Oh, what a capital city

To inhabitants of London, it's busy, buzzy and cosmopolitan. To outsiders, its size, influence and a

London is different. Neither better nor worse, but different from the rest of the United Kingdom in the way that, say, one country is different from another. It is more urban, less white, richer, poorer and, increasingly, more international than the rest of the country. The city's hectic cosmopolitan buzz stands in stark contrast to the traditional image of grey, repressed Britain.

Like so much in the world that is interesting and creative, London's contemporary success is the random sub-total of millions of actions - and often inactions - which have left Britain with what is now called a "world city". No one planned for this. It happened as the result of a number of factors, including the city's uncontrolled population growth, its chaotic government, feeble planning, successive waves of immigration (the accidental by-product of Empire), and the relentless march of global capitalism.

The sheer scale of the place is staggering. Although it has precisely the same population as New York City, it covers twice the area. Twenty million people live within an hour and a half of central London. Its economy is bigger than those of Austria, Sweden or Russia. Half of all the UK's ethnic-minority populations live there. London Underground carries half of all Britain's rail passengers. Unlike many other cities in Britain, the capital's population is growing rapidly - some believe the official total of 7.25 million is already a gross underestimate of the real figure.

Yet London's very size and importance is a problem. Because of its population and economic importance, it is inevitably the focus for much of the nation's news. As the UK's capital, it is the location of most major national institutions, notably museums, theatres and opera houses. The vast population of the city and its region means that it draws in talent simply because it offers such a range of opportunity and activity.

Viewed from Manchester, Leeds or Glasgow, London is a mixed blessing. On the one hand, it dominates all aspects of the nation's cultural and political life, apparently sucking the creativity and life out of regional capitals with their own traditions and successes. On the other hand, the city's international profile guarantees that anyone who is anyone will come to Britain. Madonna can, without threat to her glittering image, live in London. Moreover, the capital acts as a shop-window for the talent nurtured in the UK's regions. All the world's record producers, film-makers and fashion editors spend part of their year in London, and London is only a couple of hours from anywhere in mainland Britain.

What is beyond doubt is that London has come back from the dead during the past 15 years. Between 1945 and 1984, the capital's population had plunged from 8.6 million to 6.7 million. Apparently, it was heading for six million or fewer. Other cities in every continent were overtaking it in terms of scale and potential. Planners, with their policies for new towns, office relocation and regional decentralisation, had stripped the capital of many of its aspiring inhabitants. Milton Keynes, Basingstoke and Reading prospered, while the original metropolis declined. The docks and manufacturing declined towards oblivion. Nothing appeared capable of stopping the rot.

Then along came Margaret Thatcher. With her anti-planning policies and free-market creed, London was spared from much of the government-inspired do-gooding that had caused the city so much harm in the Fifties, Sixties and Seventies. Strategic planning was virtually abandoned. There was no more intervention to shift jobs out of the capital. Coincidentally, deregulation in financial services - the Big Bang - caused London's economy to boom during the mid- to late 1980s. Liberated, London became more economically dynamic than at any time since the second world war.

Even the abolition of the Greater London Council failed to dent the success in the years after 1986. The capital was blessed with industries such as financial and business services, tourism, civil aviation and the arts, which led to a huge expansion in service-sector jobs. Employment losses in manufacturing were generally cancelled out by gains in services. Although the economy suffered badly during the recession of the early 1990s, it has recovered very strongly ever since.

The picture is not entirely rosy, however. Unemployment in the capital continues to exceed the national average. There are pockets of extreme poverty within a short distance of the most valuable real estate in Europe. Skills shortages exist alongside the high unemployment. It is clear that some of the capital's population do not, and will probably never, enjoy the fruits of London's flexible economic success.

Thus, like many of the world's largest cities, London is a place of extreme contrasts. But because Britain is a country where central government controls the allocation of virtually all public spending, it is almost impossible for the capital to use its own wealth to sort out its economic problems. Out of every £1 raised in tax in Britain, 95p is allocated by Whitehall in public expenditure, social security and grants to councils. Only the remaining 5p is raised by local authorities via council tax. It is therefore the centre that determines how London, and for that matter, other cities, receive resources to tackle their problems.

The vast tax wealth produced by the City of London and the West End is therefore not available for London politicians to spend in Hackney or Tower Hamlets. The capital's councillors and MPs must bid, in competition with other regions, to get back the money their constituents have paid in tax. It is easy to see why so many local councils have behaved irresponsibly in recent years: they are under no pressure to maintain or enhance their local tax-base. It is the city's poorest citizens who have suffered when public services have failed.

Identifiable public expenditure in London is about 5 per cent above the UK average, though rather below the figures for Scotland and Northern Ireland. Tax paid by London is (per capita) well above the national average, so the capital is, overall, contributing something between £10bn and £20bn a year, net, to the national coffers. That is, London pays more in tax than it receives back in public expenditure.

Perhaps this is not surprising, given the number of wealthy individuals and corporations in the capital. But, given the dilapidated state of much of the city's social housing, primary healthcare and transport system, there is an argument to be had about whether or not the government is reinvesting enough of the capital's "surplus" to maintain its asset base. If London is some kind of economic golden goose, other regions have a vested interest in ensuring that it continues to lay eggs.

Outside the capital, "London" is two quite different entities. First, it is the centre of virtually all UK political power, the home of government ministries, inspectorates and, for four days a week, the overwhelming majority of parliamentarians. Second, London is a big city in the south-east of England, which appears to absorb most of the things other parts of the country would like to have. Both of these Londons inspire suspicion and, on occasion, downright envy.

To be fair, it is not really London's fault that it is the centre of government. It could, after all, have been Winchester or York. But once London became the capital, first of England and then, eventually, of the UK, it was inevitable that the headquarters of parliament and government would be based there. Blaming "London" for the gross centralisation of British government (a justified criticism) often leads the population of the capital to be muddled in with the criticism. Centralisation of power over the regions is then seen as synonymous with apparently generous treatment of London in a range of other ways, such as allocations of Lottery funding.

There is, after all, just one London MP in the cabinet. This is remarkable and suggestive of some kind of systemic bias. True, the mayor of London will give the city a powerful new voice in the British political system. But all the key decisions about resource allocation will remain within government. The mayor will be as much an advocate and lobbyist as a chief executive.

Regardless of London's awkward position within the UK, the place remains a cauldron of economic vibrancy and cultural creativity. The single characteristic that differentiates the city from much of the rest of the country is its international focus. Much of the trade of the City of London - the centre of the capital's most important industry - involves overseas markets. Heathrow is the world's busiest international airport, with Gatwick not far behind. Overseas tourism is worth £7bn a year to the capital's economy, almost as big an amount as manufacturing.

But it is London's resident population that represents its cosmopolitanism at its most dazzling. A quarter of the capital's inhabitants are black or Asian. This figure will rise to more than 30 per cent in the next few years. There are communities from virtually every country in the world living in London: according to the 1991 census, there were 51 communities in London of more than 5,000 people who were born outside England.

Immigration has been an enormous advantage for the capital. According to the recent study Multilingual Capital (edited by Philip Baker and John Eversley, Battlebridge Publications), there are more than 300 languages spoken in London. When the European Bank for Reconstruction and Development was set up in London, it managed to find employees speaking 38 different languages from within the capital itself. The impact of new and established immigrants on London's cuisine, fashion and music cannot be exaggerated.

In the past two years the net number of (officially recorded) new immigrants to London has jumped to more than 100,000 a year. A visit to any of the city's new restaurants, coffee shops and hotels is like a trip abroad. Young Europeans come to London for a year out, to work and learn English. Skills shortages in teaching, nursing and IT are being made good by immigrants, generally from Australia, New Zealand and South Africa. Refugees from Africa have tended to find work in less well-paid employment, typically driving mini-cabs and office cleaning.

In the context of London's seemingly endless capacity to absorb new immigrants, there are dark clouds. London boroughs have found themselves without the necessary resources to cope with growing numbers of asylum-seekers. The government's system of dispersal, itself controversial, has thus far proved chaotic and ineffective. Anyway, previous efforts at dispersal have simply led to the groups concerned moving back to London as soon as possible.

More ominously, the recent campaign against Romanian beggars has suggested attitudes to a small and visible minority of new immigrants that are greatly out of proportion to any real problem. London has far greater social ills that go unremarked upon.

Nevertheless London will most likely remain a city of mass international immigration and, therefore, population growth. The desire of new immigrants to get on and to build themselves into their host community is visible in the educational attainment of the children of earlier arrivals in Britain. Some London boroughs have recently had big improvements in their examination results as the result of the performance of the children of previous immigrants. The capital's economy will continue to benefit in a number of ways from its ever-growing ethnic minority and immigrant populations.

The cosmopolitan make-up of London, combined with its sheer scale, make it unlike any other part of the UK. But it is still a British city, with many of the characteristics that mark it out from other world cities. It can still be very grey. Poverty and squalor can be found in virtually all neighbourhoods. For newcomers, it can be hard to break into. As a major city, it never seems quite at home with 24-hour life, despite big improvements in recent years. The licensing laws remain absurd. There is still racism and homophobia - last year a bomber attacked Asian, black and gay neighbourhoods in what was supposed to be Europe's most tolerant city.

Yet it is Britain's only competitor in the "world city" stakes. It provides a window on the world for an insular race. Despite its many failures, it is a city for people throughout the UK: it is, after all, one of the country's largest Scottish, Welsh and Irish centres. Whoever becomes the first directly elected mayor inherits a place which is, in many ways, more like a polyglot country than a mere city. It is indeed different, and difference is good.

Tony Travers is director of LSE London