There is undoubtedly heightened tension about the state of the economy in London with the credit crunch as a result of sub-prime mortgage market collapse in the US, on the doorstep of the electorate for the 1st of May. So it will be interesting to see how they respond with these concerns with their ballot papers for the GLA election where we do not actually have control of the economy at local and regional level but its clearly their opportunity to tell national government their concerns.
This is all further compounded by raising energy and food costs both adding to inflationary pressure which will limit options of reducing interest rates by the Bank of England. Now in terms of public finances the GLA precept for this present financial year has only gone up by 2 per cent and is well inline with inflation targets. This all for additional policing, more public investment in transport and social housing. This while some councils like Hammersmith & Fulham are cutting services and the City of Westminster taking credit for government investment rather then anything they have done. So the public finances will not be contributing to inflationary pressures and more services thus giving value for money. At the same time, we have a serious of major capital investments that will help the London economy in the event of a serious down turn like the Olympics site; Cross rail projects involving and Thames tideway works involving 10’s of billions being spent in the real economy. This localised Keynesian demand management will be very useful particularly with our dependency of the financial services and our strong economic ties with the US, do make us very vulnerable to a recession. Furthermore the monies the Mayor has negotiated from central government for housing investment to the tune of £ 4 billion could be used to stabilize the housing market, if the monies are used to stabilise the housing market as had been down in the early 1990s. Housing in itself warrants separate coverage and will be the topic of my next blog entry but we are certainly in very choppy waters and which mayoral candidate can show how they will manage the London economy through them could well determine who is mayor on the 1st of May.