a union and organising. By looking at comparative models in other European sites that we think are successful - and increasingly looking at Germany for things being successful - having a floor on a sector for a pay grade has delivered for those workers in those sectors.
I will pick up Colin’s [Stanbridge] point. There will be some companies out there that cannot afford it and so to get to that point introduces churn in the structure of the economy and churn in which businesses function and operate but it puts in a floor for wages and other terms and conditions that will not be provided by the market or by trade unions.
It is quite sophisticated stuff to do. As we have seen with the Living Wage, it is quite possible for a Living Wage employer to pay the Living Wage but to make economies in other ways, like making the worker work harder or having fewer workers, for example. We have seen the implementation of the Chancellor’s National Living Wage coming around the corner, with large companies paying for it by taking away weekend premium and other things like that. Ultimately, having a sector wages council would have to deal with the terms and conditions of employment and not just some sort of flat pay floor. It can be not a 19th-century instrument but a 21st-century instrument for a modern economy.
Andrew Dismore AM: It was a post-war instrument that went out in the 1980s. I am just wondering where the value-added is compared to the London Living Wage for the sort of sectors you are talking about, which at the moment are in large part paying below the London Living Wage.
Laurie Heselden (Campaigns and Policy Officer, SERTUC): We are told, for example, that the GLA’s own research says that employers in London paying the Living Wage are credited. That has given a pay rise to 20
30,000 workers and we are talking about 1.5 million low-paid workers in London. The voluntary Living Wage cannot be the only solution and it is not walking very far up the hill, whereas a sector wage, for example, for retail - and it would have to be phased - could over a period of ten years provide a floor for all of those people working in retail, rather than a few who work for a company that feels it can afford the London Living Wage.
Andrew Dismore AM: What is the difference between doing that and a compulsory London Living Wage?
Laurie Heselden (Campaigns and Policy Officer, SERTUC): The thing about doing it by sector is that it is sensitive to the needs of different sectors. It is arguing that we have had the National Minimum Wage for 15 years and it is time to have a more sophisticated, nuanced version of that where the National Minimum Wage provides a floor, but within certain sectors we can now move towards a National Minimum Wage for each sector. It would be a different one for retail than it might be in another sector like construction.
Andrew Dismore AM: Sorry. I will move on, but I just want to put this to rest. One of the real problems with the old system was enforcement, as it is with the new system, and one of the real problems with the sector wages councils is that a lot of people did not know what they were entitled to and there were certainly different rates. There was a huge chance of different rates with different jobs with really micromanaging the pay scales.
Laurie Heselden (Campaigns and Policy Officer, SERTUC): I am not pretending it would be easy, I am not pretending it would be perfect, but, for example, it would be pretty clear that an employer like Tesco or Sainsbury’s or, indeed, Asda works in a sector. That would be established. You may not get everyone who works in that sector, but you would get the big players and that sets a market rate for the industry.
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): Yes, of course big companies will be able to do it, but introducing more bureaucracy and more difficulty and complexity for smaller companies is going to be a nightmare.
One factor that the Mayor needs to take into consideration is this October the business rate revaluation will happen and London will suffer and it will be those smaller companies that suffer, putting even more pressure on them in terms of expense of London. Yes, we know that for everybody living in London it is an expensive city, but for employers it is also incredibly expensive. There are pressures not just on the workforce and their wages but also on the employers. If you are in the retail sector, you are probably not charging much more than you are charging in Manchester or Liverpool or wherever it is, but your cost of operation is hugely more. As I say, business rates are going to be a big shock to this city next year and it is going to cause a huge amount of hardship for smaller companies especially, and that is going to have its knock-on effect for their workforces and the amount of remuneration that workforces can be paid.
Lord Adebowale CBE (Chair, London Fairness Commission): The fact of the matter is, though, just to be clear: that London is the fourth most expensive city in the world but is only the 13th in terms of highest wages. The gap has to be closed somehow. I am very much involved in a small business myself; I understand the pressures. The current position is not sustainable. The Mayor is going to have to address both the cost of living in London and the income issue because it is not sustainable at the current position.
Fiona Twycross AM (Chair): Can we move on?
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Andrew Dismore AM: I saw in your executive summary - and I do not have the whole thing, Lord Adebowale - that you do not make any mention of temporary workers and the problems they face or zero-hours contracts. I wondered why. Are they not driving us toward unfairness as well?
Lord Adebowale CBE (Chair, London Fairness Commission): I would argue that we certainly talked to and reflected the views of the Londoners who spoke to us, including those in part-time work or on zero-hour contracts. I have to say that the recommendations we made in the report included the views of those people. When they talked to us about the gap between what they were earning and the perception of what the people who ran companies were earning and, in particular, the issue around the London Living Wage was something that they raised. We did not really separate out the views in our report according to whether they were employed on a zero-hours contract or not.
Andrew Dismore AM: It is really a question for Colin: people in part-time work are less likely to be paid the London Living Wage and are more likely to be on low pay and 29% of the workforce are in part-time work. It says here in our brief that they are four times less likely, whichever way you look at it, to be paid the London Living Wage. Also, we have the problems of zero-hours contracts and 96,000 people in London are on zero- hours contracts. I am wondering how you can justify those sorts of things from the employer’s point of view.
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): All good employers want to pay their workforces, to get the best out of them, the best remuneration they can. One of the things we have said about zero-hours contracts is that when they have exclusivity in there, it is unfair. We do not think that is the right way forward. Of course it not only provides the flexibility for the companies themselves - and key factor in terms of success is flexibility in the labour force - but also gives the flexibility to many workers that they want to have. If the idea is that there are companies out there that are exploiting workers because of those and shackling those workers, it is obviously wrong and not defensible. However, just to say that zero-hours contracts are bad things across the board is not the case and there are many people on zero-hours contracts who would say that.
Andrew Dismore AM: I was saying the point is that it is not necessarily one-size-fits-all. When I was working as a tribunal judge, effectively I was on a zero-hours contract, which did not really particularly bother me because it was not my only source of income. My concern is for people at the bottom end of the labour market, particularly in hospitality, for example, who face the insecurity of not knowing where they are.
Exclusivity is gone now anyway, but I can give an example that I gave in the Assembly in the last session. I was in a well-known restaurant chain one morning having breakfast and I saw one of the waiters having a rather difficult conversation with a manager. I heard the manager say, “You can go home now”. This guy had turned up for his shift and it was not busy and so he was sent home about an hour into the shift. That is insecurity. That is not giving people a fair crack of the whip. That is the sort of abuse that can go on with zero-hours contracts.
One of the concerns I have is that people who should be on full-time contracts or proper contracts for part- time working - putting it the other way around - and who have worked for particular employers for a long time simply do not get that security. It must impact on their loyalty to the business, their productivity and their general feeling toward their employer.
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): If you take the catering world, of course there is great volatility in terms of bookings and in terms of the work that is out there. Being able to have the flexibility is important to the success of those companies. You have to balance 22
flexibility with fairness - I absolutely agree - and the abuse of zero-hours contracts is not defensible. Also, there is huge flexibility needed in things like restaurants and in catering. People have to understand that if we are going to have a successful industry - for example, the tourism industry, and catering and restaurants are incredibly important to the success of that sector - you need to have that flexibility. If people are abusing it, then one should not defend it, but what do you want to do? Do you want to micromanage the contracts that people offer?
Andrew Dismore AM: Frankly, I do not buy this in catering. I grew up in the hospitality industry. My grandfather kept a pub. My father and mother kept a small hotel.
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): The bar staff --
Andrew Dismore AM: Let me finish. I ran the bar in the hotel for several years. We did not use zero-hours contracts. We had proper shift patterns and people knew when they were supposed to be coming to work. A lot were working part-time, but we managed. We made a profit. What is the difference now compared to 20 years ago or 30 years ago?
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): I do not know about your father’s pub, sir.
Andrew Dismore AM: It was my grandfather’s pub.
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): You have to have flexibility in there.
Andrew Dismore AM: Let me put the point. The hospitality industry used to work quite well before zero-hours contracts were invented. Zero-hours contracts came in primarily to help the employers make a profit at the expense of the workforce, did they not?
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): No, I do not agree with this. That is a political statement, rather than a factual statement.
Fiona Twycross AM (Chair): We have other people wanting to come in as well and so maybe we could bring other people in. Richard and Clare [Ludlow] have both indicated that they want to come in as well.
Richard Brown (Research Director, Centre for London): Sorry, I hate to butt in. The other angle here is about self-employment, which is a whole different dimension. There are much higher levels of self-employment in London than outside - about 4% or 5% higher levels - and it is very ‘U-shaped’. It goes from freelance journalists, program-makers and coders to people driving delivery lorries across London.
The big challenges, particularly for those at the bottom end of that distribution, are about working on a self-employed zero-hours contract or equivalent. How do we bring them into work-type welfare situations? Is there some role for mutualisation to bring some of those workers together? I know that when I was working on the London 2012 project there was a big push there to try to stop what we talked about as fake subcontracting in the construction industry, where people would be employed and appointed as subcontractors rather than being employed by many contractors. Just looking at that across the board, it is an important angle.
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There is a significant proportion of people for whom self-employment works fantastically, even at the lower end of the pay scale, but there are some who are in a very precarious employment position.
Clare Ludlow (Director of Innovation, Timewise Foundation): Zero-hours is one type of flexible working, as is part-time. Our experience is that for some people zero-hours works fine. We are currently doing some work looking at the care sector - which it is interesting that you did not mention, which heavily relies on zero-hours contracts - and looking at how you bring together the employers’ needs because there is a need to have this flexibility where there are ebbs and flows of work but also to look at the individuals’ needs and also the service users’ needs. If you get all of those three to express their needs and then find the compatible flexibility, the sweet spot, it is not easy, but we are looking at whether it is possible to do that in the care sector in domiciliary care, which is the hard end, which could then be a practice that can then go forward. It is about understanding the benefits of zero-hours contracts for the three parties involved and not completely dismissing it as something that is bad.
Andrew Dismore AM: I just want to probe this issue about flexibility as opposed to predictability. The point I was making very crudely to Colin [Stanbridge] is that a lot of this is down to poor management. A lot of these flows, so-called flexibility, can be predicted in advance. For example - a simple issue - if you are running a pub or restaurant, you know you are going to be busier at the weekend than during the middle of the week and so you are going to need more staff at the weekend than the middle of the week. These flows are predictable. You will have some peaks and troughs but relatively minor peaks and troughs within that predictability of how the business is going to go.
My concern is that the employers are not taking their share of that minor workforce demand change that you are going to get, the minor flexibility, the minor adjustments, as opposed to predicting in advance what their workforce requirements are going to be. This euphemism of “flexibility” is actually a euphemism for bad management and not predicting properly the demands for labour that the business is going to require.
Clare Ludlow (Director of Innovation, Timewise Foundation): Absolutely. We talk about “compatible flexibility” and this idea that it is both a benefit for the business and a benefit for the individual and how you find the sweet spot rather than the risk being carried purely by the employee on the ebbs and flows of the business.
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): I really do not take this bit about, “If the employers were so much better at predicting it”. Boy, there are many businesses - the television business is a very good one - where you cannot tell me how you can predict what a new ITV drama is going to get in terms of its audience and therefore would be able to say, “We can put that amount of money up and employ these sorts of people”. That is rubbish. You cannot do any of that. There are many businesses where predictability is not possible.
Fiona Twycross AM (Chair): We have two very opposing views and we are not going to get agreement between Andrew [Dismore AM] and Colin on this point. We have another two areas of questioning. With apologies for breaking off a very lively discussion, we have Laurie who wanted to come in on this point and then we probably need to draw a line under this part of the meeting.
Laurie Heselden (Campaigns and Policy Officer, SERTUC): I could just describe this as a “third way”, but peace in our time.
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The TUC supports the concept of flexibility. There is a dreadful concept in Europe called ‘flexi-security’, I think, or maybe a more compatible type of version. The exclusivity bit has gone.
The key point is that zero-hours contracts have a bad reputation because so many people are being abused at work when on zero-hours contracts. The key point is that someone knows that they have a minimum number of hours per week or a minimum number of hours over a period of weeks and that gives them security. That is not impossible for a business to manage. It may well be that in the long term that means that we, the consumers, have to pick up the cost of that and, in terms of the London economy working properly, that is valid and worthwhile, I have to say.
We have not yet mentioned - and it is very important in terms of flexibility of work - that that does open up the concept of working from home a lot more, which is incredibly important and relieves some of the issues around the transport system.
The last thing I want to say is that with Universal Credit coming around the corner and real-time pay reporting to Revenue & Customs to get benefits, this unstructured approach to it, “I don’t know many hours I am going to get to work this week, next week or the week after”, is an absolute car crash for the poor, I have to say. If their circumstances are that they are poor already and on zero-hours contracts or similar contracts and Universal Credit comes in, it will be even worse.
Kemi Badenoch AM (Deputy Chair): I would like to go a little bit more in-depth into skills. For what it is worth, Colin [Stanbridge], I do agree with you, but we have had this conversation about zero-hours contracts so often that I honestly do not want to get into it. Broadly, I take a lot of the points you have made, Laurie [Heselden]. It is not suitable for a lot of people.
Fiona Twycross AM (Chair): Can we move on to skills?
Kemi Badenoch AM (Deputy Chair): I am just making that point because I have not said anything in the meeting all day. Some people have used up quite a lot of time.
Moving on to skills, I would like to focus in particular on the hourglass problem and that is the context in which I am asking this question. We have lots of high-skilled - I think the number is 53% - and we have lots of low-skilled and the middle-skilled jobs are disappearing.
We know that the Mayor is setting up a new body called Skills for Londoners to help them get better-quality jobs. What should he do specifically? I am open to everyone on the panel in terms of what you think they should do. Lord Adebowale, you went into quite a lot of detail in the Fairness Commission and so I do remember the points you have made, but to anyone who has not spoken already, what should the Skills for Londoners body be doing? Richard, would you like to start?
Richard Brown (Research Director, Centre for London): As you say, it is a really important issue, particularly if you look at the forecast changes from the appendix to your report. Professional and technical employment is going up by 10% by 2022, administrative and secretarial going down by 12% and then, at the other end, caring and leisure employment going up by 10%. It is an increasingly pinch-waisted hourglass.
Part of the challenge is to see within these growth areas and within the relatively high-skilled types of employment coming in what the pathway is from mid-level roles. What is the type of job offer you can have in a university environment and in a lab environment that can show progression from entry-level, where you get 25
on-the-job training, to getting an apprenticeship and those types of qualifications, to moving up through the organisation? What we are missing is that concept of mobility. That is partly, perhaps, due to employers thinking more laterally about how they can take people in and what they should be setting as qualification requirements at different levels of work. It is partly also about aspiration and people understanding that there is a way into these firms that are not just advertised and not just put through portals. I completely sign up to the idea of a pan-London portal.
Also, there are networks. With some of the work I have done in the past in east London, people just do not know people who are working in tech industries. They are all highly tech-literate, but they do not necessarily know anyone who is working in a coding job and who has broken into that. As soon as you start getting those networks operating and young people advocating to each other, you can start bringing people forward. It is about trying to think of the whole pathway through. Sorry, that was a slightly rambling answer.
Kemi Badenoch AM (Deputy Chair): No, that was not a rambling answer. It is more even getting to the specifics of how you create a network. I speak about technology in lots of schools, usually girls’ schools. Whether or not that makes a difference in terms of what children go on to do, I do not know. I have found that it is in the workplace, as you say, and less to do with, perhaps, formal guidance that people have received.
I am quite concerned that a Skills for Londoners body would make all the mistakes or would not necessarily make mistakes but would redo the same sort of stuff that is already going on. What new things should it be doing? What areas do you think have been neglected, perhaps, that this new body should be addressing? Colin, do you have any points to make?
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): I would go back to schools. You have to start in the schools. There is a responsibility on employers to be there. We are trying to engage with our members to get them to go into schools to talk about the world of work and about the sorts of ways that kids can get jobs in various sectors. The schools themselves have to understand that exams are one thing but also life outcomes are very important.
One small example: we have a painting and decorating company in Islington that has become quite famous now as a training company. I remember that the person who was the driving force for that during one Apprenticeship Week two years ago rang up six schools in Islington and said, “Painting and decorating. We have Dulux. We have all the big employers there. Will you send students?” Every single school said, “No, we are not interested in our kids going into painting and decorating”. She, being a very feisty woman, said, “I want to go and talk to your kids”. She forced her way into all of those schools and the places were jam-packed with kids who seemed to be enthusiastic.
We have to have a different attitude and that depends on schools, but also it depends on businesses wanting to do that. I find increasingly that businesses are aware that schools are one of the great things that they need for success and that it is their responsibility to get in there. Especially in the building and construction areas, there is a feeling that the industry needs to do more and many do. Laing O’Rourke, for example, and Barclay and others do work in that, but more of those companies need to invest in getting into the schools.
Lord Adebowale CBE (Chair, London Fairness Commission): Without wishing to repeat our recommendations, for this particular intervention the Mayor has a very powerful convening role. I very much agree with our colleague from business. The problem that we found was that it was hit-and-miss, particularly from the point of view of young people. Some people knew a lot and could access it; some people did not know anything and could not. Some schools were fully engaged; others were not. The Mayor could up the 26
game significantly by using IT and other forms to convene both young people around what is possible and employers about what they can do so that every young person gets access to the same information and access to employers who need their skills.
Laurie Heselden (Campaigns and Policy Officer, SERTUC): Thanks. I want to say six things and I will say them very quickly in short sentences.
Strategy and foresight and making London fit for the future is absolutely the key. I do not want to be rude. I was a fan - not a passionate fan - of the London Development Agency and its skills role. That has been lacking in the last eight years and we can do more on that agenda.
A great place for people to learn skills - and this is my second thing - is at work. Britain’s employers’ record of training people at work is not brilliant. London is better than some other parts of Britain. It is a great place for people to learn the career progression that Richard [Brown] mentioned, but also we have something like at least 25% of Londoners with basic skill needs in terms of English, maths and IT. Learning those skills at work through an employer is a brilliant way to do it.
The Mayor has the ability to use the GLA’s procurement programme as a demonstrator effect, to be a champion of skills and to prove that it works.
The fourth thing: we have discussed apprenticeships a little bit this morning. The quality of those can be variable. The Mayor can drive that agenda and make apprenticeships more gold-plated in London.
The fifth thing - and this is not unique to London but it is especially important to London - is the teaching or access to English for speakers of other languages (ESOL) courses for people. The funding for ESOL has been cut by 40% since 2010 and that has had a very detrimental effect on a lot of people’s access to the labour market. Supporting ESOL resources in communities is important.
The last point I want to make is back to the outer London boroughs. The London Challenge has been incredibly successful in raising aspirations in London schools. Part of that is about children’s aspirations and thinking they have access to these jobs, but that has been an uneven effect across London. More needs to be done in outer London boroughs talking to young people about what their careers can be and how they can do it because educational achievements are going in the right direction. If they do not think they have access to those quality careers, then it will never work. It is education without an outcome.
Kemi Badenoch AM (Deputy Chair):
Does anyone think that because of this hourglass shape, trying to get low-skilled people into the mid-level jobs is a bigger challenge? It is very difficult to go straight from the lower-skilled into the high-skilled, but having that pinch in the middle means that the transition into better, higher-paid jobs is much more difficult than simply training people up with skills when that area does not have the capacity to absorb them.
Richard Brown (Research Director, Centre for London): I do not have evidence to back up all of this, but the impression I had from the statistics is that there are fewer of those mid-level jobs in London because a lot of them have already been outsourced before. [Businesses that] had clerical roles haveoutsourced them, originally across the UK and now possibly to other continents. There are fewer of those. That number is forecast to decline. You have also the phenomenon in London that I talk about as being “PAs with PhDs”. Even in those jobs you are competing with people with first degrees and quite possibly second degrees, and it 27
is very easy - I have done this myself - to over-specify a role and ask for a degree just as a way of ruling people out when actually someone with decent A-levels or a BTech or whatever the equivalent would be could do the job just as well. The waist of that hourglass is getting narrower and this is a real challenge.
Lord Adebowale CBE (Chair, London Fairness Commission): It is worth drawing attention to the mismatch for BAME young people and that their feeling of unfairness was profound and it is matched in the numbers who get employment, whether they are qualified or not. There is a massive mismatch there which we need to address, given the demographics of London.
Clare Ludlow (Director of Innovation, Timewise Foundation): With the hourglass skills shape of the workforce, a lot of the low-level jobs are part-time and it is really hard to progress not only with your part-time hours or flexible hours but actually without skills. One of the things we are looking into at the moment in the care sector is how we enhance the entry-level lower-level jobs to upskill people in those jobs so that they can do more, be more effective and in due course be paid a bit more so that they are in better-quality jobs.
The second is to follow on from Laurie’s [Heselden] point about the skillset. English and basic skills are massive issues for in-work progression. We have recently run a pilot where people with a certain level of skillset could progress. They were working part-time and they were working under their skills potential but were able, with the opening up of flexible and part-time jobs, to progress into better pay. For people who are working without basic skills or English, there is a glass ceiling above which they cannot progress, whatever hours they want to work by relying on their other skillsets. We really need to think about, as Laurie said, the opportunity and the access when in work to basic skills and English. It is very hard to access them because there is no funding. That is something to consider.
Kemi Badenoch AM (Deputy Chair): Presumably, that is not a problem that can be solved through schooling because people who have already gone through school do not have that English language deficiency and so it is something that has to be targeted outside of the formal education system.
Clare Ludlow (Director of Innovation, Timewise Foundation): Yes.
Kemi Badenoch AM (Deputy Chair): Earlier you talked about the structural problem with jobs. Do you think that there is a trade-off between flexibility and those higher-paid jobs? The lower-skilled jobs are more flexible - hospitality - and we talked about zero-hours contracts and so on. People who are in very highly paid jobs have more control or they can throw money at the problem. If you want to move people from low- to mid-skilled you can use the option for them to have flexibility, but is there a trade-off there and how can a Skills for Londoners organisation tackle that?
Clare Ludlow (Director of Innovation, Timewise Foundation): Yes, there is. We know that 70% of people are working below their skills level because they are trading a higher-quality job for access to flexibility because that is more important to manage whatever their life is.
Yes, the solution is relatively simple and straightforward. The execution is a little bit harder, but the solution is that employers need to advertise -- “We have flexible working set”, so that everyone has the policies in place. A lot of people are doing it. Nine out of ten employers are doing it. It is happening. The evolution to make a fair and inclusive London is that we need to get employers to advertise that flexibility and say they are open to flexibility and part-time at the point of recruitment. If I am working three days a week at the moment and I am ready to progress, I cannot find a job. I take the risk at the interview, saying, “Are you open to it or not?” That depends on who I am up against and the open-mindedness and the education of the employer. If 28
employers can consider the job at the point and say, “Are we open to some flexibility? Yes, we will discuss it”, and put it on the job advert, Londoners who are working part-time and --
Kemi Badenoch AM (Deputy Chair): I have found that bigger companies are much more able to do that than smaller companies. Having worked in a very small company, the opportunity to offer flexibility just was not there. I listen to people talking about, “Let’s have more start-ups, let’s have more incubators”, but those are the sorts of companies that are least likely to be able to offer flexibility.
Clare Ludlow (Director of Innovation, Timewise Foundation): We have spoken to small and medium enterprises (SMEs) and asked them, “Would you consider this candidate? We have a brilliant candidate here for your job but they need to have some flexibility. What are you able to do?” You get the two together to discuss it - as we talked about before, the idea of compatible flexibility - and then it happens. We have had quite a lot of success in getting SMEs [on board]. It might be simple. Sometimes we think flexibility is has to be part-time or it all has to be at home. It might be cropping the hours. If someone has to pick up a kid from nursery and could work from 10.00am until 4.00pm and the SME for a £10-an-hour job, for example, saves £5,000 a year, it is a win-win for everybody. It is thinking about how you can make that job flexible and what flexibility both people need.
Kemi Badenoch AM (Deputy Chair): That job would then count as a lower-paid job and would then impact on the statistics, though, would it not? It is not a criticism. It is just saying that there is a trade-off in every area. What you gain somewhere else you end up losing in another place and there is no win-win.
Clare Ludlow (Director of Innovation, Timewise Foundation): The danger is more in the public sector, where we count on headcount resourcing. The health sector is a real challenge because it does its human resourcing on headcount. If you did contract a job to make it more flexible, the money goes. Therefore, if that person wants to have more hours or a new person wants to come in and work longer hours, the money is not there. That is where there is a challenge.
Kemi Badenoch AM (Deputy Chair): We know that there are loads of jobs and there is a skills shortage. What are the skills that are missing? Colin, I know you mentioned construction and housing.
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): It is just that we did a lot of work in construction skills, given that the housing crisis is one of the biggest problems facing London, and I am sure there are shortages in other areas. We know in tech and we know in IT that there are skills shortages. However, I suspect that if we did some in-depth work in many areas you would come up with skills shortages. The ones that stand out are those construction skills and those IT skills.
One of the problems that perhaps Skills for London needs to look into is the effect that the Apprenticeship Levy is going to have. We have had much conversation with our members and with the Department for Business, Innovation and Skills about what we think is a very unsophisticated way of going about it. We had a meeting with the Chief Civil Servant where we had about ten business talking about the effect of the Apprenticeship Levy, and we had one very large business and one very small business both say, “We are going to have to stop the training we are doing that is tailored to giving the people the skills that they can get the jobs from because the Apprenticeship Levy is going to prevent it”. It would be very interesting to see how that works out.
It could have a bad effect. It seems to take the bit that politicians always like, “We need lots of apprenticeships”. We do not need lots of apprenticeships. What we need is lots of people in jobs, not bloody 29
apprentices. Apprenticeships should only be a means to an end and if you make it difficult to give tailored training in a business, whether a small business or a large business, because it has to meet this apprenticeship standard, it seems to me barmy and it could have a difficult effect.
Kemi Badenoch AM (Deputy Chair): Thank you for that.
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): Sorry. I am going on another rant.
Kemi Badenoch AM (Deputy Chair): No, it is very interesting to hear that. I just have one final question for Laurie on this because I know we have to move on and it is again about this mismatch between having lots of highly-skilled people and also having a skills shortage. It sounds like there are some skills that we have an abundance of that are not required. Can you think of any examples?
Laurie Heselden (Campaigns and Policy Officer, SERTUC): We have two ways of looking at this. You are saying, “Is it a problem with what skills are available?” Clearly, lots of businesses are asking for lots of people with skills. You can say, “Hang on. There are not enough jobs for people doing these things”. We tend to come at it from a jobs side.
In terms of policy issues, there is a car crash coming around the corner for London with teachers, nurses, health professionals, paramedics and that kind of stuff. We have massive, massive shortages. We have recruitment problems. We are bringing people from New Zealand and the rest of it. That is going to crash into the visa system and is going to crash into the issue we are going to talk about on the 23rd of this month and all the rest of it. The key pinch points, I would say, are in construction - I totally agree - teachers, nurses and health professionals.
Kemi Badenoch AM (Deputy Chair): That is one side of it. The other side is whether there are people who are likely to be out of jobs because their skills are in overabundance.
Laurie Heselden (Campaigns and Policy Officer, SERTUC): I made the point earlier on that ultimately the definition of “full employment” is using everyone’s skills to the maximum. We already have a huge proportion of graduates doing jobs that graduates would not have done in the past and it may well be that our employers’ definition of what skills are available and necessary for a job has changed. However, we have an awful lot of people who are working part-time and do not want to or who are self-employed when it is really a lifestyle business and they are on the employment count but they are not fully employed and an awful lot of people just not using their full skills.
Kemi Badenoch AM (Deputy Chair): Thank you.
Caroline Russell AM: Rather than thinking about the workers specifically, how are these SMEs going to have anywhere to function and to practise their businesses? We saw in the original graphs that the real estate in London is a massive contributor to the economy. That is because land values have rocketed and we have a really acute housing crisis that is putting a squeeze on a lot of the - particularly inner London - industrial land and is putting a huge squeeze on businesses.
I am really wondering what thoughts you have for what the Mayor could be doing to ensure that we have work space available for SMEs.
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Richard Brown (Research Director, Centre for London): It is a difficult issue because these are two highly important things that we want. One of the challenges is that we do not have mixed-use right here in planning terms. You see it everywhere in new residential developments; it means that you have a Caffè Nero on the ground floor, essentially, and that is a mixed-use development.
Thinking about some of those industrial areas, there are some interesting examples around Hackney and Fish Island. Declaring an interest, I used to work for the Legacy Development Corporation, but there are some interesting examples there where they have tried to bring together new employment space with living space, and actually retaining many of the older buildings there.
We still have a hangover of thinking that industrial areas are where heavy, noisy, smell, polluting processes happen and so should be as segregated as possible from living space. Thinking more intelligently, if land values are high enough, can you put some residential above larger industrial uses or lighter commercial uses and make both of those work and make the sort of district Londoners like?
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): I was a member of the former Mayor [Boris Johnson MP’s] Outer London Commission and one of the things that we spent a lot of time talking about with the outer London Boroughs was the change in the high street and what councils could do to have that mixed use, bringing together business and residential [development] in the same area. As the high street and the need for large shopping premises declined, then you could mix up the businesses there.
That is something that I hope this new Mayor will take forward because the change in the high street can be something really beneficial to London and to SMEs. Many of these SMEs are going to be a person with a computer or three or four people with a computer and so the digital infrastructure again - under Sir Edward Lister [former Chief of Staff to the Mayor], the digital connectivity group discussed endlessly how we can improve that digital connectivity - is the key to getting SMEs into the high street and into those areas. A more imaginative use of those areas that there are now and the participation of local councils, led by their local boroughs and led by the Mayor, could be something where you could have something truly exciting and change the nature of those places so that the life is there and you have shops and businesses together, [enhanced by] the night-time economy.
Everyone talks about clustering and about bringing these people together. In my experience, certainly in media, clustering is about having the right bars and restaurants. That is what clustering is about there. That is what brings people together. Those high streets can create that not just in media but in other areas and continue a life in those high streets that we all would value.
Caroline Russell AM: Certainly with this business of the high street, and every possible space, we see launderettes even being changed into residential spaces and high street shops being allowed to be turned into residential developments. That means that for those small businesses that are functioning in the high street, if all the buildings are being used to be lived in and everyone is going off to work all day, then there are fewer customers for the businesses that are actually there and trying to continue.
I just wanted to explore a bit more this tension between building more homes - which are desperately needed - and supporting SMEs and whether there are particular things that the Mayor could be doing. I am thinking about examples like Southwark Council, which is preparing a plan for the Old Kent Road that is going to involve about 20,000 new homes. Everyone agrees that we need more homes that people can afford to live in. If that goes ahead, it is going to mean the loss of a lot of industrial-type and business space.
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Does anyone have any thoughts about what the Mayor could be doing to make that not such a dire situation for businesses?
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): The growth of shared workspaces and co-workspaces and those sorts of things is phenomenal in London at the moment. You cannot walk around, especially central London, without discovering that. What it does is that it shows the change in the nature of work. You talked about industrial policies and manufacturing and that sort of thing. A lot of it is not about that. It is about businesses that can survive and grow in those shared workspaces. Trying to get that and the ability to have those workspaces at an affordable level is something the Mayor could well take a lead in.
It is interesting that we have just above our offices now a shared workspace with people like firms of solicitors, who were in Putney and wanted to be in the City but did not want to bother about the rates or the Wi-Fi or the communications, saying, “We will go into a shared workspace”. People are changing the nature of that and that could be a great movement for change in the high streets in outer London boroughs and in London. The Mayor could take a lead in promoting that.
Richard Brown (Research Director, Centre for London): I have just one thought. I have read some things like the Old Kent Road proposal but I do not know the detail.
We have a development system currently in which there are people who develop commercial premises and there are people who build houses and very rarely the twain shall meet. Perhaps the Mayor if he has some landholdings there - or otherwise landowners - could look at asking the market to do something different. At the moment we just take the standardised product, which is this housing block or this commercial block. There are challenges with mixing things. There are challenges in terms of servicing and in terms of lease arrangements. It is all quite complex. We need to be more demanding. We, as public sector clients, need to be more demanding and ask them for what we want. If we can show it can be done, then there is the possibility of getting the best of both worlds with places like Old Kent Road.
Laurie Heselden (Campaigns and Policy Officer, SERTUC): I am not a planning wonk. My deep knowledge of the London Plan is limited. Clearly, land that is designated as being employment land needs to be protected. There has been a widespread review of what public land is available in London that can be sold for housing. Again, partial use of that for business purposes can be protected because we own the land to start with. I completely support the point that Richard made about the mixed use of space in countries like Holland, where you do not realise whether you are on a housing estate or an industrial estate. Again, if we can build things like that in London, then that has a demonstrative effect and people could take that forward.
We will lose a lot of our retail outlets on high streets just because of the way online shopping is going. They will alter to café-type society and the rest of it, and there is an opportunity there because of that churning space to provide more business space on high streets. The buzz that has been around Shoreditch and areas like that being a hub for high-tech, innovative businesses is great, but we should be able to start that kind of buzz in all London boroughs, in a sense. It would be great if there was a scheme in every London borough supported by local authorities, by the private sector and by the Mayor of London, “This is our hub. This is our starting point”.
Then I take on board Colin’s [Stanbridge] point that it is great having premises in which start-ups can start. Ultimately, for the London economy to benefit, those businesses need to grow. Having growth areas so that
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those firms can then go to from their incubators to somewhere bigger is important and that is where an agent like the Mayor can be very active.
Clare Ludlow (Director of Innovation, Timewise Foundation): I have a final point on this idea that future work is much more agile and people are working more effectively. It is not just when you work; it is where you work. In the old days it was that you went off to work and work was there and home was here. However, if we are thinking about locations for work to embed it in, if you are working from home, think about what facilities you need around home, think about what childcare or lunch facilities you need and so think about the unit of work being at home as well as at the workplace on the design structure.
Caroline Russell AM: Thank you. Finally, just picking up on that 24% of businesses that Colin said earlier have no online presence, it is really a huge number of businesses. I am just wondering in what other ways people think that the new Mayor should be supporting SMEs and whether this lack of online ability and skills is something that the Mayor should be addressing.
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): We obviously think it does. There are various voucher schemes. The Government had a voucher scheme. We had a conversation there last week about reintroducing it. He would reintroduce it, which gave them at least some money to do that.
The digital infrastructure of London and broadband speeds and connectivity are the key to their success and it is just not good enough at the moment for all sorts of reasons. It is interesting that three or four years ago, for example, when we asked our members what their main concerns were, it was always crime, transport and skills and they still are major concerns. Coming up from nowhere are housing and broadband speeds because they are so key. You need to get that infrastructure right. There are lots of people talking about connectivity of buildings and new developments and having ratings for those is important. Probably, of that 25%, many of them are never going to embrace it for whatever reason, but the next generation would. It is inconceivable that the new generation of entrepreneurs and business owners will not believe it is key and you have to make sure you have the pipes there that can feed them.
Anecdotally, there are apocryphal stories that we have heard. For example, in Soho, Edit House, is doing fantastic work for Hollywood movies and is hand-carrying the tapes to Hollywood. They do their work and they say to someone, “How would you like to go to Hollywood? This is what you are going to do”. This is just patently bizarre and absurd. Yes, of course, at a cost you can get that sort of productivity, but it is at a huge cost. People now regard it as turning on the tap or flicking the switch. That is something that the Mayor really does need to lead on and try to bring the various areas together to make it better.
Laurie Heselden (Campaigns and Policy Officer, SERTUC): I totally support the issue about broadband. The infrastructure needs to be there. I am very disturbed about the statistic, Colin, of 24%. I do not know if any of those businesses employ young people, but perhaps they should just talk to their employees because they will find that if they are using their skills --
Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): Many of them will be single.
Laurie Heselden (Campaigns and Policy Officer, SERTUC): Understood.
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Colin Stanbridge (Chief Executive, London Chamber of Commerce and Industry): It is interesting that they are not dead, those businesses. These are live businesses that are working. There is something there that you have to ask. Even if you are a florist or a plumber, you would think that you would have a website, would you not, to [promote] your business? Obviously, for some reason, they do not.
Fiona Twycross AM (Chair): Thank you. If we can wrap it up there, that is fantastic. I would like to thank all of our guests for their contributions this morning. It has been a very broad-ranging discussion.
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