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Reference ID Created Released Classification Origin
07LONDON4472 2007-12-05 11:11 2010-11-30 23:11 CONFIDENTIAL//NOFORN Embassy London

DE RUEHLO #4472/01 3391158
P 051158Z DEC 07
C O N F I D E N T I A L LONDON 004472 




EO 12958 DECL: 12/05/2017 



1.4 B, D

1. (SBU) Summary: Your December 7-8 visit to London comes after Prime Minister Gordon Brown has finished putting his own stamp on the government, following this summer’s transition from Tony Blair’s tenure, and begins focusing on governing. It also comes at a time during which major infrastructure programs such as Heathrow Terminal 5 are nearing completion and new proposals such as London Crossrail and a new runway for Heathrow are being launched. Ruth Kelly, Secretary of State for Transport, has highlighted security, liberalization, and environmental protection as key priorities. Kelly’s tenure began two days before terrorists drove a car with crude explosives into the Glasgow airport terminal, and security remains a key transport concern in the UK. End Summary.

(U) UK Political Scene

2. (C/NF) After leading the Labour Party for 13 years and Her Majesty’s Government for ten years, Tony Blair stepped down in June and Gordon Brown succeeded him as Prime Minister. Brown had served as Chancellor of the Exchequer (finance minister) throughout Blair’s premiership and had always been the obvious choice to succeed him. It was Brown who ran the economy; the New Labour program that made the Labour Party electable again after 18 years in opposition was as much his creation as Blair’s. Brown got off to a strong start over the summer. The public welcomed his solid competence as a refreshing change after Blair’s perceived slickness, and hoped he would turn the page on the deeply unpopular Iraq war. The new PM responded well to several early crises: abortive terrorist attacks in London and Glasgow; the worst flooding in 60 years; and an outbreak of foot-and-mouth disease. Brown’s unexpected lead in the opinion polls fueled disunity within the main opposition Conservative Party and prompted speculation that he would call a snap election this fall (though he need not do so until May 2010). The prospect of a fourth consecutive general-election trouncing caused the Conservatives (“Tories”) to rally behind their leader David Cameron, who delivered a stellar speech to the annual party conference; the Tories got a bounce in the polls, and the Prime Minister decided not to call an election after all. That decision was widely seen as a humiliating climb-down, and his claim that the polls had nothing to do with the decision damaged his reputation for integrity. Ever since then, the bad news has just kept on piling up for Brown:

- the Labour Party General Secretary abruptly resigned after it emerged that a major donor was using proxies to conceal his contributions to the party and the General Secretary knew about it and failed to comply with legal requirements;

- a government agency lost personal data - including bank account details - on 25 million people (out of 60 million) when a junior employee violated security regulations all too easily. Another case emerged recently in which a government contractor kept personal data for a year after finishing its project, leading to serious questions of the government’s handling of data;

- the government’s loan guarantees in response to the mortgage bank Northern Rock crisis (Britain’s first run on a bank since 1866) put over BPS 20 million (equivalent to more than USD 40 million) of taxpayers’ money at risk; and

- ministers and civil servants alike are said to be demoralized by Brown’s secretive and controlling approach, and parliamentary backbenchers despair at his vulnerability to Cameron’s agile taunting.

Key Bilateral Issues

3. (C/NF) The UK is our closest and most important ally. PM Brown is much less outgoing than Blair and wishes to avoid being accused - as Blair was - of being President Bush’s “poodle,” but he wants - and knows that Britain needs - a strong relationship with the U.S. Administration. He considers Afghanistan the primary front in the military conflict against Islamist terrorism and is increasing the UK’s involvement there, while emphasizing that the global threat of violent Islamist extremism cannot be defeated by military means. On Iraq, he is reducing the British presence
while insisting that the UK will meet its obligations to the Iraqi people and the international community. He attaches great importance to resolving the Israeli-Palestinian conflict and is keen to support economic development in the Palestinian territories. All British nationals detained at Guantanamo have been returned to the UK, and HMG has requested the return of five detainees who have residency ties here; bilateral discussions are ongoing.

Surface Transportation Programs

4. (SBU) In 2003, the Mayor of London introduced a congestion charge of BPS 5 (USD 10) per day to drive into the central portion of London (50 pence per day for those living inside the zone). The city considers this a fee for service (improved transportation infrastructure, decreased pollution and congestion), and did not grant a diplomatic exemption. After determining that the fee was actually a tax, and therefore not payable under the Vienna Conventions of Diplomatic and Consular Affairs, the Department of State engaged in lengthy negotiations with the Foreign and Commonwealth Office and the City of London. In July 2005, after negotiations concluded unsuccessfully, the Department instructed the Mission and its members to stop paying the tax. The U.S. Embassy was not the first to refuse to pay, and following the expansion of the congestion zone and increase in the fee to BPS 8 (USD 16) in 2007, a large number of missions, including 23 of the 27 European Union missions in London, now refuse to pay the tax. London Mayor Ken Livingstone has focused his ire publicly against the U.S. Embassy and the Ambassador personally. His position, however, should be seen in the wider context of his anti-American positions on many issues and his coziness to the likes of Hugo Chavez and Fidel Castro.

5. (U) In October, PM Brown gave the go-ahead to a major light rail program for London that was first raised in the 1980s. Crossrail will be a new east-west railway linking Maidenhead and Heathrow in the west with Shenfield and Abbey Wood in the east via tunnels under Central London. The track will be 118 kilometers and will house 38 new stations, enabling an estimated 200 million passenger journeys a year. Construction is set to begin in 2010 with the first trains expected to run in 2017. PM Brown said Crossrail will be of “enormous importance, not just for London but for the whole country” and would generate up to 30,000 new jobs. Funding, projected to be BPS 16bn (USD 32bn), will be met by the government, businesses and farepayers, with a BPS 5bn (USD 10bn) grant coming from the Department for Transport. Direct contributions will be made by some of the project’s key beneficiaries, including the City of London Corporation. TfL estimates that Crossrail will contribute BPS 30bn (USD 60bn) to the UK economy. Getting approval for this project is seen as a major accomplishment for Ruth Kelly and her department.

6. (U) In 2004 the government announced the creation of the Transport Innovation Fund (TIF), designed to support the costs of smarter, innovative local transport packages. Projects address demand management, congestion charging, and local and regional schemes to benefit national productivity. In 2005, Cambridgeshire successfully bid for BPS 385,000 (USD 770,000) and was awarded a further BPS 1.055m (USD 2.11m) to fund a study looking at transport packages that combine demand management measures with measures to encourage modal shift. The funding was provided on the condition that the local authority study whether a congestion charge would be appropriate in Cambridge. In October 2007 Cambridge submitted another bid for nearly BPS 500m (USD 1bn) which would be used to fund large-scale improvements to public transport, highways and cycling facilities and demand management measures, specifically congestion charging. The government is also considering a bid from Manchester which would involve BPS 3bn (USD 6bn) worth of public transport improvements in exchange for a peak-hour congestion charge of up to BPS 5 (USD 10) a day.

7. (U) On November 14, the first high-speed Eurostar train left the modernized St. Pancras station for Paris. The move to St. Pancras, on the north side of Central London, from Waterloo, on the south side, will make it easier for passengers from Northern England and Scotland to connect to the Continent. The move is the culmination of a BPS 5.8bn (USD 11.6bn) 10-year project designed to speed up travel to Britain from France and Belgium. The new 68-mile high speed single rail line between St. Pancras and the tunnel under the
English Channel is the final section of high speed rail to be completed and enables Eurostar trains to hit 190mph. It cuts journey times by approximately 20 minutes and links London with Paris in two hours, 15 minutes and London with Brussels in one hour, 51 minutes.

(U) London Olympics

8. (U) London will host the Summer Olympic Games in 2012. Transportation for the Games will be delivered through a partnership between the Olympic Delivery Authority (ODA) Transport team, Transport for London (TfL), Department for Transport (DfT), Network Rail and other transport providers. The ODA aims for 100 percent of ticketed spectators to travel to the Games by public transport, walking or cycling. There will be no private car parking for spectators except for some “Blue Badge” disabled parking. An Olympic Route Network (ORN) will be implemented for the transportation of athletes, comprising a network of roads linking competition and key non-competition venues. In general, roads will remain open to the public. However, some traffic lanes will be dedicated for Games vehicles on the busiest sections of the route. An Olympic Transport Operations Center (OTOC) will be established to manage all modes of transport.

Airport Infrastructure and Aviation Liberalization
--------------------------------------------- ----- 

9. (U) The UK remains the destination for the highest number of passengers departing the U.S. by air, and Heathrow airport processes more international passengers than any other airport in the world. In the face of continued rapid aviation growth rates, airport infrastructure is a key concern in the UK. Creaking and groaning under the weight of old infrastructure coupled with modern security requirements, Heathrow operator BAA and the flying public will welcome the opening of Terminal 5, on March 27, 2008. This new terminal, which is on time and under budget, will nearly double existing capacity, and is capable of handling the Airbus A-380.

10. (U) While there is light at the end of the passenger capacity tunnel, Heathrow is unique among airports of its size in operating only two runways. In fact, the southeast of England has not seen a new runway since the Second World War, and the government is eager to see a new runway at Heathrow, Stansted, or both. Nor is the issue limited to England, as Scotland’s Prestwick airport is the busiest single runway airport in the world. On November 22, the Department for Transport published a consultation on adding a third runway at Heathrow airport by 2020. This has kicked off a lively public debate, with positions crossing party lines. As may be expected, noise and local air quality issues dominate the environmental debate around the third runway, although climate change concerns figure prominently as well. In addition, the new runway would require the demolition of an entire village just north of the airport.

11. (U) BAA (formerly, British Airports Authority, which was privatized in 1984) has also come under considerable criticism for its levels of service and the Parliament’s Transport Select Committee has launched hearings on the issue. In addition, the Competition Commission has recently investigated whether BAA’s dominance of the London area should be allowed to continue. Finally, the Civil Aviation Authority has just published on November 20 its proposal for fee structures at Heathrow and Gatwick (along with Stansted, fees for these airports are regulated by the CAA because of BAA’s near monopoly over London), which neither airlines nor BAA find acceptable. On the whole, airport issues will remain a major topic for Ruth Kelly for the remainder of her tenure.

12. (SBU) Sentiment in the UK regarding the conclusion of the first phase of the U.S.-EU Air Services Agreement was largely negative, and Ruth Kelly and other ministers are under considerable pressure to conclude successfully a second round of negotiations, including concessions on foreign ownership of U.S. airlines. Airlines such as Virgin and BA are eager to gain access to the U.S. market, as you are well aware. Public opinion also plays a role, as the agreement was seen by many as another example of UK interests being subsumed by negotiators in Brussels. Department for Transport officials have raised the desire for a timely and successful conclusion of a second phase on numerous
occasions, and have not been deterred by explanations of the U.S. political climate - especially during an election year. Secretary Kelly may raise this issue with you.

UK-U.S. Climate Change Differences

13. (SBU) The predominant environmental concern in the UK is climate change. The UK was disappointed the U.S. did not sign the Kyoto Protocol. Local air quality is a concern, but when faced with a trade-off, UK policy will tend to favor reducing carbon output (as evidenced by the fact that around 50% of vehicles in the UK run on diesel and would not meet most U.S. air quality standards). There is strong support for action on climate change legislation across the political spectrum and among the general public in the UK. The UK participates in the EU Emissions Trading Scheme (ETS), a cap-and-trade program to help Europe meet its Kyoto Protocol commitments on carbon emissions. The UK is also a key supporter of a European Commission proposal to include aviation in the second phase of ETS, which is working its way through the legislative process. The U.S. and other governments have registered concerns over the legality of this unilateral environmental regulation on aviation emissions, which should be resolved within the International Civil Aviation Organization. Secretary Kelly’s office has indicated that she will raise this issue with you.

14. (SBU) Transportation is one of the largest and fastest growing contributors to climate change in the UK, and aviation is seen as unique in that it is not subject to fuel tax and duty (with the sole exception of non-commercial general aviation). In an attempt to be seen to address the growth in aviation emissions and make aviation pay its environmental costs, Her Majesty’s Treasury (HMT) recently mooted a proposal to abandon air passenger duty (APD) in favor of a charge on every flight leaving the UK. The proposal aims to include previously excluded categories such as cargo, transfer passengers, smaller aircraft and non-commercial aviation. The proposal still lacks detail, but the intent is to provide incentives to reduce emissions and more closely align the tax with environmental impact. HMT has held several meetings with UK, U.S. and other passenger and cargo carriers. In addition, the Embassy met recently with HMT and DfT officials to seek more information, including HMG’s views on the compliance of the proposal with international obligations such as air services agreements and the Chicago Convention. It is clear that UK analysis is not yet well developed, but HMG indicated a willingness to exchange further information and hold discussions with a view to avoiding another conflict over aviation and emissions.

Transportation Security

15. (U) Transportation security remains high on Secretary Kelly’s agenda, as transportation security oversight remains within her department. On June 29, just one day after Kelly assumed her duties as Transport Secretary, police discovered two failed car bombs in London’s West End. The following day, terrorists drove a flaming vehicle equipped with a crude explosive device into a terminal at Glasgow airport. This incident came less than a year after police foiled an attempt to smuggle liquid explosives aboard U.S.-bound airlines and almost two years to the day after the July 7 London bombings in which 52 commuters were killed on three Underground trains and a bus. UK aviation suffered considerably after the liquid explosives attempt, with massive cancellations and delays. The long term effects of the liquid explosive attempt have been felt far and wide. However, in the UK, the overstretched security infrastructure could not cope with the additional security requirements and passengers were strictly limited to one carry-on bag. Secretary Kelly has announced that this restriction will be lifted next year. This move, along with additional measures, i.e., implementation of new technologies such as ct scans at checkpoints at Heathrow and Gatwick, should improve passenger flow. U.S.-UK transportation security and counter-terrorism cooperation is very strong. We are encouraging UK security officials to focus on soft targets countermeasures, counter radicalization and intelligence sharing.
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