Champions of borrowing; the issue of UK borrowing habits is analysed in the light of the soaring bankruptcy figures and the news that Abbey are to offer people mortgages at five times one’s earnings. Hamish McRae (pictured right) expects an interest rate rise of 0.25 per cent and believes that if that is not successful in curbing our borrowing habits, there will be a further quarter per cent rise. McRae quotes two facts about British borrowing. One is that the household debt - mortgages, credit cards etc - is greater than the entire national debt of Africa and Latin America combined. The other is that Britons owe more on their credit cards than the rest of Europe combined. Larry Elliott from the Guardian quotes GFC Economics as saying that the housing market is “spinning out of control” and there is no evidence that the quarter per cent increase in interest rates in August has had any effect. He also quotes John Hawksworth of PricewaterhouseCoopers (see below) who claims that property is currently over-valued by 15 per cent. Independent on Sunday 05.11.06, Guardian 06.11.06
There is 1-in-3 chance that house prices will subside by 2010; PricewaterhouseCoopers have warned that there is the prospect of a fall in house prices with John Hawksworth (pictured left), their chief economist, saying that there is a one-in-three chance that prices in 2010 will be lower than they are today. He says, “The message is: be very aware of how risky housing is [as an investment] over the short period. While housing is a risky asset over a few years, it is less so over the longer term because some of the ups and downs will even out”. The warning comes as Abbey has confirmed that it is offering borrowers loans of five times their salary and Hay Group claim that average mortgage repayments are more than half of take-home pay. Further information - Click here Daily Telegraph 02.11.06
Immigrants ‘help the economy grow by three per cent’; the National Institute of Economic and Social Research (NIESR) claims in a new report that large flows of migrant workers in recent years have provided a significant boost to the UK economy. They estimate that over the course of the last eight years immigration has helped the economy grow by three per cent, and in 2004-5 when the EU opened its borders, they contributed one per cent to growth of 5.3 per cent. Ultimately five per cent of the working population has come to the UK since 1997 - a third of those since 2004 - and new migrants make up 4.5 per cent of the national wage bill. The NIESR state that immigration is providing “substantial benefits to the Treasury” as many of the new workers are young adults and have been educated abroad, thus contributing to tax revenues rather than receiving benefits. The benefit is even greater if the migrants do not stay into old age. However the influx has probably pushed up unemployment by 0.3 per cent. More than six out of every ten migrants from “New Europe” are in basic-level jobs. Further information - Click here Guardian 27.10.06, Independent 27.10.06
Sir Nicholas Stern, head of the government’s economic service, was commissioned by Gordon Brown, the Chancellor of the Exchequer, to examine the economics of climate change. His 700-page report, which was published on 30th October, has led to a fierce debate in the media with most commentators agreeing with his findings. There have been some dissenting voices notably Melanie Philips in the Daily Mail and Lord Lawson (see below).
You can quarrel with figures but not with the call to action; the Economist says that there may well be grounds for picking holes in some of Sir Nicholas Stern’s figures, but there is no reason for ignoring his recommendations. The Chancellor commissioned the Stern Report because he wanted solid material to counter those who accept that global warming is happening, but believe mitigating it is too expensive to be worthwhile – a common view in the US. Sir Nicholas Stern has sought to assess the future costs of climate change - for example drought in Africa, floods in Europe, hurricanes in the Americas, rising sea levels around the world - and has set them against the costs of cutting fossil-fuel usage enough to stabilise carbon dioxide concentrations in the atmosphere. His findings are fairly uncontroversial. The costs of switching should be minimal due to a rise in fossil-fuel prices and a fall in alternative energy prices. Stern states that the world can achieve this at a cost of one per cent of GDP by 2050 and many other economists agree. However Stern dissents from the general view on the costs of climate change itself. Until now, most economists have argued that the costs would be between zero (where the benefits of warming up the cold countries balances out the costs) and three per cent of global output over the next 100 years. Stern however argues that this figure could be 5-20 per cent over the next century or two. Stern has received support from four Nobel prize-winners but has been criticised for accepting pessimistic research and ignoring conservative work. The Economist says that although he may well err on the gloomy side that does not invalidate his central perception that governments should not plan on the basis of the likeliest outcome, but on the risk of something catastrophic such as the melting of the Greenland ice sheet. Stern justifies that just as nations use taxpayers’ money to pay for standing armies in case a rival power invades, so the world should invest a small proportion of its resources to avert the risk of ruining the planet. The Economist 04.11.06
Lawson dismisses Stern Report; Lord Lawson (pictured left), the former Chancellor, has launched a stinging attack on environmentalists likening them to Islamic fundamentalists. He told the Centre for Policy Studies that “It could not be a worse time to abandon our own traditions of reason and tolerance and to embrace instead the irrationality and intolerance of ecofundamentalism, where reasoned questioning of its mantras is regarded as a form of blasphemy”. He said that there remained too many uncertainties about global warming to impose knee-jerk carbon taxes on consumers and businesses. He states that “the voluminous Stern Report adds disappointingly little to what was conventional wisdom” and Sir Nicholas Stern is guilty of “scaremongering and regrettable arrogance and intolerance”. Daily Telegraph 02.11.06, Daily Mail 30.10.06
The world needs to respond; the FT looks at the chances of the Stern Report influencing world opinion. It says the report will serve a valuable purpose if it can convince the US, China and India - the three large economies that lie outside the Kyoto protocol on climate change - that growth is compatible with international action to curb carbon emissions. Whilst Sir Nicholas Stern (pictured right) argues that mitigation costs can be kept within one per cent of world GDP, climate change will take a very uneven toll on the nations of the world, and the poorer developing countries will suffer the most. One reason why the Bush Administration remains infuriatingly relaxed about climate change is that the US mainland is likely to be relatively untouched by rising sea levels. The large developing countries may concede the problem, but they have more immediate priorities such as poverty. However, although the industrialised countries must take a lead in the battle against climate change, the developing countries must follow. Tony Blair has pointed out that if Britain were to cease all of its emissions overnight, the beneficial effect for the planet would be wiped out just by the growth in China’s emissions in two years. The world needs to respond therefore in a variety of ways such as via a mix of taxes or the trading of permits, which was pioneered by the EU but is currently in disarray. The Kyoto protocol needs to be prolonged past 2012 so that investors have a long-term framework if they are to invest in low-carbon capital equipment and furthermore, the Kyoto signatories need to secure firm commitments from big polluters outside the protocol. Financial Times 31.10.06
UK loses ground in Research and Development; the latest issue of the Department of Trade & Industry’s (DTI) Research and Development (R&D) Scorecard shows that Britain is falling back in the global race to raise rates of research and development. The level of R&D spending as a proportion of sales has consistently declined in the UK over the past four years, casting doubts on the effectiveness of tax incentives. Businesses invested 1.8 per cent of their total sales in R&D this year, down from two per cent in 2005 and 2.5 per cent in 2003. This is less than France, Germany, Japan and the US. The US saw R&D investment worth 4.4 per cent of total sales in the past year. The DTI said that levels of R&D were healthy in some sectors such as pharmaceuticals and software, but conceded that they were lower than rival countries in the hardware, cars and chemical sectors. It also argued that the figures looked less because Britain had more firms in sectors that did not need much R&D spending such as banking, oil and gas. Only three UK firms - GlaxoSmithKline, AstraZeneca and BAE Systems - made the ranking of the world’s biggest companies by R&D spending. Further information - Click here Times 30.10.06
Helping social enterprises to expand; the FT looks at the development of Green-works, a social enterprise set up to recycle redundant office furniture. Having won the contract to deal with HSBC’s surplus furniture when 20 central London offices relocated to the new HQ in Canary Wharf, Green-works has subsequently won contracts with Barclays and the Royal Bank of Scotland. Its turnover has gone from £20,000 in 2002 to £2m in 2005. The employees, many of whom are homeless or long-term unemployed, refurbish the furniture for onward sale at a low cost to voluntary organisations. Ed Miliband (pictured right), the minister responsible for social enterprise, describes it as “transforming the way that business is done” whilst David Cameron is equally enthusiastic. The government sees social enterprise as playing a key role in healthcare. However the sector, which is gaining growing interest from private sector sponsors, faces two questions - what exactly is a social enterprise and how can social enterprises grow to meet the expectations being placed on them? One strand is the social entrepreneurs, such as Ashoka, who see themselves as agents of change. The other strand, epitomized by companies such as Café Direct, the Eden Project, and Jamie Oliver’s Fifteen, see themselves using private sector methods to achieve a social purpose and the recycling of profits back into the business rather than into shareholders pockets. Further information - Click here for Green-works, and here for CAN Times 26.10.06
Enterprise hubs in Thames Gateway; the government intends to set up four enterprise hubs in the Thames Gateway in a bid to foster innovation alongside the planned housing growth. The hubs, which will be created by the three regional development agencies, will include incubator centres, related skills academies and supply chain programmes. The hubs will be established as part of the drive to create 180,000 jobs in the Gateway area. Networks are proposed for six of the areas’ business sectors: financial and business services, creative industries, environmental technologies and services, advanced manufacturing, transport, and sustainable construction. The four main locations where the majority of job growth is expected are Canary Wharf, the Gateway port cluster of Tilbury, Purfleet, Thamesport and Sheppey; Ebbsfleet; and Stratford City. Further information - Click here Regeneration 27.10.06
Internet Christmas shopping to hit £7bn record; the Interactive Media in Retail Group (IMRG) are predicting that internet shopping will rise by 40 per cent to a record £7bn in the ten weeks leading up to Christmas. They say that it is being driven by the big investment in online services by big retailers such as Tesco and Argos, as well as shoppers’ growing willingness to buy online items such as clothes and furniture that they would normally have bought on the high street. James Roper of IMRG says that Christmas internet sales have more than doubled since 2004 when Britons spent £3.3bn. IMRG estimates that internet sales account for about ten per cent of all UK retail spending, although some sectors are more popular than others; a fifth of all electrical product sales are now done through the Internet. Further information - Click here Financial Times 04.11.06
UK population goes up by 500 a day; the UK population increased at a rate of 500 a day during 2005 as the number of new immigrants outpaced the number of those leaving the country. According to the Office for National Statistics (ONS) 565,000 people arrived to live in Britain in 2005 of which the main tranche came from the new Commonwealth. There were 49,000 from Poland. At the same time 380,000 people left the UK with 20 per cent going to Australia, making it the favourite destination for emigration, followed by France and Spain. One trend is that the number of migrants coming from the new Commonwealth fell by 26,000 to 97,000 last year whilst there was a 15,000 rise in the numbers of A8 citizens (the new member states of the EU) to 64,000. Economists say that the number of migrant workers is likely to be much bigger than that estimated by the ONS as they do not include unregistered workers from A8 countries, visitors who decide to stay, and the self-employed. The availability of large numbers of immigrants has helped fill skills shortages and restricted wage inflation during a period of relatively low unemployment. It also helps to explain why employment and joblessness have been rising at the same time. However concern about local services has prompted the government to place restrictions on Bulgarian and Romanian workers when they join the EU on 1st January 2007. Further information - Click here Financial Times 03.11.06
Government shrugs off business worries on Companies Bill; the government has refused to heed demands from business that it should water down a controversial new requirement to publish dealings with suppliers. At a meeting with disgruntled business groups the Rt. Hon. Margaret Hodge MBE MP (pictured left), the industry minister, promised to “clarify” the last-minute changes to the Companies Bill, which is designed to ensure that firms are socially responsible. She said however that she would not amend the legislation. She responded to some concerns saying, “It will not involve listing suppliers. We are also looking again to make doubly sure that companies or individuals subject to action by animal rights activists are protected. There’s absolutely no doubt they are but I don’t want concern. We will not amend the clause; we will explain it. We think this is a marginal cost to companies, which will have improved transparency and accounting”. Subsequently the government tabled an amendment to the bill in the House of Lords, which will allow companies to refuse to disclose information that would be “seriously prejudicial” to a third party and contrary to the public interest. The amendment is specifically aimed at animal rights campaigners or other extremists. Businesses are angry that the government included the supply chain amendment without consulting them or subjecting it to a review of the costs on business. The situation is made even more acute because the Chancellor axed the operating and financial review last year to minimise the pressures on business. Guardian 31.10.06, Financial Times 01.11.06
Google’s UK advertising revenue to overtake main television channels; the FT says that Google is poised to overtake Britain’s main television channels in the race for advertising revenue. The internet search company’s revenue is expected to surpass Channel 4’s anticipated sales of £800m this year, and will overtake ITV1 within 18 months according to Midshare and Initiative, two media-buying groups. Carat another buying group says that Google could even overtake ITV1 within 18 months. However Mindshare forecast that Google’s growth will be massive over the next two-to-three years, but there is a limit. At the same time ITV1 is expected to decline by twelve per cent this year as audiences dwindle. Financial Times 02.11.06
Corporate giving figures show small decrease; the Guardian’s publication of The Giving List, a social survey of stock-market listed companies, shows that the top 100 companies in the UK spent 0.79 per cent of pre-tax profits on corporate responsibility - a small decrease from last year’s figure of 0.87 per cent. Pushed by issues of sustainability, corporate responsibility has moved up the political agenda with a high-level seminar held in Downing Street organised by the Smith Institute last week, attended by 50 senior industry figures. Equally Sir Nicholas Stern in his report and Al Gore, in a speech to the Global Reporting Initiative Conference in Amsterdam, have challenged businesses to put sustainability at the heart of their activities. The Giving List says that every company in the FTSE 100 now produces a corporate responsibility report and, according to the Carbon Neutral Company, 80 of them have identified climate change as a business risk. Only 38 of those however have targets for emissions reduction, and a majority of the FTSE 250 have yet to acknowledge the issue publicly. Of the world’s top ten corporations, BP and Toyota aim for a ten per cent reduction, General Motors, eight per cent and Shell, five per cent. In terms of giving, either through cash or resources, Sainsbury’s top The Giving List with seven per cent of pre-tax profits, followed by ITV with 6.2 per cent and Northern Rock with five per cent. Further information - Click here Guardian 06.11.06
Delay in supercasino decision; the panel making the decision on the site for Britain’s first regional supercasino has been given an extra month before having to make its recommendations. The Department of Culture, Media and Sport has allowed it to delay its verdict on the supercasino and 16 smaller casinos until the end of January. The extra time is to allow the panel to make a full report rather than produce a simple list of the 17 recommended locations. The shortlist for the supercasino is Blackpool, Cardiff, Greenwich, Glasgow, Manchester, Newcastle and Sheffield. Regeneration 27.10.06
UK will be £4.3bn worse off after EU funding changes; revised government plans for regional funding show that the UK will lose nearly 40 per cent of its EU funding aid due to funding being switched to the new member states. In the period 2000-2006 it received €15.9bn (£10.7bn), however for the period 2007-13 this figure will decrease to €9.6bn (£6.4bn). Under the plans, Cornwall and the Isles of Scilly, West Wales and the Valleys, and the Highlands and Islands of Scotland will be eligible for convergence funding of €2.6bn (£1.7bn) to help bridge the gap with more prosperous areas. All three areas have per capita incomes that are less than 75 per cent of the EU average. Seven areas will receive less than half the funds that they received in the previous funding round, of which the worst hit are Yorkshire and Humberside (down 57 per cent) and the North-West (down 56 per cent). London goes down from €1,072m to €597m. Further information - Click here Regeneration 27.10.06
Pay gap between the sexes is narrowest ever; the pay gap between men and women has narrowed to the smallest on record according to the annual survey published by the Office for National Statistics (ONS). The annual salary splits into £25,800 for men and £20,100 for women. The figures show that women’s pay had increased faster than men’s across 80 per cent of the income scale. The gender pay gap has almost disappeared amongst people aged 22-29, but big differences still exist among women in the age groups most likely to have children and in older women, who faced blatant sex discrimination before the legislation on equal pay was introduced 30 years ago. Only at the top did men’s pay growth outstrip that of women, because of the preponderance of men in top jobs in the City. Further information - Click here Financial Times 27.10.06
Poor to get skills training priority; the Learning and Skills Council (LSC) has announced that its main priority in its 2007-8 investment plan will be unqualified and low-skilled people from disadvantaged areas. This will come at the expense of adult education and qualifications above GCSE level. The LSC, the government quango that funds and plans education and training in England for people aged 16 and over, aims to save £210m on adult training by asking individuals and businesses to pay a larger proportion of course costs. One of the main targets in 2007-8 will be to increase the number of 17-year-olds in education and training. At present the proportion is 76 per cent and the aim is to raise this to 90 per cent by 2015. In 2007-8, 1.3m young people will achieve qualifications through projects such as the building of 12 new employer-led National Skills Academies, to be opened by 2008. The majority of the adult learning budget is earmarked for the new on-the-job national training programme ‘Train to Gain’. The LSC say that since 2002 one million adults have achieved essential Level 2 qualifications, and the aim is to raise this to 3.5m by 2010. One critic said that the LSC had not got its priorities right and the Level 2 was not a high enough level. Further information - Click here Regeneration 20.10.06
New Skills Academies to open by Christmas; Alan Johnson (pictured right), the education secretary, has announced that three new employer-led skills academies are to open before Christmas covering manufacturing, construction and financial services. The academies, which will provide vocational training for school leavers and adults, will be followed by a second wave covering the nuclear industry, the performing arts, the chemical sector and hospitality. The prototype Fashion Retail Academy opened its doors last year in premises just off Oxford Street (see London section). Employers will design the courses around the needs of their own sectors. Britain currently has 9m skilled jobs, but that figure is due to increase to 14m by 2020. The Financial Services Academy will initially be based in London, Norwich, Leeds and Manchester. It aims to attract 15,000 students by 2008/9 and among its sponsors are Merrill Lynch and the Nationwide Building Society. The first centres for the Construction Skills Academy will be set up at the Olympics construction site and the Thames Gateway. Its sponsors include Bovis Lend Lease and Balfour Beatty. Phil Hope, the skills minister, said that it was hoped to have 12 skills academies in operation by 2008. The government, which wants the academies to be self-funding within four years, has pledged £90m for the first four years, with a further £30-40m coming from employers. Further information - Click here Times 01.11.06
City sponsored academy wins top design award; the City of London Academy in Bermondsey has won the Prime Minister’s Better Public Building Award for 2006, beating off competition from the National Assembly for Wales’ building to win the design prize. Previous winners include the Tate Modern and Brighton Library. The academy, which was designed by Studio E, boasts a soaring business hall and top-notch facilities, which are open to local residents. The City of London Corporation plans to replace two more of London’s worst performing state secondary schools with brand new institutions. Further information - Click here Times 27.10.06
Harvard to target UK state schools; Harvard University’s student recruiters are to target the UK’s state schools this year in a bid to loosen the stranglehold that public schools have over its UK intake. Janet Irons, senior admissions tutor at Harvard, said that only a “tiny handful” of students came from UK state schools and the university wants to correct the imbalance. Last year 275 UK students applied to Harvard with only 34 being offered places. Most of the centres for recruiting for Harvard are based in private schools and this may be putting off state schools students. Equally there is little knowledge of the scholarships worth £24,000 a year that are available to students whose parents earn less that £31,500 a year. At present there are about 8,400 British students studying at universities in the US. Financial Times 30.10.06, Times 31.10.06
Exploiting international students; the Times reviews the Home Office proposal to increase the cost of visas for international students. It says that trading on past excellence and the global demand for English, education at a British university has rarely been so attractive. There are currently 318,400 non-British citizens on degree courses across Britain, almost all (apart from 44,000 EU students and those on scholarships) paying the full economic cost of up to £10,000 a year in tuition fees. Many universities depend on foreign students to fill places in under-subscribed courses, such as science, and to balance strained budgets. But there is a real danger that academic greed and bureaucratic myopia will kill these golden geese. A student visa costs £85 and to renew it costs a further £250. UK Visas are now calling for a further increase to better represent the true costs of the immigration system, as well as measures to be taken by police to enforce controls. British vice-chancellors will be horrified. Already the selection of overseas students is determined by their ability to pay, and unless scholarship funds are available, British universities are now closed to all but the wealthy elite. Although the influx of 50,000 Chinese students has lulled the universities into complacency, a survey of 15,000 students by the Higher Education Policy Institute found that almost a third thought British universities offered poor value for money. If universities gain a reputation for exploitation, applications will fall away rapidly. Enterprising universities may, instead, follow the example of Oxford, which is to open a branch of its Said Business School in India. Other universities and schools have also attempted franchising in India and China but not always with success. Quality control should come at a price but not if “rip-off” are the first words learnt by visiting students. Times 31.10.06
Green taxes have ‘fallen’ under Labour; according to the Institute for Fiscal Studies (IFS) green taxes have been falling as a proportion of national income since Labour came to power. Receipts from green taxes fell from 3.4 per cent of national income in 1997 to 2.9 per cent in 2005. Andrew Leicester of the IFS says that the main reason why revenues have fallen from £37.7bn in 1999 to £35bn in 2005 is the decision to abandon the annual fuel duty escalator in 1999, as fuel accounts for 80 per cent of the total amount raised from green taxes. In a recent letter to the Chancellor, David Miliband (pictured right), the environment secretary called for a new range of `taxes on air and motor travel. The UK is not at odds with the rest of Europe, as the Organisation for Economic Cooperation and Development (OECD) have stated that environmental taxes make up a smaller percentage of national income in most developed countries. Andrew Leicester says that for the first time there is an expectation of new environmental measures either in the Pre-Budget Report, or in next year’s budget. The Economist forecasts however that the Chancellor will go slowly on green taxes. Despite the spotlight put on green issues by David Cameron and the Liberal Democrats, proposals to replace “bad” taxes on income, especially for the poor, with “good” green taxes, as well as Miliband’s pressure to go further and faster with a new range of eco-taxes, Mr Brown has not forgotten the lorry drivers strike over fuel duties. The Economist says that Mr Brown has another reason to err on the side of caution. After exhausting every conceivable way of extracting money from British taxpayers without changing the upper rate of income tax, he knows that he is stuck with the reputation of taxing by stealth. Mr Brown, we can assume, is no less keen on saving the planet than Mr Cameron, but it will not be entirely surprising if he thinks the answers to global warming lie more in complex international carbon and cap agreements than in daringly trail-blazing experiments at home. Further information - Click here Financial Times 03.11.06, Economist 04.11.06
UK airports still planning to expand; despite the warnings in the Stern Report, the Independent draws attention to the fact that Britain’s airports are planning to treble the number of flights by 2030. The details of the airports’ expansion plans, ranging from a third runway at Heathrow to a £25m airport terminal expansion at Glasgow, are due to be published in a Department of Transport master plan in the next few weeks. The Government asked for the proposals three years ago when it published an aviation white paper. The result would be that whereas in 2000 carbon emissions from the UK aviation industry totalled 8.8m tonnes, if the plans go ahead the emissions in 2030 will total 18.8m tonnes. As a proportion of the UK’s total carbon output this would represent an increase from three per cent today, to 18-23 per cent in 2030. Ken Livingstone, the London Mayor, has already come out firmly against any expansion of Heathrow and other critics say that relying on the development of fuel-efficient engines is not a solution. A spokesman for Transport 2000 said “the new Airbus superjumbo A380 is only 12 per cent more fuel efficient than the Boeing 747, which was built 40 years ago, while aviation industry emissions in just 13 years have risen by 89 per cent”. A Government spokesman told the paper that the forthcoming airports progress report would not curtail expansion plans but that flights would be curbed by the EU carbon trading scheme. Independent 02.11.06
O’Leary dismisses green tax on flying; Michael O’Leary (pictured right), chief executive of the low-cost carrier Ryanair, has dismissed the calls for green taxes on aviation and warned that extra levies will not put people off flying. He also dismissed calls to join the carbon trading scheme saying “I am far too busy doubling Ryanair over the next few years to be joining any carbon emissions trading scheme”. He said that Ryanair was in fact the “most environmentally-friendly” airline because it is overhauling its fleet of Boeing aircraft with fuel-efficient planes. He dismissed Sir Richard Branson’s pledge to invest £1.6bn in renewable energy over the next decade as a “PR stunt” because the billionaire promised to fund it out of the profits of his transport interests and O’Leary says “I doubt if the profit will get to $3bn over the next 100 years, let alone the next ten”. Guardian 02.11.06
Data-centres use more power than city of Leicester; new research from the BroadGroup shows that UK companies are using vast amounts of electricity to power the country’s 1,500 data-centres that support he UK’s growing IT needs. An average UK data-centre uses more power in a year than the city of Leicester. Keith Breed of BroadGroup said “The IT department has been divorced from reality as hardware costs have come down rapidly while computing power has risen dramatically. However higher energy costs have not been factored in”. He thought that a single data-centre’s costs will more than double to about £7.4m a year by 2010, making the UK the most expensive place for IT in Europe. Energy costs represent about 50 per cent of a company’s IT budget and companies need to invest in technology that can run more applications with less power. BT is to introduce energy-saving equipment in five of its 12 data-centres. Further information - Click here Independent 02.11.06
London Borough plans to penalise ‘Chelsea tractors’; the London Borough of Richmond has put forward proposals, which would treble residents’ parking permits for the most polluting vehicles. The council, which denies that is just a revenue-raising exercise, said that it hoped that other councils would follow their lead. The initiative, which will be considered this month, would introduce a sliding scale of charges for permits, with people using electric cars paying nothing. Those with the most environmentally unfriendly vehicles, such as high-performance cars and 4x4s, would find their annual permit rising from £100 to £300. Further information - Click here Financial Times 26.10.06
Mayor wants to push pedal power; Ken Livingstone used a Paris press conference to launch details of the 2007 Tour de France to launch a cycling campaign. He said that the 2007 Tour, which will start in London on 7th July, “gives us the chance to really make people think about cycling”. He said that his aim “is for London to become a cycling city”. Cycling has increased by 72 per cent in the past five years and he wanted a 200 per cent increase by 2020. He also said that promoting the Tour de France would make sound economic sense: “In exchange for laying out £1.5m we calculate that, with around two million visitors for the Tour there will be a £115m boost to the economy in London and Kent. The first stage on 7th July will be an eight kilometre prologue where riders race against the clock on a route that will start from Whitehall to Hyde Park Corner, loop around Hyde Park and finish on the Mall. The first road stage will start on the Greenwich Meridian and finish in Canterbury. Further information - Click here Independent 27.10.06
Crossrail review finds £1bn cost savings; more than £1bn has been shaved off the projected cost of Crossrail in a drive to build up support for the scheme being built. Douglas Oakervee, chief executive of Cross London Rail Links, the company responsible for the underground rail link between Paddington and Canary Wharf, has ordered a full-scale review of costs ahead of the talks with the Treasury due to start in earnest next year. The original estimate for Crossrail was £10.2bn at 2002 prices. More recently the Department of Transport put the cost at £16bn including inflation with internal Treasury predictions believed to be even higher. However people close to the project believe that costs can be slashed considerably by reconfiguring station layouts, driving down procurement costs, using more modern tunnelling and construction methods and by cutting contingencies with a more certain masterplan. The cost-cutting will be welcomed by backers of Crossrail who were starting to fear that any funding commitment would be delayed until after the Olympics. Ken Livingstone is pushing for an earlier decision that would allow work to begin in 2009 to allow trains to start running in 2015. Financial Times 04.11.06
London house prices keep surging; House prices in London grew by 1.7 per cent in October driven by a large number of buyers scrambling for a meagre supply of properties. Hometrack, the housing information business, says that the strong growth in house prices in London and the South East continues to put a major gloss on the apparent strength of the national housing market. “Our latest survey shows that average prices rose across a quarter of the country”. However Hometrack point to the fact that prices in the capital have risen by nearly ten per cent in as many months, and predict that they could go up twice that amount, as record City bonuses and a shortage of properties inflate the market further. Competition from people who want “to buy to live” in Central London rather than “buy to let” has meant that competition for houses in the “right” areas is so fierce that houses are going for hundreds of thousands more than the original asking price. The Centre for Economics and Business Research predict that City bonuses will go up by 18.3 per cent this year to a total of £8.8bn. Another factor is an influx of overseas buyers with 75 per cent of one leading agent’s business in Chelsea coming from foreigners relocating to London. Further information - Click here Financial Times 30.10.06, Times 30.10.06
London facing ‘housing timebomb’; the London Housing Federation (LHF) says that house prices in the capital are set to rise by 34 per cent over the next five years, and that there is the prospect of a ‘housing timebomb’ as prices rise faster than wages. It suggests that wages are due to rise by 4.4 per cent while house prices could increase by nearly seven per cent over the next five years. The average home in London costs 8.8 times the average salary and buyers need an annual income of £80,000 to get a mortgage for a typical home. With the population due to rise by 800,000 over the next decade the situation looks set to get worse. The LHF, which is the regional arm of the National Housing Federation and represents 400 housing associations in London, is urging the government to make housing a priority in the 2007 comprehensive spending review. The government said that it was investing £1.7bn to help 28,000 families in London into affordable accommodation over the next two years. Further information - Click here BBC News Online 27.10.06
London plans a hybrid bus fleet; London’s 8,000 buses are to get an environmentally-friendly overhaul in a bid to cut carbon emissions in the capital by a quarter over the next decade. Ken Livingstone wants every new bus from 2012 to run on hybrid motors that generate 40 per cent less carbon dioxide than their diesel-engined forebears. The aim is to put 500 hybrid buses on the roads each year with the aim of creating a green fleet. A trial of six hybrid buses ran into trouble this year when the diesel engines overheated, forcing a temporary withdrawal of the vehicles, which ran on the 360 route between the Elephant and Kensington. Transport accounts for 20 per cent of all carbon dioxide generated by the capital. Buses account for five per cent of the transport total. An entirely hybrid fleet would produce 200,000 fewer tonnes of carbon each year. London is aiming to reduce its carbon emissions by 20 per cent by 2020, rising to 60 per cent by 2050. Transport for London expects its all-green fleet to include biofuel-powered buses as well as hybrid and hydrogen propelled vehicles. It expects to subsidise the introduction of more hybrid buses next year but cannot accelerate the programme because manufacturers do not mass produce hybrid models because of lack of demand - although it is hoped that the 2012 targets will spur increased production. Further information - Click here Guardian 25.10.06
Prime Minister opens Fashion Academy in West End; on 31st October the Prime Minister and Sir Philip Green opened the Fashion Retail Academy in its new purpose-built premises in Gresse Street in the West End. The academy, which is the brainchild of Sir Philip Green, ran a pilot course with 40 students last year using the premises of the London College of Fashion. The Academy now has 220 students in its new building which was funded with half of the initial £20m provided by the Department of Education and the other half split by five retailers: Arcadia, Marks & Spencer, Tesco, GUS and Next. Two year-long courses for students aged 16-18 lead to a Level 2 or 3 diploma which can count towards a UCAS application. The curriculum includes customer service, personal shopping and visual merchandising. Students are given hands-on experience with master classes by industry leaders, including Sir Philip Green and Stuart Rose, chief executive of Marks & Spencer, with 40 per cent of the time spent on work placements, particularly with the five business sponsors of the academy. Further information - Click here Daily Telegraph 01.11.06
ODA Chairman says “politics and soaring costs” drove him out; Jack Lemley (pictured left), the US construction engineer who was brought in to chair the Olympic Delivery Authority (ODA), has explained why he quit the post that he took up in March this year. At the time his departure was said to have been due to ill health and the difficulties of having to commute between the UK and the US. Now, in an interview with the Idaho Statesman, Mr Lemley, who was responsible for the Channel Tunnel project, says that it was politics that drove him away. “I went there to build things, not to sit and talk about it, so I felt it best to leave the post and come home”. The Guardian says that London’s Olympic bid was successful because of the unprecedented level of co-operation between government, the mayor and sporting bodies. Now there are real signs that the coalition is starting to fracture over two key issues. One is the negotiation with the Treasury over the true cost of delivering the Olympic infrastructure and the promised root-and-branch regeneration of the Lower Lea Valley - especially as politicians get more ambitious about the potential of the area. But while David Higgins, the chief executive of the ODA wrangle with the Treasury with a view to finalising the budget in the new year, potentially more trouble is brewing on the future of the Olympic stadium after the Games are over. Again the problem is the promised legacy of 2012. The vision was for the 80,000-seat Olympic stadium to be reduced to a 25,000-seat athletics stadium. However an athletics stadium would need ongoing subsidies. The athletics stadium is supported by the mayor and the organising committee chairman, Lord Coe. On the other side is the government in the form of Richard Caborn, the sports minister, who believes that the solution is to copy the Commonwealth Games stadium in Manchester and turn the site over to a Premiership football club. However senior Olympics figures are adamant that football should not be subsidised on the cheap, and the two possible football clubs Tottenham Hotspur and West Ham United are opposed to having an athletics track. To add to the problems West Ham, whose existing ground is only one mile from the Olympics site, are in the throes of a messy takeover. Until this is settled HOK Sport, the architects, cannot start designing the stadium. The Guardian concludes however that London can point to an impressive list of milestones reached, and a recent visit by the International Olympic Committee’s evaluation team gave the city a clean bill of health. Daily Telegraph 01.11.06, Guardian 04.11.06
Work is ‘ahead of schedule’; Tessa Jowell (pictured right), the culture secretary, has given the cabinet an upbeat assessment of London’s preparations for the 2012 Olympics. She states that London is substantially ahead of other host cities at this stage of the process and is two years ahead of Sydney at a comparative stage. The cost of building venues, infrastructure and regeneration is put at £3.42m, but the budget may be expanded to include up to £2bn of extra regeneration work associated with building 40,000 homes and creating 60,000 jobs. The security budget is also expected to exceed the £220m in the bid document. Tessa Jowell further claimed that the Olympic Delivery Agency is half way through its two-year planning programme, which will be followed by four years of preparing the land and construction work, and then a year of test events. She said that 100,000 people had registered as volunteers to help with the games. Guardian 27.10.06
Contingency plans for rising cost of 2012 Games; the Times says that it has learnt that a windfall tax on land values in East London and a raid on most non-arts spending in the National Lottery are two of the options being considered to meet the burgeoning costs of staging the 2012 Games. The bid estimate of £2.4bn is expected to rise, possibly to two or three times that sum, largely due to the fact that the full prices for policing, contingency and transport are missing. The current costs of policing do not cover security for the rest of London and were made before the 7th July terrorist bombings. The transport costs do not include items such as the extension of the East London Line. The most radical idea is the property tax, although the Treasury already has proposals for a new “planning gain supplement” from Kate Barker which would impose a levy on developers whose land increases in value because it gets planning permission. These supplements would be a form of local taxation, to be spent mainly in the local communities where they are raised. Any Olympic windfall tax would have to be retrospective although the Chancellor has used such measures in the past mainly to finance the welfare-to-work programme. The Mayor has ruled out any further levy on the council tax beyond the £625 already earmarked. A spokesman for Tessa Jowell confirmed that along with the Treasury it was studying a revised Olympic budget and accepted that the lottery was a source of extra funding. However he said that the idea of a windfall property tax was “not ringing any bells with anyone here”. A further snag is reported by the FT which claims that the Treasury has told the London organisers that they are liable to pay VAT on the infrastructure projects and this will cost a further £1bn. Times 28.10.06, Financial Times 06.11.06
DLR extension to Stratford gets approval; the Department of Transport has given planning approval for the six-kilometre extension of the Docklands Light Railway from Royal Victoria to Stratford International. The link, which will open in 2010, involves converting part of the North London Line to DLR operation and the construction of a further link to the new Channel Tunnel Rail Link station at Stratford International. It will serve existing stations at Stratford, West Ham, Canning Town and Royal Victoria with four new stations being built at Stratford International, Stratford High Street, Abbey Road and Star Lane. The extension means that passengers arriving at Stratford International in 2012 will be able to quickly access the Olympic Park and other venues using the DLR and its connections to the rest of London’s transport network. Further information - Click here Evening Standard 26.10.06
Olympic Transport Plan is issued for consultation; the Javelin rail service bullet trains will be at the heart of the transport plan for the 2012 Games according to a consultative document issued by the Olympic Delivery Authority. The 12-carriage trains are designed to deliver 250,000 people an hour to the Stratford International rail terminal in a seven-minute journey from King’s Cross. The 140mph train, which goes into service in 2009, will also take passengers from Ebbsfleet in North Kent to Stratford in ten minutes. The Olympic Park will be almost car-free, with 80 per cent of those attending the games arriving by train. A further 15 per cent will travel by coach in park-and-ride schemes, and five per cent will cycle or walk along designated routes. The transport plan will now go out for consultation with a full plan published next summer. Further information - Click here Guardian 31.10.06
Hammerson chosen for Victoria upgrade; Network Rail has announced that it is to enter into exclusive talks with Hammerson to redevelop Victoria Station (pictured right). The scheme is part of a series of upgrades planned by the not-for-profit rail operator which will see private development of shops, offices and flats around the major stations. Through this, it is hoped to raise £4bn of private money to help pay for station improvements at 50 big regional stations and hundreds of smaller ones. At the same time Network Rail announced that British Land and a consortium of Morley Fund Management and Chelsfield Partners were the two bidders shortlisted to rebuild Euston. Euston with 50m passengers a year and Victoria with 115m a year have not seen any significant upgrades for half a century. The amount of new space is likely to total 800,000 sq ft at Victoria and 4.3m sq ft to be built on 15 acres around Euston station. The next big project will be Waterloo, which is likely to be the biggest of the three projects, as it will involve lowering the main concourse to the ground floor. Further information - Click here Financial Times 27.10.06
Select Committee threatens to disband; the select committee set up to review the £16bn Crossrail scheme has threatened to disband following the government’s decision to ignore their recommendation for a £200m station at Woolwich. The Crossrail Bill could be delayed for up to a year by a collapse of the committee and there could be knock-on consequences for Thames Gateway. Estates Gazette 28.10.06
Elephant bidders urged to link up; Colliers, the surveying firm that advises both the remaining bidders on the shortlist for the redevelopment for the Elephant & Castle, has urged them to link up. St Modwen owns half of Key Investments that owns the shopping centre at the heart of the Elephant project whilst Lend Lease, who lead the second consortium, also hold major land holdings within the 69ha site. Regeneration 27.10.06
Royal Court supports Sloane Square plans; the Royal Court Theatre is the latest organisation to come out in favour of the proposals from the Royal Borough of Kensington and Chelsea to reinstate the cross roads in Sloane Square in place of the existing roundabout. The proposals will go on show to the public in the New Year. Further information - Click here Regeneration 03.11.06
John Lewis fears delay in the tram; Charlie Mayfield, the chief executive of John Lewis, has called on Ken Livingstone, the Mayor of London, and Westminster Council to ensure that the new tram system planned for Oxford Street is ready in time for the 2012 Olympics. Retailers fear that the tram system, the highlight of a £1bn facelift of London’s premier shopping street, will not be ready until the following year. The final plans are expected in the next few weeks. Mr Mayfield will be opening the first stage of the £61.5m refurbishment of John Lewis’s Oxford Street store this week. When it is finished by Christmas 2007 it will have added 44,000 extra square feet, two more banks of escalators, added parking and a Waitrose Food Hall in the basement. Times 30.10.06
St Modwen retreats on Queens Market; St Modwen has bowed to pressure from local campaigners and scrapped its controversial plans to move traders out of Queen’s Market in Upton Park to facilitate the building of a supermarket. The original plan was to move the 160 market traders out of the 100-year-old covered market to a nearby site but now St Modwen will build new stalls for the traders alongside 70 new shops and 350 houses. The new supermarket had been intended for Asda but they withdrew in June. Estates Gazette 28.10.06
Councillors admit King’s Cross error; councillors in Camden were wrongly advised about the proportion of social housing contained within the plans for King’s Cross Central. Having granted planning permission in March, the council received a submission from local community groups last month calling into question Camden’s decision and that it contained too little social housing. Now, in correspondence with solicitors for the community groups, the council has admitted that the proportion of social rented housing should have been 35 per cent rather than 30 per cent, and that it was a “typographical error”. Councillors will consider the final draft of a section 106 planning gain deal for the scheme on 16th November. Regeneration 27.10.06
Westminster University plans landmark scheme; the University of Westminster has announced that it is looking for a partner to provide a site and develop a landmark building as part of an overhaul of its London estate. The university is thought to be putting together a bid for 100,000 sq ft development site close to its original Central London Polytechnic home in Regent Street. The Estates Gazette quotes sources as saying the University’s freehold campus on Marylebone Road, the current home of the Business School, was the most likely option for redevelopment. Estates Gazette 28.10.06
grapevine is produced twice monthly (except in August and December when there
is one issue) by Brian Wright on behalf of GLE
Next issue on 23rd November, 2006
Circulation enquiries to grapevine@gle.co.uk
Content enquiries to Brian Wright on user164898@aol.com
Tel: 01789 263252