178. Sadiq Khan: This Government Frustrates Me

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1:38And welcome to The Rest is Money with me, Robert Peston. Now, annoyingly, Steph's not here, but we've got... I don't know if you're a sort of substitute, because you're never a substitute for anybody, but I'm thrilled that we've got the Mayor of London, Sadiq Khan, with us today. So much to talk to you about. It's a pleasure to be here, Robert. Thanks for finally having me on. And Sadiq, there's a ton of stuff I need to talk to you about. And there are big issues actually around the economy of London and the southeast. But I did want to start really with a bigger political picture. You are a Labour Mayor of London.

2:16And I suppose I just wanted to ask you, how different does it feel to be a Labour mayor of London under a Labour government? Because for most of your many years as mayor, you've operated under Tory prime ministers. Does it feel very different? You know, I've been the mayor since Moses came down with the tablets. It's been that long. But I've had, you know, David Cameron as prime minister, Theresa May, Boris Johnson, Liz Truss, Rishi Sunak and now Keir Starmer. And to give credit to David Cameron, I think he was a prime minister who believed in devolution. He believed in working with the mayor of the capital city.

2:54But I only had him for a short period of time because of the referendum and he decided to quit. It's been tough, frankly speaking. It's been tough getting access to prime ministers and chancellors. Philip Hammond being the exception, he was very good. He got the importance of the capital city. It's been tough getting a fair hearing. It's been tough trying to explain to previous governments that it's not in our national interest to pit London versus the rest of the country. It's been tough to explain to the government if they talk down London, it's less likely a chief executive, a VC, angel investors will want to invest in London.

3:27It's been tough to explain to previous governments why infrastructure, housing, transport matters. And so the last 10 months haven't been a bed of roses. We've not got everything we've asked for. We still await the CSR announcements next week. But having the ability, Robert, to make the argument is so important. Having the ability to explain to the Prime Minister, to the Chancellor, to the Secretary of State for Transport, to the Prime Minister, why these things matter, is important for me and important for London. and we'll wait and see how much fruit we bear when the SR's unveiled next week.

3:59I mean, I suppose a contrast that somebody like me would see is you have, you know, I would argue, looked like a, nothing conventional about you, but a more conventional Labour mayor. Many would argue that this government hasn't been Labour enough and has seemed to define itself by welfare cuts, abolishing universal entitlements, the winter fuel payment, refusing to reinstate access to universal credit for those with more than two children. How frustrating has it been to be a Labour mayor with a government that, as I say, many would say is just not doing Labour things? I was a member of Parliament when Tony Blair was the Prime Minister and Gordon Brown was the Prime Minister.

4:53And I feel one of the challenges Keir's had is, for those of us who have been campaigning for Labour, for those of us who are team Labour, it's a bit like waiting for Godot. We project our own expectations, wishes, demands on Keir and his team. And let's be frank, his inheritance is far tougher than Tony and Gordon's in 1997. And they've had to grapple with not just the last 14 years, but with hard Brexit. They've had to grapple with the consequences of Putin's invasion of Ukraine. They've had to grapple with the consequences and the trail of the pandemic. And then you've got on top of that the uncertainty posed by the president of our closest ally, who you go to bed not knowing what you'll wake up to.

5:34And so in that context, I think it's been really tough for the prime minister and the team. But of course, listen, all of us who worked really hard for, you know, a Labour government would have expected and hoped for instant gratification. We've not had that for obvious reasons because, you know, the money's tight and tough choices have got to be made. So you think they're the right choices, do you? Well, we'll have to wait and see if the CSR gives us, you know, more scope for the sort of stuff that many of us want the government to do. I'm somebody who believes... Isn't there a risk already that the Chancellor, Rachel Reeves, has announced, I think it's a£15 billion package of transport investment in the Midlands and North?

6:15I mean, the politics of that are pretty transparent that there was quite a lot of criticism that the government faced when its big infrastructure investments to date rather favoured this part of the country, whether it's, you know, the runways, particularly the runway at Heathrow or, you know, whether it is the corridor between Oxford and Cambridge, which is not exactly in your patch, but it's definitely in the south. and there was a risk that this government would be seen to be ignoring the North and the Midlands, which is why they make a big song and dance about these transport investments. But in general, don't you worry that, in a sense, the tremendous advantages that this part of the world has means that you're not going to get what you want?

7:01Well, firstly, I think the government's got it wrong with Runway 3 and the whole Heathrow Runway 3 saga I think needs to come to an end in terms of Runway 3. Look, we as a capital city contribute north of£530 billion in terms of economic output. We contribute about a quarter of the GDP of the country. Roughly speaking, 21 % of the tax take more than 30 % of the country's exports. So we matter as the capital city. What's important, though, is unlike the last 14 years where London's been pissed against the rest of the country, it should be us and the rest of the country. And I fully support and I was cheering when, you know, Rachel and Heidi, the Secretary of State for Transport and the Chancellor announced this funding for West Midlands, the North West, Yorkshire, elsewhere.

7:49Because London needs the rest of the country to be also flourishing and thriving, not at the expense of London. So can I just ask you a question on this? Because this is such an interesting issue. we've had years now of successive governments and I suppose Boris Johnson was the biggest or original cheerleader for this, so-called levelling up, trying to narrow the wealth and income gaps between the rest of the country and London. That's not happened. The data shows that the gap between London and the rest of the country is pretty much... Parts of London. I don't want to get back to the inequalities within London.

8:28Of course, that's really important. But if you just look at the averages, right, that gap between London and the rest of the country, wealth and income, has not closed. Well, listen, that's firstly one of the reasons why I support the announcement today when we're having this conversation in relation to additional funding for other parts of the country with transport, infrastructure and so forth. But the second part of the answer is this. Look, you can make our country more equal by making London poorer, right? Logically speaking, our country becomes more equal. That is bonkers. What you should be doing is not simply giving a bigger slice of the pie to the parts of the country, but increasing the size of the pie.

9:05So London gets investment, as well as other parts of the country. I'll give you one example, a tangible example, which shows the difference we can make. So I had the pleasure of being a minister in the last Labour government, introduced a bill in Parliament, the Business Rate Supplement Bill, which required businesses in London to pay a contribution towards what was then called Crossrail. I then became the Crosshalls Minister and I was then fortunate to be the mayor that opened Crosshalls and I call the Elizabeth Line. The Elizabeth Line goes from Reading, outside London, the last time I checked, to Shenfield, Essex, outside London.

9:37We in London paid two thirds of this line in London, both London taxpayers and London businesses. The government paid for a third, Reading to Paddington, Liverpool Street to Shenfield. But here's the great part of the story. This train line is the most successful train line in the country, but the trains are built, guess where? Derby. The signage built, guess where? Isle of Wight. The infrastructure built, guess where? In parts of Yorkshire. We've not got the expertise to build this line, but other parts of the country has. And so for every£10 we spend on this line, £7 went to other parts of the country.

10:13So we, the capital city, benefit by having a fantastic rail line. So does Reading and so does Shenfield. but less the country benefits from the jobs created by this piece of infrastructure. So the impression that's been given wrongly is London's getting all this at the expense of other parts of the country, but they benefit as well. It's not crumbs of the table by any stretch of the imagination. These trains are built in Derby and they're brilliant world-leading trains. I have to say, as somebody who has sort of immersed himself as I have in a sort of series of books and films about this kind of stuff, I think when Londoners say, be grateful to us for our success.

10:49That's not what I said. I'm not sure. No, what I said was the opposite. What I said was we need the expertise of those that make the lifts in other parts of the country. We need the expertise of those in Biola. I'll give you an example of our buses. So we've got the most electric buses than any city in Western Europe. I'm incredibly proud of that. It helps us get to net zero, improves air quality. I've not got the expertise in London to make these buses. I'll tell you who has. great engineers in Falkirk, great factories in Ballymena, great factories in Yorkshire. And the point is we rely upon this expertise in the parts of the country and it's not crumbs of the table, you know, be grateful to us.

11:29It's an example of partnership approach. That's why I'm cheering on the additional investment in the parts of the country, but also saying London also needs investment. You and I both know young people, indeed our children, who will end up with great jobs but can't afford to live in London because of the housing crisis. If the country is going to prosper, flourish and thrive, we need people who are young to be able to stay and live in London to do the jobs that are being created. So it's in the national interest, yes, to build 1.5 million homes over this parliament, but a significant chunk has to be in London and the southeast because a lot of people need that housing.

12:06A related issue in terms of economic development is the growing sort of tech sector that we have here. But it takes me on to a sort of slightly philosophical question, which is how we define our tech sector. because when I talk to the entrepreneurs in that area and those who back these businesses, they see themselves as part of a European tech sector. They don't narrow it down to London and Oxford, Cambridge, and they see the competition with Silicon Valley as being actually a sort of combination of London, Paris, Amsterdam, you know, certainly those that are on the high-speed trains. When you think about London's position, we are definitely the strongest of all of these centres, right?

13:08We have more of these companies than, you know, Paris and Amsterdam and the rest, but they also have significant players. So how do you see it? So are we a hub for Europe? Yes and no. So look, I'm both competitive, but also I believe in collaboration. And so let me just give you some numbers to give you a sense of scale when it comes to London and other parts of the globe. Well, firstly, Silicon Valley's been gained for decades. Silicon Valley is the startup capital of the world. Oh, yeah, by a huge margin. I mean, no, we're not disputing that. But if we're going to have a prosperous, growing economy, we've got to have more of it.

13:44Let me tell you our USP. So if you look at just AI, one example, we've got more than 1 ,300 AI companies in London. That's more than the next three cities in Europe put together. I'll give you another stat which is just remarkable in terms of my pride in this city. The top four cities in Europe when it comes to tech investment, London, Paris, Stockholm, Berlin. If you add up the investment in tech in Stockholm, Paris and Berlin combined, it's the same as London. That gives you an idea of how far ahead we are. But nonetheless, if you put all of that together, the investment is a fifth of what it is in California.

14:19And, you know, so we're all suffering from underinvestment. Let's be clear. Yes and no. And so let me tell you the huge advantage we have in terms of London and our friends in Berlin, Stockholm and Paris. If you were in America and you wanted to have access to capital, you'd go to New York. If you wanted access to the creative industries, you'd go to a culture, you'd go to Los Angeles. If you want to speak to the policymakers, you have to go to Washington. The joy of London, we have all of that within a 15 minute tube ride. And that's one of the reasons why people have been attracted to London.

14:53The other big advantage we have is a pipeline of talent coming through. More than 50 universities in London, more universities in the top 50 than any city in the world. Our challenge has been filling the gaps in those critical sectors. And that's why it's so exciting. Some of the stuff Peter Karl is doing in relation to attracting investment here. I'm really pleased, Robert, during my loyalty, we managed to persuade Amazon, Apple, Google to expand their presence in London. and at the same time are supporting startup and scale-ups as well. But you're right in your starting point, which is we must work close with Paris, Berlin and Stockholm.

15:29Just out of interest, I'm sure you've met him. There's an impressive investor, Saul Klein, who's come up with this concept of new Palo Alto, which is basically the European-wide cluster that is challenging California. I mean, I personally find it a compelling concept, But it does require us, I think, to balance a bit more collaboration and not just, you know, red in tooth and claw competition. And you're spot on. It really isn't, you know, us always being at 50 Cups competing and stuff. So we've got London Tech Week in June taking place in London. At London Tech Week, you'll have French, German, Swedish and many other European, you know, coders and others represented in London.

16:16A big strength, though, Robert, we mustn't ever underestimate this, is the joy of agglomeration. We've not just got a great tech sector in London, like Silicon Valley. We've also got financial services, professional services, education, culture. So ed tech, clean tech, legal tech, fintech, and so forth. Although you have led me on to the other thing where I'm genuinely worried about if this is true of the whole of Europe. The big difference between us and America, Silicon Valley in particular, is we're still not providing the scale up finance. This is something I've talked to the chancellor about repeatedly, but we still don't.

16:52You know, if you are a really ambitious, growing tech company in Europe and you want to get to the stage of global domination, almost all of them say it's a no brainer. We've now got to move to America. And that's a real issue. That's a real problem for us. We've got to persuade these companies, when they've got those global ambitions, to stay here. And we've got to provide them with the cash. Spot on. And, you know, you just don't need to go to a Nobel Prize winning Brit, you know, who's found a deep mind in Google to see a real example of this. But you speak to the pipeline where they're looking at VC investment, where the R &D goes.

17:30So the good news is we've spent a lot of time with fantastic universities in London, Imperial in particular, UCL in particular, King's College. We've set up a tech cluster to work with this talent, Robert. This is early stage. What I'm talking about, when you've got to the stage of having, I don't know, $25 million of turnover and you want to get to a billion, two billion, three billion, too many of these businesses will relocate to America. And we've got to stop that from happening, haven't we? Yes and no. Yes, we do. We want to keep as much talent as we can. Retaining our talent is very important.

18:03We want to recruit that talent here as well. Let's not be scared of pinching some of the talent from America to come here as well. with our unique ecosystem. And here's the beautiful thing about Neverwasting the Crisis. Have you told Yvette Cooper that she's not doing enough to help you on this front? Because that is a... Well, hold on a second. Particularly with Trump, you know, there are loads of Americans who want to leave America at the moment with real talent. And they look at Britain and they think, we've pulled the drawbridge up. Why, you know... That's not quite what they think. Let's look at the numbers.

18:29A lot of them do. Look at the numbers. We have a record number of Americans applying for British citizenship this year alone. Since records began, there's never been more Americans. For obvious reasons. Well, you just, I think you're making my point for me, Robert. But there are so many more who want to come here. And there's a related point. As you know, pretty much every university in the country is in some state of financial crisis. They're sacking people. They're not hiring people. You know, why isn't the government helping universities, providing them with funds to get the great brains out of American universities who want to leave Trump's America?

19:05Let me do with each of your various points, if I may. So firstly, at a time of huge global instability, at a time when there are choppy political waters in America, I think what London provides is that rare thing, a stable, open, diverse environment where innovation can flourish and thrive. And actually, we've got to take advantage of the opportunity provided by what's happening across the globe. And I agree with the premise of your argument, which is we should be attracting that talent through our universities. Postgrad visas are really important in terms of enticing people here versus Canada, Australia and elsewhere.

19:40But also in terms of... But the Home Office is restricting all this? Well, yes and no, in terms of... They're not restricting all of this. What the Home Office is saying, and by the way, I'm not the Home Secretary, what the Home Office is saying is that there are certain types of... Well, you can make your representations to her now. Which is the point of having a Labour government. I can now make these representations to a Labour Home Secretary, where in the past I couldn't, and I've had many Conservative Home Secretaries. And it's a point many of us understand in terms of the London story. The London story is, you know this from your background, the London story is we've been a place that's attracted talent from across the globe.

20:11It's benefited our city economically, socially, and culturally. And one of the biggest USPs we have as the capital city are our values. And that's one of the reasons when you're talking about, and we're talking about Americans coming to London and from other parts of the globe, is because of our values, our openness to different ideas, different ways of working. Our challenge with the tech sector, Robert, has been, actually, if you're a great inventor, So you've got a great product. You get better rates of VC. The scale of VC is huge, but also your ability to scale up is exponential. What we're going to do is create that same sort of environment in London as well.

20:44And I'm really confident we've got that environment. We can do even better. You didn't really answer my question about whether the government, frankly, is grasping. This is an amazing opportunity for the UK. We suffered in the 1960s and 70s, as you probably know, from this terrible brain drain where so much of our talent went to America. Now, it's quite clear that because there are so many brilliant people in America who hate the Trump presidency, that, you know, if we opened our doors in our universities and our businesses, there would be a massive reverse brain drain. And I'm not sure the government is seizing that opportunity.

21:19I think it's really important that we run at the red carpet for this talent. I think it's really important that London is seen as an attractive place for talent to. But do you think Keir Starmer gets this? Well, I think it's really important the government understands that there's an opportunity here for our city and our country. And not just tech, by the way. No, no, no. I wasn't just restricting it. Culture, creative industries, life sciences. When you look at the London economy, we've got huge vacancies in massive sectors. Creative industries, tech, construction, you know, hospitality. And I think it's really important to recognize, yes, we're going to train up in record numbers.

21:55Londoners have these jobs, but there's still vacancies there. And there's this talent that's desperate to come to London and we should be attracting and enticing that. Now, before the election, one of the big things that Keir Starmer repeatedly talked about was the importance of devolving powers from the centre, particularly to metro mayors and mayors like yourself. You obviously do have significant powers, but I don't get a sense, actually, that this devolution programme is being executed with the sort of urgency that one might have expected. I'm frustrated by the lack of progress when it comes to devolving powers away from Whitehall to city halls across the country, including London.

22:37But this was a commitment they made before the election. Why isn't that happening? Well, the phrase used by the prime minister and others is those with skin in the game are probably best suited to make those decisions. And I agree. We repeatedly talk on this podcast about how one of the huge priorities must be to improve the skills of our people. And one of the things the government talked about was giving much more control over, you know, essentially skills budgets to people who really know what local people need, people like yourself. And that hasn't happened yet. Devolving skills budgets to mayors is the single biggest positive game changer this government could make to address some of the challenges around growth.

23:19I mean, we're lobbying for that. And it's a question I think is worthy of asking members of. But you agree that this is really important. Let me give you a tangible example of why it matters. Yeah. So civil servants in Whitesall, love them as we do. I don't think are best suited to decide what the needs of London or Manchester or Liverpool or Bristol or Leeds are. I know my employees. I know what they're crying out for. I know what colleges can provide. I know what our young people's aspirations are. I think we are better suited to match up the employees, the wealth creators with the education establishments, with the young people.

23:55But also, Robert, you and I both know the importance of continuing professional development. Somebody who's in a low pay job having the right skills to get a better pay job, even within that company. And that's why we're lobbying the government to devolve these powers to mayors across the country, because we know our economies far better than civil servants in Wineshall. And it's really important for the government to grasp the game changing power of devolution. And it's a frustration to me that, you know, nine years after me being first elected the mayor, I've not got the powers that I think are worthy of the capital city.

24:25But also Andy Burnham, Steve Rotherham, Tracy Brabin, other mayors across the country deserve those powers because they know their communities far better than these civil servants. But just to be clear, you were trying to excuse Keir Starmer for some of the unpopular welfare reforms that he's pushed through on the basis that, you know, there wasn't enough money in the kitty, to use that phrase, left behind by the previous Tory governments. But he's got no excuse for not pursuing this agenda. On this, you've just got to take, I mean, you know, you either do it or you don't. It's not a money issue.

25:06I think there's an entrenched view in Whitehall that we know best. There is a view that you and I both experience, not just, you know, in one government department, but in many government departments where we know best. We're the most centralised democracy in the Western world. I'll give you an example. So in London, as the mayor, I get to spend, roughly speaking, 7 % of taxes raised in London. Mayor of New York, 50%. The governor, mayor of Tokyo, 70%. And you can just do similar examples with Manchester, Liverpool and so forth. When it comes to skills, we're not saying give us a big check. We're saying allow us to decide how this budget is spent.