§ Order read for resuming adjourned debate on Question [21st January]:
§ That this House takes note of the White Paper, Public Expenditure 1968–69 to 1973–74 (Command Paper No. 4234).—[Mr. Roy Jenkins.]
§ Question again proposed.
§ 4.32 p.m.
§ Mr. Peter Walker (Worcester)
I begin by joining with the Chancellor in the tribute which he paid to his right hon. Friend the Member for Gloucester (Mr. Diamond) for the part which he has played in the past in presenting his views on the manner in which public expenditure should be presented to the House, and their result in the White Paper which we are discussing today. May I say how pleased I am to be once again debating financial and economic matters with the right hon. Gentleman the Member for Gloucester. In 1965, we had considerable debate together on similar items.
I follow the speech of the hon. Member for Heywood and Royton (Mr. Barnett). In tribute to his speech, may I say that I very much agree with his criticism that there is a need to present more vividly the alternatives in public expenditure. One of the failures in presentation is that the House can see the suggested programmes of the Government, and their projections, but cannot see the expense and the cost of different variations of those programmes. I should like to see ways in which the alternatives could be more vividly presented to the House and to the public at large.
The hon. Gentleman made one rather remarkable comment, in criticising the Chancellor of the Exchequer and the Treasury in general, when he said,…for too long we had had an almost Victorian outlook on debt, as if being in debt is wicked and that it is bad for the country to borrow."—[OFFICIAL REPORT, 21st January, 1970; Vol. 794, c. 636]724 I should have thought that that was a pretty unfair criticism of this Government. Rather than a Victorian attitude, they have had much more in mind George III, and, possibly, the relationships between the I.M.F. and the Government are similar to that of Parliament and George III.
An interesting feature of the debate is the climate in which it is taking place. If it is any encouragement to those two financial ferrets, the hon. Member for Heywood and Royton and the hon. Gentleman the Member for Ashton-under-Lyne (Mr. Sheldon), there is a considerable similarity between the speeches which they are now making and the speeches which the Chancellor made in 1961–63. Perhaps there is a sort of progression in these affairs. One has the 1961 phase, when both the Chancellor and his right hon. Friend the Member for Gloucester used to come in on all the Finance Bill debates when we were in power and make good pro-growth speeches on the importance of not taking too much notice of the balance of payments. Then one comes to the 1964–65 period of optimism when the growth was being planned and the talk was of how it would be spent.
Now, we come to the dreary final phase when they are counselling that one must not be too optimistic about growth—but it may be 3 per cent. with a little luck. At least, the two hon. Gentlemen on the back benches are at the beginning of the progression. We shall be interested to watch their progress in the next decade. [Interruption.] They will, I think, enjoy it on this side as much as they have on that, though, in fairness, one should say that, on whichever side they may sit, both are always in opposition.
As regards the background of our present debate, any estimates of public expenditure and plans for the future are bound to be very much affected by immediate past history. It would be easy for us on this side to quote items from the National Plan and contrast the various speeches which have been made. Any Government presenting forward-looking plans must be considerably affected by the economic background of the immediate past. The immediate background of this White Paper is an interesting one and one which will therefore have affected the Government's thinking, and yet one 725 wonders to what extent they have taken into consideration the impact of the immediate past upon the immediate future.
For example, the immediate past has been a good period for expanding world trade. In any projections of our economy, the Government must come to conclusions about the next period of world trade. There can be plenty of argument either way about whether we are likely to see a few years of expansion or, perhaps, slower growth than in the past few years. This is an important factor.
The other interesting feature is that the Chancellor did not deal yesterday with what I should have thought was an important aspect of public expenditure, that is, the importance of savings. Over the past few years, savings have shown a disappointing decline. The failure to expand savings has a considerable impact upon the whole attitude towards public expenditure.
Third, we have had a period of pretty bad investment record in terms of investment in new plant and machinery and in industry generally which will obviously have its effect on demand in the next few years.
Finally, something which has been grossly under-estimated by the Government is that they are planning a period of growth and public expenditure immediately following the longest period of restraint in recent times. I do not say that as a party point. I put it in these terms: if there is a long period of restraint, the problems of expenditure then become much more urgent. It is possible, for example, if the Government say that there mist be a cut in public expenditure, to stop maintaining the roads for a little while. It is possible to stop painting and repairing houses and buildings in the public sector. However, if there is a long period of restraint, the expenditure needed to make amends for the prolonged restraint becomes considerable, and I wonder whether this has been taken fully into account in the Government's projections.
There are four factors which the House must have in mind in examining this White Paper, none of which has been given great attention so far in the debate. First, there is the impact of savings. Second, the impact of prices and incomes 726 policy, or lack of it. Third, the once-for-all saving factor of the past. Fourth, the whole impact of local government expenditure.
First, the impact of savings. It is important to recognise the impact which the increase or decrease of savings has had over the past decade. Taking the period 1959–60 to 1964–65, one finds that the proportion of public expenditure to the gross domestic product went up from 41.94 per cent. to 44.26 per cent. During the same period, the proportion of savings to g.d.p. increased from 4.02 to 6.77 per cent. Thus, subtracting the figure of savings from public expenditure, in the period 1959 to 1965 the net amount actually required went down from 37.92 to 37.49 per cent. That is an important factor. I recognise that it is not a pure argument and that there are factors in savings not directly related to public expenditure, but, as a general principle, the right hon. Gentleman will agree that there is this important relationship of savings to public expenditure, and during that period the overall figure showed a decline.
In the last five years, the proportion of public expenditure to g.d.p. went up from 44.26 to 51.2 per cent., and the proportion of savings went down from 6.77 to 5.99 per cent., so that the net balance left meant an increase from 37.49 to 45.21 per cent. There is, therefore, urgent need to look at the whole problem of savings.
In fairness to the Chancellor, one must say that in his last Budget he introduced the contractual savings scheme, but, on the figures so far available—it is early days yet—those of us who advocated the scheme before the Chancellor actually introduced it have been rather disappointed. We hope that the figures will improve. However, the overall position of savings at present is not very happy. The unit trust movement has announced that it had had the worst December for many years. The National Savings Movement overall is not good. The contractual savings plan is disappointing. The building societies say that for the last quarter of last year their net figure of cash receipts is £6 million down on the same quarter of the previous year. Clearly, the Government must give much more attention to the encouragement of savings.
727 The second point which the Chancellor did not deal with is the whole question of wages and their impact on public expenditure. The right hon. Gentleman made some interesting observations about the reason why he had made, and correctly so, certain adjustments in the figures. Defending what is referred to as tile relative price effect, he said:The reason for this stems from the fact that prices do not all rise at the same rate. Generally speaking, whether in the public or private sector, rising costs can be offset to a greater extent in manufacturing industry than in services, by better machines and higher productivity. So the public sector, with its greater concentration on services, tends in any case to get less help from rising productivity in keeping down costs and prices than does the economy as a whole … It is right to attribute to public expenditure this rise in the relative cost, which amounts on average to nearly ¾ of 1 per cent. each year … "—[OFFICIAL REPORT, 21st January, 1970; Vol. 794, c. 530.]That is an important and correct adjustment to make, but, in view of the current wage increases being given, how does the right hon. Gentleman regard the figures published in his White Paper?
The impact of the wage increases in the public sector will be far greater than any adjustment made here for prices. I give but three major examples. The projections for education do not take into account increases in teachers' salaries of anything like the dimensions being demanded by the teachers at present. If they are given the increase for which they are asking, either it will mean that the amount to be spent on education must be substantially increased, putting all the projections up by a considerable amount at the very commencement, or, alternatively, it will mean that there will have to be drastic cuts in other spheres of education.
Second, there is the position of the nursing profession. Many nurses are contacting right hon. and hon. Members today. The Government have already agreed to an immediate increase of 11 per cent., or 22 per cent. over two years. If those figures even as agreed by the Government are to be put into effect, they will, presumably, make a substantial difference to the estimates and projections in the White Paper. The degree of difference created by these large wage increases has not yet been subject to sufficient comment.
728 We are told this morning that the Government have agreed to an increase in the building industry of 26 per cent. over the next 16 months. The impact of that increase will be considerable in the public sector. The House should be told more about this aspect of the matter at a time when wages are being increased by such enormous percentages. I am not arguing about the correctness of the claims. [HON. MEMBERS: "Oh."] Not a bit. I am arguing the case in the context of what the Government have presented to us as their projections over the next few years. They have a duty to tell the House how they relate their figures in the White Paper to the size of the increases which are now being given or are about to be given.
The third factor is the impact of the once-for-all savings to which I referred earlier. To what extent have the Government recognised the effects of some of their past period of restraint? I take the road programme as an example. Road maintenance has been cut back considerably. All experts on road maintenance say that one pays a far higher price in the end as a result of such cutting back. Presumably, the Government will now agree to go ahead and make amends in their figures for the cuts in road maintenance over the past few years. But what do they intend as regards the major road programme? There is considerable anxiety among people who are connected with the road building programme as a whole.
Although the original project announced by my right hon. Friend the Member for Wallasey (Mr. Marples), of 1,000 miles of motorway by the early 1970s, has been kept to, and probably by the middle of 1973 about 980 or 990 miles of motorway will be open, so that the long-term programme has been kept in terms of broad ambition, what worries those connected with the industry at present is that, after the coming completions, most of which are under construction, there is very little planning or preparation going on for the further advance of the motorway system. I hope that the right hon. Gentleman will be able to tell us a little about the Government's view regarding their budgeting and expenditure on roads.
Now, the question of local government expenditure, which also has not had the 729 attention in this debate which it deserves. Local government in this country is currently administering expenditure amounting to about £8 a week for every family of four. It employs about 4,000 people in every constituency. Therefore, in terms of total public expenditure, it is folly not to consider the whole impact of local government as opposed to central Government.
The Government must more fully than hitherto appreciate the impact which their central policies have upon the spending of local government. I give but one example. One town clerk informed me that on one morning he had received four circulars, one a general circular urging the cutting back of various programmes, the other three from three different Ministries urging better provision and more services in particular spheres. There has been this great contrast between the dictum of the Chancellor to local authorities and the dicta of the spending Ministries about the services which they should provide.
In addition, there has been a considerable increase in the staff of local authorities as a result of specific Government measures. Some of these measures were non-controversial, and some very controversial. The selective employment payments, for example, have led to the recruitment of more staff. The Land Commission Act likewise, and the Leasehold Reform Act of 1967, the Civic Amenities Act of the same year and various Finance Acts. The provisions of the 1967 Finance Act, and the 1968 Transport Act which strengthened the councils' powers in regard to vehicle licence evasion, have led to enormous increases in local government staff.
Too often we fix our attention on staff increases in central Government in which there is plenty of scope for savings, but because they are dissipated throughout the country nothing like that amount of attentions is paid to great increases in staff in local government as a result of Government decisions.
I will give a few examples of these increases in the period 1964 to 1968. In education the amount of teaching staff has increased quite substantially. No hon. Member would regard that as a controversial matter, but the figures show that teaching staff has gone up from 730 415,000 to 529,000—a substantial increase. It may be quite justified, but it is an increase in which the public should take much more interest than it now takes.
Then if one turns to the general administration of local government, the pure bureaucracy side, there has been an increase in that five-year period from 524,000 in 1964 to 589,000 in June, 1968. Much of this has been related to measures passed by this House and the additional services which local authorities have been called upon to carry out. I hope that any Government in power, when thinking of the effect of their decisions on central Government, will also carefully calculate the enormous expenditure involved in local government.
Furthermore, tremendous rises have taken place in costs following Government action. I have before me the figures of expenditure of one London borough as a result of Government measures. These show the impact either of rate requirement or aid from the Government on local authorities in matters completely outside their control. For example, National Insurance contribution has risen from £12,000 in 1967 to an estimate of £22,000 in 1970, almost double. The amount of S.E.T., which affects local government construction workers, has risen from £10,000 to £19,200. The graduated pension contributions have risen from £21,000 to £54,000. The road fund licence has gone up from £6,000 to £24,000 in the local authority which I am citing. Increases in fuel duty have meant a rise from £2,600 to £5,600.
By far the largest rise has been in the cost of borrowing, which in this local authority has gone up from £286,000 in 1966–67 to the current figure of £1,643,000. Part of that increase is rebated, namely £175,000, but as to the rest it amounts to an enormous increase. The borough I quote has been more adversely affected than most because of some heavy borrowings in the past which have fallen due and which it has had to pay and reborrow. This will happen increasingly to local authorities throughout the country in the coming two or three years.
In looking at local government expenditure and at the projections in the White Paper, I do not believe that the 731 Government have calculated clearly enough the real impact on local authorities of their legislation and also the effects of the past period of restraint. This has been reflected in the whole rate support grant policy. In this respect local authorities for some two years have been unable to agree with the Government figures of expenditure, and outturn has been considerably more than the Government have regarded as the agreed figure. Therefore, many local authorities are in considerable financial difficulty.
This is bound to affect two of their major spending activities. The first is that of education. My right hon. Friend the Member for Enfield West (Mr. lain Macleod) yesterday dealt with education and pointed to the inadequacy of the figures. In yesterday's debate there was a tendency on both sides of the House, when pointing out lack of confidence in the figures in a particular sphere, to suggest that the discretionary figure allowed should be used for certain sections of public expenditure. The figure of £175 million was used at least 10 times yesterday for various different topics.
On the matter of education, I wish to quote the experience of the Inner London Education Authority. For more than 10 years that authority, and the L.C.C. before it, has had an annual increase in expenditure in real terms of 6 to 7 per cent. Simply to maintain existing standards for the increasing number of pupils an annual growth rate of between 4 and 5 per cent. in real terms is required. This is without any improvement, without, for example, tackling any of its slum primary schools; some 400 out of the 800-odd in inner London were built before 1902. It is also without meeting the cost of any real increase in teachers' salaries. Expenditure was held in 1969–70 to an increase of 2½ per cent. in real terms only by limiting the number of teachers employed, by forbidding many technical colleges the introduction of any new courses, and by many other highly undesirable short run economies. The Government are now predicting that this situation will continue for the next two or three years, with all the adverse effects which will follow.
§ Mr. Walker
We have not only made clear that we consider that education is a sphere in which there is need for a rise in expenditure, but also, and this is much more important, we made it clear that in the 13 years of office we achieved it. That is the important factor.
§ Mr. Dickens
That is an interesting admission by the hon. Gentleman. I am sure we can take it that he and the Conservative Party support the teachers' claim for an interim award, which is currently before education authorities. Will he say how the Conservative Party, if they form the Government of the country in the 1970's, intend to finance a large and growing total of public expenditure in education and on a wide field of social services?
§ Mr. Walker
The hon. Gentleman should not be surprised at what I have said, since yesterday my right hon. Friend the Member for Enfield, West devoted an important part of his speech to this subject. The important factor is the matter of growth. The reason that during the 13 years of Conservative Government we were able to bring about a very real rise in public expenditure in education, in housing, and in other spheres was that we achieved growth. This Government have not. This is the basic difference between the two sides.
§ Mr. John Biffen (Oswestry)
One point that will interest the House is whether he foresees that under a Tory Government the percentage spent on education, as divided between public and private resources, will remain as now fixed, or does he foresee an increasing share coming from the private sector?
§ Mr. Walker
I believe that the share from the public sector will continue to increase at a substantial rate.
To turn to housing, we all realise that the housing situation is a serious matter. What is startling is the complete lack of projected growth in the White Paper. I am told that the Minister of Housing at a lunch held today—if I misquote him 733 he is here to correct me—used the expressionI cannot conceal that the housing figures for 1969 are a great disappointment to me, but one cannot expect a boom in the house building industry while the economic situation continues to decline".
§ The Minister of Housing and Local Government (Mr. Anthony Greenwood)
I said that, if there were a high interest rate reflecting world conditions, if there were a cut-back in personal consumption it was bound to have its effect on the house building programme, but that I considered putting the economy back on a sound basis was the first priority and that one must therefore accept that fact and pursue it in the national interest.
§ Mr. Walker
I am grateful to the right hon. Gentleman for giving the details of what he said. All I can say is that it is rather remarkable that earlier this year, in January or February, when he was well aware of the state of the economy, he suggested to the House that the housing figures for this year would not be very much lower than last year. He well knows that they are considerably lower than last year, and probably will be something like 130,000 lower than the Labour Party promised the electorate.
On the matter of housing in the public sector, I point to the considerable impact on future housing policy because of the manner in which the price of houses has risen over the past few years. The average price of a new house in 1964 was less than £3,500. It is now more than £4,800 and is fast rising. It easily can be estimated that the likely average price of a new house within the next few months will be £5,000. If that is so, it means that during the lifetime of this present Government the average price of a new house has gone up by £1,500. If this is the situation, then in any future estimates of Government expenditure these figures must be projected, or alternatively the Government must take action to lower the price of housing.
The depressing factor in the housing situation is that the estimate of expenditure for 1971–72 is very similar to, indeed identical to, that of 1968–69. Therefore, the Government are not projecting any increases in expenditure on housing. There is an increase in the subsidy position purely because of their estimate that interest rates will remain at a high 734 level. There is no scope for any increase at all in the investment programme. This is taking place in a declining housing situation, a situation in which the Government endeavour to suggest that they will go in for a great programme of home improvements in addition to a major housing programme. The figures in the White Paper clearly show that this is not the case. If they succeed in these three years in a programme of major house improvements, it will be at the cost of the housing programme as it now exists. The housing programme at present is at a regrettably low level.
This leads me to the great difference between private expenditure and public expenditure as viewed by the two sides of the House. It is the view of hon. Members on both sides of the House that every person in the country should be housed to a decent standard. Yet this Government cling to a system of house subsidies which is directed both to those in need and to those without need. They are enthusiastically supported in this view by their own backbenchers, and particularly by the Prime Minister, who uses every occasion to suggest that under the Conservatives there might be a change in policy which would mean that some council house rents would go up. In his Swansea speech he issued a challenge to this side of the House to declare what they will do about council house rents. Doubtless those in marginal seats in the North-West with large council estates are anxious to make the maximum political capital out of this matter.
The Government are saying in this document that they see little scope for expanding expenditure on housing. It is impossible to defend that while they continue with a subsidy system where someone who may not need it gets a substantial subsidy, while others who need it receive no help. I do not know why Parliament should not agree that whatever help is available should be used to meet the real housing problems.
In fairness to the Minister of Housing, against criticism from his own side, he brought in a rents Measure and a Housing Bill recently to help a section of houses in the private sector where he admitted that years of wrong rent control had had an adverse effect upon housing standards. I would hope to see a situation in housing where we could 735 agree that fair rents should be charged in both the public and the private sector, with the help available given to those who are in need. To do that, the present subsidy system must be changed, and we will change it.
Another factor in this is what people will want in terms of housing in the future. In 20 or 30 years, if we succeed in achieving a high wage economy, I do not think that a third of the population will want to rent homes let to them by public authorities. I believe that a much higher proportion will prefer to be owner-occupiers.
This really brings to mind the basic divergence between the two sides of the House on a number of issues. I would prefer to assist people to take on a higher responsibility for housing themselves by encouraging them to do so. Over the years, whether people could afford it or not—I am all in favour of seeing that those who cannot receive the help that they need—a large section of the population, either because of the controlled rent system in the private sector or the subsidy system in the public sector, has paid a proportion of its salary for housing which is much lower than in many Western countries. I would like to see people taking on the responsibility that they can afford—a higher responsibility in housing—and going for better housing standards. If we did that, there would be a substantial improvement in housing conditions.
In housing, pensions and industry, there is this basic divergence on public expenditure. We on this side of the House consider that, where an individual can take on the responsibilities himself, it is better for him to do it than for the State to do it.
§ Mr. Dickens
Will the hon. Gentleman deal with this specific question of the subsidy given by means of income tax relief on mortgage interest to the owner-occupier which now averages £47 10s. per mortgaged household as against £30 per annum for council households? Does his party want to overhaul that? For example, does it want to phase it out for people buying houses costing more than £15,000? Is not that subsidy a most regressive one?
§ Mr. Walker
If an individual borrows money and pays a rate of interest on it, as the person receiving the interest is taxed, it is reasonable that there should be an allowance in respect of that interest. However, the figures are rather different from what the hon. Gentleman suggests. The average council house tenant receives not only the assistance of the rate subsidy or the housing subsidy. In addition, he normally receives a considerable historic subsidy since the houses concerned do not appear in the housing accounts at their true value.
In reality, under the existing system, people in the public sector are receiving heavy subsidies when they do not need them, whereas there are many people in the private sector, especially those in furnished accommodation, paying very high rents and receiving no help.
We believe that there is considerable scope. My hon. Friend the Member for Bournemouth, West (Sir J. Eden) dealt last night with the nationalised industries. However, housing, industry and pensions are all spheres where we would prefer to see personal and individual ownership rather than public expenditure. In addition, we would like to see the resources of public expenditure given far more to those who need them than they are at present. That is the principle upon which we shall prepare our policies. I believe that they are policies which will commend themselves to the electorate.
§ 5.12 p.m.
§ The Chief Secretary to the Treasury (Mr. John Diamond)
I am grateful to the hon. Member for Worcester (Mr. Peter Walker) for his gracious remarks, as I am to other right hon. and hon. Gentlemen who have referred to my continuing interest in this topic of public expenditure. I am glad that the hon. Gentleman has raised a number of important topics. I thought that he would be likely to raise them, and my hon. Friend the Minister of State will reply to them fairly fully towards the end of the debate, should he succeed in catching Mr. Deputy Speaker's eye.
I am grateful for the hon. Gentleman's general attitude to the topic of public expenditure. On the basis of his and his party's philosophy, he drew attention to the areas where he thought that savings 737 could be made and to areas where additions could be made. That is what this debate is all about. He did not take the view of some hon. Members that public expediture is an evil and must be reduced at all costs because it is an insupportable burden.
I want to start by saying how I look upon public expenditure after my years of experience of it, and to say that I share with the right hon. Member for Enfield, West (Mr. kin Macleod) the hope that we shall develop these debates in the years to come in a most satisfactory way. I understand his reasons for taking the view which he explained at the start of his speech, that he was fielding a different kind of team from the one which the Treasury is fielding. In explanation of that, we have taken the view that on the occasion of this the first debate, it would be right to put the matter in context, deal with a good deal of the generality of public expenditure and its relationship to the House and to the community, and deal with the control of public expenditure.
We recognise that, as these debates develop, naturally they will be concerned more and more with the programmes involved in public expenditure and with the priorities involved, which are the most difficult choices to make. The whole point of having this kind of debate is so that any Government can be aided by the expressions of opinion in the House which, by that time, will be reinforced by a knowledge of the feelings in the community at large, so that in determining priorities in the years ahead, note can be taken of those developments.
With regard to public expenditure generally, I am sure that the way in which I look upon it and the way in which the right hon. Gentleman regards it is the way in which people who know about it regard it. When I think of public expenditure, I think of two main elements. The first is the provision by the community of what the individual needs. In my case, and I suppose in others, what I need above all is peace and security. That is something which I am happy to pay for and which I recognise is provided for on a community basis far better than it could be on any individual basis. I want clean water to drink, I want good roads to travel on, I want an enlightened system of education and good hospital 738 facilities in case I am taken ill. I want these services and a good many others, and they all have one feature in common. They are needed, they are wanted, and they are most economically provided on a community basis.
Being a practical person, I pay happily for these services, the more willingly because I understand what I am paying for and that I am getting value for my money, provided that the service is well and economically run. It is the Government's responsibility to achieve that, and it is Parliament's responsibility to test it.
I recognise that it is easier for a Chief Secretary to be familiar with public expenditure and the nature of it than it is for the ordinary man in the street. That is why I welcome this debate and think that it is the first of an important series. For the first time, through the wise co-operation of Government, Parliament and the Select Committee which has done such a helpful and thorough task, we are able to see what kind of services are being provided, how the cost varies over time and as between the different programmes, and what burden it creates for the taxpayer.
I am sure that this is the essential first stage in spreading a wider understanding among the community as a whole and that, the more we have this understanding, the more responsible will be the comment, the more fruitful the discussion and the more certain that the community will get the services that it wants, as compared with those which the Government think that it wants.
Obviously I could not argue that the whole community wants exactly the same services. Some individuals want the community to provide more, some want less, and they want less so that they will have more money left in their pockets to spend in their own way. I do not believe that we shall ever reach a situation where there is a complete identity of view on this. However, the more that we have White Papers of this kind and the more that we discuss them, the more widely we shall get the understanding of them to which I have referred. In addition, we shall get nearer the point where the community is clear about what it wants and what it is prepared to pay for.
These communally provided services form an important part of the individual's standard of living. An increase in them 739 constitutes an increase in the individual's standard of living. Broadly speaking, this increase is at the expense of what he could otherwise afford in that part of the standard of living which he provides personally.
This gives rise to the question, is there a permanently fixed proportion of the nation's resources which it is right to allocate to the provision of these community services? I do not take the view that there is. It is a matter of opinion, and one worthy of serious discussion and debate. I do not take the view that the proportion which we provide at present is too great. During the current year, the cost of the services about which I have been talking is about £11,000 million. The gross national product is roughly £39,000 million, so the services about which I have been talking amount to between a quarter and one third of the gross national product.
I recognise that, in the enjoyment of these services, there is less freedom in terms of individual choice than those which the individual provides himself. I recognise, too, that an excessive provision of public services would be an encroachment not only on the pocket of the individual taxpayer but also on his freedom, through his own spending, to achieve his own way of life. That is a most important freedom. It is plain to me that my way of life depends both on what the community provides and what I am able to provide myself. To the extent that the community provides these services more cheaply than I could provide them, I am saved money and so am free to purchase privately a higher standard of living than I would otherwise be able to do. That then is a part—
§ Mr. Patrick Jenkin (Wanstead and Woodford)
Before the right hon. Gentleman moves on to his second head, I was wondering whether he would say anything about charging for the community service, which many of us agree can often be provided more economically by the community. But this does not rule out charges.
§ Mr. Diamond
It does not rule out charges. The interesting question is not what we charge but the method by which we charge. The hon. Gentleman is really asking: should the individual pay as the consumer of the service or as a member 740 of the community? We have established our policy in these various spheres. We do not close our minds completely to possible extensions where it may be thought fit and wanted. My appeal is to get understanding spread so that this House and any Government will know what the people want. It follows that if people want a publicly provided service—I will not say by a nationalised concern, because that will put backs up—and they want to pay for it individually, I can see nothing against that. If they want to extend or to create a new service and to have it provided on a communal basis, I see no reason why that should not be done. I can think of obvious examples that a local authority could extend its activities into which it might think that it could provide more satisfactorily, understandingly and cheaply than on another basis. There is no earthly reason why that should not be done and be charged for on an individual basis.
If the hon. Gentleman is talking about education, the water rate, or a whole host of things like that, we have long passed the stage where we regard it as appropriate to try to assess the cost that the individual is putting the State to or the service to rather than the need of the invidual. Our policy emerges from our programme and the programme of the years ahead. It is clear that policy changes are involved, but they are all set out in that programme.
I now turn to the other part—and it is a large part—of the picture that presents itself to my mind when I think of public expenditure. I am referring to the provision of the resources which enable those who would not otherwise be in a position to do so to satisfy their legitimate needs. I have in mind old-age pensions, supplementary benefits, family allowances for the poorer section of the community—all those things that we classify as grants and subsidies. To some extent these are provided by national insurance contributions, to some extent by taxation, direct and indirect. This element is very different from the provisions of the community standard of living, to which I referred earlier. Its impact on resources, as my right hon. Friend the Chancellor made clear yesterday, may be very different. It is also to be distinguished in the sense that it is the ultimate spender who has the freedom 741 of choice, to which I referred earlier. But the real distinction with which I am concerned is that, to the extent that this provision is made out of taxation, then those who provide and those who receive tend to be different individuals. I will tell the House why I also welcome that element in our public expenditure, with its marked redistributive effect.
I could wish that all I need do was to state the simple and by now, I hope, fairly universally accepted proposition that in taxation we should take from each according to his capacity to pay and in social benefits give to each according to his need. I cannot, for the simple reason that we have not got that far yet. I need hardly remind the House that direct taxation is progressive and, in the surtax levels, steeply progressive. I need hardly acid that indirect taxation is regressive.
If one examines the impact of direct and indirect taxes combined on a wide range of families, one finds that for each type of family over a wide range of incomes direct and indirect taxes together constitute a remarkable stable proportion of income. The point that I am making is that our tax system, broadly speaking, is neither progressive nor regressive, but neutral. Our system of social service benefits, on the other hand, is very progressive. It favours families with lower incomes much more than those with high incomes; and larger families more than smaller. As a result of this element in our public expenditure, during the period that we have been in office benefits have not only kept pace, but moved markedly ahead.
I suggest that the best way of testing it is to have regard to what is called the break-even point—that is, that level of income at which the average family gets more out of the State in benefits than it pays in taxes. The break-even point has been rising. Poorer households have had an increasingly better deal, and w thin each income range the larger the family the greater is the margin by which benefits exceed taxes.
So it must not be expected that I or arty of my hon. Friends should hang our heads in shame every time someone points out—this is frequently done either at Question Time or in debate—that taxes have risen during this period of Labour Government. That increase has enabled 742 the Government to improve the living conditions of the whole of our community, and those living conditions go a long way in determining the quality of life. That increase has also enabled the Government to carry out the kind of redistribution of income which is the mark of a humane and self-respecting society.
I take pleasure in the fulfilment of my beliefs and pride in the fact that this party and this Government have done what they were sent here to do—[Interruption.] I have referred to the increase in taxes and spelt that out. I have done it on the basis that hon. Gentlemen will in due course come to look at the matter fairly and not in highly partisan terms.
That is why I thought that on this, the occasion of the first of these annual debates, I should spend some time on the general propositions affecting public expenditure.
I now turn to the White Paper and offer a comment or two upon the figures and answer some of the more important questions that have been put to me about it.
§ Mr. Stanley R. McMaster (Belfast, East)
Before leaving his general beliefs, will the right hon Gentleman say a word about another aim of public expenditure, namely, providing employment or building up the infrastructure in development areas?
§ Mr. Diamond
I should be glad to do so, because the hon. Gentleman knows that this is a level of expenditure which has increased considerably. I have dealt with two main broad categories. Within one of them we have this expenditure, which has gone up considerably, but which I think—and I hope that the hon. Gentleman thinks so, too; it would be extraordinary, coming from where he does, if he does not—has had a most beneficial effect.
I should like to deal with the figures broadly. Although I have done this before in a short form, I think that it would be reasonable to try to put the whole matter in context by covering the course of the figures in recent years. I do this because I realise that the House is confronted with a special difficulty in that we are dealing with a topic where the definitions are not fully established 743 and where there have been changes in definition. We think that we have now established a definition which will serve for a long time. This is not the definition which right hon. and hon. Gentlemen opposite adopted earlier. Therefore, I should be careful to compare like with like.
I think that the House knows that the average annual growth of public expenditure during the first five years of this Government is about the same as in the last five years of the previous Administration, namely, about 4¼ per cent. I hope that it will be established shortly that it is slightly below that.
It has not, of course, been 4¼ per cent. each year. The figures have varied during each of the five-year periods I have mentioned and the variation has been considerable in both cases. In our case, we planned to increase public expenditure at this average rate over this period, but we did not attempt to delineate the annual path. Indeed, my right hon. Friend the present Home Secretary referred on several occasions to the "hump" of public expenditure occasioned by the need to increase rapidly certain services which had been inadequately financed by our predecessors and which could not be matched by corresponding savings in other services on the same time scale.
Having achieved that, we are, Of course, criticised for having continued to plan, or having increased public expenditure when it became out of line with the rate of increase in the national product. As I have explained, it is not possible to keep these two in line precisely each year. The rate of growth of the national product cannot be accurately determined years in advance and the course of public expenditure is such that variations, particularly downwards, cannot be achieved at short notice other than at substantial cost.
So we are faced with the familiar situation of public expenditure growing at a higher rate than G.N.P. in certain years and at a lower rate in others. I say "familiar" because this is a pattern which our predecessors also experienced. So I can justifiably claim that public expenditure has been well controlled, in whatever sense that term is used. I am referring both to the total and to detail.
§ Mr. John H. Osborn (Sheffield, Hallam)
At this stage, the Chief Secretary cannot dispute the figures already stated that, as a percentage of G.D.P., we are over 51.1 per cent. and that public expenditure is likely to stay at that level.
§ Mr. Diamond
The way to avoid arguments about figures is to have the figures in front of one. The advantage of a White Paper of this size—83 pages—is that it gives every figure which one can reasonably ask for—[An HON. MEMBER: "Many figures."] It gives so many that I am surprised that we have not been criticised for publishing a paper too long to be readily digested. As every hon. Member knows, if he needs any figures he need only put down a Question and we will do our best to give him the information he requires. The figures which I have been talking about finance the services which I have mentioned.
§ Mr. David Howell (Guildford)
Going back to the figures of the right hon. Gentleman's White Paper and to his point just now that the rate of growth of public expenditure has been lower than the rate of growth of G.N.P. in some years, and that in others it has been higher, surely he must tell from his own figures that, over the period of the five years 1964–69—the next three years, to 1972, apart—the five years had a rate of growth of 5.9 per cent. and the next three will have a rate of 3 per cent. and that, if one adds all these together and divides by eight, one comes out with a figure of well over 4 per cent., which is higher than the rate of growth of the G.N.P. either over the last five years or projected for the next three.
§ Mr. Diamond
I was not aware that anyone had said anything different. The hon. Gentleman was asking me about a proportion of G.N.P. On the question of the growth—I have never said anything to the contrary—my case is that we did what we needed to do. I have demonstrated that. In certain years, public expenditure grew faster than G.N.P. and in other years slower, but what I do not admit or accept is that, at the point of time when, coincidentally, a General Election took place, in 1964, the Government opposite, in their wisdom, had achieved such a proportion of G.N.P. for public expenditure as to be right and 745 unalterable for all time. That proposition has never been demonstrated to me.
What I am saying is quite to the contrary—that there were certain services which were not provided for and which had to be made good, and rapidly. I have already referred in this situation to "cries from the grave". One cannot wait forever without increasing old age pensions. The purpose is no longer served if one does. I hope that the hon. Gentleman will not misunderstand where I stand on public expenditure.
I now continue with what I was saying about the control of public expenditure, in whatever sense one uses the term, both in total and in detail. What distinguishes the public expenditure of our predecessors and that of ourselves is neither the absolute rate of growth nor the short-term relationship to the gross national product, but the difference in our priorities which is shown both by the importance which we attach to the publicly provided element in our standard of living and, within that total provision, the importance which we attach to the social services.
As the figures show at a glance, our predecessors showed a marked preference towards defence expenditure, we for the social services and in particular for those providing for the neediest in our community. In real terms, their defence budget expenditure rose on average by 1 per cent. a year. Ours has gone down by 1½ per cent. a year. They spent more on defence than on education; we have spent more on education than on defence.
I would say to some of my hon. Friends who are doubtful about the impact on defence expenditure that, if defence expenditure between 1964–65 and 1970–71, the period covered by the White Paper, had increased at the same rate as in the period 1959–60 to 1964–65, the comparable period under the previous Government, the cost of the defence budget in 1970–71 would have been nearly £2,600 million, at 1969 survey prices, or 17 per cent. higher than the planned expenditure on defence in that year.
There is no doubt that our predecessors were just as true to their philosophy as we have been to ours. I delight in the fact that we have a White Paper 746 which sets out the facts so clearly for all to see. It is only over a period of years that one can really see the implementation of a good policy in this field. This is one of the benefits of the White Paper and of this debate.
There are three major advantages of this. The first is what I have already referred to—enabling the true nature of public expenditure to be fully understood. The second is that it would show up the unbalanced criticism for what it is. There are several examples of unbalanced criticism which one hears every day. There is the criticism that more resources should be devoted to a particular service, with no indication of what corresponding reduction there should be either in public or in private consumption. There is the criticism that a particular service to which the speaker is attached should be increased and expanded, but that the total of public expenditure should be reduced. There is the criticism that a particular service is inadequate and that the way to resolve the inadequacy is to take on more men and women in the Civil Service, but that the total number of civil servants must be reduced. One hears this all the time and the contradictions inherent in these ambivalent attitudes will soon, I hope, fail to impress the previously unsuspecting and inadequately informed public.
The third advantage which I claim for what we are doing, and the most important, is the deliberate and voluntary sharing by the Executive with Parliament, and hence with the community, of the process of reaching decisions affecting the living standards of us all. The proposition has only to be put in those simple terms for it to be self-evident that this eminently democratic process should occur, but the interesting thing to note is that it has not happened hitherto, and the remarkable thing is that it was thought right that it should not. The Plowden Committee of 1961, which represented what was the most forward thinking in this field, at that time took the view that no Government would publish their public expenditure plans. We have done this, but the point which I want to make is that the mere publication of a Government's intentions is not enough.
It is not enough merely for the Government to say, "This is the journey which we propose the country should take over 747 the next period". We have to go further and take a position in which the Government say, "We have made our plans for this period. Not only are we consulting you on them; we are asking you whether this is the journey which you would like to make". We cannot affect the first stage of the journey, but the subsequent stages we really can. It is not in the early years of a public expenditure programme that there is any real possibility of choice. The first three years' figures—and we are already three-quarters of the way through the first year—are really the Government saying where we are going, but from then on they are saying, "Where would you like to go from there?" I understand and expect that next year, when we have this same debate, Parliament will be eager to see whether the plans for year three of next year's White Paper, by then a year of commitment, sufficiently take account of the views expressed here and elsewhere while that year was still year four, and a year of some choice.
I do not think that I am over-stating it when I say that it is not perhaps on every day that a Government, even this Government, take the view that they ought to share with Parliament more of their decision-making processes. What we are engaged on in this debate represents a real sharing of power. For the Government it has meant the acceptance of many restraints which were not necessarily in the interests of good Government, but I think that it is always worth paying a price for the extension of democracy. It also means that Parliament has an additional new responsibility, one which has been clearly described in two very interesting and valuable articles in the Guardian and The Times. We are indebted to those who wrote those articles for drawing our attention, and that of the public, to the importance of these new procedures and in highlighting the difficulties which they create. I have no doubt that Parliament will, as always, rise to the full level of its responsibilities, but it is wise that we should take note that they have come to exist.
I recognise the importance of what the right hon. Member for Enfield, West said yesterday about committee structure. I listened very carefully to the arguments which he put forward, and to his conclusion. In particular, I noticed that his 748 view was that there would be an additional burden which should not be undertaken by Members who are already fully burdened. That is what I understood the right hon. Gentleman to be saying. All I can say is that those views and all the views expressed in this debate on this very important topic—and I hope to hear further views today—will be most carefully considered by my right hon. Friend the Leader of the House who, with his colleagues, is conducting an intensive review of the whole of the Select Committee structure. My right hon. Friend will make his recommendations to the as soon as possible, but it is obvious that on a matter of such fundamental importance to our democratic processes time will have to be allowed for the most careful consideration, and I understand that he hopes to present the findings to the House in the spring.
May I now say a few words about parliamentary control. I have detained the House long in giving my interpretation of today's events. Having said what we are doing, may I now go on to say what we are not doing. We are not interfering in any way at all with Parliament's inalienable right to discuss grievances before Supply. The Supply debates on the Estimates will go on as hitherto, and the authority of Parliament to vote or to deny Supply will be unaffected. That is done on an annual basis and for good reasons, and there are many kinds of parliamentary procedure, both in and outside this Chamber, which go to the composition of a well-understood and well-established system of checking and controlling the flow of cash. There is, of course, a superficial inconsistency between the voting of cash annually and the entering into of commitments which continue for more than a year, but this is well understood and presents, in my view, no insuperable difficulty. I welcome the continuation, subject to one variation to which I shall shortly refer, of the system of parliamentary control of cash flow and of the audit of the payments made.
One consequence of the procedure of voting cash annually for given purposes which have to be approved by Parliament is that the Government need a cash float to keep up the payments of salaries at the start of a new year until Parliament has had time to approve the expenditure. A cash float is really how 749 I would describe the Vote on Account. That is not a method of anticipating Parliament's approval, nor of avoiding Parliament's examination. That examination still tales place, and it is open to Parliament to withhold its approval. But Parliament obviously wants the machinery of Government carried on in the meantime, and has, therefore, over the years evolved this simple procedure of a Vote on Account. This year we are making the procedure even simpler, as the result of the examination and wise recommendations of the Procedure Committee, and as befits such a normal and commonplace procedure as providing a cash float. The amount of the float is quite simply based on the Supply Estimates for the current year adjusted to take account of developments known to the Treasury up to November, and covers the known period ahead before Parliament has reached its decisions. That is the recommendation of the Committee—for which I am most grateful—which has been adopted by the Government as being wholly right, and I do not imagine that the House will wish to spend a great deal of time, or possibly even any time, in dealing with that formality when it arises at the end of this debate.
All that remains for me to do is to repeat my heartfelt thanks to the all-party Committee on Procedure which spent so much time considering our proposals with such beneficial results, and to rest on my conviction that Parliament will deal wisely and well with its new responsibilities.
§ Mr. Deputy Speaker (Mr. Sydney Irving)
Order. I must remind hon. and right hen. Members of the need to keep their speeches short, in view of the large number of hon. Members who still wish to speak in this debate. Mr. Biffen.
§ 5.47 p.m.
§ Mr. John Biffen (Oswestry)
This is a somewhat hybrid debate, in that the House wishes to comment both on the First Report from the Select Committee on Procedure, and on the White Paper containing a whole range of figures of prospective public expenditure over the corning five years. I think that the temptation to make two speeches is great indeed. It is one which I hope I shall avoid, but I think that it would be dis- 750 courteous, particularly in the presence of my right hon. Friend the Member for Thirsk and Malton (Mr. Turton), if I did not at least make a passing initial reference to the Report of the Select Committee, because I think that it goes to the heart of a problem which has fascinated Parliament ever since men came up from the shires to London, namely, how to import some more effective control over public expenditure.
There have been a number of speeches on this. I have very much in mind the eloquent speech of my hon. Friend the Member for Guildford (Mr. David Howell) yesterday. As I see it, we are offered two prospects. Either, as a result of certain recommendations, the House will be able to take a more effective rôle in controlling public spending, or else, possibly as a result of the new procedures, the Treasury will be reinforced as an instrument within the Executive in operating on its usual task of cutting back on public expenditure.
§ Mr. Biffen
The hon. Gentleman, in whose constituency I shall be spending the coming weekend, says that it could be both. That opens up an endless avenue for discussion, so I hope that he will forgive me if I do not follow him.
Although it is a time-honoured parliamentary bloodsport to pursue the Treasury mandarins, I have great respect for them. Indeed, when it comes to being beastly to the spending Ministries, I suggest that the Treasury mandarins will always have the edge over the House of Commons. Select Committees may be stringent over money already spent and perhaps wasted, but their whole attitude might be different if they were dealing with prospective figures. Only time will show if the series of debates which are bound to occur, this being the initiation year, will result in the House having a stringent regard to public expenditure.
On the whole, I am inclined to put my money on the Treasury as the main instrument for containing public expenditure. My right hon. Friend the Member for Flint, West (Mr. Birch) was right when he said yesterday—he was using the word "certain" as a qualification—that the Treasury seemed to have won a certain victory in connection with the 751 publishing of public expenditure forecasts.
As the Chief Secretary said, it is probably best if we concentrate on the figures in the White Paper. I will not engage in a detailed examination of this matter or speak at length, but concentrate on three points: namely, the arguments about growth, the position of the nationalised industries and the question of investment grants. If time permitted I would discuss certain remarks that have been made about overseas aid and education, although I will comment briefly on the latter. These are subjects which can be properly debated satisfactorily only in a debate of a less wide-ranging character than this.
Today I wish to be kind to the Government, particularly as this is election year. They may not find too much generosity in the months ahead. It might be as well, therefore, to get this eccentricity out of the way and congratulate them on the realism which they have shown in the White Paper. In referring to growth, the Government say that the task ahead envisages an increase in total output within the range of just under 3 per cent. to about 4 per cent. a year. They also say that in settling the levels of public expenditure over the next few years they have based their decisions on the assumption that the rate of growth of the nation's resources will be at the lower end of this range.
That is a healthy realism, first because I suspect that we really do not know very much about what are the constituent factors which affect rates of growth, and, secondly, because the Government seem to be saying, "This is how things have seemed to operate in the past"—yesterday the hon. Member for Edmonton (Mr. Albu) even went back as far as the Great Exhibition in pointing out that there seemed to be certain fundamental characteristics about the British community which produced certain figures—"and perhaps this is how things will turn out, give or take a little here and there, in the next few years".
This is how politicians should approach the subject of growth. They should adopt a great deal of scepticism and not presume future advantage from rises in growth which they think will come about 752 as a result of changes made here at Westminster. I hope that this realism will prove infectious and that we will not hear in the months ahead how there will be brought out of the community pent-up resources which have been strangled by, for example, the present taxation system and that all we need is a substantial alteration in the nature of taxation to produce a substantial rise in economic growth. It may happen, but I am prepared to wait and take advantage of it when it does. But in terms of public expenditure, it would be foolish to assume it in advance.
§ Mr. Mackintosh
Does the hon. Gentleman regard as unrealistic the remarks of his hon. Friend the Member for Worcester (Mr. Peter Walker) who suggested that more expenditure on education could be met out of extra growth that would come, conjured up somehow, under a Conservative Government? Is it responsible to advocate more expenditure only by cutting expenditure elsewhere or by raising taxation?
§ Mr. Biffen
I said at the outset that I would be charitable. I do not wish to be seduced into a lack of charity towards my Front Bench.
In referring to certain remarks made yesterday by the right hon. Member for East Ham, North (Mr. Prentice) I fear that charity, like aid, must stop short. When cataloguing the prospects of getting extra resources to sustain his spending programme, the right hon. Gentleman said:The first is clearly that we have to think in terms of a much higher rate of growth."—[OFFICIAL REPORT, 21st January, 1970; Vol. 794, c. 558.]I do not want to intrude on the contemplations and beautiful thoughts of the right hon. Gentleman, except to comment that they might be attributed to a flower child of politics. It is no good indulging in the wishful thought that somehow or other we could be operating in a very different world than reality indicates the one in which we have operated in the recent past.
I hope, therefore, that in the debates which will undoubtedly continue within the parties, the views of the hon. Member for Edmonton will win, for it will be better for the general level of argument and the atmosphere in which we will 753 be conducting political decisions in the next few years if they do win.
It is in this connection that I will comment briefly on the question of education. There are always difficulties—I apologise to my hon. Friend the Member for Worcester for asking the sort of question which cannot adequately be dealt with by way of a quick question and answer—in discussing matters of education, but impulses to higher public spending are essentially demographic in terms of the educational and welfare services. There may be other considerations which lead the Government to higher expenditure, but it is not the disposition of even Labour Governments to spend more and more of the public's money out of sheer desire. There are also strong secular factors which make for increases in public spending in society today. Nowhere is this more so than in higher education.
Thus, if we look at the present distribution of spending on education as between publicly provided services and privately provided ones, we must ask if the frontier has now been fixed and will remain unaltered in all our expectations in the future, and also if the contribution of thanes within that total spending on education are fixed and unalterable for that period.
The hon. Member for Edmonton gave his views on this subject and I found them refreshing and encouraging. Earlier Mr. Speaker spoke of the natural situation in which the Prime Minister would talk Socialism. It is confusing to find an hon. Gentleman opposite talking sound Toryism, which occasionally happens, although I do not accuse the hon. Member for Edmonton of that. However, it was encouraging and refreshing to hear him say that we must recognise that if we are concerned to control public expenditure, we must not assume that present conventions in regard to public spending on education can or will remain unchecked and unaltered.
My second point concerns expenditure on the nationalised industries. What I find so refreshing about the White Paper—it is not particularly new, but it is good to have it in the form in which it is presented—is that today the capital spending of the nationalised industries is almost entirely covered by taxation. There is obviously a certain amount of borrow- 754 ing—I know not how much it is—from overseas, but broadly speaking the capital requirements now come from the taxpayer.
Therefore, the choice is now starkly presented. Either in these great areas of investment there will be investment by private investors from choice, or there will be compulsory investment by tax fiat. The arguments that have gone on within the Conservative Party on the question of the future rôle and significance of the nationalised industries is given an additional twist by the publication of this document. I have noted in the past, when some Tories have been confronted by a challenge that we should move to reintegrating these great areas of nationalisation into the privately financed sectors of the economy, that we have been as it were warned off such a course by reference to the intractable political problems attending on coal and railways.
In Table 2.22, in the 1971–72 estimate of expenditure on fixed assets by nationalised industries, that in respect of coal and railways accounts for less than 9 per cent. of the total. I therefore hope that, if my hon. Friends do not have the political stomach—I perfectly understand this—for engaging in denationalisation in respect of coal and railways, they will turn their attention to the 91 per cent. which is both more attractive and more significant.
I turn to my third and final point, which is the commitment to reduce direct taxation to which I, like my party, am committed. I do not believe that reductions in taxation can take place in the context of shifting taxation from direct to indirect without any reduction in the overall significance of taxation. This is not a political starter. I therefore look for the area of major economies—activities which the State now undertakes and which in future we would expect the State to cease to undertake. A demolition job must be undertaken on areas of public expenditure. This is what happened after 1951. There were large areas—the most obvious was the question of food subsidies—from which Government withdrew.
There are two broad areas that I identify as being areas from which the Government should withdraw, in whole or in part. They are the investment 755 grants, now running at over £550 million, and agricultural deficiency payments. The agricultural deficiency payment figure is not available in this document, but my guess from Table 2.8 is that it will be about £150-£200 million. [Interruption.] I am sure that this is not so. As I understand it, I am only echoing what has been a commitment. I understood that there was no question but that agricultural deficiency payments would be phased out, and as I understood my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) yesterday, there was no question but that investment grants in part were under severe scrutiny.
§ Mr. Patrick Jenkin
Lest anybody should have been misled by the departure of my hon. Friend the Member for Worcester (Mr. Peter Walker), may I inform the House that he told me that he is about to address a gathering of professional men concerned with land economics; and I can only imagine that he hurried off to tell them the goods news.
§ Mr. Biffen
I am sure that my hon. Friend will tell them nothing that he was not otherwise already intending to tell them.
§ Mr. Austen Albu (Edmonton)
The hon. Gentleman says that he is in favour of abolishing investment grants. Do I take it that he does not propose to replace them by investment allowances or a similar sum?
§ Mr. Biffen
Absolutely. Let us have no nonsense about replacing investment grants by investment allowances. There is no particular advantage in reducing tax revenue as the alternative to cutting public expenditure. There can be a great deal of argument about the extent to which investment grants were effective in both promoting investment and in promoting employment. Much of the discussion about that at least started in embryo yesterday. I ask the House not to provoke me into discussing that question.
I will state one reason why I welcome the fact that the two items I have mentioned of public expenditure have been selected as areas of retrenchment by a future Tory Government. They are two areas of the most capricious elements of 756 behaviour in public expenditure. My right hon. Friend the Member for Enfield, West made the point very well when he said this in reference to investment grants:Examining this"—this was a Supplementary Estimate—Sub-Committee D pointed out that in each of its last three Reports on the Supplementary Estimates, it had to comment on the underestimate of this Vote."—[OFFICIAL REPORT, 21st January, 1970; Vol. 794, c. 540.]I remember when we used to have the most terrible business with Supplementary Estimates arising on deficiency payments. In 1963 we had the most fantastic increase in the beef subsidy. The White Paper ruefully concludes at page 39—I have no doubt that this is in terms of its experience with the deficiency payment arrangements:But, even if there were no changes in guaranteed prices, the cost of implementing the guarantees would be liable to marked variations according to the levels of supply and of market prices.That merely underlines the very considerable expense we have had in this area.
As this is a debate about confirming expenditure, it is valid if we are concerned with retrenchment to talk about taking out of public spending two of the most unpredictable elements in it, because this will make that much more effective the Treasury's ability to fulfil what I think is its prime function of financial and monetary control.
I have tried to put these views with some degree of detachment, as I think this is still, by virtue of this being the introductory debate of this series, the responsibility that I should fulfil. However, the urbane nature of our discussions here should not conceal from ourselves or from the country the fact that these are issues which lie at the very heart of political controversy.
§ 6.8 p.m.
§ Mr. William Hamilton (Fife, West)
I have been waiting for that speech for a long time. It was the frankest speech which has been made by an Opposition Member so far in the course of this two-day debate. The hon. Member for Oswestry (Mr. Biffen) has at least given us some indication of what will be in the Conservative Party's election manifesto 757 —that Scotland, South Wales, the North-East and the North-West will be deprived of our investment grants in total, with nothing being put in their place; that the Scottish farmers—
§ Mr. Biffen
I prefaced my remarks on investment grants by saying "in whole or in part". I did that because I had in mind the reservations my right hon. Friend had made in respect of their continued use as a regional employment instrument, although it is evident that there is now a considerable body of opinion which believes that they are nothing like as effective in producing jobs as other forms of regional assistance.
§ Mr. Hamilton
The hon. Gentleman is terrified of having his Whip withdrawn. He used the expression, "a demolition job". When he was challenged on whether he would replace investment grants by investment allowances, he said, "No. We will go the whole hog." If that does not mean getting rid completely of £590 million of public expenditure on investment grants in Scotland, South Wales, the North-East, the North-West—all the development areas—I do not know what the English language means. He had better square his views with those expressed by the hon. Member for Worcester (Mr. Peter Walker), when he opened the debate on behalf of the Opposition.
The hon. Member for Worcester cleverly sidestepped the taxation issue when challenged by my hon. Friend the Member for Berwick and East Lothian (Mr. Mackintosh). He did not say outright but implied that we should grant in total the salary claims of teachers, which I believe that we should, nor the complete salary claim of the nurses, which I also think we should—indeed, I think that we should go a lot further. But one cannot say these things at one and the same time as one is criticising the size of public expenditure and saying that one will reduce taxation. The hon. Gentleman was saying—and I watched his facial expression when he said it—that all this would come out of an automatic and painless growth like that with which the Tories provided the country so painlessly during the 13 years they were in power.
We could have been deceived. I do not believe that the country will accept that the genius of the Tory Party will be 758 able to provide a 5 to 6 per cent. growth, all the goodies for the teachers and nurses and all the schools and universities painlessly and without increasing taxation and public expenditure. The hon. Gentleman said that there are built-in escalators for so many elements in our public expenditure that one must either cut standards or educate the people by telling them, "If you want better services, or even if you want to maintain the existing standards, you must pay more for them."
The argument is how one pays for them. Does the consumer pay? Does the taxpayer pay? How do we finance these things? One of the most disturbing features of the White Paper in the view of many of us is that the programmes are not sufficiently ambitious. The question one has to ask is how we are to finance the improvements in the health services, education and all the other services which we on this side of the House want—I am not sure about hon. Members opposite. How are we to finance them? We shall not do it within the figures in the White Paper, so one is driven to suspect that we shall be asked to revert to, or to look at, charges in the National Health Service, increased charges in education—indeed, charges all along the line. If that is the case, it will meet the most violent opposition from hon. Members on this side of the House.
I do not see anything wrong in saying to the public, "If you want these services, if you want a high quality and uniformity of service, you will get only what you are prepared to pay for". It is up to the Government of the day to ensure that the tax system is so arranged that people who can pay do pay and that the people who cannot pay are protected. One can only do that most fairly within the terms of the fiscal system.
Yesterday, I was struck by the fact that the White Paper innovation was given a general welcome but that hon. Members repeatedly asked for more information, more detail, more about the thinking behind the over all assumptions of the total size of public expenditure and the consideration which has determined the priorities which are laid down within the White Paper.
For instance, one gets global figures on health and education but one is not given figures indicating the priorities within each. In education, we are given no 759 indication of the priorities of the Government as between nursery, primary, secondary and further education. I see that the hon. Member for Finchley (Mrs. Thatcher) is showing passing interest in the debate. She should be here. She is the chief spokesman on education for the Tory Party. No doubt she has some other activities in hand. Surely in such a debate all the Front Bench spokesmen opposite on all the expenditures enumerated in the White Paper should be here.
§ Mr. Hamilton
The hon. Lady must be patient. This is her token appearance in the debate. She must earn her corn.
I referred in the hon. Lady's absence to teachers' salaries. I repeat that I am very much in favour of the Government granting what the teachers are demanding. We have yet to hear anyone on the benches opposite spelling out whether or not they agree with the full implementation of the teachers' claim or the full implementation this year of the nurses' claim. It is important for them to spell these things out and to marry them and their claims that they would reduce taxation. They cannot have both at the same time.
I was pointing out that the White Paper hides more than it discloses. We have come a long way, but then we had not got very far. I pay tribute to my right hon. Friend the Chief Secretary to the Treasury and to the Select Committee on Procedure, but I was disappointed by his remarks today when he said that my right hon. Friend the Leader of the House will wait until some time in the spring before he makes any announcement about the Government's proposals on the real guts of the matter.
The real guts is not so much the White Paper, but what follows. Contrary to the views of the right hon. Member for Flint, West (Mr. Birch) and of my hon. Friends the Members for Ebbw Vale (Mr. Michael Foot) and Penistone (Mr. John Mendelson), I believe profoundly that the guts of the problem lies in the creation of the new sub-committees of the proposed Expenditure Committee, the idea of which was put forward by the Select Committee on Procedure. If we do not 760 get that, these debates will be as pointless and uninspiring, and the House will be as empty, and hon. Members will be as uninformed as happens in defence debates, in which half a dozen hon. Members vote £2,000 million virtually on the nod. If we do not get these committees, we cannot inquire in depth in any sense at all.
My right hon. Friend the Chief Secretary said, "We will be glad to provide information if hon. Members ask Questions in the House." Any idiot on that Front Bench can get away with murder at Question Time. He has just got to waffle and Mr. Speaker protects him. Mr. Speaker says, "We must get on."
§ Mr. Deputy Speaker
Order. I am sure that the hon. Gentleman was not intending to reflect on the Chair. I hope that he will not do so.
§ Mr. Hamilton
On the contrary, Mr. Deputy Speaker, I was praising the Chair. I was saying that Mr. Speaker was safeguarding the business of the House by saying that we must get on with Questions. Mr. Speaker's target when he came to office was 70 Questions an hour—more than British Railways—and this is what my right hon. Friend the Chief Secretary calls public accountability.
If we want to investigate in depth the figures which have been produced in the White Paper, this House is not the machine for it. It is not equipped for it. Therefore, we have to think about equipment for it and I think that the Select Committee on Procedure might have the answer, in principle, anyhow. I think that the size suggested for the subcommittees might be too big. I do not think that nine members plus a chairman of a sub-committee will attract people to the job.
I know from my experience on the Estimates Committee, where the membership is smaller than that, that, where you get a domineering chairman who insists on asking 90 per cent. of the questions, he does not get a quorum. Members say, "What are we doing here? Let him ask the questions". They simply disappear. However, one can consider details of that kind. In principle, I agree that we should get on, and quickly, with the establishment of these committees.
The right hon. Gentleman for Enfield, West (Mr. Iain Macleod) expressed the 761 fear that we might not get the numbers. I want to make it clear—and it was implied in the Select Committee's Report, although never explicitly said—that other Specialist Committees would disappear. We had better face that fact honestly. If we are to have this new system working properly, the Select Committees on Agriculture, Education and Science, Overseas Aid and Race Relations will be wiped out because all the subjects they are investigating can be covered within the terms of reference of the eight sub-committees suggested. If we do not do that, I agree with the right hon. Gentleman that one will not get the bodies to man these committees. Nor have we they physical capacity in this building to house them. Nor will we get Clerks to service them. There are all kinds of difficulties to contend with unless we face these problems realistically.
§ Mr. Frank Hooley (Sheffield, Heeley)
I am in sympathy with the general argument of my hon. Friend the Member for West Fife (Mr. William Hamilton). However, there are certain sectors where the expenditure is not the major or only consideration—for example, race relations.
§ Mr. Hamilton
All these matters can be investigated within the terms of reference suggested by the Select Committee on Procedure for the proposed committees. Even we in the Estimates Committee, with our restricted terms of reference, went into overseas aid. We made a thorough investigation of it less than two years ago. Now, the Government have set up the Select Committee on Overseas Aid. In the selection of it, I was not consulted. I was Chairman of the Labour Party's Parliamentary Reform Group. My right hon. Friend the Secretary cf State for Social Services, who was then Leader of the House, came along and said to me, "What Select Committees do you want? We want two more." I gave him two subjects. He welt away and set up two others.
§ Mr. John Mendelson
Surely my hon. Friend the Member for West Fife (Mr. William Hamilton), with all his experience, did not seriously expect that the Government would consult a group of parliamentary reformers when they were taking a decision in real life.
§ Mr. Hamilton
I accept that. I am just recording the fact.
762 The Government set up these Specialist Committees ad hoc without any long-term view of what they are after. I suspect that they set them up to keep a few of us out of trouble.
This will be an historic occasion. The debate will go down in parliamentary annals because it is the beginning of a process of establishing a new relationship between the Executive and this House. It is giving us just a little scent of power—just a whiff, no more, but I hope that this will not be deceptive. I hope that we will proceed with this in this Parliament. I suspect that, when we have a General Election, whatever the constitution of the Government, this will be swept quietly under the carpet and forgotten. If we get a Conservative Government, I certainly fear the worst—
§ Mr. Hamilton
I like the right hon. Member very much, but I do not think that he will be in the Government.
§ Mr. Selwyn Lloyd
Is the hon. Member suggesting that one has to be in the Government to have power?
§ Mr. Hamilton
Yes, I think so. I feel a bit like a political eunuch. When one gets on the Front Bench, I suspect that one becomes another animal: I have seen the change.
I hope that my right hon. Friend will take my remarks seriously, that the timetable which the Government have in mind for the introduction of the proposals in the spring is not enough unless we can be assured at the same time that they will make an effort to get these sub-committees off the ground and fully implemented.
§ 6.26 p.m.
§ Mr. Kenneth Baker (Acton)
The characteristic of this debate has been a benefit performance for the Chief Secretary, and my gratitude to him would be more fulsome if it had the other characteristic of such a performance, namely, that it marks the end or the drawing to a close of the career of a star performer. Although the run is ending, we have not yet reached the last night.
I should like to thank him for publishing this White Paper. His predecessors, 763 Socialist or Conservative, should have done so long ago. It sets out clearly, in a way that a back bencher can understand, if he does his homework, the problems of the Government and the Cabinet in determining the priorities in public expenditure. From now on, every back bencher, as a result of the White Paper, will carry in his political knapsack a sort of "do it yourself Chancellor kit", and the debate has been largely a matter of back benchers saying what they would take off here and put on there.
The right hon. Member for East Ham, North (Mr. Prentice) said that he would change the rules of the game completely because he wanted higher and better growth. If on etakes this assumption which is purely an assumption, the rules are completely different, but when I heard his speech and that of the hon. Member for Ashton-under-Lyne (Mr. Sheldon) they sounded like the siren voices of 1963 and 1964 all over again—"we can have anything in the world when we have higher growth, therefore we must have higher growth, therefore we will have everything we want in the world". The Socratic logic is completely upside down.
The greatest criticism of the White Paper and of the Government's performance over the last six years is that the proportion of public expenditure, 5.9 per cent. over six years, has each year outdistanced by a considerable margin the growth in our nation's resources. We are spending more than our resources earn each year and it cannot go on.
The Chief Secretary was a little elusive on this. He said that, taking one year with another, one cannot exactly get public expenditure into line with the rise in gross national product. I take this point. He then said that some years it goes up and some it goes down. In which year, since his Government has come in and he has had personal responsibility, has public expenditure been lower than the rise in the gross national product? He knows that there is no year.
The figure for last year, according to the table, is 1.6. That is qualified by the footnote: this Government are masters of footnotes. If one reads that carefully and does the sums again, the proportion is found to be not 1.6 over the previous 764 year, because one has to add in regional employment premium, investment grants and S.E.T. premiums, which puts the increase by my calculations at about 2 per cent. Although it would be nice to believe that, taking one year with another, some up, some down, it has balanced out, in fact, it has always been in excess while this Government has been in power. That, of course, is why the proportion of the gross national product occupied by the public purse has grown from about 44 per cent. to something over 52 per cent. I am not in politics to support, condone or approve of such a move. I want to see exactly the reverse.
Touching on what the hon. Member for Fife, West (Mr. William Hamilton) said about the use of the committee procedure, this is an essential follow on these debates, which have been discursive but very inconclusive. For example, yesterday, my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) expressed some doubt as to whether the figures in the White Paper for education expenditure would be sufficient over the next few years. Some hon. Members opposite also said exactly the same thing; we all have some doubt about it.
We cannot follow that doubt. It is no good asking questions at Question Time. One cannot pursue this doubt at Question Time, but something has gone wrong, for instance, in the education figures. Maybe there has been an underestimation by the Department, maybe the Treasury has cut and said that it has to come down to that, maybe there are some changes which we do not know about, but, unless we have a Select Committee probing and examining with the regularity and expertise which its members would accumulate, we shall never know.
Therefore, I hope—and believe—that the Government will come to this view. I am sure that they would like to see this. Backbenchers must work out a new relationship between the Executive and this Chamber. I suppose that the hon. Member for Heywood and Royton (Mr. Barnett) was allowed to sum up last night in an important debate as a gesture to the backbenches and perhaps some sort of reward for five years of loyal support. I cannot help feeling that F. E. Smith had something else in mind when 765 talking of the "glittering prizes", but the back benches will want to participate more, and their means of doing so are essentially Select Committees.
I now turn to the question of where the money comes from if one is to have better schools, roads and hospitals. Some hon. Members opposite are ungracious to think that we do not want these things. Of course we do, but the question is a fair one: how does one pay for them? Some hon. Members opposite are growth addicts, and say, "We will get it out of greater growth," and another group say "We have some contingency reserves. We will dip into them." One has only to have one cold snap or excessive wage award in the public sector and there goes that reserve. So this is a real question.
I. among others, have made suggestions in the past about the whole question of capital expenditure by nationalised industries, this now stands at £1,500 million, give or take £100 million, each year. This is a massive sum. One of the ways in which this Government have been able to control their total expenditure in the last year and will do in the next three years is by cutting down the growth in the expenditure of nationalised industries. The figures are, in 1967–68, £1,783 million, which then fell by nearly £300 million to £1,500 million. Then it was £1,439 million, then £1,474 million and in 1971–72 it will be £1,436 million. It is in this area that one must ask whether a proportion, small to begin with but growing larger each year, can be met from the private sector.
I believe that it can. I do not agree with the views in The Times article yesterday by the hon. Member for Ash-field (Mr. Marquand) that this is not a real choice. One can draw out of the private purse quite a lot of the money to finance a particular programme. I give an example from an area of which I know something—the Post Office. This will become the big spender of the future. By 1971–72, it will be spending nearly £2 million a day on capital equipment. I would be rash to say but I would be honest to say that I feel that this is probably not enough, bearing in mind the technological developments needed in the Post Office and telecommunications, bud: it is a massive sum.
How can some of that money be met from the private purse? There are many 766 ways. One could not denationalise the telecommunications side of the Post Office and go over to the Bell system of America, but one could make a significant inroad into that capital programme by allowing private companies to buy their own telephone exchanges in their businesses, so that they would finance this capital equipment rather than the Post Office financing and also servicing it. If the companies did not want to do this, I am sure that the suppliers would welcome the chance. I do not know, since I have not asked them, but this is certainly the pattern overseas. I would extend this even further and allow the suppliers to approach the public directly, as is done in America and some European countries—allow them to purchase their own telephones.
We are not talking chicken feed. This is a capital programme—most of this on capital equipment—of £368 million a year, with £403 million next year, rising to £497 million in 1971–72. If private capital is not brought in to finance some of this, any future Government are bound to say that, if they want to spend a bit more on education or on roads, they should raid the capital investment programme of the nationalised industries. It is too great a temptation to resist. If we get back into that cycle, the investment which is needed will not be forthcoming from the public purse.
This is how I would create a substantial margin. I do not think that our choices are very great. Any Government is bound to look into this to see whether one can tap private capital for the nationalised industries.
I welcome the White Paper, but there must be a follow-up to examine the capital programmes, for example of the nationalised industries. The Post Office cannot be examined at all in this House at the moment, yet it is the biggest spender. Under the present system we cannot control and scrutinise it, and we should not be satisfied with that position.
§ 6.38 p.m.
§ Dr. Jeremy Bray (Middlesbrough, West)
I was interested in what the hon. Member for Acton (Mr. Kenneth Baker) had to say about Post Office investment, and I will return to that subject.
This has been a valuable debate and I hope that it is considered sufficient reward by the Chief Secretary and the 767 Chancellor for their courage and that of the Government in making this important constitutional innovation. I am sure that the House is right and that the very select group of Members who have attended diligently throughout this debate, and will yet speak, are right in the importance which they attach to this development and that it is up to the House and the Government to ensure that this benefit is carried through to the point of decision in the readiness by the Government to consider what is said in this debate.
A number of themes have emerged and I hope that these will be considered carefully by officials after the debate. The effectiveness of blanket measures of industrial incentives is a matter on which I have spoken before. The increased need of education is recognised on both sides of the House and I am sure that the Government will have to take this into account, given the explosive demand not only in higher education, but, as new methods are introduced, in secondary and primary education, too.
Two aspects of our approach to this problem have not, however, been sufficiently pursued in this debate. The Chief Secretary dwelt slightly on one, when he considered what is the appropriate level of public expenditure within the gross national product. He said that there was not a single answer. He said that one cannot think of either a total sum of money or a percentage of the gross national product and say that that is the right level for all time or even for the three years which we are considering at the moment. I do not think that any of us could get any response from our constituents other than to say that public expenditure in general is too high and not high enough in the particular fields they are interested in. Therefore, on what pattern of argument can the House debate this important question of the total?
What we must do is put forward a set of costed options of expenditure which are either in the programme and which we think is of such low priority that it could come out, or which is not in the programme but which we should like to be in, and, with a series of costed options, rank them in order of priority, see where the Government's proposal puts the cut-off at any particular time and then consider the marginal cases. If we 768 think that the raising of the school-leaving age should not have been postponed, we can see what the total is in expenditure and recognise that it must be paid for either by increased taxation or by abandoning or postponing some other aspect of public expenditure.
I am all for including some very sacred cows in these costed options. I do not see any embarrassment to the Government in putting forward a costed option for something which the Government would not conceivably do but which the Opposition say they would like to do, and then it would be brought out how ridiculously small is the sum which it is proposed should be saved or what enormous social consequences a major cut in expenditure could have in some vital aspect of the social services.
If we had these costed options, I do not think that the Government would be involved in very much extra work because plainly these are the categories in which the Government and that unmentionable body the Cabinet and Cabinet Committees must consider the problem. It would, therefore, be a matter of going a stage further and saying, "What are the decisions?" and having the comments of hon. Members on the specific decisions and not just the generalities. Clearly, these costed options would be the meat that the committees would get their teeth into.
I should like to put forward some possible areas in respect of which I should like to see costed options put forward. The investment grant has been mentioned on both sides of the House. I should have liked the Government to reply, in the form of a costed option, to the proposals put forward yesterday by the right hon. Member for Enfield, West (Mr. Iain Macleod). I do not think that what he said was very impressive. With regard to the development areas, the right hon. Gentleman proposes increasing the relative capital intensity of the incentive rather than reducing it, and it would not save any money simply to turn grants into allowances. But all this should be given in sums of money. In education, the Treasury has already published standard costs of primary school places in England and Scotland, of teachers, and so on. But it is a rash Member who translates those standard costs into specific improvements in reducing class 769 sizes, clearing slum schools or raising the average school-leaving age in parts of the country where the great majority of children leave at the statutory school-leaving age anyway.
However, in terms of the support for industry, I depart wholly from the view of hon. Members opposite. I should like to see increased direct support for industrial technology, and not just in the engineering industry. It so happens that there have been developments in engineering industries because they have been industries for which the Ministry of Technology was responsible. But the needs are just as great in many craft-based industries and industries closer to the consumer where perhaps the greatest scope for increasing efficiency lies.
At the same time, to give an item of expenditure which I would gladly see reduced, the total of expenditure on Government research in research establishments is too high. It is derisory that the Atomic Energy Authority should be able to raise only £250,000 of the £4¼ million which it spends per annum under Section 4 of the 1965 Science and Technology Act. Clearly, a greater part of research could be financed by direct payment from industry, and the Green Paper obviously points the way ahead. I hope tin t we shall be able to debate that matter on a later occasion.
To get down to more particular detail in another area, I cannot see why expenditure at the Social Survey should have been allowed to increase by only 10 per cent. over four years when expenditure on home publicity services has been allowed to increase by 50 per cent. Perhaps we are glad to boast about something provided that we do not know too much about it.
One aspect which nobody has mentioned in this debate, or which has been hardly mentioned, is the farm Price review. I am sure that there are some hon. Members present who would like to mention it. In looking for economies, we need to consider other areas where perhaps we require to lubricate the movement of people into thoroughly efficient employment. I should have thought that there was scope for increasing expenditure co employment services.
The road programme is increasing by an enormous amount, but all of us as 770 constituency Members are very conscious of the hopeless overload in administration in the Ministry of Transport in the proper and humane consideration at the planning stage of major road schemes. Yet there is no increase in the central Government administrative costs for the road programme when the programme itself is being increased by 30 per cent. or £100 million.
These are the types of costed options which need to be explored much more thoroughly.
The other general consideration which the House should bear in mind is the stability of public expenditure and its impact on the economy as a whole. An important sector of industry which is very dependent on public expenditure is the construction industry. Is it impossible to go through the White Paper and separate the implications for the construction industry? I should have thought that it would be relatively easy to break down the capital formation figures into vehicles, plant and construction in the usual national accounts classification. This would require further work to be done in Departments. I should have thought that that would be of great interest to people outside the House.
But what matters for the construction industry is not the total, as my hon. Friend the Member for Bishop Auckland (Mr. Boyden) said yesterday, but its impact on the construction resources in a particular area. He advocates regional breakdowns. Studies by Professor Turin, of University College, London, shows that there can be great stability within a region yet the construction industry in it be subject to intolerable strains because of the changes in the region. Population movements within the region and new town development and slum clearance may have resulted in very inefficient patterns of activity being imposed on the construction industry.
We cannot bring these to light within a national level of the control of public expenditure, and this is why I would like to see the rôle of local authorities in the control of public expenditure much increased, with their being given increased responsibility for raising the capital and the revenue to service the capital within taxes which are at their own disposal. I hope that as the argument goes on over the years we shall realise that some of the 771 problems cannot be solved by the deliberations of the House or of the Government.
I turn to a question of stability for which the House is clearly responsible. A very disturbing picture is emerging concerning the capital expenditure of nationalised industries. Total expenditure by the Electricity Council and the electricity boards is declining by 30 per cent. over these four years. Probably the excessive investment by the boards was the biggest single cause of the balance of payments difficulties which the country has faced over the past four years. It was excessive in that the expenditure, if the power stations had been completed on time, as they could have been, and fewer power stations had been built, would have saved the country about £100 million a year of effort which could have been directly exported if it had not been taken up in the home market.
But now we are seeing the benefit of this reduction in the capital expenditure programme of the Electricity Council and boards in the enormous orders that Reyrolle Parsons and G.E.C. are today picking up for export. There has been a slow carry-over, as they have had to introduce new designs for the export markets. It is an inefficient business to switch the greater part of one's resources from the home to the export market in a short period of years.
Now that electricity is switching into the export market, the steel plant industry is switching back from exports into the home market and over these four years expenditure by the British Steel Corporation or its predecessors increases from £70 million to £180 million—more than 100 per cent. This cannot be argued as balancing the reduction in the electricity investment, because, for example, Davy Ashmore is in Sheffield whereas Reyrolle Parsons is in Newcastle. One cannot just transfer people, machines and engineers making turbo-alternators over to making steel plant.
There is an enormous shift over to the steel investment programme now taking place in the engineering industry again, when all the steel plant companies have been in great difficulties, not maintaining research and development and the sheer operating practical experience possible only from steady production.
§ Mr. David Mitchell (Basingstoke)
Does that not demonstrate the enormous damage to investment and modernisation in such industries when the threat of nationalisation stands in front of them for a number of years?
§ Dr. Bray
I should prefer not to be diverted from my argument.
What I would hope to see in the case of the Steel Corporation, and I very much admire the members of the Steel Corporation for the enormous job they have taken on, is for them to take very seriously the question whether they cannot stabilise their programme. They have inherited a difficult situation, but to think that it can be put right at once with a flash in the pan cutting the level of investment in the later 1970s would cause difficulties not only for engineering, but for the steel industry itself.
§ Mr. Hooley
I think that my hon. Friend will recognise that what matters is the starting point of the stabilisation. The figure he referred to here was an absolute trough of investment and if one stabilised on that one would be imperil ling the whole productive investment for a long time.
§ Dr. Bray
Yes, and there is no question but that a major increase is needed. But it should not rise to a high peak and then fall back again. It should rise to a plateau and then stabilise.
The hon. Member for Acton said that Post Office expenditure is rising to a high level and that that is necessary because of the increase in demand for telephone equipment. In fact, a great part of that expenditure is on obsolete telephone exchange equipment, much of which is not being installed in any other major country in the world and is really quite unsuitable for modern telephone exchange operation. There is no alternative in the position in which we are now and I am not suggesting that there is an easy solution to the telecommunications problem.
There are all these instabilities. We have had them in electricity, gas, railways, the Post Office, and I believe that we currently have one in roads. It will become fashionable in a few years' time to criticise the road programme. The reason for all this gross instability in particular, public sector programmes is 773 that there is not the margin of resources available either in this House or the central Government machine to keep a steady detailed review of where expenditure is justifiable, where it is needed, and to make a response to that need quickly.
We could see what would happen with the explosive demand for telephone equipment. We should have had plans under way very much earlier. We could have seen the demand for roads in the early 1950s and got some of the trunk roads under way much earlier.
One can point to directions of public investment in which we should be beginning now to gain experience, but which we are postponing and will rush into and do inefficiently in a tremendous rush. There is, for example a very tight rein on university development. We shall have to double the numbers in the 1970s with no up-to-date experience of university organisation or the appropriate construction methods to match.
There are no easy answers to the question of the stability of public sector investment, but if we include in our annual review an increasingly more thorough analysis of the economic implications, I believe that we shall develop towards a more detailed scrutiny of the economic management on a disaggregated basis. I think that the methods exist by which this is possible. I think that we shall find ourselves forced to adopt them by the strains that come about in other ways in the economy, but I am quite content to let the lessons of this emerge from experience.
§ 6.59 p.m.
§ Mr. Peter Emery (Honiton)
This debate has been of major use. For a change in this House hon. Members have taken the points of other speeches and examined them fairly closely and one has seen a hard core of experts interested in a specific subject and attempting to give their advice to the Government often without political motives but joining forces in forcing the Government to take certain action.
I hope I shall not embarrass the hon. Member for Fife, West (Mr. William Hamilton) when I say that I want to comment on some of the points he made and agree with them and expand on them so far as the Select Committees are concerned.
774 I shall be brief. I have sat through all but one speech in this two-day debate, and I know how much other hon. Members want to speak.
I shall take one moment over what was said by the hon. Member for Middlesbrough, West (Dr. Bray). He talked about the massive capital factor within the Post Office with the amount of exchange equipment. He said that most of it is obsolete. Quite right. It is obsolete in the sense that it is not technologically advanced, and, moreover, because of the back-dated elements in it, so to speak, we cannot sell it abroad. No one wants to buy it, and, if it were not for a nationalised industry, it would not be in use.
However, I do not accept the hon. Gentleman's comment that that is just too bad and there is no answer. In my view, there is an answer. Individuals and industry would be willing to pay for up-to-date modern equipment and buy it outright. I can certainly speak for myself here. I am sure that small firms would be willing to buy their own exchanges in their own offices, the type of small automatic exchange which the Americans or the Swedes have. The item involved is not chickenfeed, either. It is estimated that this sum alone comes to about £25 million. If that could be saved, not only should we stimulate the production of more modern equipment by our manufacturers, but we should stand a chance of competing abroad and selling in markets where we have no chance at all at the moment.
The Labour Party has put the question to the Opposition: how would we make an alteration in public expenditure, and how would we carry it through? It is a fair question, and I answer it by saying that, on the whole, much of it ought to be met by the consumer and not by the Government themselves. I shall give some other examples later in my speech.
The Government seem to have accepted that the massive advance in the relative growth of public expenditure in relation to the gross national product must be arrested and calmed down. I believe that the public wish to see not just an arrestment of the increase but a positive reversal. The public, particularly the informed public, wish to have the information on which to make judgments about how that might be done. 775 There is no way of making such a judgment today. But the public wish to examine and question—and not only the public but Members of Parliament, particularly those who are present at debates of this kind.
I cannot accept the Chancellor's statement yesterday that,Most readers inside and outside the House will agree that the line has been drawn generously, and that the Paper presents enough information for a full discussion of the Government's objectives in the public sector, both general and specific."—[OFFICIAL REPORT, 21st January, 1970; Vol. 794, c.525.]That cannot pass unchallenegd. It is one of the wildest bits of cloud-cuckoo-land that I have seen for a long time. The Chief Secretary shows the same attitude. As the hon. Gentleman for Fife, West said, the right hon. Gentleman tells us that we have only to ask for information and the Government give it. What nonsense.
I have asked for information many times and been told that it is not available. I have even asked how much it would cost to provide it. The prime example is that I still want to know how much is being spent on research grants on management projects throughout the country. I regard the new management sciences as one subject on which the Government ought to be informed about how much they are spending. But I am told that they do not know, they are not willing to find out, that it would cost £72 to obtain the information, and they will not provide it. That is the sort of response which one can have from the Treasury Bench. We urge the right hon. Gentleman the Chief Secretary not to give us any of his kind but woolly words about our having only to ask for information to be given it.
As the hon. Gentleman the Member for Fife, West said, this debate is meaningless unless we can go deeper, and the White Paper is meaningless unless we can have, if not the working papers on how the sums were arrived at, at least the subtotals. Unless we can begin to analyse the programme behind these overall sums, we shall still be powerless to give informed criticism; we shall be looking at a crystal ball in attempting to analyse the break-down.
The only way to remedy that deficiency is to set up the Select Committees. 776 Again, I agree with the hon. Member for Fife, West: I hope that it is done before the spring. After the General Election, the Conservative Government will go ahead with it, of course, but I fear that it will not be done quickly, because there will be so much for us to do and this idea will be lost sight of for a year or two after we come back to power. [Interruption.] I say that in all honesty. In my view, this idea ought to be taken up immediately so that the Select Committees begin work before the General Election. It would be greatly to the benefit of backbenchers if that could be done.
§ Mr. David Crouch (Canterbury)
The Select Committee on Procedure, apart from asking for the sub-committees and the working papers, stressed the need for Parliament to give working time to those sub-committees.
§ Mr. Emery
Yes, working time. I have a suggestion to make, although I am not sure that it will be very popular. If, instead of meeting at 2.30, the House met at 3 o'clock, with Questions from 3 to 4 o'clock, and the Committees met from 2 till 4 o'clock, those hon. Members serving on the Committees who had Questions down could come to the Chamber for Question Time, and in that way there would be at least a two-hour meeting of the Committee, and, although the House would be sitting during part of that time, there would not be the sort of conflict which we now have when hon. Members say that they do not wish to have to attend Committees when the opening speeches are being made in major debates. However, that is a minor point, and I do not dwell on it now.
One of the reasons why I want the committees to be set up is that I believe that such a system might—I say "might"—make Ministers examine expenditure decisions, whether to allocate money or to make cuts, with a little more thought and using a little more of the management techniques which ought to be available to them in analysing expenditure. Too often, Cabinet decisions on expenditure happen to be made because a report suddenly comes out, because there is pressure, or because there is need for a quick political decision. That is the worst way to make an expenditure judgment.
777 If the Select Committees were in existence and had power to begin making cost-effectiveness studies of expenditure and were able to challenge the Minister and the civil servant about why and how decisions arose, we might find that Ministers themselves were beginning to use a little more forethought and management techniques in studying the basic information before arriving at decisions. If that happened, there would be an improvement in Government decision-making.
It is important also that we should be able to challenge the priorities which the Government have put in their expenditure programmes. As the hon. Gentleman the Member for Middlesbrough, West said, we should like to see the priorities. I want to see them and to be able to challenge one programme against another and compare one programme within a Department with another. Only in that way shall we ever be able to make the sort of cuts—if cuts we want—or evaluations which are necessary in any year when properly considering the way the overall expenditure programme is arrived at.
I turn now to the nationalised industries. I am convinced that capital expenditure in the nationalised industries is a major drag on the overall Government economy as such. We must find ways of financing part of the capital expend lure out of the private sector.
§ Mr. Emery
It is a subjective view, not objective. The hon. Gentleman should realise that, even if he might wish to do exactly the opposite. I believe that many people would want what I suggest. They rightly consider that they should be able themselves to spend more of the money which they earn. They realise that in so doing they will have to give up some of those things which are provided at present by the State. I believe that expenditure in the nationalised industries which is financed by taxation should be investigated. Three undertakings in the nationalised area, the Post Office, electricity and gas, amount to 78 per cent. of all capital expenditure in toto over the projected four years. The figure over the four years is in the region of £107 for 778 every man, woman and child in the country.
We do not know how much money is being spent by the Gas Council on trunk pipelines. I estimate that it is something like £160 million to £200 million. If we went about the matter in the proper way, it would be the industry rather than the Government that would undertake their construction, as happens in other countries of Europe and in America. But the Government have to meet that expenditure. Surely any Government, even the Socialist Government, would be happy to save a capital figure in the region of £150 million to £200 million over four years. But until we can analyse the figures, there is no way in which we can have knowledge of these sums, nor can we see how far they are spread and whether the allocations are viable.
I urge the Government to do everything in their power to set up these Select Committees as soon as possible. By doing so they will fulfil their undertaking to the House that they seek a new approach to Government capital expenditure and indeed to Government outgoings overall. The establishment of these Select Committees is the only way by which such a process can be carried through.
§ 7.12 p.m.
§ Mr. John Mendelson (Penistone)
The hon. Member for Honiton (Mr. Emery) has dealt with a number of the nationalised industries. I will not follow him far into that subject in this debate since we would need a series of debates to go into all the details. But all the figures that he has quoted do not deal with the major problem of the allocation of real resources. So long as he fails to address himself to that matter, then his argument will be lopsided and not relevant to today's debate.
There have been two references in the debate to the steel industry. Since there has been no Government reply on the steel industry from the point of view of the Ministry of Power, I should like to comment because of my constituency connections with the steel industry. The hon. Member for Bournemouth, West (Sir J. Eden) went out of his way to attack the steel industry on its proposals for increased prices. When I tried to intervene he refused to give way. I 779 believe that he is the only hon. Member who has refused to give way in the debate so far. I suppose he felt that he might have lost his place in this brief, but the fact remains that he did not give way. For a man who has no connection with steel workers and whose constituency has nothing to do with steel, this was a rather strange attitude to adopt.
The fact is that the hon. Member suppressed an important element of information on the proposals for increased prices. These are at the moment being considered by the Government, but since they have been published the consumers of steel have come out with two statements backing the proposals put forward by the British Steel Corporation. This is published under a fat headline in the Financial Times on Wednesday, 21st January:Consumers back steel price move".I would have expected them to be the first people to protest, but this is what they say.Mr. Fry, the representative of the Consumer Council, pointed out that if B.S.C. did not get the money it ultimately needs from us, it would certainly get it from the taxpayer. We feel that it is in the interest of consumers to have a healthy, viable steel industry".That is a sensible point of view.
I am sure that the hon. Member for Bournemouth, West does not spend very much time talking to steel workers. Steel workers have as much right as any other worker to be considered and to have decent prospects, particularly since the steel industry is undergoing various changes in many respects.
§ Mr. Mendelson
I want to be brief. The hon. Member for Bournemouth, West who made the remark is not here. The hon. Member for Honiton (Mr. Emery) has nothing to do with the matter, but I will give way.
§ Mr. Emery
The hon. Member criticised my hon. Friend the Member for Bournemouth, West for not giving way to him. He did not mention that my hon. Friend had given way in the debate earlier, as will be seen from the OFFICIAL REPORT. The Iron and Steel Consumer Council is thought by many 780 people to be nothing more or less than the tame poodle of the British Steel Corporation. That should be made quite clear.
§ Mr. Mendelson
I am accustomed to hon. Members opposite, who have no connection with either steel workers or people who gain their livelihood in the making of steel, making these wild accusations based on no knowledge but upon prejudice. The statement I have quoted is significant to anybody who knows the industry. In the interests of fairness, the hon. Member for Bournemouth, West the accusation he made was steel industry, should have made the House aware of this important statement.
§ Mr. Patrick Jenkin
I do not think that we should pursue this matter too far, since I am not sure that it flows from the White Paper but in fairness to my hon. Friend the Member for Bournemouth, West the accusation he made was that this was the third increase in three years. The hon. Member for Penistone will remember, because he and I both served on the Committee, that one of the arguments advanced by hon. Members opposite was that it was alleged against the private companies that they had failed to deal with overmanning. My hon. Friend's case was that there was no sign that the B.S.C. was grappling with this, but that, instead, it was seeking an easy way out by putting up prices.
§ Mr. Mendelson
That statement is even more nonsensical than the statement made by the hon. Member for Bournemouth, West. Published today in all the major newspapers is a detailed set of proposals put forward by the British Steel Corporation.
§ Mr. Mackintosh
On a point of order. Is it in order to discuss proposals in the steel industry in a debate on public expenditure?
§ Mr. Mendelson
I cannot understand my hon. Friend's point. This statement was not initiated by me, but arose out of what was said yesterday by the hon. Member for Bournemouth, West, who made a direct attack on the steel industry. If he was thought to be in order on 781 the matter, I am entitled to put the record straight by replying to his argument.
As I was saying, published today is a detailed set of proposals from the B.S.C. dealing with manning and putting forward a set of proposals which I hope will form the basis of agreement between unions and the corporation as to how the matter should be dealt with. It can only be dealt with by giving good prospects and security to all those who work in the steel industry.
I move on to the point which was made by my hon. Friend the Member for Middlesbrough, West (Dr. Bray). He said that one of the matters which will make these debates valuable is that they will provide an opportunity to make comments on the development of various industries. I think he is right. It would be desirable if the steel industry, among others, instead of having a bulge of development over a short period, could spread its development over a larger number of years. The people working at Davy Ashmore and other firms working for the corporation to my knowledge would probably agree.
I turn to the twin subjects of the debate, the prospects before us as disclosed in the figures in the White Paper and the proposal to set up eight subcommittees. I am probably the first speaker so far who is in opposition to this proposal—certainly, the first who has been called in this debate. I make no complaint about that. I merely want to put it on record because of something that was said by the right hon. Gentleman the Member for Enfield, West (Mr. lain Macleod) yesterday.
The right hon. Gentleman said that in the debate on 21st October a consensus of opinion had emerged which was almost unanimous, with the exception of the hon. Member for Ebbw Vale (Mr. Michael Foot) and the hon. Member for Penistone, who took a different view. He said that most of the others seemed to be moving in the same direction. One might as well say that something similar has happened in this debate, because nobody called has expressed a different point of view on this proposal.
The hon. Member for Honiton spoke about hon. Members present today as a group of experts. I do not regard us as a group of experts. There are as many 782 hon. Members who are not present who could be regarded as more expert on this particular subject than hon. Members present at the moment. One of the reasons that I am opposed to the setting up of these committees is that an arrogance of expertise will soon develop. They will regard themselves as one set of members, first-class, while others who are not part of their charmed circle will be regarded as second-class members.
The hon. Gentleman has played right into my hands in using this terminology. [Interruption.] I know that I will not carry my hon. Friends with me in taking this point of view, but they should let me make my point before they stab me in the back. A little later they are perfectly free to do so.
The right hon. Gentleman the Member for Enfield, West had no right to talk about unanimity on this matter. There is no evidence as to what many other hon. Members think. Surely it would be absurd for the Government to hurry through a major change in the work of Parliament without consultation with many more Members of the House than are taking part in this debate. In the debate on the 21st October—and I make no reflection on the Chair—of all the speakers called seven were members of the Select Committee on Procedure who had already agreed to this proposal.
It always strikes me as strange that, apart from the chairman and perhaps one other member, so many members of Select Committees, having already presented their views in Committee, should wish to take up the time of the House once again with their arguments. I should have thought that they would be silent to allow their colleagues who have not taken part in the original deliberations to bring their minds to bear on the proposals. But instead they try to monopolise these debates in the House. When the right hon. Gentleman the Member for Enfield, West talked about quasi-unanimity, he was referring to hon. Members who, having already expressed their point of view in Committee, put them forward again before the House.
I feel that my right hon. Friend the Chief Secretary to the Treasury was perfectly correct when he said that there must be no haste in these matters. They must be carefully considered not only 783 by the Cabinet, but, also, there must be the widest possible consultation with Members of the House, whether or not they have taken part in the Select Committee on Procedure or in this debate. Time must be taken for that consultation.
I now turn to what I consider to be the substance of the twin subjects of the debate. We have had one or two experiences to indicate the motivation in the minds of hon. Members who want these new proposals. The hon. Member for Guildford (Mr. David Howell), for example, tried to entice members of his party who might be reluctant to accept this revolutionary change in our procedure by arguing:Today's debate is crowded by the standard of many debates at about this hour of 7.30. One is not merely condoning badly attended debates and a general feeling among the public that Parliament has lost its grip on what is happening in government. More than that, one is condoning—I ask my hon. Friend particularly to be interested here—a situation in which the bureaucracy and the pattern of activities, the vast range of public programmes and sub-programmes and detailed activities, continues to expand unscrutinised, unsurveyed, and unquestioned—and from our point of view on this side, at least, uneliminated."—[OFFICIAL REPORT, 21st January, 1970; Vol. 794, c. 591–2.]The hon. Gentleman wants to eliminate many of the proposals brought forward by a progressive, radical Government. That is his argument.
It is clear that what is sought after here is a consensus of opinion. Some hon. Members—though not all—are motivated by the desire to use the usual claptrap about "vast bureaucratic schemes" which the party opposite has employed over the years against any proposals put forward by a radical Government. They wish to use this procedure to allow a consensus of opinion to emerge which is anti-progressive.
My hon. Friend the Member for Edmonton (Mr. Albu) made a totally reactionary speech about the future of educational expenditure, to the loud echo of all the Tories present—[HON. MEMBERS: "Hear, hear."] By their cheers, hon. Members opposite make my point. That is the kind of consensus for which they are hoping. They want to clothe themselves in the mantle of expertise and present themselves as groups of hon. Members who know more about public expenditure than anyone else.
784 The decisions as to what money is to be spent on education is a political one and not one for experts. It is a decision which can only be made on the basis of philosophical inspirations. At a private luncheon the other day, organised by a club run by journalists in the House of Commons, Lord Robbins was the chief speaker. He began by saying that we have had many reports and accounts of the problems and doubts about the further expansion of higher education. He said that, although they might be dealt with and discussed now, it is clear that the policy of university expansion must go on. That is his judgment. While one must not say that no other opinion counts, at any rate that is relevant as being a significant opinion on the subject.
§ Mr. Mendelson
But not because he is an expert in a little committee with eight other members who come to expert conclusions. It is because he is engaged in the job and is working out plans with his colleagues. That is one significant opinion. However, we will not hand over to him the position of first-class member as against second-class members. His is one opinion to be taken into account, and no more.
My fear is that the consensus which will emerge from such committees will be a cautious one. It will be against expansionist policies rather than for them. In such committees, the desire is always to reach agreed conclusions and not to have minority and majority reports. However, when dealing with most problems, we do not want agreed conclusions. We want majority and minority reports.
I move on now to a more general point about economic policy. Various hon. Members have said that the urgent need for the proposed reforms resides in the fact that, in the country, Parliament is regarded as less important than it used to be. Assuming that that is right, the reason is not that there have not been too many agreed conclusions in this House. The reason is that there has been too much consensus politics over the last 10 years. That is why many people feel that, on many days, there is no interest in this place. There are no real disagreements between the main parties.
785 On overall economic policy, the right hon. Member for Enfield, West agrees with me that what determines new investment is not the type of grant that is paid, but whether we have an expanding economy or a deflationary situation. The main consensus between the two Front Benches has been on deflation. They have always agreed on it. The right hon. Gentleman told my right hon. Friend the Home Secretary when he was Chancellor and produced deflationary measures that he must go on down the rocky road and that he would support him in doing it.
Recently, in British politics, there has not been enough fighting between the two sides. There has been too much agreement, and people have lost interest. Outside this House, it is generally agreed that the significant arguments have taken place within the political parties rather than across the Floor of the House. There are many examples. My right hon. and hon. Friends complained bitterly when the Opposition did not vote with them on Vietnam the other day. What a peculiar complaint far a Government to make. One would have thought that we were sent here expecting the other side to vote against us. Instead, senior members of the Cabinet complain when the Opposition do not go into the Division Lobby with them. The underlying reason why this House has not been sufficiently the true centre of British politics in recent years is that there has been consensus politics and not enough real disagreement.
§ Mr. Hooley
Might I remind my hon. Friend that there has been a consensus between himself and the hon. Member for Oswestry (Mr. Biffen) on prices and incomes?
§ Mr. Mendelson
It does not matter if individual hon. Members get together occasionally because they do not like a certain proposal in a Bill, even though they disagree on the whole subject of economic policy. I am talking about the kind of six-line Whip that we have seen between the two Front Benches on such matters as the Common Market, Vietnam, deflationary policy and other major matters.
I turn to another fear that I have about the proposed Select Committees. Playing the devil's advocate, the right hon. 786 Member for Enfield, West referred to it and then dismissed it. He said that there is no danger of there being any Parliament in the position of the United States Congress because the Cabinet there does not sit in Congress whereas here it does. However, that is not the end of the argument. All American observers on the subject have come to the conclusion that it is the vast power given to the Appropriations Committee which has destroyed Congress as a debating chamber.
There is a hint of the Appropriations Committee in the views put forward in the Select Committee's Report. My hon. Friend the Member for Fife, West (Mr. William Hamilton), who is Chairman of the Estimates Committee, made the case openly and frankly. When I made the same point to my hon. Friend the Member for Birmingham, Northfield (Mr. Chapman), who is Chairman of the Committee on Select Committee on Procedure, he threw up his hands in horror and said that there was no intention to eliminate the other committees. Now, we hear from another valuable horse's mouth that it is inevitable that it will happen. We shall have an Appropriations Committee in future years, and we are planning for it.
This is to be the procedure of this House for many decades to come. The Appropriations Committee will be fully fledged. A number of hon. Members will assume the power of chairmanship or vice-chairmanship. The position of ranking members will be introduced—[Interruption.] Those hon. Members who have served on Select Committees know the kind of seniority, expertise and standing that one acquires. It stands an hon. Member in good stead to be a member of such a committee. It is clear that a number of powerful chairmen of committees will acquire a political influence that they should never have.
In the United States today, although the Executive and a majority of Congressmen may be in favour of certain proposals which will cost money, the chairman and deputy chairman of the appropriations sub-committees can bottle them up and prevent their implementation, so avoiding the expenditure involved for a number of years. That is stultifying progress.
There is always a case to be made for not doing certain things. We on this side 787 of the House represent the party of progress and reform—[Interruption.] I am making no such charge against hon. Members opposite. I confine my remark to hon. Members on this side of the House. We are concerned with opening new avenues of social advance and progress. Without us, the kind of university expansion that we have seen in recent years would not have taken place, no matter how much hon. Gentlemen opposite may pay lip-service to it. There would have been no Beveridge plan or Health Service, however much the lion. Member for Guildford may refer to vast bureaucratic machines spending huge sums of money.
I do not want to advance consensus politics. It would be highly dangerous to do so. The place for urgent debate, first of all, is in the country. That is where ideas germinate. The second place for it is in the political parties, to which I attach great importance. But when hon. Members talk about drawing the country into their deliberations, do they think that, by asking a more detailed question of a senior civil servant from the Treasury or a Treasury Minister, they will draw in millions of people to participate in the political process? That is nonsense. It does not happen that way. One set of hearings about Vietnam in the U.S. Senate is no example. I have attended similar hearings on other subjects. At any of the parties on the same evening, one can find no one who knows anything of what was discussed. The example is always given of Senator Fulbright and Vietnam. But even our Vietnam debates have attracted attention, and, certainly, recent reports of what is going on in Nigeria have created great interest throughout the country—
§ Mr. Peter Hordern (Horsham)
On a point of order. What relevance has all this got to do with the subject under discussion?
§ Mr. Deputy Speaker (Mr. Harry Gourlay)
Order. I think that the hon. Gentleman is using this in illustration of the point that he is making. I am sure that he will soon come to the point.
§ Mr. Mendelson
I have sat here for two days listening to hon. Members supporting the proposals for a Select Com- 788 mittee. I am the first and only speaker who has opposed them. I do not understand why there should be such intolerance amongst my hon. Friends, who are such great parliamentary reformers and want greater participation by hon. Members. I have not yet put my case. It ought to be put on record if for no other reason than to prevent the right hon. Member for Enfield. West the next time round saying that there was unanimity, not quasi-unanimity, on these proposals.
How is this linked with the general policies indicated in the White Paper? The link is clear. The debates that will take place in future, which will, I think, become more acrimonious between the two sides, will not be on procedure or scrutinising of the allocation of money, but on political choices. The proper place for these, I hope great, debates, on two, three or perhaps more days every year, is in this Chamber. Control of expenditure is a matter of political control. Control of how that is done is a matter for technical experts and other specialists who can do their work and report to this Chamber.
Any movement away from this Chamber as the central place of argument and debate about the political choices that have to be made is dangerous and hostile to the purpose of the House of Commons.
§ 7.42 p.m.
§ Mr. Peter Hordern (Horsham)
I thought that the hon. Member for Penistone (Mr. John Mendelson) made an amusing speech, judging not so much by its content, but by the expressions on the faces of his hon. Friends.
The hon. Gentleman dealt with one important topic which has been referred to throughout the two days of the debate, namely, whether the process begun by the issue of the White Paper will be continued through a number of committees sitting under an Expenditure Committee.
We are not really in a position to judge whether my right hon. Friend the Member for Enfield, West (Mr. lain Macleod) is correct in saying that this is an historic debate. All that we can say is that the House of Commons, through the Procedure Committee, has sought to get information from the Executive about its plans for some years ahead and that it has achieved some success. It has drawn 789 blood for the first time. I do not think that this trend will be easily reversed. It may take a long time before we see this process implemented as many hon. Members would wish it to be implemented, but I do not see it being reversed.
It may bring us to consider a number of matters connected with this point. For example, if more information is to be released by the Government about their future plans, it seems fairly certain that hon. Members sitting on these committees will require a reserve of extra facilities behind them adequately to question the Executive on the kind of decisions that they have proposed. This will inevitably create a change in the mechanism and procedure of the House of Commons.
I do not argue that this is necessarily a good thing. I suspend judgment. I do not know. The inevitable process must be that of a full-time professional House of Commons engaged in questioning the Executive. I think that this development is inevitable. Whether it is desirable, I do not know. It would be wrong to assume that we should not be forced to accept and to follow the procedure followed in the United States.
My right hon. Friend the Member for Enfield, West mentioned yesterday—and it is true—that Cabinet Ministers are not members of Congress. But I do not think very much of the powers of debate on the Floor of the Senate or the House of Representatives in the States. The power lies in the Congressional Committees. Real power is given to the members of those Congressional Committees, because they can call whomsoever they like to appear before them. We should consider carefully where the House of Commons is going down this path. On balance, it is a good process; but let us not deceive ourselves that the end result will not be a very different Chamber and a very different House of Commons from what we have now.
We should consider what credence we can give to the White Paper. After all, we have been asked to note it. I cannot think that we have been asked to note very much when we consider the aplomb with which the National Plan was originally introduced with the Declaration of Intent signed at Lancaster House in, so far as I remember, a welter of champagne. In contrast, the White 790 Paper is rather like going to a temperance function and being told that the orange squash is off. So far from a National Plan, what we now have is Cmnd. No. 4234 and the Chief Secretary. I prefer the second to the first every time.
Talking of the National Plan reminds me that we, as a Conservative Government, achieved the rate of growth—namely, 3¾ per cent.—that was set out in the National Plan. This the Government have wholly failed to sustain. The growth projected now in their White Paper is only 3 per cent. This should not be difficult to achieve, but I do not think that it will be as easy as was suggested last night by the hon. Member for Heywood and Royton (Mr. Barnett).
The position now is that the level of investment in recent years has been so low and the level of stocks is so low that I do not see how it is physically possible to increase the level of production markedly and quickly enough over the next two or three years.
What we must note, in looking at the projected growth of only 3 per cent., is the commentary on the last five years of purposive planning, of five years of dragging industry, kicking and screaming, I seem to remember, into the 20th century, of years of the I.R.C. and the Ministry of Technology. I wonder what people think now when those two bodies are mentioned—cancelled aircraft projects, the veto of investment from abroad, the imposition of a tariff on textiles, and the propping up of failed and profitless organisations. In other words, Ministries forming an industrial soup kitchen.
If the rate of growth projected now is paltry, compared with the growth in world trade and that of other countries, so also, happily for a change, is the prospective rate of growth of public expenditure. In economic terms, this makes a welcome change from what we have seen in recent years. In the three years between 1965 and 1968 the progression of increases in public expenditure was 6.7, 6.6 and 9 per cent., and these bore no relation to the growth in the economy. I do not think that the fault lies so much in the increase in public expenditure as in the failure to get growth.
The Government have asked what we would cut. The answer is that we should never have got into the hole that they 791 have dug for themselves in the first place. We do not accept the original premise. But if we are asked—and I shall develop this point later—we must point out that the Chancellor and the Government have cut down their original projects for Government expansion very considerably.
What about the next four years? We see from the White Paper that expenditure on education is due to increase by 3.9 per cent. and on health and welfare by 3.8 per cent. The House should recall that both these increases were exceeded by the last Conservative Government. We do not really have to look at the book of records to recognise this. All we have to do is to drive out into the country and count the potholes in the road and look at the state of the primary schools. I am thinking particularly of my own constituency where the primary schools are sometimes a hundred years old. I think of two villages, Billingshurst and Fittleworth, where children study in unspeakable conditions. The county council is at best able to carry out its function of putting roofs over heads by building hutted classrooms. That is all that it can do, let alone cope with the requirement for improving the school buildings.
When the Government ask what we are going to cut, they tend to forget that they have been doing a lot of cutting themselves. It is perhaps worth reminding them that many of what were hitherto sacred objects in Socialist mythology have been grievously violated, for example, health charges, school meals, and milk. In his less pragmatic days the Prime Minister once resigned over the question of health charges—at least that was the story on that occasion—but now we see the price of meals going up by 3d. in April, and so they are no longer sacrosanct. This question of charges is something that could be continued under a Conservative Government, and is in any case a preferable way of paying for what is required in education, namely, the improving of the conditions in which primary schoolchildren have to work.
I think that if one looks into the two functions of primary and secondary education, and higher education, one tends to get carried away on higher education. Current expenditure on primary and secondary schools is due to rise by 11 per cent. by 1972, but that on further and 792 higher education by 15 per cent. It seems, on the face of it, a curious phenomenon that a Socialist Government should plan to increase expenditure on the educationally privileged, rather than on children in primary and secondary schools, but that is up to them. What I question is whether it is right nowadays to be so generous with student grants, and particularly with post-graduate grants. I do not know—there may be some—of any other country which gives these grants quite so generously, and I should have thought that at least some of the £120 million that we are proposing to spend on student grants in 1972 could better be spent on primary education.
I think that it would have another beneficial effect. Both the Dainton and Swann Reports refer to the serious shortage of sixth formers studying science and the shortage of qualified scientists and engineers going into industry. I wonder whether there would be such a high proportion of students following the social sciences if they had to contribute, at some time in their careers, to their studies. I think that we should tend to find rather more following a course which promises a more immediate financial return, and that, as it happens, would suit the national interest as well.
I turn briefly to the question of roads. It has always seemed strange to me that we do not examine more carefully, and try to experiment with, toll roads. It is said that the difficulty is that one cannot control the access to these toll roads. I do not see why France, Germany and Italy should be so immune from this disadvantage. At least we should try the experiment.
Talking about experiments brings me to the research councils which were mentioned by the hon. Member for Middlesbrough, West (Dr. Bray). One piece of research which I would support is a major study of how and why each of the Government research establishments was set up, and what they are doing now. We should then try to distinguish in which of these fields of pure research Britain has more advanced knowledge than other countries, and we should concentrate on those.
It is often said that Government research establishments provide an invaluable service to industry. I am sure that that is true, but I do not see why 793 these establishments, which were founded to perform a particular function, very often in war time, should perform functions which can be carried out by industry. Nationally we do not have enough qualified scientists and engineers, and of those that we have too many are in the Government's service. If Government expenditure on research establishments were reduced, we could afford to reduce company taxation, and they, in turn, could afford to carry out more research.
The White Paper mentions the I.R.C. This will not take long. It can be scrapped with very little difficulty. I see that it is proposed to increase the existing limit of £150 million. We can abolish that proposal straight away. The whole thing is nothing but a boring, irrelevant, hectoring, postulating, condescending, interventionist nonsense. It is, of course, liked by some people in industry. It lends money at the wrong price. It induces people to do what their commercial judgment tails them is unsound, and I do not see why the taxpayer should have to be a party to this kind of monumental abuse.
I turn, briefly, to investment cash grants. We have had to face a Supplementary Estimate of £100 million for the current year, and we are told that this has been included in the figure for 1969–70 of £530 million. It is not as though industrial investment has been booming. In real terms it is a good deal less than it was in 1961 when my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) was Chancellor. Yet the provision for 1970–71 is less than for this year, and the total provision for industry as a whole, not just the cash grant, is expected to decline in 1972–73 and 1973–74. Paragraph 10 on page 37 of the White Paper refers to the substantial charge on the contingency reserve which this additional grant expenditure has already entailed. What, then, will it do to the contingency reserve in future years, when the estimates for these years show a decline? That is, if industrial investment should ever rise to its proper level.
The fact is that the level of industrial investment is far too low. The reason for this is not that the investment cash grants are not generous, they are, but that people invest in expectation of a profit, and under this Government there is 794 not the kind of atmosphere which induces them to make profits. The taxpayer has been paying industry to invest, a function which it would willingly perform for itself if there were a good chance of making profits.
If one makes an international comparison of the level of gross domestic fixed asset formation as a proportion of the G.N.P., one sees that we stand below France, West Germany, Italy and Japan. If we take gross fixed capital formation of the private and public corporations for West Germany and ourselves, we find that West Germany invested just under 19 per cent. of the G.N.P. and we invested 13.2 per cent. in 1967. The interesting thing is that in Germany they put a premium on invested and distributed profits.
In outlining his proposals yesterday my right hon. Friend referred to the suggestion that it would be better to have no tax at all, that this was the best inducement, and that companies should be allowed to carry out their own survey of what investment is required, but I wonder whether, with our position of a low level of investment for many years, we would not be better to follow the German system, which is to see that a positive penalty is placed on a firm if it does not invest in new plant and machinery, because it pays a high rate of corporation tax on retained profits. But against that high rate it can offset its capital expenditure. If it does not wish to carry out investment, it is taxed annually at the rate of 15 per cent., a low rate, on distributed profits to shareholders, who well know how to invest it. Given the peculiar and particular circumstances of our country's economy, this may be a preferable system. What is certain is that we are operating a highly expensive and ineffective system and it is time that we changed it.
I know that a committee is working on the effectiveness of the investment grant system. May I suggest that another committee, under a Royal Commission, be invited to examine the merits of a negative income tax, or guaranteed income as it is sometimes known? A good deal of work has been done in the United States already. There has been a special report to Congress, and some interesting academic papers have 795 appeared here, one a year ago by Mr. Brown and Miss Dawson, and one just recently by the Institute of Economic Affairs. What is certain already is that a system of taxation and social security benefits which has grown piecemeal over many years is now too complicated and much too expensive to administer. I noticed that the Minister of State, Department of Health and Social Security, said that it took 16,000 people to administer the supplementary benefits system. If a negative income tax could do without those people, there would clearly be a considerable saving. If ever a matter was particularly suited to computer techniques and could make substantial savings, it is surely this idea.
I suggest that this is the sort of study which Sir Paul Chambers, with his great experience of the revenue and of management, should be invited to perform. Of course, the worst of it is that it is very unlikely that a plan like this, involving the dismantling of a considerable part of the Civil Service, could emanate from the Civil Service itself.
I have greatly enjoyed reading this White Paper and perhaps no part more than the chapter on methodology. This has dealt effectively with the criticism that the application of constant prices to public expenditure means that no account is taken of possible increases in rates of pay and the relative effect of those increases between the public and private sector. In the White Paper the difference is put at between 1½ and 2 per cent. and is allowed for in the relevant price concept. The only trouble is that this has probably been based on past trends. It seems much more likely to me that these trends do not allow for a kind of wage explosion which we are now witnessing. I wonder whether sufficient allowance has been made for the teachers' pay claim and, if so, how much of it has been allowed for—whether it is the £27 million that the Government have offered or the £44 million for which the teachers have asked. We should be told.
However, it certainly seems, in the light of the news this morning that the December earnings increase was larger than any year for, I think, 10 years, unlikely that this trend in wage rates has been properly taken into account in the White Paper. In any event, the contingency reserve of 796 £75 million in the coming year and £175 million in 1971–72, will I think be found inadequate. But, as in all these matters, it is not the party opposite who will have to deal with it but us. I hope that the Prime Minister will soon allow us to get on with the job.
§ 8.3 p.m.
§ Mr. David Marquand (Ashfield)
Earlier, my hon. Friend the Member for Fife, West (Mr. William Hamilton) said that he felt like a political eunuch. If anything can be guaranteed to make one feel like a political eunuch, it is sitting in frustration for two whole days, an experience which I have just undergone. I therefore want to be very brief and try not to inflict the same experience on my colleagues who still want to speak. So I hope that the hon. Member for Horsham (Mr. Hordern) will forgive me if I do not comment on his speech.
We are addressing ourselves to three main issues. The first is the implication of the White Paper on the relationship between Parliament and the Executive; second the overall strategy behind the White Paper and, third, the priorities with it.
On the first, the debate has proved that the Select Committee on Procedure was right to say that, if we wanted an effective debate on the priorities of public expenditure we would have had to back up the proceedings on the Floor of the House with an effective committee system. Whenever an hon. Member tries to discuss in detail the priorities between one item of expenditure and another, he ands himself so short of information that it is difficult to relate different aspects and have a proper debate. All these problems are inherent in a situation in which we are trying to debate these issues without a committee system. My views on this are well known and I will not pursue them further. This proves the case.
I was, in the main, pleasantly surprised by the White Paper, which went further than I had expected. It is a revolutionary document in British Government. It is one of the most sophisticated attempts to present these issues that I think any country has ever published, but I still think that the economic background in the early chapters is far too thin to enable a proper 797 judgment to be made of the strategy. I agree with the overall strategy of the White Paper, but not because of what I have read in it. It does not give me sufficient information to be able to prove my case.
The guts of the strategic argument is contained in paragraph 12:Despite the marked recent improvement in the country's overseas earnings, there remains the overriding need to make available a sufficient share of these growing resources for maintaining an adequate surplus on the balance of payments and a higher level of private investment.That is the crucial sentence in all the strategic arguments in the White Paper. What the White Paper is actually saying, and what I think many of my hon. Friends have failed to understand, is not that public expenditure will rise only as fast as private consumption in future but that public expenditure will rise only as fast as private consumption together with private investment. But they are hoping for a higher level of private investment; in other words, they expect a diminishing share of the G.N.P. going to private consumption.
Public expenditure has to keep the same share, the private consumption share has to go down and the investment share has to go up. That is the crux of the White Paper's argument. If this is what is going to happen, I support it, but I do not think that one brief sentence is an adequate and satisfactory was of explaining this strategy to the House and the nation. Therefore, in the Government's own interests I hope that future White Papers contain rather more economic background. I understand the Chief Secretary' reluctance to publish full-scale economic forecasts for years four to five—I ant not on that—but the economic argument in the White Paper must be better in future if we are to have proper debates.
Turning to the overall strategy, the experience of the last five years of the Labour Government proves conclusively that it is not possible to achieve a greater social equality and justice without a rapid rate of growth. If one tries to do it in a situation of low growth, it involves an absolute cut in the standard of living of some people and virtual stagnation in the standard of living of others in order to benefit those at the bottom of the 798 scale. The majority in society are not prepared to tolerate that. Perhaps they should tolerate it, on moral grounds, but they do not, and since we live in a democracy, we cannot force them to. Therefore we must have more rapid growth if we are to have greater social justice. But how do we get it?
This is where I part company with some of my hon. Friends. It is no good saying that it is an insult to the British people to suggest that the nation is only capable of a growth rate of 3 per cent. over a long period. It is no good saying that that suggestion is shocking and wicked. The way to get a higher rate of growth over a long term is not to run the economy at a higher level of demand—that will only use up the surplus capacity which exists at present, but it will not solve the long-term problem. It is to increase the level of investment.
If that were done and if, at the same time, we had the rate of increase in public expenditure which we had in the early years of Labour Administration, then I would be forced reluctantly to the conclusion that the people would not stand for it. Any attempt to do that would backfire in many ways and we should find ourselves back in the horrible dilemma of stop-go and stagnation which we have been through often in the past.
I am, therefore, reluctantly forced to the conclusion that to obtain a higher rate of growth, which alone will make possible a higher rate of expansion in public expenditure, it is necessary to restrain the rate of expenditure in the coming years and so have a higher rate of investment. I do not like being forced to that conclusion, but I am inexorably forced to it.
There does not seem much point in trying to argue in great detail the question of priorities. As I said earlier, this is not the right place for such a discussion. However, I wish to put forward two broad propositions in the light of which the discussion of priorities should be considered.
First, it seems that in Britain the ghosts of Adam Smith and William Ewart Gladstone still stalk the corridors of Whitehall. There is still the idea at the back of the minds of policy-makers that, somehow, expenditure on the social services is a luxury which can be afforded 799 only when times are good, while expenditure on hard, tough things like aid to industry or road building is productive and virtuous. This is an astonishing view.
If one looks at the White Paper one finds that, under Labour, expenditure on the social services, in which we believe, has been running at a slower rate than expenditure on aid to industry. Considering our views about effective Labour policy, how many of us can justify such a state of affairs, which is astonishing even from the point of view of economic efficiency alone?
Hon. Members will have read the Brooking Institution's study of the British economy. When one studies the chapter on education one sees that there is no doubt that one of the major constraints on economic growth has been the shortage of skilled manpower and the inadequacy of investment in education. Even from the economic point of view this scale of priorities is wrong, and I am glad to see the White Paper stating that there will be a slowing down of the rate of increase in aid to industry, though I still believe that this item needs careful scrutiny.
I believe that I have the support of my hon. Friends in that general proposition. I am not so sure that I will have their support for my second proposition, which is that there is nothing un-Socialist or egalitarian in saying that there should be greater selectivity in the social services in the sense of trying to channel aid more directly to those who are in need.
It would be anti-Socialist and regressive—indeed, I would oppose it—if that were used as an excuse for cutting the total amount of aid given. I am rather dubious about some of the high-sounding and apparently sensible speeches that are made by hon. Gentlemen opposite in favour of selectivity, for I suspect that if they came to power they would use it as a smokescreen for a cut in the amount of provision.
I do not believe that it is possible to argue that an attempt to channel aid more directly to those in need, combined with expanding the level of provision, is anti-Socialist. On the contrary. It is at the very essence of Socialism. It is the very thing we said we wanted to do, 800 for it is tackling directly inequality where it can be found. I suggest, therefore, that the question of selectivity in the social services should be divorced from the ideological debate which takes place about the amount that should be given.
As I have made clear, I am in principle passionately in favour of a rapid rate of growth in the public sector and a larger share of the G.N.P. going to public expenditure. I believe that the majority of my hon. Friends also hold this view. However, it is incumbent on us to press for a more effective form of planning of public expenditure.
If one studies the White Paper one cannot possibly defend the extraordinarily lopsided way in which the growth of public expenditure has taken place for a considerable time, not only under Labour but under hon. Gentlemen opposite. One of the most interesting speeches I have heard since coming to this place was made by my right hon. Friend the Chief Secretary in the 1968 Budget debates when he contrasted one year with another from the point of view of the rate of increase in public expenditure. He compared, year by year, the position between 1960 and 1968 and the pattern was the same under both parties.
My right hon. Friend showed on that occasion that when the balance of payments position was strong, the Treasury was weak, that when the Treasury was weak public expenditure was out of control, that the balance of payments then became weak and the Treasury became strong, with public expenditure coming under control again with the screws being adjusted accordingly. His figures revealed this extraordinary hump-back path. This state of affairs occurred because the political pressure on the spending Departments to increase expenditure when times are good is irresistable.
I welcome this debate and will welcome still more the discussion that will follow it to strengthen the machinery for the orderly, rational planning of public expenditure which is a necessity for those who, like myself, believe in a rapid rate of expansion.
§ 8.18 p.m.
§ Mr. John H. Osborn (Sheffield, Hallam)
To borrow the terminology of the hon. Member for Penistone (Mr. John Mendelson), I may be described 801 as a second-class debater in this discussion. Many hon. Members who have taken part are economists or financiers. Certainly they are experts in financial matters who are used to taking part in Budget debates. It has been a privilege for me to listen to their speeches and while I venture, with mixed feelings, to express my views, I trust that those with expertise will bear with me.
I read with interest—I was present to hear many of the speeches—the OFFICIAL REPORT of the debate which occurred on 21st October and I read with equal interest the Report of the Select Committee which resulted in the White Paper being before us.
Yesterday, there was an interesting exchange between my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) and the right hon. Member for East Ham, North (Mr. Prentice) on overseas aid, when it was admitted that Governments had been making decisions necessarily in terms of clinical analyses but for prestige and strategic reasons. It was said that, whatever information was provided to Governments, that would always be a factor. The background to this is that the people want activities which they cannot afford themselves to be carried out by Governments. At election time they expect political parties to promise this. What they will not accept is that anything Governments are asked to undertake must be paid for ultimately by the taxpayer.
It has been stated that Parliament has been struggling for at least 15 years to have this forecast of future public expenditure. In the debate on 21st October my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) referred to events in 1955. I welcome the fact that we are well on the way now to having a five-year continuing programme Fifteen years is a long time, as the hon. Member for Penistone said.
Fifteen years ago I undertook a project for an industrial company, an activity in a subsidiary company requiring money from the parent company. At that time management expertise was unsophisticated as compared with the expertise needed in many larger projects involving cash flow and the control of a financial director. The factors which must be examined by those managing large industrial enterprises are complex and require 802 skills and expertise which only an industrial nation can acquire. Such skills and expertise are required in the public sector as well as in the private sector.
The approach is a numerate one. Modern management must use statistics as a weapon of management. Obviously those advising Governments must acquire this expertise. It is very difficult for Members of Parliament to acquire it. A good speech in the Chamber requires the minimum use of figures. There is not the element of exchange and discussion in a political problem which is vital to the discussion of a numerate problem. Therefore, we as politicians tend to make these issues political ones. I suggest that the similarity between the qualities required to be a Member of Parliament and the qualities required to manage large industrial organisations is greater rather than smaller than was the case 15 years ago.
The hon. Member for Ashfield (Mr. Marquand) questioned whether the debating Chamber is, without preliminary work, the best forum for reviewing a White Paper of this type. Before the debate my reaction was to welcome the White Paper as a stride forward in the right direction, though I have reservations. I had rather hoped that the Chancellor would lead the House through the White Paper as a financial director would lead a board of a company through a similar set of statements so that the board could understand the various aspects of the problem. Perhaps that would be to ask the Chancellor to do too much, condemning him to a form of parliamentary gymnastics which would turn out to be as dull as dishwater.
There has been debate on the question whether we should extend the committee system and, if so, in what form. Eight years ago I was the joint author of a Conservative Party publication, "Change or Decay", in which we advocated a form of specialist committees. We supported the concept, initiated by Winston Churchill in his Romanes lectures, of some form of third Parliament to combine the work of "Little Neddies" and to involve Members of Parliament—I see no reason why it should not involve Members of the other House—and perhaps industrialists. However, industrialists are busy people and committee work does not fit in with their other work. I support the view that without background 803 work the debating chamber, by itself is somewhat hampered.
It is important to get clear the factors we must consider—growth in the national product or domestic product; productivity; exports; imports; investment. The key document which we have is "The Task Ahead" in which various forecasts are recorded. An annual review of public expenditure must go hand in hand with an annual review of the economy. By this I do not mean the debate on the Budget which, although it revolves round the economy's performance, essentially deals with the revenue needed to achieve the Chancellor's objectives. Perhaps the machinery necessary to deal with a White Paper still eludes us in Parliament, but I believe we should go a stage further.
The next question that has been raised is as to the scale of public expenditure. Is large-scale public expenditure inevitable? I repeat the view expressed by many of my hon. Friends that it is not and that the problem must be considered differently.
The Chief Secretary analysed public expenditure into services and said that it was running at £11,000 million a year, including the social services and what we consider essential. My hon. Friend the Member for Worcester (Mr. Peter Walker) outlined the growth in public expenditure which has doubled in 10 years—from £9,000 million in 1959–60 to approaching £20,000 million now.
Taking the forecast in "The Task Ahead" for the growth in domestic product, it is an undoubted fact that in these 10 years there has been a 10 per cent. increase in effect in public expenditure as a percentage of the gross domestic product. The best assessment I can make is that this will continue, but I would welcome views on this. We could also discuss the question of the importance of investment, public and private.
My hon. Friend the Member for Bournemouth, West (Sir J. Eden) discussed the question of the nationalisation of steel. This morning I noticed from the Benson Report that 10 years ago the return on capital was about 15 per cent. and substantial profits were being made. I do not now want to argue present performance as against performance 10 804 years ago, because the steel industry would have had to have undergone a period of change, anyhow. I support the argument of my hon. Friends that much of this activity need never have been financed by the Government in the first instance.
A debate of this type, on the information we have available, shows the vast scale of capital expenditure by the nationalised industries, which is in the current year about £1,510 million, fortunately dropping in a few years. The capital expenditure of the steel industry is going up in the current year. We have been told today of the development programme of £69 million this year, building up later to £105 million and then £180 million. This expenditure need not appear in the White Paper but for the policy of the Government. It should really be outside a White Paper on Government expenditure.
Last week I asked how much money in the nationalised industries has been raised in the form of loans or perhaps equity outside this country—the latter is still subject to Treasury guarantee. I have not been able to discern what the answer is. I have, therefore, asked a further question. Is such outside money, because it is guaranteed by the Treasury, included in this public expenditure? It is probably excluded but is still guaranteed by the Treasury. The other thing which the steel industry is denied is funding from overseas as the capital or private sector can do. The private sector can raise capital overseas and it does not have to go through the Treasury or the accounts.
Again, we have had discussion of the merits and demerits of savings. In the first five years of a 10-year period, savings rose to 6.7 per cent. of the gross national product; in the latter five years they have dropped. Increased savings mean that industrial investment can go on without reference to a Government White Paper. The most important thing is to determine what can be cut out of this White Paper rather than what can be put in.
There are two small issues which raise detailed questions for which a debate of this kind is not the right place. Page 33 contains references to direct research in industrial technology. There is reference 805 to an increase of £15 million to £25 million over the next few years. There have been articles in The Engineer and in the New Scientist to indicate that much of this money will go to the National Computing Centre, the British Calibration Service and Non-destructive Testing.
We have discussed the rôle of Government research establishments. They are undoubtedly costing money. Admittedly, the cost over the next three years is likely to diminish rather than increase. The hon. Member for Middlesbrough, West (Dr. Bray) supported a view which I endorse—that this could be contracted at present. I welcome the fact that, within the research establishments, much more work is of a sponsored type and those requiring research and development are paying for it, instead of the money corning from the resources of the taxpayer.
Another question we have discussed is the education budget. The most important issue here at the moment is the expansion of primary education and the cost. Another issue we have to face and which will be a burden on public expenditure is the expansion of higher education. This is presenting the Department of Education and Science with a problem. I managed to obtain an extract from the Oxford University Gazette of 27th November, printing letters between the Vice-Chancellor and the Committee of Vice-Chancellors. The main theme there is that it is now known that people likely to gain qualifications in higher education in the early 1980s will total about 727,000, of whom 450,000 could well claim entry into the universities.
Page 16 of the White Paper tells us that the education budget for 1968–69 will rise from £2,232, million in 1968–69 to £2,499 million in 1971–72. The forecast: for 1972–73 is £2,550 million and for 1973–74 it is £2,600 million.
One of the difficulties in such a debate as this is that it makes nonsense to repeat such figures, which proves that a debating Chamber of this type is not really supposed to discuss individual budgets of Departments because it is unable to analyse the figures. Capital expenditure on the universities in 1968–69 is stated to be £79.5 million, while current expenditure is estimated at £231.8 million 806 in 1968–69 and £264.1 million in 1971–72. If the Government are to make some effort to meet this increased demand for 450,000 places by the early 1980s, I believe that there should be more in this estimate of public expenditure than occurs. It would be useful to have the comments of the Chief Secretary on this.
All these issues can be debated separately. I have cited these two examples of detailed issues which such an occasion as this does not provide the best opportunity to debate. As one of those supporting a stride in this direction many years ago, when I first came into the House, I welcome the publication of the White Paper and the opportunity to debate it.
§ 8.35 p.m.
§ Mr. James Dickens (Lewisham, West)
The hour is late, this is nearly the end of a two-day debate and I will endeavour to be brief in order, I hope, that one more of my hon. Friends may yet catch your eye, Mr. Deputy Speaker, before the debate closes.
The hon. Member for Sheffield, Hallam (Mr. J. H. Osborn), during a characteristically interesting speech, was earlier on the point of discussing the rôle of the Member of Parliament and the change that would come over that rôle as a consequence of this debate and the White Paper we are considering. Before discussing the implications of that, I should like to add my compliments to those already paid to my right hon. Friend the Chief Secretary to the Treasury, who has played a conspicuous part in the preparation of the White Paper. I know that he has been a main inspiration in getting this impressive extension of democracy in this House and the country and I am glad to add my congratulations to him for his efforts.
I am also very glad that the right hon. Member for Enfield, West (Mr. Iain Macleod) has sat through much of the debate. As a back bencher, I am grateful to him for doing so. I have great admiration for the right hon. Gentleman and it was not diminished after his remarkable speech yesterday, during which he managed to talk about public expenditure for 50 minutes without discussing where the Conservative Party stands either on the total of public expenditure at present or on various items within it.
807 What will be the major repercussion from the changes which the Select Committee on Procedure recommend? I am a strong supporter of the main recommendation, namely, the setting up of a comprehensive sub-committee system to ensure that this House has proper control over the total of public spending and of the priorities within it. It is self-evident that the effectiveness of this House as a debating Chamber would be greatly enhanced as a consequence of this development. I believe that it would lead to a profound change in the rôle of the back-bench Member of Parliament.
Mr. David Wood said recently in The Times that the day of the amateur politician in this country was drawing to a close. I believe that that is true. I do not say that in any sense to denigrate the rôle of amateur Members of Parliament, in the past or currently. They have played an extremely valuable rôle in the development of representative government.
What I am saying is that the requirements of a modern industrial society are such that it is a nonsense in 1970 that this House is kept going by the consistent activities of perhaps 100 or 150 back-bench Members out of a total of 500 or so. We have to recognise that this country now requires full-time professional Members of Parliament who will devote themselves full-time to the job. The day of the part-time barristers or journalists or other professional people acting as part-time M.P.s as well is over. It is now totally inappropriate to the interests of our country.
This will be an inevitable part of the development we are debating today; the setting up of these sub-committees will start this process. We cannot man up these sub-committees unless we can recruit into this House people of the necessary calibre who will come here on the understanding that they will be adequately paid and serviced for what they will be called upon to do and will not have to spend part of their time earning a living outside because of the present inadequacies in salaries and services.
We will have to recognise that in due course, not immediately perhaps, this will mean that full-time membership of this House will be incompatible with any sort of part-time outside employment. 808 We may not move to this in one stage. Hence my advocacy in recent months of the two-tier salary argument as an interim measure. But I believe that full-time membership is a necessary and desirable development for this country, for the remainder of this century and beyond.
Thus, I welcome these procedural changes because they will enhance the quality of debate in the Chamber, raise the standard of membership of this House and make Parliament a much more meaningful instrument.
I turn now to the economic aspects of the White Paper. Underlining all the questions of the level of public expenditure is the determination of economic strategy. An hon. Friend has said that it seemed to be the case that the Government, in determining that the surplus on the balance of payments was the first requirement, had worked everything back from that premise and had eventually arrived at the level of public expenditure. Consequently, they had also arrived at the level of public expenditure on the premise that one could not do anything further beyond getting a rate of economic growth of 3½ per cent. per annum, nor could one raise the level of direct or indirect taxation because of the ceilings that the politics of our times had imposed.
I dispute both propositions. First, I point to the past. Those who say, as the present Chancellor says, that we have to keep our public expenditure in line with the gross domestic product, should remember that the party opposite achieved almost exactly this during their 13 years in office. Taking 1951 as an index of 100, public expenditure grew from 100 to 230 by 1964. The gross domestic product at factor cost, again taking 1951 as an index of 100, rose to 229 by 1964. These figures were given to me in Parliamentary Answer on 20th December, 1968.
As a result, in 1964 we as a party and a Government inherited a position of acute and growing crises in virtually every one of the social services, despite the desperate last minute efforts made at the St. Bartholomew's Day massacre by Mr. Harold MacMillan in 1962 vastly to increase public expenditure, in a last minute effort to make up for years of neglect.
809 If we go forward on this premise, on the assumption of a rate of economic growth of 3½ per cent. or so in the 1970s, then this country will face precisely the same position in about 1974 as we faced in 1964. The social achievements of this Government since 1964 have been very great. There have been 2 million new houses, a real increase of 20 per cent. in the basic old-age pension and a vast rate of expansion in education despite all the problems. These achievements would not have been made if we had stuck to the formula now being provided and based our social policy on it.
The gross domestic product, taking it as 100 in 1963–64, had risen to 113 by 1968–69. Public expenditure rose over the same period by almost 35 per cent.—an increase two and a half times as much. It is no good claiming that we have made rapid social advance over the last five years if we say that over the next five years we intend to restrict the social advance to the results of the sort of economic policies which the Chancellor of the Exchequer and other Treasury Ministers have described.
I believe that this country can attain a much more rapid rate of economic growth. This must be the basis, not only of a rapid expansion of public expenditure but, as my hon. Friend the Member for Ashfield (Mr. Marquand) said, of the necessary and long overdue increase in the level of private investment in the country.
I am not a growth man without consideration for the environment. No one who has read the works of Dr. Mishon and others can hold that view. We must recognise that there are various disadvantages in the sort of very rapid economic growth which the Japanese people have achieved in recent years. Certainly this is so of the quality of the human environment in cities like Tokyo and in that country generally.
But surely it is possible for our country to attain the average reached by our O.E.C.D. competitors, which, in the recent past and currently, is on average about 5 per cent. per annum. I would put 5 per cent. as the realistic lower level of the 5 to 6 per cent. band of increase in economic growth which the T.U.C. and other people have been arguing for in 810 recent years. I am trying to be realistically optimistic about the future in this respect. If we achieved that over the next five years, it would lead to the creation of real resources in Britain of about £8,500 million over the period covered by the White Paper.
I am not suggesting that all this can go towards increasing public expenditure. Clearly some of it must go to private consumption. In my view, a lot of it should go to increased investment. But a considerable proportion of it must also go to meet the public expectations of a high and rising level of public expenditure.
This is not an economic debate, but the House will know that over the last three years or so I have argued in the House for a radically different economic policy. We can attain this rate of economic growth, given the safeguards on the balance of payments which I have described in earlier speeches. I simply give the alternative policy in subheadings now: we should liquidate part of our £5,800 million worth of overseas portfolio assets to repay short-term debt; we should strengthen import controls as Sir Roy Harrod suggests in an interesting article in The Guardian this morning; we should place further restrictions on the outflow of private capital investment in the sterling area; and we should make further cuts in the foreign exchange costs of overseas expenditure.
Moreover, like my hon. Friend the Member for Heywood and Royton (Mr. Barnett), I would go for a much more rapid rate of economic growth at the cost of a smaller balance of payments surplus. In short, a £500 million balance of payments surplus is unnecessary and, in terms of international liquidity, undesirable.
I should like briefly to say something about private consumption. It is remarkable that, as the country with the highest level of private consumption as a proportion of the gross national product among the advanced industrial countries, we are not considering a White Paper on private consumption over the next five years. The argument that we have had in the last two days must be seen against the immense social pressures on the British people to increase their private 811 consumption—the pressures of advertising and of marketing. If one spends an evening, for example, looking at commercial television, if one can bear to do so, all the advertisements are designed to implant in people's minds the assumption that improvements in their individual living standards are the ideal thing to aim at and are much more preferable to improvements in their collective living standards.
Whether it be higher consumption of potato crisps, alcohol, or pet foods, the assumption is that individual private consumption is in itself good but that public expediture and the present level of taxation are bad. We never see advertisements saying that new good schools or better houses or better roads are good for people in themselves, not only individually but collectively. I think that the House must have a regard for this dilemma with which we and the people of the country are at present faced. On the one hand, there is the increased pressure on people to increase their personal consumption and, on the other, their rightful desires for an increase in the quality and quantity of our public services.
This has been a useful debate and the Government have done right to produce this White Paper. I think that we can go forward in the years ahead to have debates of this nature in this House. I hope that we shall set up a committee system, but I ask my hon. Friends to recognise that we cannot obtain the necessary levels of public expenditure which the people of this country will require unless we have fundamental and radical changes in economic policy as a whole.
§ 8.51 p.m.
§ Mr. David Mitchell (Basingstoke)
This has been an interesting debate not only on public expenditure, but about whether we should have this debate at all. It has certainly been a recurring theme of many speeches to look introspectively at ourselves.
For the first time, perhaps, I find myself in some agreement with the hon. Member for Penistone (Mr. John Mendelson), when he expressed some reservation about the Select Committees. I only enter a caveat and that is that it 812 would be dangerous for us to overdo it and reach the position where Ministers were able to shuffle off responsibility for decision by saying, "The all-party committee recommended it". In that way we would tend to have a further weakening of the doctrine of Ministerial responsibility which is so important in this House.
I heartily support the idea of having future debates like the one we have had these two days. It was fascinating to watch hon. Members opposite recognise that one cannot have everything, that one must make choices. It was fascinating to watch some hon. Members opposite recognise that one must have a reining back of public expenditure to make room for increased private investment. This has been a very valuable teach-in for the House, but it would be more interesting if we were to have some conclusion on where the money was to come from for investment in private industry and how to motivate private industry to carry out that investment, especially if profits are as immoral as we are so often led to believe.
The debate has certainly demonstrated a considerable difference of view between the two sides of the House. I am glad to see that the hon. Member for Ashton-under-Lyne (Mr. Sheldon) is in the House, because I was fascinated by his comment yesterday—which I carefully noted—that we can expect that take-home pay will be a shrinking part of the pay packet. That is a clear indication that hon. Members opposite are expecting increases in taxation in future years and that perhaps more than anything else underlies the difference in view, certainly in this respect, between the two sides.
I shall deal with only one item of expenditure, but it is something in excess of £140 million and an item which hardly any other hon. Members have spotlighted during the debate so far. I refer to the deficiency payments to agriculture. There is an extraordinary situation. Public expenditure on agriculture for 1970–71 is estimated on page 39 of the White Paper at £326 million, yet at the very same time the farming community faces the most desperate financial crisis it has had in 25 years. There is this extraordinary contrast between substantial public expenditure in respect of agriculture and the industry itself desperately short of 813 money for investment and desperately short of the necessary cash flow to increase its own production.
The situation has not been made easier for the industry during the past 14 months. We had the N.E.D.C. Report. The Minister of Agriculture went round the country making buoyant speeches saying that he recognised the value of agriculture in the saving of imports and showing how necessary it was to raise production. Everyone expected an era of prosperity to follow in agriculture, but then we came back to the hard reality of the Price Review and an award of £34 million against rising costs of £40 million and a shortfall in payments from the Treasury to help agriculture of about £6 million.
To people in agriculture who may feel that the Minister must be either a fool or a knave I say, "No", because—and this is the point I am making—the Government have got into this situation because their present agricultural policies are up a dead-end alley out of which there is no escape if they do not change the policies themselves.
What is the financial consequence for the Treasury of a good Price Review? A deficiency payment makes up the difference between the market price and the price guaranteed to the farmer. The market price of product A is, say, 23s. a cwt. and the guaranteed price is 29s. a cwt. The Treasury will have to pay the difference of 6s. If there is a good Price Review and the guaranteed price is up by another 2s., this does not alter the market price one penny. What happens? The Treasury has to fork out another 2s. a cwt. One can well understand why the Treasury feels it necessary to put such a hard screw on the Minister of Agriculture and the negotiators of the Price Review in February to ensure that they do not give a generous award or an award sufficient to encourage farmers to produce more, for, if they do, every penny of it will come out of the Treasury purse.
It is worse than that, because, were mere production to be encouraged, the result might well be a further drop in the market price, or, during the coming year, one might even see something of the surpluses in the European Economic Community coming over to the tune of more than 300,000 tons of agricultural 814 products into this country's market. If that were to happen, it would further depress the market price, and, again without benefiting the farmers a penny, the amount which the Treasury put in would be increased.
I have no doubt that British agriculture suffers, and has suffered for a long time, from the fact that at the beginning of the year the Minister of Agriculture cannot go to his colleagues and say, "I want so much money for agricultural deficiency payments", because he does not know and he cannot know; it is an open-ended subsidy which is affected by market prices over which he has no control.
The change which I suggest is simple. The Government should alter their form of financial assistance to agriculture. Instead of having a system of deficiency payments, we should move over to a variable import levy. With product A at 23s. a cwt., with a variable import levy of 3s. a cwt. up will go the market price to 25s. or 26s. By manipulating the variable levy or tariff a situation can be brought about in which the market price in this country rises until we can eliminate the whole of the £150 million paid to the farmers in subsidy.
The simple fact is that a saving of this nature of about £150 million would be allied, with great advantage to the country and the Treasury, with something in the region of £100 million coming in in cash paid by overseas centres of food to this country in levy payments at the port of entry. With £250 million of public money saved, we would have something in hand both to help those affected by consequent changes in food prices and also to help reduce taxation.
Let us be frank. Any policy of the sort I have described will have some small impact on the cost of food and on the cost of living. I am glad to see that hon. Members opposite agree. Hon. Members on both sides of the House must face the fact, palatable or unpalatable, that the increase in cost of living for the ordinary housewife will be substantially less than the increase in cost of living has been during the past few years, and that the increase in the cost of food will itself be less than the increase in the cost of food in recent years.
By doing this we can give substantial help to the balance of payments to the 815 country as a whole and can take a substantial stride forward in reducing unnecessary Government expenditure.
§ 9.2 p.m.
§ Mr. Donald Dewar (Aberdeen, South)
The Front Bench looms large, and I hope the House will accept my apology for having to telescope what are necessarily complex arguments into a few perhaps over-simplified slogans.
I am a little surprised because the White Paper has created less stir than I would have expected. In many ways it is a striking document in its implications for the future. We are all aware that the average annual increase in public expenditure between 1964–65 and 1968–69 was 5.9 per cent. and over the next three years will be cut to 3 per cent. In Scotland the figures are 7 per cent. and 3.5 per cent., respectively. Clearly, although this preserves for Scotland a remarkable differential which reflects the commitment of the Labour Government—a commitment which we can see in terms of results in infrastructure and in investment the slow down we can expect must have its consequences.
It comes at a particularly difficult time when there are to be more old people, more young people, and when the working population in Scotland is falling. At the same time, even though these demographic factors may have been taken into account by those who drafted the White Paper, it is clear that there is another and much more significant factor. It is the enormous explosion of public expectation in terms of services and facilities.
There is increasingly a proper intolerance with bad housing, inadequate hospitals, crude roads. Everybody expects more rapid improvement in Scotland than can possibly be financed out of a 3.5 increase over the next three years. This is the dilemma that faces both parties. Priorities are not enough. The Government may mean well, they may have a heart of gold but people expect results. There is a very limited political mileage out of the no doubt extremely command-able fact that expenditure on education has overtaken defence in real terms.
We have to ask ourselves in looking at the White Paper how to reconcile the limited allocation of public financing which the Government has been able to 816 make against the enormously increasing public claim on these funds. I do not believe that this can be done by cutting public expenditure, as perhaps some of the more extreme hon. Members opposite believe. I have no time for those who cry out for a greatly increased programme in almost any sphere and at the same time launch a generalised assault against public expenditure as though it were some sort of fiscal original sin. I do not think this is responsible.
I do not believe the Conservative Party will be able to make real cuts affecting real resources in public expenditure over the next few years. There are threats about regional incentives. I certainly believe that if one looks at the economy of Scotland—and this could be duplicated in other parts of the country—taking all sorts of specific indicators an enormous impact has been made by Government policy in these areas. We will fight hard to ensure that there will be no demolition job, as was promised or threatened by one hon. Gentleman opposite.
Agricultural subsidies have been suggested as another victim. We know that this will make a considerable impact on consumer prices, but the Conservative Party have blurred their own case by paying for the support of the National Farmers Union by a promise of a system of guaranteed prices. The result will be a great deal of administrative confusion and expense and a much lesser saving to the Treasury than many hon. Gentlemen opposite seem to believe.
Even those who believe passionately in Britain going into Europe must accept that a price has to be paid, the price being a value-added tax and a levy system of agricultural support. It seems to me surprising that the Conservative Party has committed itself to both policies irrespective of whether we get into Europe or not. They seem determined to pay the membership fee of the club before they know that there is any chance of being elected.
I do not believe that one will be able to make the kind of cuts which sometimes are glibly assumed. I accept the arguments which have been made from this side of the House, and possibly they may be accepted by some hon. Gentlemen opposite, that we must reconcile ourselves to the realism of the Government's expenditure forecast if only because it is 817 not possible to sit back complacently and expect growth to come and rescue us from our dilemma. If growth is to come, vie must jack up our investment by squeezing public expenditure, and also possibly consumption however unpopular that may be.
If the balance of payments situation is to be made the criteria, and paragraph 12 of the White Paper has been much quoted in this respect, and if resources are to be made available to ensure a surplus, all the talk about the financing of nationalised industries out of the private sector is so much irrelevant nonsense.
At the end of the day, the electricity industry, the gas industry or any other industry needs real resources. In terms of the balance of payments, it does not matter whether that is funded by offering equity to the general public or done through taxation. If taxation is reduced and the funds raised in the private sector, there is a danger that the reduction will not be reinvested by taking up the equity offered but will result merely in increased consumption.
Even accepting the difficulties, it seems to me that there is an important split between the two sides. I said that there was a tendency to look upon public expenditure as an original sin—Socialist extravaganza, bureaucratic red tape rattier than homes, nurses' pay, roads, or a boost to the restructuring of the economy of the development areas.
Having condemned the rush to cut public expenditure for the sake of it, this does little to get our side of the House off the hook. I have been forced to the conclusion that we cannot raise taxation. However learnedly one may quote from international comparisons to prove that we are not highly taxed, people believe that we are, and believe that it has a disincentive effect. If my own taxation is raised, I will not give up in disgust. I will work harder to maintain my income in real terms. However, I appear to be an atypical animal in this respect and the Government must pay attentior to the realities of the political world.
I do not think that we can raise revenue through higher taxes or by squeezing public consumption while retaining z n untouched or expanding public sector. At the end of the day, I am forced reluctantly to the conclusion that 818 a choice must be made. That choice, even on these benches, may have to be to switch from the public to the private sector. It may be that we shall have to look at pay-beds or students' loans instead of grants. It may be that we shall have to live with B.U.P.A. or use the education voucher system which has been suggested in some quarters.
I know that these are anathema to my hon. Friends, but they are the hard inescapable logic of the Government's White Paper. If it makes us at least think about the possibilities and realise that, rather than letting these grow uncontrolled and in a haphazard form, we have to channel and control it and minimise the damage which results, it will have performed a function.
§ 9.7 p.m.
§ Mr. Patrick Jenkin (Wanstead and Woodford)
I began to wonder whether the last paragraph of the hon. Member for Aberdeen, South (Mr. Dewar) was the first in my notes and that he was winding up for this side of the House. I am sorry that he has had to stop in full flood when he was talking such good sense.
When the debate started, I hardly knew what to expect. I had read in The Times of 5th December:…there is little or nothing that can be usefully said, for example, in the two-day debate on public spending which will follow this White Paper.Then I read another paper, which also happened to be The Times. It said:It is not going too far to say that the future of Parliament as a relevant and effective part of the whole political process is at stake.I think that, when the Chief Secretary gave evidence to the Select Committee, he probably had the right answer in saying that we do not quite know where we are going. I am sure we must press on. My hon. Friend the Member for Honiton (Mr. Emery) cast doubt on whether the next Government would proceed with this experiment. Of course, we have to, reserve our position until we have seen and discussed the detailed plan which the Leader of the House will put before us in due time. However, my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) made it clear yesterday that, although there are formidable difficulties in the experiment, it seems well worth trying.
819 This is the latest stage in what has been a long process. My right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) perhaps started it when he instituted the first five-year defence programme. That was followed by my noble Friend Lord Eccles, with his five-year programme for technical education. I will not go through all the subsequent stages, but we are here now considering a White Paper covering the whole of public expenditure for five years ahead. The process is far from finished, and in some ways it has only just started.
There are two distinct points at issue. The first one is the efficiency of the Executive in managing and controlling the public sector. The second is the scrutiny and influence which Parliament keeps on that process. Few will quarrel with the first, and perhaps I do not need to spend time on it. My hon. Friend the Member for Guildford (Mr. David Howell) pointed out a number of the limitations on the present advance and how much still is to be done.
However, perhaps I might say a few words about parliamentary influence, though I will not rehash the whole debate and discuss what hon. Members on both sides had to say in the October debate. Those in favour of the procedure outlined in the Report of the Select Committee say, as the hon. Member for Heywood and Royton (Mr. Barnett) did, that the White Paper lacks the details of the choices to be made. The hon. Member for Ashfield (Mr. Marquand) said that a two-day debate is bound to be fairly superficial and certainly very diffuse and, therefore, that it is of little value until we have the detailed probing, questioning and challenging.
I agree completely with the hon. Member for Fife, West (Mr. William Hamilton) that Question Time is no means of doing this. Nor is the ordinary Supply debate. They argue therefore, that the Select Committee procedure is the only way to investigate the objectives of policies, the means and the various alternatives and then report to the House so that the debate on the next year's White Paper can be a good deal more meaningful, when one can concentrate on some of the real choices open to one.
The hon. Member for Middlesbrough, West (Dr. Bray) talked about putting into 820 the White Paper costed options. This is a suggestion which the Government might usefully explore. In that way it could be said that through this procedure the House would have more influence over Ministers and their Departments.
Those against this proposal fall into two opposite and inconsistent camps. First, there are those who say that the whole proceeding is ineffective because the real power rests in the Cabinet; that, when the chips are down, decisions depend upon the personal influence of Ministers and upon the political situation at the time, and that any parliamentary investigation, even over a long term, is likely to be almost irrelevant, if not futile. Further, they say that it will be a great waste of Ministers' time, because it will distract them from their real duties.
On the other hand, there are those like the hon. Member for Penistone (Mr. John Mendelson)—I do not see him in his place—who say that, on the contrary, the influence of the Committee will become too great; they will become policy-making committees, like the Appropriation Committees in the United States Congress, and that this will undermine the influence of the House and kill debate on the Floor of the House. In our October debate the hon. Member for Penistone said that this would be very dangerous to the democratic process of the House of Commons. Obviously, these two arguments are inconsistent.
The interesting and relevant fact that has come out is that, of the 30 speakers who have taken part in this two-day debate, there have been one and a half who have been against the Committee proposal. The half that I refer to is my hon. Friend the Member for Basingstoke (Mr. David Mitchell). The rest have been in favour. In reply to the hon. Member for Penistone's point, only four of those who have spoken were members of the Select Committee. I think that this is an overwhelming expression of opinion by those who have taken part in the debate.
If the Government are impervious to the influence of Parliament—if the House of Commons is no more than a place for making speeches—why do we bother with the White Paper? There would be no point. If we have any influence, I believe that we must probe more deeply if we are to make that influence 821 effective. So I come down on the side of the majority in favour of proceeding with the experiment.
Turning to the White Paper, I should like to mention the presentation. This is the first attempt at a functional presentation of the structure of public expenditure setting out the figures under broad functional headings rather than by Departments, and, furthermore, on a constant price basis. I hope that the Minister of State, when he winds up, will confirm the point made by the hon. Member for Sheffield, Heeley (Mr. Hooley) about aid. That table is not put in constant prices. Therefore, in so far as the figures are sought to be relied upon to show a rising percentage of gross national product, to that extent they are misleading. The right hon. Member for East Ham, North (Mr. Prentice) made the same point.
On this functional division there are still some extraordinary lapses. Looking at Table 2.18, on page 55, "Financial Administration", we find, "Royal Mint (including decimalisation, etc.)". The narrative makes clear that this includes a sum for the new Mint at Llantrisant. Yet on the next page in Table 2.19, "Common Services", we find a heading, "Accommodation (Home)", which includesmiscellaneous buildings such as the Royal Mint".The Royal Mint appears under two quite different headings.
In the same table, under "Home publicity services", we find that there is to be a substantial increase from £6.7 million to £10.2 million. Why? Because there is to be expenditure on publicity for decimalisation. So we have two functions there spread across two tables.
Under "Housing", Table 2.11, there is a modest increase of an average 3.2 per cent. per annum. On the other hand, looking at Table 2.20, on page 57, we find the biggest single increase in the whole of the White Paper. It refers, my hon. Friends will not be surprised to hear, to the Land Commission. There is a 500 per cent. increase in expenditure in three years—from £4.4 million to £22 million. What is the reason given for this expenditure? It is said that it is to enable land to be purchased for much needed housing projects. Perhaps hon. Gentlemen opposite thought that it would escape notice by being put under "Miscellaneous 822 Services". We shall abolish the Land Commission.
The essence of a functional breakdown is not just how much is being spent, or what increase is provided, but why it is being spent, what is the objective? Perhaps I can give an example. Perhaps hon. Members will look at Table No. 216 on page 52 and study the figures under the heading, "Welfare foods". Over the period, this shows a small decline in real terms, but I believe that this is an example of an on-going programme which for years has never been properly challenged. What is the purpose of spending £40 million on welfare foods? Is this a hangover from the days of rationing when nursing mothers and small children needed supplementary orange juice to get their vitamins?
Who today, apart from a tiny minority, needs these free hand-outs, or subsidised hand-outs, of food? It may be that this is justifiable, I do not know, but nothing whatever is said about it in the White Paper. No information is given, and I believe that something should be said about it.
I return to the main point made by the hon. Member for Ashfield and by my hon. Friend the Member for Guildford, who said that what is needed is a disciplined and efficient questioning of objectives. Like my hon. Friend, I am far from satisfied that the programmes, although we are now nearly 10 years on from the Plowden Report and the spirit which inspired that, have been subjected to the sort of penetrating cost-benefit analysis which they surely need. This is the purpose of what has been called, on the American model, a planning, programming and budgeting system—P.P.B.S. A limited start has been made on this in Whitehall, mostly in the Ministry of Defence, and a little in education, but it must progressively spread to other departments.
The lesson to be learned from the United States is not to try to do it too quickly. I am not suggesting that my right lion. Friend the Leader of the Opposition should sit down to breakfast with all the Permanent Secretaries on the day after the General Election and insist, like the President of the United States, on P.P.B.S. in every department, but it is going ahead, and it is right 823 that it should be pressed on with, because this is how objectives can be tested. One can see whether the money is being spent on a worthwhile objective in the most efficient way.
I turn to two underlying assumptions which have figured highly in the debate. The first is the rate of growth of the economy. This has dominated our discussions, and quite rightly, because it is crucial to the whole exercise. Many hon. Gentlemen opposite have expressed disappointment with the figures in the White Paper, and well they might, because the combination of high public expenditure programmes in the last five years and a poor overall economic growth record has led to soaring taxation.
The hon. Member for Aberdeen, South made this point. Hon. Gentlemen opposite recognise that there must be a clear limit to the future growth of public expenditure, but they face an agonising choice. Either they accept these expenditure figures, with no increase in the standards of welfare, falling standards in education, no chance of reaching the target to which the Government committed themselves, as the right hon. Member for East Ham, North said, and so on, or they contemplate the prospect of still higher taxation and face a massive revolt from their constituents.
Many hon. Gentlemen opposite recognised and admitted that they wanted higher taxation. They did not, however, tell us how they would get their constituents to understand this, and one was left with the impression that they felt that their unsympathetic constituents were hardly worthy of their noble and unselfish parliamentary representatives.
The right hon. Member for East Ham, North, bad though he realised this was, comforted himself with the thought that it was worse under the Tories, but I shall discomfort him. If one takes two five-year periods, the Government's five years, and the preceding Tory five years, I agree with the Chief Secretary that the percentage increase in public expenditure was almost identical. But let us look at three of the things which have figured largely in this debate.
First, let us consider education. This point was made by my right hon. Friend the Member for Enfield, West. During 824 the Labour years there was a 27.4 per cent. increase. During the Tory years the increase was 45.1 per cent. We are not opposed to rising standards in the public sector if we can afford them, and in those years we could.
The figures for health expenditure are, in the Labour years 25.9 per cent. and, in the Tory years, 27.2 per cent. On road expenditure, in the Labour years the figure was 30.5 per cent. and in the Tory years 57.5 per cent. On housing—surely the Labour Party won the last two elections as much on their housing promises as anything else—in the Labour years were was an 8.9 per cent. increase and in the Tory years a 70.6 per cent. increase.
There is the answer to the right hon. Member. And during our period of office, we also cut taxes, whereas the Labour Government have increased taxes by £3,020 million. The difference was that we achieved this because we had a much higher overall growth rate. Therefore, when people ask, "How can you promise to increase the standards of public provision and cut taxes", we say not only that we did it before and we can do it again, but, also, that we did it better and that we will do that again.
The next assumption is that public expenditure must remain in line with the overall growth rates. Here, of course, Labour is singing a very different song from that of even two years ago. The Home Secretary used to talk about our "collective standard of living", the "infrastructure" of our society. We heard much of this from the Chief Secretary today. Yet the extraordinary thing is that the one field in which the party opposite can point to a higher growth in public expenditure in their five years than in the preceding five years is welfare payments, pensions, supplementary benefits and unemployment benefits. That has nothing whatever to do with infra structure. That is not the collective standard of living; that is redistribution and falls under the right hon. Gentleman's other heading.
If they argue that it will be in line with growth, that assumption has been challenged, and I also challenge it. After the question, what is the purpose of a particular expenditure, one is entitled to ask whether that purpose would be better achieved if the activity were carried out 825 in the private sector. A number of hon. Members on this side of the House have made many bids for transfers to the private sector—parts of the steel industry, elements of the Post Office and forestry and so on.
One which the hon. Member for Middlesbrough, West mentioned, and which I already had on my list, is the research and development done at Government establishments. In 1967–68, the latest year for which I have been supplied with figures, the figure was £220 million. The first lunch of the Parliamentary and Scientific Committee which I attended was addressed by Professor Blackett, who told us that a qualified scientist and engineer was worth three times as much in private industry as in public service. Therefore, I would say, let us challenge every item of this research and transfer much of it to the private sector.
Or what about the Royal Ordnance factories, which make a huge quantity, about £42 million-worth a year, of unsophisticated military equipment? Would that not be done more efficiently in the private sector? I should stress that we will not save money: if the quantities are needed, they have to be paid for.
The hon. Member for Middlesbrough, West also mentioned employment exchanges. There are about 750 and their total expenditure is about £25 million. They achieve a 34 per cent. success rate with placements as against registration. That is not too bad, but is all that expenditure equally valuable? In a Parliamentary Question on 6th November, the hon. Member for Reading (Mr. John Lee) asked about professional employment exchanges.
The Minister of State, Department of Employment and Productivity, said:During 1968, there were 72,058 registrations with the Professional and Executive Register, which deals with most professions and also with managerial, technical and scientific posts; 10,608 vacancies were filled by the Register during the same period—14.7 per cent. of the total of registrations. Steps to extend and improve the work of the Register are continuing and include additional staff, better staff training, speedier circulation of vacancies and movement of some officers into better premises."—[OFFICIAL REPORT, 6th November, 1969; Vol. 790, c. 161.]But surely, in every city in the land, we have a whole mass of private agencies which can do this job. The pages of 826 the quality Press, every day and every Sunday, are covered with advertisements for these jobs. Are we really satisfied that this is a function which needs to be carried out in the public sector?
This is what I mean by conducting a critical examination of whether tasks should be carried out in the public or private sectors. I am not prepared to accept the argument that something is in line with growth unless I can be satisfied that a service can be performed effectively only in the public sector. I am not prepared to see services like education bumping along on the ground floor, starved of resources, while resources are being squandered under other doubtful headings.
I urge the Minister to answer a question which my right hon. Friend the Member for Enfield, West asked of the Chancellor of the Exchequer yesterday. My right hon. Friend said:The particular point which I want to ask the right hon. Gentleman is whether there are any unannounced decisions which have been taken and are allowed for, but not announced to the House of Commons".—[OFFICIAL REPORT, 21st January, 1970; Vol. 794, c. 547–8.]My right hon. Friend was referring to education.
A classic illustration of expenditure which should probably not be in the public sector is the huge amount that is being spent on housing subsidies. My hon. Friend the Member for Worcester (Mr. Peter Walker) had a great deal to say about this subject, which raises another issue to which the Chief Secretary referred but did not deal with adequately.
It is the whole question of the collective purchase of goods and services which, when financed by taxation, may give rise to an element of redistribution in public expenditure. Those in favour of greater redistribution find themselves wanting to sweep more and more activities into the public sector, while those who are against it tend to be opposed almost automatically to public expenditure simply because of its redistributive effect.
The Chief Secretary drew a distinction between the provision of goods and services, on the one hand, and the redistributive function, on the other. But there is a third category of public expenditure which was referred to by Sam Brittan in 827 an article in the Financial Times a year ago under the heading "Public Sector Subventions". Under that heading he included subsidies for public house building, investment grants, agricultural support—my hon. Friend the Member for Oswestry (Mr. Biffen) referred to this—the railway deficit and a soggy mass of expenditure of which the objective is far from clear.
This area deserves the most rigorous examination. Some of it may be counterproductive, even if its ostensible purpose is redistribution. For example, housing subsidies which are designed to help meet the difficulties of those on lower incomes may accrue to the benefit of council house tenants who may be better off. The agricultural objective of saving imports may be frustrated by the agricultural subsidy programme, or it may promote inefficiency, such as the R.E.P. does.
One can itemise these matters, including the question of investment grants. This is what I would describe as the soft under belly of public expenditure, and I regard it as a misplaced priority in this ill-considered, on-going programme of subventions which continues while, for example, education is starved of funds.
This is where the real argument about private affluence or public squalor arises. We are bound, therefore, to question whether public expenditure is really necessary in certain respects. It might be argued that this has nothing to do with keeping in line with the growth rate, but it is the self-imposed limit placed by the Government on what should be spent in the public sector that is in question and we say that they have a wrong order of priorities because of the confusion of objectives.
We need rigorous scrutiny of public expenditure. For example, the sickness benefit is rising from £348 million to £428 million in three years, an increase of 23 per cent. We are told that this is happening because of an underlying upward trend in sickness benefit claims. Has a study been made to discover it there are any institutional factors involved? Nobody minds paying benefit to people who are genuinely sick, but I cannot believe that sickness has been rising at this rate. Something else is clearly at work.
828 This is all a question of priorities and, in the last resort, that is what this debate is all about. It was a Texan who, when shown the total expenditure by the American Government in the public sector, gasped and said, "Thank God the people of America do not get as much government as they pay for".
I sometimes wish the same could be said here, but, unfortunately, we do. We all know about the 65,000 extra civil servants during the past five years. What people do not realise is that, even taking account of the transfers from the Post Office, the total number of civil servants has risen by 4,500 since last October. We are told that this is a long-term cyclical trend. I do not accept that.
There are a great many things that could be done. My right hon. Friend talked about introducing self-assessment for income tax, for instance. I agree that, if there are to be great changes, changes of policies must be involved—changes in policies in moving from the public to the private sector, in stopping on-going programmes, in determining objective, and applying cost-benefit analysis right across the board.
The White Paper gives the House the chance to begin to scrutinise these figures. Public expenditure committees could enable hon. Members to challenge, to probe, and then to influence. Together, we would be of great help to Ministers. Then perhaps the Legislature could begin to regain some control over that huge, benign, secretive remorseless juggernaut that we call the Administration.
§ 9.36 p.m.
§ The Minister of State, Treasury (Mr. William Rodgers)
I am sorry that I cannot match that exciting and well-contrived peroration. I very much enjoyed the hon. Gentleman's speech and want to follow him in some of the paths he trod. I believe that if some of his best throw-away lines were to be subjected to the close scrutiny which he thinks should be applied to public expenditure they would be found to have much less substance than he supposes.
This has in some ways been a curious and rather self-conscious debate. On the one hand, we have been discussing the major issue of the relationship between Government and Parliament—between 829 the Executive and the House of Commons, in this case. On the other hand, we have been discussing ultimately questions of political philosophy and party controversy. I very much agree with the reference by the hon. Member for Oswestry (Mr. Biffen) to the issues which are involved in the White Paper as being at the heart of political controversy. It may well be that the speech to which we have just listened by the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) is not the end of this debate but the beginning of the next.
The tone of this debate has been partly muted out of proper recognition of the historic event which is involved and as a preparation for something which will be sharper the next time round. Both my right hon. Friend the Chancellor and the right hon. Member for Enfield, West (Mr. Iain Macleod) muted their more attacking instincts and so settled the tone of what has been on the whole an urbane debate in which there has been a certain amount of self-consciousness about too strenuous controversy and some fairly odd alliances across the Floor—as, for example, that between my hon. Friend the Member for Fife, West (Mr. William Hamilton) and the hon. Member for Honiton (Mr. Emery).
My hon. Friend the Member for Edmonton (Mr. Albu), in a typically informed and congenial speech, made some sharp remarks about some aspects of Government philosophy. The hon. Member for Oswestry was not alone in turning a familiarly sceptical eye on the policies of his Front Bench.
So it has been a good debate, although I shall resist the temptation to turn polemical and deal with some of the points of a more strictly debating kind made by hon. Members opposite.
I have nothing to add to what my right hon. Friend the Chief Secretary said about the proposals of the Select Committee and, therefore, on parliamentary control. My right hon. Friend said that we were listening carefully to all that was being said. We have, on the one hand, the views of my hon. Friend the Member for Fife, West and others and, on the other, the views of my hon. Friend the Member for Penistone (Mr. John Mendelson), on the proper future course. My right hon. Friend the Leader 830 of the House will be making recommendations as soon as possible.
Whatever then emerges, I am sure that the process of discussion today will ensure that, in future, the public expenditure programmes of all Governments, of whatever kind, will be more closely scrutinised than hitherto, and it may well be also that the House will continue to demand some of the additional information—the costed options, for example—which my hon. Friend the Member for Middlesbrough, West (Dr. Bray) mentioned. So we have learned, as a result of this discussion, of the proper relationship of Parliament and the Executive, a subject which we discuss all too rarely in this House and which is in some ways a symptom of our reluctance to consider change and the adaptation of the machinery of Government and of the constitution to vastly changing needs.
I turn now to public sector pay and the consequences which it may have for the calculations set out in the White Paper. This point was made in particular by the hon. Member for Worcester (Mr. Peter Walker). In recent years, pay in the public sector has tended to move broadly in line with pay in the private sector. Of course, there have been divergencies over short periods and different classes of workers have fallen behind and then caught up again. But there has been this broad relationship between the two sectors.
We have no reason to expect that this broad relationship will not persist in future and, indeed, a relationship of this kind is implicit in the policy for the public sector set out in paragraphs 93 and 95 in the recent White Paper on Productivity, Prices and Incomes after 1969. This relationship is equally implicit in the relative price effect for which provision has been made in our plans and details of which are set out in Appendix 3 to this White Paper.
As long as public sector pay keeps in step with private sector pay, however much they may rise, the relative price effect for which we have allowed will make the necessary adjustment. Although I understand the anxieties of the House about the awards which may recently have been reported upon, all the present signs are that the relationship we have known will persist. But perhaps I should 831 add a word of caution. A new and very difficult situation would arise if claims were to go forward from the public services on a scale which was way out of line with the rates of increases which were being currently earned in the rest of the economy. If a situation of that kind were to arise, the Government would have to consider very carefully how this would affect the published plans for the individual spending programmes. So I concede the point that, if evidence showed that they were getting much out of line, this might affect the programmes. Of course I am not discussing now the other consequences of a very sharp increase in the public sector as well as the private sector which are outlined in the White Paper.
Perhaps I can answer a question originally asked by the right hon. Member for Enfield, West yesterday, and which was repeated by the hon. Member for Wanstead and Woodford tonight, about the education programmes. As the right hon. Gentleman knows, the estimates are really a whole host of minor decisions of a kind which Departments are bound to be making throughout the course of a year, but I take it that he refers to the major decisions such as, for example, the increase in school meal charges, which are normally announced in the House. I can say that the forecasts assume no such unannounced decisions.
I come now to the question of investment grants, which again is a subject on which a number of hon. Members have commented. Whatever view one takes of what their future should be, this is properly a subject for discussion in the House, particularly when the Estimates Committee has commented on factors which will determine the level of expenditure in any one year. I repeat them because this is a good example of some of the limitations on public expenditure control which both sides of the House are familiar with and have been obliged to deal with from time to time.
As the Estimates Committee mentioned, first, there is the total of investment undertaken by individual enterprises both in plant and machinery generally and, particularly this year, in ships and computers; secondly, there is the proportion of that investment eligible 832 for grant; thirdly, there is the proportion of the investment in plant and machinery undertaken in the development areas; and, fourthly, there is the length of delay, which may vary between a few months and a couple of years or more, between the time when the claimant incurs investment expenditure and the time when he submits his claim to the Government for grant.
Once the Government have determined the grant, the actual volume of expenditure depends primarily on actions by individual private industrialists which the Government must seek to forecast but which the Government cannot directly control. I think that it is common form that this is the case, but it is desirable to mention it again when looking at the problem of controlling public expenditure.
It is also worth mentioning that, in discussing investment grants, we are discussing a new scheme and claims are still coming in in respect of 1966, the year when investment grants were first introduced. So the forecasters do not yet have the figures for one year's complete operation of the scheme on which to base their future projections.
§ Mr. Patrick Jenkin
No doubt the hon. Gentleman would wish to add an extra hazard. The Comptroller and Auditor-General has reported today that 2,500 claims have been wrongly paid in the last few years.
§ Mr. Rodgers
That is another factor which must be examined, but it does not affect the principle of the nature of grants of this kind. But, having said that—and I am trying to be as conciliatory as possible and clearly am being much more conciliatory than the hon. Member for Wanstead and Woodford—I agree with what the Estimates Committee says about the need to improve future forecasting of this expenditure. This again must surely be common form.
As we have told the Estimates Committee, and as the House knows, the Ministry of Technology has recently taken over responsibility for the scheme from the Board of Trade and it is looking at this problem very seriously. But, as has been mentioned today, particularly in reference to agricultural support, investment grants are by no means the only 833 case where the out-turn of public expenditure is at least partly dependent on events beyond the reach of Government, even beyond the reach of this Government. This is why there needs to be some flexibility in the programmes.
I listened with great interest to what the right hon. Member for Enfield, West said yesterday about the alternative merits of capital allowances. All that I will say now is that they are similarly open-ended. However, in the case of allowances, and this is worth remembering, the total cost does not appear dramatically as an increase in public expenditure but is concealed in the loss of revenue from taxation. The same problem arises whichever way we look at it. It is a problem of control.
I know that aid is of deep concern to my hon. and right hon. Friends in particular. I will not make the point, which I could, that there is a faster rate of increase than was recorded in the last five years of the previous Administration. The point of non-controversial interest to the House is the question of calculating on a cash basis and gross of loan repayment. This is being examined by another Select Committee of the House and I know that my right hon. Friend the Member for East Ham, North (Mr. Prentice) would not expect me to go into detail here.
I ought to say that the decision to work on the current price basis which we use in the White Paper is standard international practice and is applied, for example, in the calculations on the U.N.C.T.A.D. 1 per cent. target. I am not saying—I am trying hard not to be dogmatic on anything—that on future occasions there may not be a case for expressing this figure in some other way. Even if it was expressed in some other way, in the same terms as the White Paper as a whole, it would be discovered that there was a very substantial increase over the years ahead, very close to the average annual rate of 8.2 per cent. between 1968–69 and 1973–74, set out in the White Paper.
The hon. Member for Worcester raised some interesting questions, taking as his starting point housing subsidies. I will not follow him in the details of that except to concede that these are matters which it is proper for us to discuss and to examine closely. That is 834 the spirit of the remarks of my hon. Friend the Member for Aberdeen, South (Mr. Dewar). We cannot close our minds to the very difficult question of the rise of public expenditure in the welfare and social services areas and the possibility in some way of getting a transfer from private consumption to public expenditure.
My willingness to keep an open mind on this became a little hesitant in view of the remark of the hon. Member for Wanstead and Woodford about welfare services. He took far too bland a view of the possibilities although I do not doubt that the points raised by his hon. Friend should be discussed in future.
There are a couple of points I could make on housing if I wished to be controversial. For example, for the first time, half the nation's houses are owner-occupied and we have lately asked local authorities to use loans, among other things, to help council house tenants to move to a house of their own if they wish. This is not a sharply divided issue, there are shades, and there is a margin. It is something to be discussed and something which is in dispute on both sides of the House.
A word now about the 3 per cent. figure which we have put in. This is a question of judgment. It was argued by my hon. Friend the Member for Lewisham, West (Mr. Dickens) and by others from time to time, that the rate of growth in future may be higher. This may be so and we hope that it will be the case. Certainly in the White Paper my right hon. Friends the Chancellor and the Chief Secretary are surely right to work on what may turn out to be a pessimistic assumption but one which will enable these figures to be maintained and public expenditure programmes to grow at a steady rate over a period of time.
A point which has not been made very often is that it is true that in the field of public expenditure, as in others, the important thing is to maintain a steady rate. Sometimes it is more desirable to maintain a steady rate of growth at a relatively low level than to create a situation where there is rapid expansion one year and a sharp cut-back the next.
The hon. Member for Worcester had something to say about the damming up, as he thought, in the local authority 835 world of necessary maintenance and repairs of one kind or another. I think that he exaggerated that, because the period of damming up has been very short if the public expenditure figures over the last few years are examined. Nevertheless, I concede that one way in which public expenditure should not be run, in any sector, is by a rapid expansion then a rapid cut-back because we have exceeded our means. This is the worst way of using resources.
It is necessary, in reflecting upon these figures—the 3 per cent. growth and the extent to which public expenditure will grow in line with national resources—to note what my right hon. Friend the Chancellor of the Exchequer said yesterday, that the plans in the White Paperinvolve different rates of growth of public expenditure at different times—not some … hard-and-fast limit for all time and all situations."—[OFFIctAL REPORT, 21st January, 1970; Vol. 794, c. 527.]This question of the relationship of public expenditure to the nation's resources is, after all, at the heart of the matter and at the heart of our debate. There can be no dispute that more effective control of public expenditure both by Government and by the House is desirable. Nor can there be any argument that there will always be a problem of deciding priorities within the total of public expenditure—even if we refine the techniques that we use, as the hon. Member for Guildford (Mr. David Howell) and my hon. Friend the Member for Middlesbrough, West would wish us to do. Nor perhaps will it be questioned—I do not think that it has been in the last two days—that there should be some relationship between the growth of public expenditure and the growth of the nation's resources. The question is, what relationship?
The present situation is that a massive shift of resources to exports and import saving, which has been the Government's objective over the past two years, has been secured. We must now maintain this position while we reap the benefit of it. We do not have to switch a still higher proportion to the balance of payments: the public sector, private investment and private consumption together can henceforth broadly maintain their share. The Government's view, as expressed in the White Paper and clearly 836 reiterated in this debate, is that growth of public expenditure in broad proportion to the growth in national resources is the right relationship in the coming years, particularly in the first three years of the five-year period.
But the debate has shown that Members have different views on whether the balance is right. In particular, on this side of the House, and not only in this debate, there is some feeling that the proportion devoted to public expenditure should perhaps be higher now and should certainly rise more rapidly as the gross national product rises. This was broadly the view of my hon. Friend the Member for Lewisham, West. I do not want to get involved in a detailed argument at this stage on public expenditure versus private consumption, but I thought that my hon. Friend the Member for Ashfield (Mr. Marquand) made some shrewd comments on this today both on the risk of provoking wage-cost inflation if private consumption is squeezed too far and on the need for an adequate level of investment.
Our judgment of where the balance should be struck rests in large part on our judgment of what people in this country mainly want, and it is in turn a judgment resting on assessments both of personal psychology and of national mood. How far are they prepared to forgo additional rises in their own spending power in order that the problems of environment should be dealt with more energetically? How willing are they to pay in taxation for a better quality of social benefit than hitherto? We are bound to give differing answers according to our experience and our settled views. But we cannot deny the relevance of the questions or be insensitive to the replies. It would be arrogant for any Government, and self-destructive, not to seek to strike a balance which not only makes the best economic sense but takes account of the country's own assessment of its needs and wants. That, after all, is what democracy is largely about.
We have had an extremely interesting debate, and I think that all of us will reflect carefully on what has been said. If, however, there is one incontrovertible point which emerges it is that the quality of life that we can hope to achieve in this country will continue to depend substantially upon our rate of economic 837 growth. Growth does not solve all problems, but the absence of none. This is an obvious a very sophisticated one, to make it.
I hope that the House take note of the White Paper
§ Question put and agreed
That this House takes note of the White Paper, Public Expenditure 1968–69 to 1973–74 (Command Paper No. 4234).