Order read for resuming adjourned debate on Question [8th December]:
That this House takes note of the White Paper on Public Expenditure to 1975–76 (Command Paper No. 4829).—[Mr. Maurice Macmillan.]
§ Question again proposed.
§ 4.0 p.m.
§ Mr. Harold Lever (Manchester, Cheetham)
I beg to move, at the end of the Question to add:'but, while welcoming the relaxation of earlier doctrinaire policies of Her Majesty's Government regarding the level of public expenditure, deplores the serious hardship already inflicted upon large sections of the people; and gives warning of the continuing danger to human and social needs and to the prospects for reducing unemployment if Conservative philosophy is accepted'.I should make it clear that with this Amendment we are seeking to widen the debate somewhat to more general issues rather than to register a vote, perhaps inappropriately, on a Motion which merely asks us to take note of the White Paper on Public Expenditure. I should also indicate that the way in which I shall seek to deal with the question of public expenditure is by attempting to relate it—not merely its mechanics but its policy—to the more central question of the economic welfare of the country. In particular, I want to speak for a while on the aspects of public expenditure which affect the stabilisation of the economy in support of an on-going economic advance, particularly in relation to the regions and the redistributive aspects of public expenditure—which, in less repulsive language, means the way in which we use public expenditure to recognise increasing moral, ethical and political obligations to the less fortunate members of society.
I have to trouble the House for a moment or two in stating the premises on which I am discussing these questions. First, I believe that if we want a continuously advancing economy—one in 1518 which there is a good deal of investment for the future—the way in which we can get it is mainly by ensuring that there is a continuous level of demand sufficient to induce the confident expectation of a future profitable and sustained increase in demand. That is how we get the investment ingredient, and it is far more important than any of the skills and subtle manoeuvrings of the Treasury; in other words, we get it by getting demand up and keeping it up and ensuring that it never lags sufficiently to depress confidence.
My other premise—because I shall be told, otherwise, of the balance of payments difficulties which stand between me and the economic advance that I advocate—is that the right route to prosperity and a healthy balance of payments lies in a true understanding of the management of parities rather than in the somewhat extraordinary measures taken from time to time over the last 25 years to deal with the balance of payments. Broadly speaking, the approach of Governments in the past has been, "Let us defend parity at the cost of diminishing employment", whereas any sane economic policy must always be based upon the premise that we want our resources fully employed and that, if necessary, parity must be adjusted to that condition.
I say at once that this does not put me with the floating rate merchants who want to fluctuate from day to day or month to month. Fortunately, this is not the debate on international monetary affairs which is long overdue and to which I should be happy to make a contribution. I will not, therefore, go into detail, beyond saying that I hope that no one will think that I have resiled from my firm position on managed parities—but managed under the general principle that we do not defend a particular parity at the cost of under-employing the economy, but that we defend employment and the full use of our resources by an appropriate adjustment of parity. That is a different text, alas, from that which has prevailed since the war in this country.
Having stated my premises, I must now come to the relationship in general terms of public expenditure to demand management. When after the war we saw the huge size of public expenditure and public investment, it was not surprising that many people's thoughts turned to the idea 1519 of using this vast expenditure as a tool of demand management in a counter-cyclical way, so that when things were slack we would speed up public expenditure on capital account and when things were perhaps under greater pressure and we needed to ease off we would slow up such programmes. That may be a happy solution when propounded in a seminar, but it is not very effective, unhappily, in real life. Many right hon. and hon. Members would like it to be used in this way. Certainly, past experience has taught me to believe that it is not a suitable method because, unfortunately, public investment, which is of a complex and large-scale character, requires a great deal of preparation before the work is done, and it needs also to be linked into an orderly framework at least as much as private expenditure.
The idea that one can speed up road-building, school-building, electricity power station construction and the like in a significant way, disrupting the phased long-term or medium-term planning under which such programmes are undertaken, doing so usefully in support of counter-cyclical measures, has all the evidence against it. Therefore, one has to be rather careful because one may end up finding that the overwhelming bulk of one's public investment programmes are not suitable to be used in this way. Because one wrongly accepted this idea, one may end up doing marginal things which are not absolutely useful, have not been vetted carefully enough, have been rushed into the pipeline, and so on, and are, even after a delay, very often the wrong measures, providing in any case little practical speed-up in the timing.
§ Mr. Eric S. Heffer (Liverpool, Walton)
It is with great regret that I always, apparently, have to intervene in my right hon. Friend's speeches, but I do so only to raise points which to me are important. Would he not agree that there are many projects which have been vetted by local authorities, and for which plans are available, but which have been shelved because of past Government decisions not to allow the finance for them? Surely, in this sort of situation we could inject that sort of capital into the local authority programmes so that 1520 these plans could be taken off the shelf and work on them begun.
§ Mr. Lever
I am inclined always to think, when my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) is about to interrupt, that he should be presumed guilty until proved innocent. On this occasion, he has proved himself innocent. I totally agree that many projects have been disrupted in this way—very often precisely because Governments have had this attractive idea that one should use public investment planning counter-cyclically. Of course, if one accepts that proposition it means that one stops some investment whenever the economy is over-heated. That is what has happened, and that is exactly what I do not want to happen.
My hon. Friend must not construe what I am saying as suggesting that we do not need adequate public expenditure. I am saying the opposite. We should phase public expenditure accurately and sensibly on its merits. We should not believe that, with these complex and crucial programmes, we are able on the one hand to rush things forward to stop a depression and—even worse—on the other hand to arrest them in the way Governments have done in an attempt to counter overheating. On this occasion I acquit my hon. Friend of having made any criticism with which I could not agree, and if he will listen further to me I do not think he will find himself in any substantial disagreement with me.
§ Mr. Lever
What I am proposing means that we should not have what we have had in the past—instability in public investment precisely because we have attempted somewhat hurriedly at different times to use it counter-cyclically. I think I am right in saying that the volatility of public investment is as great as that of private investment—it goes up and down as sharply as private investment does—so that we lost the real advantage that we might have had of public investment following a stable path if we had not been moved by the attractive theory of using it to seek a stabilising effect.
That is what I should like to see, as I am sure my hon. Friend would. When we see this desirable public investment which 1521 has to be made—be it from Government, local authorities or nationalised industries—it is to the advantage of the economy, and a useful stabiliser, not if we jiggle about with it in a counter-cyclical way but if we set it up and get it on a stable path, and we have not done that in the past.
I believe, however, that there is one advantage which public investment can have over private investment. Private investment comes as a secondary consequence of the pull of demand coupled with confidence. In the case of public investment, one is able to anticipate because one is not dependent on the reflexes of a profit-motivated system. One can, therefore, advance public investment not counter-cyclically but in advance of the demand because its estimation here is more possible.
§ The Chancellor of the Exchequer (Mr. Anthony Barber)
I appreciate the points being made by the right hon. Gentleman, as I do his argument, but recently the Government have deliberately, rightly or wrongly, brought forward certain public investment programmes precisely because of the economic situation. I am not putting this to the right hon. Gentleman as a trick question. Is there any particular proposal which he has in mind which we should not have brought forward? These proposals were brought forward deliberately. But for the economic situation, they would not have been brought forward as they have been.
§ Mr. Lever
I am talking about the general principle. It is possible to find small measures of public expenditure which can effectively be brought forward so as to make a ready and rapid impact on the kind of situation into which the Government have brought us. I accept that it is conceivable that some minor Government capital expenditures can be advanced in a way that will allow them to create employment at the relevant time, which is right now or in the next few weeks or months. If the right hon. Gentleman can claim that the advancing of any major public expenditure—in shipbuilding or anything of the kind—will provide employment in the next weeks and months, and that the project is worth while having, then my general remarks have to be qualified. I was merely stating the general proposition that the Government cannot say, "We have an electricity 1522 power programme. Let us get it moving in a counter rhythm to the cycles of the economy." They cannot say, "Let us carry out a lot of school-building when the economy is slack, and slow it down when the economy is busy." That is what I was trying to put to the right hon. Gentleman, and I hope he will accept that as being sound philosophy.
When one comes to consider the other aspect of public expenditure—current public expenditure which directly affects demand, such as family allowances, pensions, and so on—there is here an ideal counter-cyclical weapon, an ideal instrument for action, because this creates demand immediately and surely and in a manner that can be quantified pretty readily even by the Treasury econometric department, with all its talent, which is forced to spend too much of its time probing into the unforeseeable future instead of into the knowable present. Here is the ideal counter-cyclical action.
What is more, it is not only good economics but good morality, because it is a shameful reflection upon us that, on the one hand, we have large unused resources, and, on the other, we are not prepared to make a move forward at times of slackness to help the more unfortunate people in our land. Anybody who understands modern economics will know that in helping those people we are helping ourselves. When I heard the Chief Secretary opening the debate on behalf of the Government yesterday, I could not help thinking of his respected father when he was Chancellor of the Exchequer and then Prime Minister. I did not always agree with the right hon. Gentleman, as he was then, but he had very firm principles in this respect. He was conscious of the fact that it was a great shame on a nation to have idle resources instead of making use of them to help unfortunate people.
Moreover, it is economic good sense in another way, and that is on the question of building confidence. I ask right hon. and hon. Gentlemen opposite to believe that confidence does not depend upon their looks or their speeches, or their beatings of their breasts. Confidence depends on the experience of business people, and if these public expenditure measures were used as a counter-cyclical instrument the Government could guarantee that we would never again come 1523 to the miserable situation in which we find ourselves today, because we would ensure that demand never diminished to a level at which we had 1 million unemployed and were threatened with more. That would never happen if the Government were to use the real counter-cyclical weapon of public expenditure on current account to improve family allowances, pensions, unemployment pay and the like.
§ Mr. J. Enoch Powell (Wolverhampton, South-West)
When the right hon. Gentleman urges the counter-cyclical use of an increase in pensions, family allowances, and so on, is it the corollary that those would be reduced again if there were an over-heating of the economy?
§ Mr. Lever
No. It is a characteristic of the right hon. Gentleman's destructive pendantry that he should leap to that conclusion. I am saying that we have idle resources, and that we should bring them into action. If the economy gets over-heated, I do not say that the first priority is to draw back and become mean-spirited to the unemployed, to be cowardly and unjust to the old-age pensioners. There are ample areas of fat in the economy which can be touched before those. I want to use the resources that we have to the advantage of the community, to move forward demand by directing it to where it is most urgently needed and where the Government have the power most proximately to direct it. There is no corollary that it should be reduced when things are busy.
If the Government want investment in the private sector, they should realise that nothing will encourage it more than the expectation of demand based upon the knowledge that as soon as demand flags the Government will march in and supplement it in the way that I have stated. The right hon. Gentleman the Prime Minister and others constantly tell business people that they are missing tremendous investment opportunities. I can only tell the right hon. Gentleman and his right hon. and hon. Friends that business people do not regard them as the final authority of what is or is not a good investment opportunity. They rely upon their own experience of demand, and it is no use the Prime Minister telling industrialists that they must invest more when they cannot employ more than 55 per 1524 cent. to 60 per cent. of their plant. The Prime Minister tells business people that they can make a fortune if they invest and that there is a tremendous opportunity for them to do so. Business men hear what the Prime Minister says, and then look at the under-employment of their plant. The Prime Minister and his colleagues have allowed unemployment to rise to unprecedented heights, and using their own judgment on the facts as opposed to the oratory, business men fail to invest.
Perhaps I may use an example which I used in another context 20 years ago. The Prime Minister is in the position of the lady who was unfortunate enough to have her husband come home when she was in the middle of an act of infidelity. When he reproached her, she leapt out of bed, turned on him and said, "I see that you do not love me any more. You believe the evidence of your own eyes rather than my assurances." The business people of this country believe the evidence of their own eyes, and no amount of assurances from the Prime Minister and his colleagues will affect their decision. If the Government want business men to invest, the way to achieve that is to give then adequate demand. If the Government want to show that they are an expansionist Government, it is not the most eloquent power of self-approval that will convince businessmen but their action in times like the present.
Let me now try to relate those general principles to the experience of the last 18 months. By the time the Conservative Government came in we were approaching what I would think was the second phase of the Labour Government's economic planning; that is to say, our first phase was to restore order after the well-intentioned but incompetently managed reflation under the previous Government Which had left the country with low credit in the world, a very heavy balance of payments deficit and very real difficulties. If, perhaps like every previous Government, my own Government reacted to difficulties with something less than perfection at every step and turn that would not be remarkable, because no Government in those difficulties can be expected suddenly to get the matter right.
At all events, we got phase 1 right. We got the balance of payments handsomely in surplus, and were then ready 1525 to seek to reflate the economy on a much stabler basis than was possible when we came into office. At this point it was clear that some stimulation would be needed some time in the summer of 1970. Unhappily, the Government, the Treasury and even the T.U.C. had been misled into believing that the substantial wage increases which were occurring at that time were an adequate reflator. Even the T.U.C. believed that. The T.U.C. said, "If the Government are not going to reflate the economy we will do it for them." That was said by its spokesman at one point.
What misled them was that they believed that these rapid wage increases would add more effectively to demand than, in fact, they did. They had underestimated the speed at which price increases would follow wage increases, having regard to the need to build up the profits of companies and the like. I am not blaming the companies concerned. It was inevitable and foreseeable. Indeed, we warned about this. If it is not immodest of me to say so, I continued to give the Conservative Government the benefit of my advice in various newspaper articles throughout the summer of 1970, saying that the Treasury Estimates would prove wrong. They were wrong in expecting that there was enough demand in the pipeline. I am clearly on record about this, as are many of my colleagues. We believed that the country would stagnate unless there was immediate stimulation. But these warnings went unheeded.
What did the Government do? They brought in their infamous mini-Budget which cut expenditure. It cut expenditure on school meals, milk, museums, prescription charges and dental treatment. Investment grants were threatened, and there were threats of further cuts in expenditure in relation to housing, envisaging increased rents, under some Tory doctrine or other which seemed to them very relevant to the economic situation. So at a time when the country needed stimulation of demand, particularly from the public sector, this Government cut demand as if to say, even though, clearly, demand was flagging, that if only the public would realise the true cost of having a dental filling the economy would move in a much more impressive rhythm. This was the philosophy behind these 1526 extraordinary actions on the part of the Government.
The Government promised tax concessions. If I take their mini-Budget with their maxi-Budget, what they did was to decide that they wanted to make some reflationary gesture of over £500 million, and they gave tax concessions which were concentrated lopsidedly on selective employment tax, corporation tax and income tax. The big problem here is that nobody knows what is the reflationary effect of reducing selective employment tax; and I doubt whether right hon. Gentlemen either knew at that time, or are any better informed now by their experts, about the reflationary extent of the reduction of selective employment tax or how long it will take before that effect, whatever it may be, will be felt in the economy. The same thing is true to some extenet of corporation tax and income tax. When an income tax cut is given to better-off members of the community, nobody knows how much of that will be saved and how much will be spent. Although many of the recipients—and voters—of the Conservative party were grateful, they do not show that they have any great confidence in their Government's ability to produce a very prosperous economy; so, many of them save because they are nervous.
Nor could the effect of a cut in corporation tax be known without knowing what would be happening in other respects to reflate demand. The Government took the wrong measures, which were inadequate in amount because, on the best expectation of their measures, that would still leave a continuation of the 800,000 unemployed that we had at the end of 1971 and, indeed, would slightly add to the number. I was very tempted—and refrained only because of my personal regard and respect for the Minister of State—to bring with me and read to the House the transcript of a wireless discussion that we had at the time of the Budget when I said that the meaning of the Government's budget was that on the best expectations we would have at least 800,000 unemployed throughout the fiscal year, and very likely more, and that if things went awry we could have seriously over 1 million. That was on the best expectations of the Government because they budgeted on a 3 per cent. growth in the economy when we all knew that the 1527 productivity increase in the economy was at least 3 per cent. and, therefore, even if their expectations had been gratified, we would still have had over 800,000 unemployed.
The Government were, in effect, playing with fire, and the people of this country have been burned as a result. What I have to ask the House to think about is why the Government chose to reflate in the spring of this year by the tax concessions which I have discussed rather than by the sure, calculable, immediate impact of public expenditure to help the poor families, especially those suffering child poverty, by family allowances and action of that kind? The answer is that they were so intoxicated by their own political doctrine that they chose to abolish S.E.T. and to reduce direct taxation and corporation tax at a time when what was wanted was the certitude of the immediate impact of the direct expenditure relief which I have mentioned.
I say at once, since this is not a Budget debate, that I will assume for the purpose of debate that everything that the Government did ought to have been done. But why, on any calculations, should it have been done in April of this year? Why in April of this year was it necessary to redeem the S.E.T. pledge at the cost of other reflationary measures?—because we do not know the effect of S.E.T. If I believed in the abolition of S.E.T. I would not have supported its part-abolition in the spring of this year as a reflationary measure but would have deferred it to some later date—even if I had believed in it. The same goes for investment grants. Assuming that there is a reputable case for saying that investment grants should be replaced by tax allowances, I would say: but not at the time when the economy needs stimulation. If I were going to make the changeover, the time I would have chosen, if I had thought it desirable, would have been when the economy was somewhat overheated. In April of last year that was the last kind of thing that should have been done. The result is that we have high unemployment followed by panic measures which make complete nonsense of the Government's claim that they are able to reduce the aggregate of public expenditure, because by putting tax reliefs into the pipeline, with an incalculable 1528 effect on the economy in terms of the amount and the time they will take to become effective they have turned what is always a difficult problem of demand management into a baffling problem. They cannot be very sure whether they should put more in now, because they have mistimed their reflation and misused the instruments available for reflation. The result is that they have a very difficult problem.
I turn to the question of what the Government might do in the situation which they have brought upon themselves. I believe that the immediate further reflation, at any rate in the next month or two, should be concentrated on the regions and on the areas of high unemployment, because these are the areas where the greatest damage has been done by the Government's policies. The "lame duck" philosophy means the weakest to the wall. Strictly speaking, the regions and the areas of high unemployment are the weakest.
The very preaching of such philosophy damages economic prospects in the regions in all sorts of subtle ways. People have less confidence in investing. People have less confidence in giving credit if they believe that the country is being run by a Government which believe that the weakest should go to the wall. That is entirely inconsistent with the philosophy that we have preached—that the regions should be supported and helped by the more prosperous areas.
I will not go into the details, but the Government have a lamentable record of negative action in relation to regional employment. I have come to the conclusion that if they wish now to repair the damage that they have done they must concentrate their reflationary efforts, and on a very large scale, on the regions of high unemployment.
The time has come to set up a vast development bank for the regions. We should think in terms of a very large sum of money. Initially, £1,000 million would not be too great a sum to put into the hands of a new vast development bank to enable it to finance development and employment in the regions and in the areas of high unemployment such as Lancashire and Yorkshire.
Why do I want such an instrument? Briefly put, if we could think of the 1529 areas that I am referring to as if they could be aggregated into a country, probably they would want to have a currency with a different parity from our own to get their economies going. We cannot do that. I will not go into the technical reasons against it. First, it is not even one group or part of the country, and there are other reasons connected with our operation of currency.
Therefore, what we should seek to do is to set up a vast development bank which should be put in possession of ample funds to be deployed in the areas of high unemployment at cheaper rates than prevail elsewhere and on special terms which would give entrepreneurs using those funds a tremendous incentive to set up business and develop in those areas. One could even think in terms of zero interest in some cases. One could think in terms of medium-term and long-term loans. The cost would not be great, certainly not a fraction of the cost of the economic damage done to the country as a whole, as well as to the regions, by the absence of an adequate policy.
The advantage of this idea is that it would be more comprehensive than anything that has been done so far. It would leap over boundaries; that is, there would not be the problem of the grey areas, the near-grey areas, the black areas, and the super-black areas. There would be a flexibility in dealing with projects which would be far greater than anything which has been established so far. Such a body should be empowered to finance every project calculated to stimulate and help the areas of of high unemployment, including amenity projects, whether they be restaurants or playhouses or help to local authorities with cheaper loans. All this would help.
It is astonishing that at this time the newspapers should carry the headlineLondon to be given a face lift".Any expenditure that we are inclined to make at present should be concentrated in the areas or high unemployment because giving them a face lift is part of the whole process of rehabilitating them. We could do this by giving what I would call a financial infrastructure specially favourable to those areas.
1530 It is strange that in Scotland, for example, traditionally one pays more to borrow money than in the more prosperous areas of the country. From an economic standpoint, less should be paid to borrow money in these areas. All the natural reflexes of business, however, are to raise the cost of borrowing in the areas of high unemployment because these are riskier areas than other parts of the country.
In broad principle, I approve of what the Bank of England has done to free banking from artificial restraint, but in a free-for-all, when they are competing for the country's available credit cash, the development areas will have a very thin time, unless the Government set up a counter-measure or counterbalance of this kind which consciously and deliberately sets out to favour those areas.
The right institution to operate such a development bank would be the Bank of England. The development bank should be a department of the Bank of England so that it would tie in with the country's general economic and financial management.
That is what I have to say today in dealing with public expenditure in relation to the general economic problem. To sum up, we look back upon the Government and we see that they have been an economic failure.
I know that many hon. Members—some on this side—are apt to say that all this high unemployment does not matter and that before the next General Election there will be a reflation and that the people will be happy and will vote the Conservative Party in. Or they may vote us in. But I am not concerned with that today.
I am concerned about sane, constructive economic policies. This year's stagnation and suffering from unemployment will never be undone. The misery and the upset have occurred and cannot be unwritten. I want to see that it does not continue.
I hope that my hon. Friends will not be distressed if in conclusion I administer what is now an overdue public rebuke to some of them. Some of my hon. Friends have been very unfair to this Government. They have watched the mounting unemployment, the total failure of the 1531 Government's economic policies, the absurd, near illiterate, twaddle which justifies the assaults on meals in schools, milk for working people's children, and the like, and they have come to the conclusion that they are dealing with a lot of wicked men and believe that what has happened corresponds to the Government's intentions.
That is very unjust, and it is completely against the weight of the evidence. There is overwhelming evidence not of malignity but of gross incompetence, total muddleheadedness, and a naive intoxication with out-of-date Conservative Party doctrines. That is the real charge that I make against the Government. That is the real complaint that I make. That is the fair charge that I make. It is a very simple one; namely, that the Government are not up to the job.
§ 4.38 p.m.
§ The Minister of State, Treasury (Mr. Terence Higgins)
The right hon. Member for Manchester, Cheetham (Mr. Harold Lever) is always full of original ideas, but the speech that we just heard from him was surely one of the most remarkable which can ever have been made from the Opposition Front Bench. The right hon. Gentleman appeared to think that the measures which my right hon. Friend has announced for increasing public expenditure in such a way that it will help to ameliorate the problem of unemployment should not be supported. I am not surprised that the right hon. Gentleman got some reaction—
§ Mr. Harold Lever
As I explicitly said the opposite, the hon. Gentleman should not attempt to make a debating point. I told the Chancellor that if a particular measure could give employment swiftly, even though it was a capital account measure, I should welcome it. But this could not affect my general proposition that the capital programme as a whole cannot be used in a counter-cyclical way. The hon. Gentleman may save his breath, because I tell him frankly what I told his right hon. Friend a moment ago, that if he has a specific measure that brings employment to parts of the country that need it in the desperate situation the Chancellor has brought about, I will welcome it. The 1532 hon. Gentleman must not distort what I said.
§ Mr. Higgins
I do not think that when we look at the OFFICIAL REPORT tomorrow it will be found that I distorted what the right hon. Gentleman said. He did not make it clear which, if any, of my right hon. Friend's measures he did or did not support. If he is to take the attitude that I believe he took in his speech, I do not think that he will receive much support from his right hon. and hon. Friends.
The second remarkable feature of the right hon. Gentleman's speech emerged in response to the intervention of my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell), when the right hon. Gentleman said that we should be spending more and more on social services. We are already spending a great deal, and have increased our expenditure in many respects. In answer to the question, "What happens if you find that you have excess demand?", the right hon. Gentleman says that he would not cut back on those items. He would then be in precisely the situation of excess demand in which there is most danger of creating inflation, and he did not make it in the least bit clear what he would cut back. What will be very clear to my hon. Friends is that we should be likely to be back in a situation of ever-increasing taxation to make up for the kind of mis-planning the right hon. Gentleman is proposing.
This is the first time in our debates on the annual public expenditure White Papers that an Amendment has been moved. Therefore, we should pay it the compliment of considering precisely what it says, though the right hon. Gentleman did not deal very much with either the White Paper or with the specific words of the Amendment.
I shall take each of the Amendment's four points in turn. First, it welcomes the relaxation of the earlier doctrinaire policies, as it calls them, of Her Majesty's Governmentregarding the level of public expenditure …".It is true that the right hon. Gentleman is always prepared to find a stigma to 1533 beat a dogma, but on this occasion he failed to do so, because apart from its being a term of abuse it is far from clear what the expression "doctrinaire" in the Amendment means. If it is meant to relate to what has been said with full authority on behalf of my right hon. and hon. Friends it is as well to look at the manifesto on which the country elected us. Our doctrinaire policy, if that is how the right hon. Gentleman wishes to describe it, in this sense was that we would cut out unnecessary Government spending. Are we supposed to have relaxed on that and to be incurring unnecessary Government spending? If so, the right hon. Gentleman should have pointed out precisely what we should have cut, and he failed to do that.
The other side of our so-called doctrinaire policy was thatWe will give priority to those most in need.…Are we supposed to have relaxed on that? Does the right hon. Gentleman wish us to do so? If so, we should make it quite clear that we do not propose to relax on a policy which we believe to be both justified and humane and to be an essential part of our overall strategy if we are to concentrate resources where they are likely to be of the greatest use.
In the years before we took office, when the right hon. Gentleman was in a position to influence events, we saw first the years of indiscriminate spending and indiscriminate subsidy, and then, after devaluation, which was when that policy ended, we saw a period of restraint on all spending, public and private alike—what we might call a period of indiscriminate restraint. With all respect to the historians or economists, there cannot be any proof of these matters, but the common sense view is that there would not have been anywhere near as bad a surge in prices and incomes in the winter of 1969–70 but for the history first of vast expansion and then of very severe cut-backs.
Whatever the cause, the subsequent problem was very difficult. It is our determination to reshape public expenditure policies in the medium term to ensure that the capacity of the economy to carry its necessary obligations will grow and improve.
1534 Moreover, by the means we adopted, we were able last year to start towards our other objective of giving help to those most in need. We began last year with a new programme—about £28 million over the four years to 1974–75—to replace old primary schools. There was new provision of £110 million for developing those parts of the health and welfare services in greatest need, particularly for the elderly and mentally-handicapped. There were improved benefits for women widowed between the ages of 40 and 50, family income supplements for low wage-earners with dependent children, attendance allowances for the severely disabled and—I know that the right hon. Gentleman who is to wind up for the Opposition will appreciate this because he knows my personal interest in it—pensions for the over-80s. Those changes are all in direct contradiction to the terms of the Amendment.
From this beginning we have now gone further in the same direction, as the White Paper shows. There is still more for the schools; still more for the hospitals and replacement of old institutions and homes for old people; more for the over-80s. and the chronic sick; and an improvement of some 3 per cent. in real terms in the purchasing power of retirement pensions generally compared with their level at the 1969 up-rating.
So much for the relaxation of our so-called doctrinaire policies. What I have said is an apt comment also on those hon. Members opposite who wish to argue that our policies are inflicting hardship on large sections of the community.
§ Mr. Higgins
We recognise that there is considerable waste and hardship caused by unemployment. Neither my right hon. Friend the Chancellor nor my hon. Friends would wish to deny that. My right hon. Friend spoke on 23rd November of… the present unacceptable level of unemployment."—[OFFICIAL REPORT, 23rd November, 1971; Vol. 826, c. 1153.]That is the view throughout the House. To seek to attribute the present scale of unemployment to the public expenditure policies introduced last year, which the Opposition wish to criticise, would be a diagnosis of the cause of a grave social evil so superficial as to do no service 1535 to those afflicted by it. It is presumptuous of the Opposition to lecture us about… the continuing danger to human and social needs …In many of the areas I have mentioned we have made it our business to do better than the right hon. Gentleman's Administration did in meeting the needs of those who really require help, and we are doing so.
§ Mr. Heffer
Is the hon. Gentleman aware that in making representations to the Government the Trades Union Congress has pointed out that over half those unemployed are not receiving unemployment benefits and are therefore on supplementary or other benefits not up to the level of unemployment benefit? Is not that inflicting great hardship on a mass of people who are suffering unemployment through no fault of their own, unemployment which has been contributed to by the Government's policies?
§ Mr. Higgins
The facts of this matter are well known, both as to the action taken by the previous Government and that taken by the present Government.
I should like to pursue the point about unemployment, because that comes up in the fourth and last part of the Amendment, which claims to give a warning about the prospects for reducing unemployment if Conservative philosophy is accepted. I am not clear whether the Opposition are saying that had they been re-elected there would have been a total reversal of their fiscal and monetary policies, and more besides. The right hon. Gentleman said that he was waiting for the second phase of the Labour Government's policy. We waited a very long time. It is clear that if one wants to abandon totally the policies of a Government there is a great deal to be said for changing the Government, because it is likely that the incoming Government will pursue new policies with more enthusiasm than the previous one. I am not going to catalogue yet again the changes in fiscal and monetary policy announced in the Chamber over the last 12 months or so. But as regards the expenditure programmes which are the subject of this debate, I would simply like to make three points. First, the measures embodied in the White Paper 1536 and in the Chancellor's further statement of 23rd November are directed to specific places where unemployment is high or the threat to employment is immediate and severe.
Second, they take the form of expenditures involving directly a substantial requirement for labour. Thirdly, they are not permanent or long-term additions; they represent commitments for a limited period ahead so that, as the country moves out of recession, public expenditure will not be committed at such a level that taxation has to be increased and the brake applied. This is the fundamental difference between the extraordinary proposals of the right hon. Member for Cheetham and the proposals of my right hon. Friend. How far one should go in undertaking public expenditure of this counter-cyclical kind is a matter of judgment.
At the present time, I notice the Financial Times of 26th November asking the question whether, in the coming months, the measures we have taken will prove to be enough; and Mr. Wynne Godley in The Times yesterday argued, though he did not press it so hard today, that public expenditure measures are already so large that we may be over-committed as they work through—more slowly, he suggests, than we expect.
One can usually take comfort from being accused of doing both too much and too little. It suggests that one is likely to be on the right course. My conclusion from these comments, coming from authoritative quarters as they do, is that, given the seriousness of the problem of unemployment there is no cause for us either to repent of having done what we have done to increase the public expenditure programme in the short term, or to reproach ourselves for not having added still more. But I do stress what was clearly set out in the White Paper, paragraph 9, thatPolicies will continue to be reviewed, for the better direction of expenditure to needs, including those of the areas where unemployment is high, as well as those of more general kinds; and changes in the programmes may yet be made for those reasons, producing net increases or decreases in the totals, if in the developing situation the Government judge them to be required.Taking all these facts into account, it seems clear to me that every single assertion in the Opposition Amendment is 1537 totally unjustified. No doubt, when the debate concludes this evening, right hon. and hon. Members opposite will feel bound to vote for it. But I have no doubt that when they look back over the years in say three or four or five years' time they will see how wrong they were and how little their warnings were justified.
One of the themes running through the debate yesterday was that one ought to divide technical discussion on the White Paper from political discussion on priorities. To some extent this is what we are doing; yesterday, the tone was more analytical, today we have a highly controversial Amendment on the Order Paper. But I would like to take issue with the hon. Member for Heywood and Royton (Mr. Joel Barnett) who, winding up last night, seemed to me to draw too hard a line between the facts and analysis—the conceptual framework of the White Paper—and political discussion. It is only if one has a good conceptual framework and adequate facts, that the political discussion can be more than a party charade.
I do not take the pessimistic view expressed by some hon. Members yesterday that hon. Members are deterred from participation in the debate because the jargon is incomprehensible or the technique too difficult to master. The fact is that, following the improvements we have made, it does take a little effort to comprehend the conceptual basis of the White Paper. This is largely because the improvements are unfamiliar, and perhaps I may spend a few moments spelling them out. I stress that we have not only met virtually almost all the points for improvement made by the expenditure Committee, but we have also, on our own initiative, and as a result of very fine work by officials, gone a great deal further.
The Green Paper on public expenditure back in 1969 proposed a way of presenting public expenditure in which projections of receipts would be set alongside the forward estimates of expenditure to the second year beyond the White Paper year. Incidentally, that was rather a short period; the measurement to which I am referring in the new White Paper covers the full five-year span.
The Green Paper gave three reasons for its proposal. First, there were times 1538 when payments may be made from public funds in place of tax allowances or vice versa so that there is a switch in the programmes. Moves to investment grants are an example. One needs to be able to see what is exchanged for what in such situations. Second, there are some expenditures with directly associated receipts, such as the National Insurance scheme of benefits and contributions, both depending on the same policy system. Third, there are cases where public expenditures produce their own flow-backs in tax, so that the demand effects of the expenditure are offset to a greater or lesser extent by the tax.
Our approach is to deal with each of these points in turn. Thus, in last year's White Paper, as we were then substituting investment allowances and changes in corporation tax for investment grants, we showed the effects on expenditure and receipts alongside each other. As regards the receipts directly associated with particular systems of expenditure policy, we have embodied in the present White Paper a series of tables—one for each year covered—showing for each programme the directly related receipts and distinguishing charges which are normally netted out of expenditure—for example, charges for school meals—from other forms of receipts which are not normally netted out—for example, the contributions under the National Insurance system. A potentially complicated picture is thus presented in a simple form. Our only major problem, in constructing this table, has arisen on nationalised industries' capital expenditure where we have found that the estimate of the gross trading surpluses of the nationalised industries is, at this stage, too problematical to justify publishing them.
This leaves the question of how to show the effects of the flow-backs of tax from public expenditures. There is no particular interest in the flow-backs themselves. The interest lies in the fact that as tax flows back, the net effect of the expenditure on demand is offset accordingly. The same effect is produced where public expenditure goes into personal savings instead of getting spent.
The Green Paper envisaged setting out projections of revenue alongside projections of expenditure, so that the revenue figures would incorporate, though they would not distinguish, the amounts of 1539 revenue flowing back from the expenditure. This, unfortunately, is a cumbersome arrangement. In the first place there are great difficulties in making the revenue projections themselves, and they cannot represent estimates of the effects of forward fiscal policy over the period in the same way as the expenditure represents the effects of forward expenditure policy. Also, since they do not distinguish the amounts of revenue that flow back from the expenditure, they provide no information on this point unless numerous variants of the tables are given in which particular changes of expenditure are isolated and nothing else is changed. The consequential effect on the revenue can then be detected. But as this was never done, the procedure never served its original purpose.
In the new White Paper we have tried to overcome these very serious difficulties, and produced a much simpler and more direct presentation of the point by providing a measurement of the rate of increase in net demand on output which is implied in the public expenditure programme, and this, when the relative price effect is taken into account, provides the basis for measuring the increase in real cost to the economy. The calculations on which this measurement is based are directed to taking account specifically of the extent to which there is a tax flow-back from each form of expenditure, and the extent to which the expenditure remains suspended in savings
The technique is elaborate, and therefore, at the same time as we have introduced this form of measurement into the White Paper, we have also provided a technical paper for study by the general sub-Committee of the Expenditure Committee. The basic concept is not difficult to understand. It is essentially what are the costs of the resources in the economy. As far as political debate is concerned it provides figures which are far more relevant than any produced before. Indeed the figures are more useful than those which were asked for by the Expenditure Committee. I thought it was worthwhile spending a moment or two spelling that out but as I say it provides us now with a much better measure than we had. When hon. and right hon. Gentlemen have had the opportunity of assimilating what is set out in about two 1540 or three pages at the beginning of the White Paper it will be apparent that this is indeed a major advance.
§ Mr. Neil Marten (Banbury)
One improvement in the layout some of us would like to see is this. In the previous White Paper there were provisional out-turn figures for the years 1969–70. This White Paper does not give the actual out-turn and it would have been nice to compare the provisional out-turn with the actual out-turn. Is there any reason why that should not be done in future?
§ Mr. Higgins
I hesitate to give my hon. Friend an answer off the cuff, but I am sure my hon. Friend the Chief Secretary will be happy to answer that with reference to the specific table when he comes to reply.
There is therefore a link between the conceptual basis of the White Paper and the political debate which came out clearly in a number of speeches by hon. Members yesterday—including that made by the hon. Member for Willesden, West (Mr. Pavitt)—who made contributions on specific political priorities. It is much better that we should judge particular priorities in this context with a better conceptual basis than we have ever had.
I turn to two quite specific and important questions asked in the debate yesterday. The first is: why is the total figure for the annual average increase in public sector demand on output 1971–72 1975–76, shown in table 3.1 on page 66 as 2.5 per cent. in volume terms and 3.2 per cent. in cost terms? How have those figures been arrived at and why have they been selected? The second question is: what is our overall strategy on public expenditure? Let me turn first to the overall size of the public expenditure programme and the changes in it. The hon. and learned Member for Lincoln (Mr. Taverne) and the hon. Member for Heywood and Royton asked yesterday why the rate of growth of public expenditure had been settled at that of the White Paper. That rate over the period from this year to 1975–76 is an average annual rate of increase in real cost to the economy of about 3.2 per cent. That is the figure given in paragraph 7 on page 6. For that reason it is necessary to read the next paragraph which says:Such a rate is close to that of the productive potential of the economy over the past 1541 decade or more, which has been around 3 per cent. a year.There is no obvious reason for thinking it is unreasonable to go for a rate as high as 3 per cent.
What are the grounds for going for a little more than 3 per cent.? This is apparent if we read on because the White Paper then says:But a projection of this trend will understate the future growth in resources.This is for two reasons:First, there is the increase in output that will result from taking up of spare capacity. Second, there is the likelihood that the recent improvements in productivity will be found to have made some permanent addition to the level of productive potential.This in the present context is very difficult territory not least because we are now, have been for some two years and are likely to be for another two years, in an unprecedented situation. Mere extrapolation of past trends is likely to be misleading. We have not previously had a period of cost inflation without excess demand anywhere near as severe as that which we have suffered recently. This, as my right hon. Friends have pointed out on other occasions has led to a substantial shake-out of labour and higher unemployment. We have also seen an increase in productivity which is higher than past experience would have suggested, given the relatively modest rate of increase in output. It would be extreme to infer that productivity has gone on to a significantly faster long-term rate than in the past and it would be foolhardy to make strategic decisions on public expenditure on such a slender basis.
It would be equally extreme to assume that all of the gains over the last year or so will vanish when the present slack in the economy is taken up. It is a familiar observation that at the beginning of the upswing output per man tends to rise. Moreover we need to note that because of the shake-out of labour it is likely that as the upswing continues labour will in future be employed in uses where it is more productive than before—there is more potential productive potential! That being so, there is no firm basis of experience on which to make a forecast but a reasonable view would be that recent gains would be at least partly retained, that is that the level of output corresponding to a given pressure of demand will remain higher than a 1542 straight projection of past trends would suggest. This makes it reasonable to plan for a somewhat higher level of public expenditure, even in the longer term, than seemed right some time ago.
We again turn to the basic question asked by the hon. and learned Member for Lincoln and the hon. Member for Heywood and Royton. We must ask the question: if we can have a bit more than 3 per cent.—and this is relevant to the suggestion of the right hon. Member for Cheetham—why not a lot more? Again it is right to quote from the White Paper which says:The Government however, whilst allowing the absolute level of the public expenditure programmes to increase throughout the period, have held the rate of growth of their real cost to the economy in that period close to 3 per cent. so as not to produce excessive pressure on demand when resources are fully employed again.As my hon. Friend made clear yesterday if resources increase over the five years more than the 3.2 per cent. a year on average we shall have a choice of whether to step up the programmes, to increase standards or reduce taxation or to do a mixture of both.
§ Mr. J. Bruce-Gardyne (South Angus)
I am listening carefully to what my hon. Friend is saying. Is it not a fact that the last year we made it clear that it was one of our objectives to ensure that the proportion of our total resources pre-empted by public sector should be diminished after the substantial increase of previous years? Is he satisfied that what he has been saying is consistent with that?
§ Mr. Higgins
I shall seek to show in a moment that it is important to take account of the pattern of expenditure over the period. This is the answer to his question. If he looks at the long-term effects, leaving aside the present immediate situation confronting us, I do not think he will find that there is any inconsistency between the policy we put forward last year and the policy we are now adopting. I would prefer to put that summary more in the overall context of what I am about to say.
§ Mr. Austen Albu (Edmonton)
Does the hon. Gentleman really believe that in the years ahead it will be possible to maintain full employment without maintaining roughly at least the present level of the public sector?
§ Mr. Higgins
It depends on a vast variety of variables, as the hon. Gentleman will be aware. I want to go back to the point my hon. Friend has raised because it is crucial. Before doing so I return to what I was saying earlier and say that we are determined not to do what hon. and right hon. Gentlemen opposite did when they were in Government, which was to count on a far greater increase of output in advance. We believe that our overall fiscal and monetary policies, designed to increase incentives to work harder and to invest more will produce a faster rate of sustainable growth. But our public expenditure programme must in total be both adequate and prudent. I believe that the figures in table 3.1 on page 66 meet these two essential criteria.
This brings me to the question of the overall strategy for public expenditure. This needs to be directed to the achievement of a high and sustainable rate of economic growth—and I stress the word "sustainable"—an amelioration of inflation and a higher level of employment. It is therefore designed first of all—and this is part of the answer to my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne)—to make the public sector contribute as much as possible to the provision of jobs while unemployment is high. We still are not in the clear here although I do not know where the right hon. Member for Manchester, Cheetham stands on this.
Secondly, the overall strategy must keep the level of public expenditure in the medium term—1974–75–1975–76—rising at a rate which will not produce excessive pressure on demand when the nation's resources are fully employed and therefore not exacerbate inflation or jeopardise our taxation policies in the medium term. The White Paper shows a distinctive pattern through time reflected most clearly in the table on page 12 which compares the position described in last year's White Paper with this year's White Paper. The annual percentage increase in cost terms now shows a more pronounced inflection. The percentage figures are higher in the earlier years, 1971–72–1972–73 than they were and lower in 1973–74–1974–75. This is in no way inconsistent with our earlier policies, as hon. and right hon. Gentlemen opposite appear to assert. It is a 1544 sensitive response to the present situation specifically designed to avert the dangers which the right hon. Gentleman says that we are ignoring.
One of the problems in this area is to get over to the public what is really quite a simple message. I therefore make no apology for repeating the figures given twice from the Front Bench yesterday which the right hon. Member for Cheetham apparently regards as minor or marginal. In addition to the massive fiscal and other measures taken to stimulate employment, we have made important short-term increases in public expenditure. These are what the right hon. Gentleman describes as marginal or minor.
There are four special programmes beginning this year but concentrated mainly on 1972–73 and 1973–74, though they extend to some extent later on. These increases are designed to provide employment as quickly as possible where the problems of unemployment are greatest.
First, there are new works in development and intermediate areas, and measures to improve the infrastructure, totalling £164 million—apparently regarded by the right hon. Gentleman as minor—
§ Mr. Harold Lever
The hon. Gentleman must not go on flogging this dead mouse. I urged that the Government should have done much earlier much more in the way of public expenditure to create employment. I said that the difficulty of using capital expenditure to meet the present situation was that, amongst other things, it took too long to take effect. What I regard as marginal and minor is the impact of this on the immediate unemployment situation with which we are faced. If the hon. Gentleman cannot understand that, I hope that he will give way to me again until I finally get over the simple point that the Government have reflated too late with the wrong means and, as far as public expenditure is concerned, they should have done it earlier and in a different area. I welcome the present measures, if on examination they will give extra employment, but at no point do I believe that they will make a significant contribution to unemployment within the next few months. What the hon. Gentleman has just said has confirmed every word of my criticism.
§ Mr. Higgins
The right hon. Gentleman has now made three fairly lengthy interventions, as will be seen from the record tomorrow. At the risk of seeming to refurbish my right-wing image, I must say to the right hon. Gentleman that if he produces dead mice he must expect them to be flogged. The point I am seeking to make is that none of these measures is either minor or marginal.
Second, there are house improvement grants totalling £53 million. Third, there is acceleration of naval shipbuilding which, as my hon. Friend pointed out yesterday, will create jobs in shipyards in areas which suffer severely from unemployment. This totals £80 million. Fourth, there are the measures announced by my right hon. Friend on 23rd November, the acceleration of capital programmes and road programmes, a further £163 million. So there is a very substantial amount—
§ Mr. Higgins
Many of my hon. Friends are waiting to speak. If the hon. Gentleman wishes to make a speech later, and there are not many people waiting to speak, he will no doubt have an opportunity to do so.
There is a substantial amount of public expenditure, and this will stimulate the economy over the current year and the next two years to provide or maintain employment in specific situations over and above the other assistance to intermediate and development areas. Resources will, therefore, be used which would otherwise remain idle.
The effect is confined in time, as my hon. Friend the Chief Secretary said yesterday, to the earlier part of the White Paper period and, where there is a spillover into later years, confined in space to areas where demand is likely to rise more slowly.
Mr. Tam Dalyeil (West Lothian)
§ Mr. Higgins
I am coming to a conclusion. It is indeed remarkable, given the weight of our overall fiscal policies 1546 and our public expenditure programmes, that business confidence and investment have not responded more rapidly, but I have no doubt that we shall see an increasing positive response in the coming months.
In this context it is important to stress the longer-term aspects of our overall public expenditure strategy. Given the scars which they still bear from the period of Socialist Government following devaluation, it would be surprising not to find that many businessmen fear that a period of expansion or "go" is likely to be followed by a period of "stop". I therefore stress as strongly as I can that our objective is sustainable economic growth, and our public expenditure programme is specifically designed to ensure that demand towards the end of the period covered by the White Paper is not excessive and that industry can, therefore, invest with confidence. This is in contrast with the period under the previous Administration when public expenditure was completely out of control and ever-increasing taxation failed to offset it. The taxation then had to be continued despite cut-backs in expenditure programmes at a later period.
Public expenditure is now under control, and the White Paper makes clear that it is being used as a vital component of economic policy to serve both our short-term needs and our long-term objectives. The Amendment which has been put forward by the Opposition, as I have already demonstrated, is wrong in every respect, and overall it is divorced from the reality of the situation. I therefore call on my right hon. and hon. Friends to reject it and to endorse the constructive approach which is set out in this White Paper.
§ 5.16 p.m.
§ Mr. William Rodgers (Stockton-on-Tees)
I do not intend to follow the Minister of State into any of the imaginative by-ways he chose this afternoon. If I found his speech at times incomprehensible, I am led to believe that the fault was in me and not in him, and that on reading HANSARD tomorrow my shortcoming will be remedied.
I want to say a word about some of the matters which we discussed yesterday. In so doing I am aware that I shall be contributing to an unsatisfactory 1547 debate. As hon. Members have said, our debate is conducted on two levels. On the one hand we are discussing the control of the executive by Parliament, and whether the new methods which we have developed are a step in the right direction and how far they fall short and, on the other hand, we are discussing the larger question of strategy.
I have some sympathy with my right hon. Friend the Member for East Ham, North (Mr. Prentice) who said that he hoped this debate would take on a wider flavour and that it would have been used to discuss some of the questions which are raised by choice in public expenditure. The answer to him and to my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), who also commented on the unsatisfactory nature of the occasion, is that we are trying to find a new way of controlling public expenditure and, until we are sure that we have the procedures right, it is inevitable that this debate, being on two levels, will be to that extent unsatisfactory.
I am not at all satisfied that we yet have the procedure right, and this debate is at the wrong time. I appreciate that the Leader of the House may have felt that some undertakings had been given, but equally I am sure that the House would have been prepared to forgo them. Had this debate been held in January or February, the Expenditure Committee would have been able to prepare for it in a way that would have made the debate more meaningful. A debate now is certainly to the Government's advantage because it is bound for this reason to be more cursory than it should be.
I hope that, if not today, within a short time, the Leader of the House will give a clear and unequivocal undertaking that any future debate on a similar White Paper will follow only after the Expenditure Committee has been able to conduct its own full inquiry. It suits the Government's convenience that we should proceed in this way, but I cannot believe that it suits the convenience and preference of the House.
I said that it was not clear to me that we had yet made sufficient progress towards better parliamentary control. My hon. Friend the Member for Ashton-under-Lyne yesterday mentioned the more sophisticated instruments of government at our disposal and commented upon the 1548 implications of the Fulton Report. He may be right, but there are other factors which are militating against effective parliamentary control.
The existence of huge conglomerate Departments makes it far more difficult to cross-examine and to pin down a Department where the debate is conducted behind closed doors. In the past the debate on the Executive became an open debate in Parliament as well. Parliament has greatly under-estimated the damage done to political control by the creation of conglomerate Departments. There is no evidence yet that the Departments themselves have found a way of managing their affairs.
On 26th April last the House discussed and passed within a very short time, with a very few dissident voices—though I am glad my voice was one—a dissolution order for the Ministry of Aviation Supply. In the ten sitting weeks before that debate, 78 Oral Questions were answered by the Minister of Aviation Supply. In an equivalent 10-week period afterwards, only 18 questions were answered on matters concerning civil aviation supply policy. I appreciate that unusual factors may have operated earlier this year. I also appreciate that when the House appears to be dealing with as many Questions as before, the change of emphasis may represent an unconscious decision by Members. But I believe that however unsatisfactory Parliamentary Questions are by way of controlling the Executive, such Questions have a function. The White Paper, Command 4829, estimated expenditure on civil projects in 1971–72 at £213 million. This seems to disclose an unsatisfactory situation of control and is one of the consequences of having a large conglomerate Department. It also means that we are less able to get after Ministers than hitherto has been the case.
§ Mr. Eric Deakins (Walthamstow, West)
I do not follow the hon. Member's logic about Parliamentary Questions. Surely if fewer Questions are asked of one Minister in a 10-week period than in a previous 10-week period, then more Questions must have been asked of another Minister. It becomes a matter of balance as to which Minister one puts Questions to.
§ Mr. Rodgers
I think my hon. Friend must have missed part of what I said. 1549 I said that it represented an unconscious choice by Members. Members may have chosen to place emphasis in this way, but it must be of concern to the House that, whereas before the dissolution order there were frequent opportunities for hon. Members to cross-examine a Department, now Questions which used to go to a single Minister responsible for that one Department go to the Secretary of State. This reduces the possibility of cross-examining the large spending Departments, even if the matter may involve a minority interest.
I was interested in the evidence given by Sir Antony Part, the Permanent Secretary to the Department of Trade and Industry, to the Trade and Industry Sub-Committee on 23rd March this year, which evidence has been published. As Chairman of the Committee, I was asking him about the change to investment grants and whether he was concerned that information affecting the Department would not be available in the White Paper. He first told me that I should put the Question to the Treasury. I then asked him at Question 146:But in so far as you took part in discussions which led to the change of form, was the question of information to be available to the House of Commons one of the matters which was taken into account?Sir Antony's reply was:So far as I know, no.There were then the following series of questions and answers:(Q) It was not considered that it was important that the House of Commons should know how Government money is being spent, as of course it will be spent with allowances?—(A) No….(Q) But you would agree that it is a step back from disclosure?—(A) It is a step back from disclosure….(Q) Parliament's control of the Executive is weakened?—(A) Parliamentary control of the Executive is not weakened in relation to the allowances, because the practice in relation to the allowances is not changed.(Q) In relation to the spending of public money that the allowances involve?—(A) Yes.I draw attention to those questions and answers simply to illustrate the extent to which that evidence put before the Committee by the Permanent Secretary, to the effect that the House of Commons would be less informed, was not a matter which was considered.
§ The Financial Secretary to the Treasury (Mr. Patrick Jenkin)
Sir Antony's first answer that the hon. Member should direct the Question to the Treasury was perhaps most useful. Perhaps the hon. Member will recollect that in the Budget debates his right hon. Friend the Member for Birkenhead (Mr. Dell) asked if we would be publishing the same sort of information about depreciation allowances. I gave an undertaking that we would examine it, and we are examining it. It is not right to draw the conclusion that nothing of that will appear in the same particularity as it did in regard to investment grants.
§ Mr. Rodgers
The Financial Secretary is dealing with a somewhat different point. I was asking the Permanent Secretary whether lack of disclosure was discussed at that time, and he said it was not. I should be glad to give way to the Financial Secretary if he wishes to say that the Permanent Secretary was wrong—I see that the hon. Gentleman does not wish to say that.
My third point is as to the extent to which concealment arises in regard to Concorde. Yesterday there was a Private Notice Question concerning the discussions in Paris on Tuesday of this week about the selling price of Concorde. As the White Paper shows, there has been substantial public investment in research and development, and it is likely that this eventually will amount to some £500 million of Exchequer money. Therefore, it is reasonable that the House should know first the selling price of Concorde; secondly what allowance is made in the estimates; and, thirdly, what assumptions have been made as to the number of aircraft to be sold. Fourthly, is there any further information concerning loans to be made available for the production of aircraft? Finally, what is thought to be the likely outturn?
I thought it was wholly unsatisfactory and out of keeping with the attempt by this House to learn more about public expenditure that basic information of this kind was denied on Tuesday and is again denied to the House today, despite the fact that some £500 million of taxpayers' money has gone into the development of Concorde. The Concorde story—irrespective of the merits of the aircraft, which we are not discussing—is from start to finish a story of concealment, and I shall 1551 not be satisfied until the House has developed instruments to prevent a similar history in the future.
I agree with the important point made yesterday by the right on, Member for Taunton (Mr. du Cann), Chairman of the Select Committee on Expenditure, about developments which will enable us better to conduct our work. He said first that we should be appointed for more than one session at a time, and I am sure that is right. Secondly, he referred to the timetable for the debate, to which I have already referred. Thirdly, he mentioned the need for further specialist help. And, fourthly, he spoke of the need for an overall programme of work which was satisfactory to the House. There was one passage in the right hon. Gentleman's speech with which I would quarrel:We shall try to open the door as little—as much, that is, as is proper—and thereby re-establish somewhat the authority of Parliament …"—[OFFICIAL REPORT, 8th December, 1971; Vol. 827, c. 1339–40.]I felt that reference to what is proper was out of place in a debate of this kind. Nothing is improper for a Committee of this House in trying to prise open the door into government. I hope none of us will be in any way constrained in our endeavours to seek information which has not hitherto been available.
§ Mr. David Marquand (Ashfield)
My hon. Friend said—and I am sure he is right—that the Expenditure Committee needs to have a programme of work that is acceptable to the House. Would he consider some mechanism for feeding into the Expenditure Committee the views of those hon. Members who are not members of the Committee to ensure that the programme is acceptable to the House as a whole, and is not simply devised by specialist technicians who are lucky enough to be members of the Committee?
§ Mr. Rodgers
I am sure that my hon. Friend is right, and I hope that we shall develop more sophisticated procedures. In future, the sub-committees of the Expenditure Committee might well find a formula by which they can take the views of the House before deciding the subjects that they should discuss.
I make a further proposal which was not contained in the remarks of the right hon. Member for Taunton (Mr. du Cann) 1552 but which is important. I reflect on the wide area that the House very properly wishes to examine, and I am conscious that each sub-committee is extraordinarily small. The Trade and Industry Sub-Committee consists of eight members. Even if they occupied themselves every day of the week, which would be quite impossible if the Chamber were to remain central to Parliament, they could not get through the volume of work required of them. As our experience unfolds, I hope that the House may consider at some stage establishing not simply sub-committees of the Expenditure Committee, but main committees dealing with the principal areas of policy. Whether that will be possible depends on the interest in and the concern of hon. Members in the work of the Expenditure Committee. Not everyone is as concerned and interested as my hon. Friend the Member for Ashfield (Mr. Marquand). If that is so and more Members are prepared to be involved, I am sure that the Expenditure Committee can increase its area of competence and that that will be to the great advantage of parliamentary control.
§ 5.31 p.m.
§ Mr. J. Enoch Powell (Wolverhampton, South-West)
I am sure that the hon. Member for Stockton-on-Tees (Mr. William Rodgers) is right in saying that, although on the two sides of the House in many respects there may be very different approaches to public expenditure, there is in this debate a unanimity—at any rate, of profession—in the desire to see a closer and more effective control of public expenditure exercised both by the Government and by Parliament. I intend to offer my own decided opinion as to the progress or retrogression which is being made in that respect.
First, however, I want to look back just 14 months to the famous mini-Budget of my right hon. Friend the Chancellor of the Exchequer in October, 1970. In the White Paper which accompanied his statement, we were impressed, startled, and on this side delighted to discover that, in the three following financial years, 1971 –72 to 1974 –75, the average annual rate of increase in public expenditure, which, but for his decisions, would have been 3½ per cent. a year, had been reduced to 2.8 per cent. a year. That appeared to be a useful start upon the ambitions of many members of this 1553 party and many of its supporters. That prospect seemed to be confirmed when the following White Paper on Public Expenditure, which appeared in January of this year, showed an average annual increase in public expenditure of 2.6 per annum expected over the five years from 1969 –70 to 1974 –75. Moreover, the same White Paper pointed out with some satisfaction in paragraph 10 that this rate of increase was below the rate of increase in productive potential which had been the experience of the country during preceding years.
All, therefore, seemed to point to a projection of the increase in public expenditure which would be within the projection of the increase in the national income, thus allowing not merely more scope for manoeuvre to the Government but the prospect of a continuing alleviation of taxation and transfer of elements of the economy from the sphere of State decision. Such was the prospect that we were invited to contemplate by the White Papers of October, 1970, and January, 1971.
We find something different to read in the White Paper of November, 1971. In the famous paragraph 7, that White Paper presents us with a projected annual increase in public expenditure over the next four years of 32 per cent. per annum. Again it relates that prospective rate of increase to the increase in the nation's productive potential; but this time it only says, with rather more restraint and some ambiguity, that the rate of increase in public expenditure is keeping close to the rate of increase in productive potential which has been experienced during the last 10 years, though it goes on to make some reasonable but, on the whole, optimistic forecasts as to the future progress of that increase in the nation's productive potential.
So here is a contrast, at any rate on the face of it, and those of us who have attended patiently throughout this debate have listened carefully to the explanation for the difference which has been given from the Treasury Bench. I am sure we are especially grateful to my hon. Friend the Minister of State, to whose explanation of the method of calculation adopted in the new White Paper we listened with equal enjoyment and fascination.
1554 Undoubtedly, there is a new basis of assessment. The method of measuring public expenditure which is now used and which produces a projection of 3.2 per cent. per annum—higher than recent experience of the growth in productive potential—is a different basis from that which had caused us so much satisfaction and happy anticipation a year or so ago. Still we are confronted with the fact—and it is a fact upon the new basis; that is stated plainly on the face of the new White Paper—that public expenditure, projected in the manner in which it is considered most reliable and least misleading to present it, is destined to rise over the next four years on average at a rate which will exceed the growth in the national productive potential, unless that rises faster than has been our recent experience. So the prospect is no longer, subject to certain qualifications, one of our being able to look forward to progressive, however gradual, limitation of the sphere of the State in the economy as a whole, or to a reduction in the burden which that represents on the public in terms of taxation.
How has this come about, and what are the real prospects? Undoubtedly a factor, but perhaps not a very important one, has been the decisions on expenditure taken and announced by the Government between their first and their second public expenditure White Papers. But there are other points which it is more important for the future that we should notice.
The first is the choice of the expression "productive potential" as the basis of comparison with the rate of increase in public expenditure. One understands why this expression, philosophically very difficult, has been preferred by the Treasury. It is not very easy to be sure what is meant by, or what is, the "productive potential" in any year—
§ Mr. Powell
Nor my hon. Friend's potential potential. The only ascertainable fact is what was the actual production; and the significant ratio year by year is the ratio of actual public expenditure to the nation's actual production. No doubt that also is difficult to estimate and project and it should be remembered 1555 that our experience has invariably been one of excessive optimism in projecting the growth of the gross national product. There may or may not be reasons for expecting the growth of the gross national product to accelerate; but we are to a certain extent pre-empting our optimism in that respect by the rate of increase of public expenditure expressed in terms of an annual average of 3.2 per cent.—the Chief Secretary adjusted that to 3.3 per cent. in his speech last night—over the next four years.
However, this figure is itself subject to considerable qualification. There was an interesting exchange between the Minister of State and my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne). The Minister drew the attention of my hon. Friend to the movement of public expenditure in the individual years over which the average of 3.2 per cent or 3.3 per cent. is obtained. It is a delightful picture when one looks at the tables on pages 11 and 12 of the White Paper. Successive figures of the annual increase in public expenditure are given, and we see the figure of 3.9 per cent. in the present year, then 3.1 per cent., followed by 1.9 per cent., and finally 1.4 per cent. in 1974 –75.
We are invited to believe that the projected annual average of 3.2 per cent. over the next four years conceals, as well as expresses, a downward trend as dramatic as that from a 3.9 per cent. increase in the present year to a 1.4 per cent. increase four years hence, in 1974–75. Nobody can prove anything about the future, but the kind of shape of the prospective future movement of public expenditure which is presented by these tables is highly improbable.
§ Mr. Higgins
I think my right hon. Friend was referring to Table 1.1 on page 11. I was referring to the table at the top of page 12.
§ Mr. Powell
I was aware of that, but the Minister will agree that the table on page 11 sets out the volume changes, which are then translated into cost changes in the table at the top of page 12. I make no complaint about this. If however, recalculation in the new "cost" terms had been made for each of the same years, we would have had a similar sequence to that which I have brought to 1556 the attention of the House in volume terms.
Now, I realise that in their choice of new expenditure measures in the present year the Government have avoided the pitfall into which the right hon. Gentleman opposite so precipitously fell. The Government have selected expenditures which, on the face of it, are of a terminable character. It is their proposition that they are not increasing the total of public expenditure, or at any rate not appreciably, but are simply bringing forward into earlier years expenditure which would have occurred in later years. I can only say that the tendency of a level of expenditure, once attained, to persist or to rise is very great indeed. I fear that we shall find that although these expenditures may have been brought forward from later years, there will be no lack of others to fill their place when those later years arrive.
§ Mr. Powell
There is a difference of principle between the two sides of the House, which I am not disputing. I am considering the question of control, about which in some sense both sides are at one, and I hope that on that I shall carry the hon. Member for Liverpool, Walton (Mr. Heffer) with me.
There is another and more serious respect in which these long-term forecasts of public expenditure are misleading. That is that there is a built-in tendency to underestimate future expenditure and to underestimate it the more the further ahead are the years with which one is dealing. The reason is simple: it is that in the immediate future we see what there is to be done; we see the expenditures that are needed; we know the circumstances. But try as we may to insert contingency items—and there are contingency items in these tables—we never, and experience verifies this, dare insert sufficient contingency items to grasp the reality of what comes along as the later years arrive.
This was illustrated and in a way sharpened by an important exchange last night between the hon. Member for West Lothian (Mr. Dalyell) and the Chief Secretary. The hon. Gentleman elicited from my hon. Friend that there is a difference in kind, as well as in perspective, between many of the figures relating 1557 to the later years of the quinquennium or quadrennium and the figures for the earlier years. It was exemplified by the case at which the House was then looking, namely, capital expenditure on nationalised industries. It resulted in the Chief Secretary saying of those later figures that they weresimply an estimate of what the present decisions will result in,but werein no sense a forecast of what decisions would be taken."—[OFFICIAL REPORT, 8th Dec., 1971; Vol. 827, c. 1379.]This is not a question of the impact of new policies. What is being said is that the figures written in for years three, four and five are merely the figures produced by decisions actually taken and already in the pipeline. They are, therefore, totals which have no significance in themselves. They are not genuine attempts to estimate total expenditures, even on the present outlook, in the later years of the four or five-year period. Thus, we have a third distortion.
Now, all these distortions are in the same direction, and are introduced into a long-term forecast which itself provides no reason for supposing that there will be a downward divergence between public expenditure and national income.
§ Mr. Tam Dalyell (West Lothian)
Is the right hon. Gentleman aware of the real practical problem that if industry takes seriously the figures about which he has been speaking, that could result in it taking decisions that will prove to have been taken on a false basis? For example, there are people in the heavy electricity generating industry who are taking decisions on the basis of figures for the projected 1973–74 investment of the nationalised industries in Scotland. The Treasury should appreciate this. Those figures may bear no relationship to the total investment of, for example, the South of Scotland Electricity Generating Board. This is a practical example of something that could now hurt investment in contracting industries a great deal.
§ Mr. Powell
The hon. Member has drawn attention to one of the many dangers of publishing apparently precise figures as to years which are two, three or four years away, without attaching to 1558 those figures warnings which would, in effect, prevent them from being put to any practical use. Indeed, what I am submitting to the House is that, so far from these four-year or five-year projections, these long-term statements of public expenditure, assisting the House in understanding or controlling public expenditure, they do in fact have the opposite effect, and that in the attempt to strengthen our control and our understanding, we are in danger of actually weakening them.
These long-term forecasts stem from the Plowden Report, which received so much acclaim 10 or 11 years ago. I have, Mr. Deputy Speaker, in accordance with the custom of the House, given notice to the Chancellor of the Exchequer of that time, who now occupies the Chair, that I would be referring to a correspondence which passed between us when in 1961 he was considering the initial implementation of the Plowden Report. However, I intend to quote only the submission which I at that time made to the right hon. and learned Gentleman, and not the reply which I received from him; and I believe that I am entitled to do so, as that submission was expressly made by me in a personal and not a ministerial capacity, although I was at that time Minister of Health. I ask the indulgence of the House in quoting the actual words on Plowden which I submitted to my right hon. and learned Friend over 10 years ago, not only because I do not find today that I can express the thoughts better, but also because it may be useful, when we are contemplating the development and the maturity of what was a popular new notion 10 or 11 years ago, to remember that doubts and anxieties about it were felt from the outset.
In September, 1961, I wrote to my right hon. and learned Friend:I believe that the central recommendation of the Report…"—that is, of the Plowden Committee—… (that public expenditure decisions be taken in the light of prospective total expenditure and resources over a period of years) is destructive of Treasury control and will strongly tend to the increase of public expenditure and to inflation. My reasons are as follows.… Given the current preoccupation of politicians and the public with 'growth', the Government dare not, for very shame, pitch their estimate of prospective resources low. As it is, they are liable to be told by 1559 their opponents that the rate of growth anticipated is miserable, and that all difficulties would be resolved by a policy to make it increase faster. Inevitably therefore the estimate of prospective income …"—in our more sophisticated day, this, of course, has become "productive potential"—… is on the high side. The same happens with expenditure. Every service has to be allowed to 'expand'; otherwise there would be a terrible outcry. What?' people would say, 'no expansion in the health services for the next five years?'. It sounds terrible in prospect: in retrospect nobody bothers, because the same expenditure at constant prices has been made to yield more benefit. Furthermore, the whole public sector of expenditure has to be committed to existing services and their expansion, because we do not yet know what new ones will be demanded in future and it is not practicable politically to keep a big contingency fund'. The result is that the new expenditure, when it imposes itself irresistibly (as new expenditures do), is piled on top of the existing expenditures already publicly and fully committed. Nor is it practicable to come forward forecasting a decline in the proportion of the national product to be expended on public account"—ten years later, the White Paper is still not forecasting such a decline—otherwise every interest would clamour that its essential needs are being sacrificed for the sake of reducing taxation: 'why me?'… Finally, since all the forecasts of expenditure have to be made 'in real terms' or at constant prices' …"—of course, this too, was before these sophisticated days of "real costs" which have been embodied for the first time in the new White Paper—there is a built-in inflationary mechanism. The Chancellor enters into commitments which are hedged against him in the event of inflation. When prices and wages go up, he cannot say to his colleagues: 'Stop overspending your estimates'. It is they who say to him: 'You have promised us such and such in real terms therefore pay us more cash accordingly'. The form in which the spending intentions are expressed thus tends to deprive the Government of control over cash expenditure exactly when they need it.I concluded:The Plowden exercise, as a public policy, is an exercise in escapism. There is only one key to the control of expenditure. That is for the Government to wish it, and to wish it more than they wish anything inconsistent with it. If this condition is not fulfilled—no amount of long-term planning and forecasting will give control. If, on the other hand, a time comes when a Government does want to control expenditure, the Plowden policy will have created a series of commitments, expectations and habits of thought and speech which will be a severe impediment.1560 I revert from words of ten years ago—I apologise for having troubled the House at such length—to the present. I admit that there seems something very churlish, very unattractive after the tremendous efforts which have been made by the Treasury in evolving long-term estimates of expenditure and perpetually refining them, after all the work of the Committee presided over by my right hon. Friend the Member for Taunton (Mr. du Cann) and its sub-committees, to suggest the conclusion that it is all "vanity and vexation of spirit"; that, so far from giving Parliament or the country a truthful or genuine impression of what is likely, so far from strengthening the hands of those who wish to criticise and control, the net effect is rather the contrary. Yet that, I am sorry, is what I do suggest to the House.
I believe that there is only one key to control of public expenditure, either by this House or the Treasury. It is the method on which indeed the very existence of this House and of so many of its procedures have been founded. I almost hesitate to mention it, so unfashionable is it. It is the annual presentation of estimates, the annual examination of estimates, the annual control of expenditure. I believe that still is the only formula which yields genuine information to Parliament or real power of control to Treasury or to House of Commons. On the two sides of the House, the trend of public expenditure upwards or downwards evokes very different emotions; but I believe that, on both sides of the House, we should be very jealous to see that changes in procedure do not weaken rather than strengthen what we would all, though for different purposes, wish to be strong.
§ 6.0 p.m.
§ Mr. David Steel (Roxburgh, Selkirk and Peebles)
We have just heard an interesting analysis of the White Paper and the procedures now used by the House. I am sure that the right hon. Gentleman did not mean to be churlish to individual members of this Committee—
§ Mr. Steel
As a Member who has not sat on that Committee and does not normally take part in economic debates, 1561 I am grateful to those hon. Members who have laboured over the past Session on the Committee on Public Expenditure and its various sub-committees.
I do not agree with the right hon. Gentleman's analysis, interesting though it was. The hon. Member for Stockton-on-Tees (Mr. William Rodgers) in particular made a valuable point when he said that the House, both in its open questioning and in its examination by specialist Committees, must be more effective in tackling conglomerate Departments.
If anything, the right hon. Member for Wolverhampton, South-West (Mr. Powell), has underestimated the extent to which the present Government have, in part at least, adopted his own philosophy by abandoning attempts at forecasts. We no longer get forecasts of unemployment or house building levels. The right hon. Gentleman wants to push them further—
§ Mr. Higgins
The hon. Gentleman says that we "no longer" give forecasts of unemployment. Could he tell us when we did?
§ Mr. Steel
It is one of the big sticks with which the present Administration beat the previous Government that the latter's forecasts were wrong. If they were wrong, they must have existed. In housing, a particular interest of mine, I remember specific figures being given which were not attained. That is the reason for the present Administration laying down no figures at all.
§ Mr. Steel
No, I will not give way again.
This is a weakness in policy. I hope that the Government will not take too much heed of the advice from behind them to pursue a policy of no forecasting.
It is interesting that the right hon. Member for Wolverhampton, South-West and the hon. Member for South Angus (Mr. Bruce-Gardyne) and, I dare say, other hon. Members opposite are, to be fair to them, trying to keep their policy more akin to the attitude which they adopted at the last General Election—that increases in public expenditure were themselves bad and that lower taxation 1562 was itself good, a proposition with which those of us who take a slightly wider view of the social responsibility of Government would not necessarily agree.
The debate has been interesting because it has proceeded on two distinct levels. There are those who use the opportunity to exchange their economic theories, as most hon. Members have done, and there are those like myself—perhaps a minority—who want to use the occasion to pick out certain items from the White Paper to ride their particular hobby horses on the figures with which we have been supplied. I want to do that with three topics.
I turn first to the forecast on page 54 of the White Paper that levels of unemployment benefit to be paid out in future which are to rise from £150 million provisional outturn for the current years to £172 million in 1975 –76. There is an interesting annotation at the bottom of the table, which says:The figures for unemployment benefit are not to be regarded as reflecting a forecast of the levels to which unemployment will be reduced.That is very interesting, when one notes that the estimate for next year jumps from £150 million to £230 million in 1971–72.
The Government's policy of emergency public works programmes should be followed to its logical conclusion. These figures represent a tremendous waste of human and material resources as well as social evils in individual cases. I represent an area which has not had unemployment as a very serious problem until recently; even now, I am conscious that other parts of the country are suffering far greater hardship than my own constituency.
But when one sees electricians, joiners, construction workers thrown out of work, one is more than ever aware of the sense of the paternalist capitalists of the last century, who used to construct follies rather than see people idle. There is no need for the Government to go in for a set of nationalised follies. There are plenty of public works which could be brought forward. The right hon. Member for Manchester, Cheetham (Mr. Harold Lever) had a fair point when he said that one could not switch on tomorrow public works programmes and 1563 reduce unemployment unless there had been forward planning of projects which could at any given time be produced.
We could each go to our constituencies and produce items for the Government. I will resist that temptation, but one figure which worries me is that given on page 62 of the White Paper, where a slide is forecast in the level of expenditure on housing in Scotland from £230 million in the present year to £221 million in 1975–76. By any standards, with the present housing situation in Scotland, this is a very alarming development. I should like to see programmes for housing, roads, hospitals, for example, brought forward at least to the drawing board stage where, given an economic situation in which unemployment was threatening to rise, they could be implemented and an immediate effect secured in the reduction of unemployment.
I turn now to the details of expenditure on regional development on page 25. From them we can see that investment grants will drop from £592 million in the present year to £37 million in 1975–76 and that the regional employment premium will also drop from £109 million to £2 million. In the face of these figures, I do not see how the Government can pretend that they are keeping up steam behind their regional development programme.
The transition from investment grants to investment allowances, apart from being less effective, has been done as part and parcel of the Government's bookkeeping programme, so that they can say that they have reduced public expenditure, because tax allowances do not appear in these tables as items of expenditure.
I was interested in the right hon. Member for Cheetham's advocacy of a regional development bank, but my experience of representing part of a development area under both Governments is that the biggest single step forward which could be taken in regional development is not the advent of new ideas, incentives or definitions of development areas, but rather the creation of a feeling in Government that regional development must be the concern of every Department of Government and of every aspect of public expenditure. It is no good having 1564 other arms of Government taking the view that regional development is somehow the responsibility of the Department of Trade and Industry and of no one else.
I can give three examples which have occurred in the course of my ordinary work in the last month. They are not the most profound or serious which can be given, but they illustrate my point.
Last month the Scottish Office sent the Under-Secretary of State for Development to Germany on a tour to persuade German industrialists to invest in Scotland. At the same time B.E.A. announced plans to abolish the first-class air services to Scotland with effect from next spring. When one tackles the Minister, he says that it is a matter for the commercial judgment of B.E.A. If the Government believe that, they might as well hive off B.E.A. to be a private company. The whole point of a public company is that its commercial judgment should be subservient to the policy of the Government. If we are serious about regional development and attracting more investment to Scotland, it is ridiculous, for some marginal savings, to take away the one swift and most painless method of getting to and from Scotland.
The second example is the public programems of the B.B.C. and I.T.A. in the development of their transmitters. In many parts of my constituency, the public are denied U.H.F. services, colour television and B.B.C.2, because the transmitters are not available. They pay the same licence fee as anyone else and if they live in certain urban areas, they are lucky enough to be able, by paying another fee, to be wired in to a commercial relay company.
If we are to have a fourth T.V. channel, the best thing that the Government can do is say that for once the development should start at the other end of the country. Even if it is uneconomic, if we are serious about regional development, the benefit should start for once in the development areas.
The third and perhaps more important example is the development of subscriber trunk dialling. I recently visited a factory making highly sophisticated avionic equipment in the Scottish development area. The managing director told me, "We were told to come here because it was a special development area and we had all 1565 these extra incentives. But I waste many hours and a lot of money trying to get telephone calls to and from New York because we are not attached to subscriber trunk dialling." If we are to have regional development and make it effective, the Post Office must be told that its capital expenditure programmes and the development of communications must be geared to it.
The Prime Minister, in reply to a Question today, talked about the willingness of the Government to disperse offices and their executives out of London within the limits of retaining Government efficiency. But Government efficiency cannot be retained consistently with dispersal unless infrastructure is built up adequately. The greatest difficulty in the regional policies of both Governments is the maintenance of the view that the developments in civilisation begin in London and taper off the further north of Hampstead one goes. The biggest single improvement would be to get every Government Department and every sector of the public economy switched on to the need for regional development.
Finally, I turn to the figures of expenditure on social services. It is really time we supported the campaign, growing among members of all parties, to get the Government to make a proper economic assessment of the value of the savings that would be made by introducing a proper, free family planning service under the National Health Service—something for which medical bodies themselves are beginning to campaign also.
In the face of abortion figures running at the rate of 100,000 a year, the Birmingham Pregnancy Advisory Service carried out last year a survey of 5,000 patients who came to it for advice, seeking abortions. It was found that 36 per cent. of the married patients and 63 per cent. of the unmarried had used no form of contraception on the occasion which had caused pregnancy. From the point of view of social policy, it is clearly more desirable to reduce abortions by having effective contraceptive facilities but there is also the wider economic argument as well.
The expenditure on maternity grants, maternity allowances, the provision of ante-natal services, welfare milk, hospital facilities, midwives, health visitors, primary 1566 and secondary education, school meals, family allowances and all the other services—including, in particular, a large amount on problem children—adds up to a cost of £2,000 per child over 20 years. This means that if we continue to allow 200,000 unintended children through lack of an efficient birth control service we are committing ourselves to spending another £400 million per annum of the taxpayer's money during the next two decades.
Of course these figures have to be treated with caution but we are entitled to ask that the Government investigate them because, at this year's Family Planning Association's conference, the Secretary of the South-West Metropolitan Regional Hospital Board also gave the figure of £400 million in assessing the potential saving on each year's unplanned pregnancies. He estimated that the cost of free, comprehensive birth control services would be about £40 million per annum, which would mean a net saving of £360 million if the figures quoted are correct. The saving would certainly be very substantial.
One of the differences which will remain between the two sides of this House is that we believe that public expenditure should be used in order to achieve a more just society. The minor reductions in public expenditure which we see in the White Paper—for example, on school meals and milk—are the reverse of the kind of policy we would like to see pursued.
§ 6.15 p.m.
§ Mr. Wilfred Proudfoot (Brighouse and Stenborough)
Looking at the White Paper figures, I am reminded of a story I heard yesterday. It was to the effect that a firm had given its figures—which were historical, of course—to three different firms of accountants, which all produced different profit figures. Those were on historical grounds. Here we are trying to look, quite correctly, into the future—even more difficult.
I was rather surprised when my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) asked that we should not have five-year rolling programmes. I remember in 1961—I was then still a back bencher, although I sat for a different constituency—being 1567 very proud of my right hon. Friend's ten-year rolling programme for hospitals. I thought that it was intelligent, sensible and the correct thing to do. So he has changed his mind very much since then.
§ Mr. Powell
I have not changed my mind; it is my hon. Friend who has fallen into the crude fallacy of assuming that, because it may be sensible in one service or another to have programmes for 5, 10 or 15 years ahead, therefore it is sensible or wise to have programmes of total public expenditure for five years ahead. No such deduction can be drawn.
§ Mr. Proudfoot
I am glad my right hon. Friend has made that clear because I agree with him that some sectors are much easier to define for the purpose of future expenditure. Indeed, it is vital that it should be done.
For many years I have thought that if I had the chance to distort our public expenditure I would do it for one purpose above all—road construction. I believe that we have not given and are not going to give ourselves the roads we really require. We all accept that, by about 1990, we will have the maximum number of cars per head of population that we shall ever have. Why not get the roads now as rapidly as possible? That is one way in which I would virtually unbalance the economy because it would pay a very big dividend to the whole of society and not just drivers. The roads are purely the extensions of the factories to get the goods to the consumers—and that includes the consumers at the other end of our export drive.
The other thing which did not attract me very much about the White Paper was that I could not pick out any sum of money for medical research. I must admit that this rather surprised me because I would have thought that to spend money to look at the two or three diseases which now frighten people to a major degree could produce results far more rapidly than a lot of people may believe.
The main factor about the White Paper which struck me when I was reading it was that it is about spending our money and our constituents' money. The Government and the local authorities spend 41 per cent. of all the money which goes through the hands of the public. 1568 Then I looked at the figures for the Department of Trade and Industry and was disappointed, although not surprised, to find that nothing was allocated either to what we now refer to as the Bolton Committee—the report on small firms. I look forward to next year's White Paper, when I hope to see a very tiny amount in it for expenditure on small firms.
I say "tiny amount" because when I look at these massive figures in the White Paper, obviously this tiny amount will get incredible results. It will not be easy to find out how to spend the money, because people in small firms are not easy to communicate with or get at. One of the biggest jobs will be to find out how to get at them.
I wrote to my right hon. Friend the Prime Minister yesterday but found that the journalists who bothered to report what I had written to him had got my story completely wrong, as did the right hon. Member for Workington (Mr. Peart) earlier this week. He assumed that small firms were all in manufacturing. The Press assumed that small firms were, in the main, small grocers' shops, and it is worth pointing out that Bolton, for the first time, has identified what we can all agree are small firms. That might, in the end, be the only lasting service which the Bolton Report will have done. It has given small firms a political identity, and I should like to quote from the report.
It shows that in manufacturing industry small firms with fewer than 200 employees have 20 per cent. of the total number of people working in manufacturing. In the retailing industry, firms with a turnover of less than £1,000 a week have 49 per cent. of the people employed in retailing. For the wholesale trades the figure is 25 per cent. For construction the figure is 33 per cent. of the total of those employed in the industry. In mining it is 20 per cent., in the motor trades it is 32 per cent., in miscellaneous services it is 82 per cent., in road transport it is 36 per cent., and in catering, which is pretty obvious to everybody, the figure is 75 per cent.
I believe that a tiny amount of money ploughed into helping and encouraging these small firms would bring magnificent results, not only in the areas of high employment, but in the development 1569 areas where we all acknowledge that most of the money that has been spent has gone naturally to capital-intensive industries instead of to labour-intensive industries. If a small amoant of money were expended in that way, we should all be surprised at the result that would be achieved. It would help the small men of business but, more important, it would help the whole of the community in which they operate and the whole of our society.
I repeat two suggestions which I have made to the Department of Trade and Industry Minister with the responsibility for small firms. One is that a small firm scholarship should be set up. By that I do not mean that small business men should go to university or to a technical college for a year or more. They have their noses to the grindstone, and they are not likely to take them off easily. The scholarship which I envisage would be seminars of two or three days. My son has been on a one-day seminar today on this very type of thing. Attending these seminars would get the small business man out of his environment, out of the daily pressures of his business, and give him perspective.
If that were done, I am sure that small businesses would grow. When it comes to distributing the scholarship, I think that that could be done by local Chambers of Commerce, local Chambers of Trade and the Small Business Association collectively. I think that there should be a maximum age limit so that the establishment in the local districts association would not get the scholarships. I should probably look on as a criterion for a scholarship a man's success as shown by his audited accounts, if he were prepared to produce them. I should give the go-getter that type of scholarship.
I have asked the Minister to spend money on programme learning for specific areas which are common to all businesses—cash flow, budgeting, discounted cash flow, and so on. There are perhaps 20, 30, 40 or 50 techniques which are common to all businesses, and it would involve only a small expenditure to write the programmes.
I should then like to see the programmes freely and easily available to men in small businesses with the requisite teaching machines, or there might be 1570 merely a printed text of programme learning. That would enable small business men to be taught at their place of business. The Armed Forces use this technique. Businesses with a scattered sales and work force use it, too. Indeed, it is in use in some of our schools.
Those two suggestions, with a small amount of money expended on them, could give this country a good return.
§ 6.26 p.m.
§ Mr. David Marquand (Ashfield)
I hope that the hon. Member for Brighouse and Spenborough (Mr. Proudfoot) will forgive me if I do not follow the points that he has made. One of the difficulties inherent in the nature of this debate is that individual hon. Members, quite rightly, pursue their own hobby-horses when it comes to priorities within the total of public expenditure. That is perhaps one reason why, in certain respects, the debate tends to be somewhat unsatisfactory, and I shall contribute to its unsatisfactoriness by not replying to what the hon. Gentleman has just said. Instead I should like to consider some of the more general issues which have run through the debate today and yesterday. I want to start by looking at the procedural questions which were particularly prominent yesterday rather than today, not simply because of their intrinsic interest but because of their high political significance.
Anyone interested in this subject must acknowledge that thanks to the work of the Expenditure Committee, and in particular, perhaps, to that of the General Sub-Committee, a great deal of progress has been made in the form of the White Paper. From the point of view of public scrutiny and control this is by far the best White Paper that we have ever had. I freely acknowledge the work which the Treasury has done in this respect. I suspect, however, that the Treasury would not have done that work had it not been for the prodding of the General Sub-Committee of the Expenditure Committee. I may be cynical but I doubt whether the Treasury would have been as forthcoming had there not been the stimulus of this expert Committee behind it.
Although a considerable advance has unquestionably been made, it would be a pity if the Treasury and Treasury Ministers were to sit back and assume that they have done all that they can 1571 and that no further improvements are necessary. There are still serious defects in the White Paper from the point of view of parliamentary control and appraisal and I hope that I shall not sound churlish in asking for a still better White Paper next year.
I hesitate to refight this battle as it is on a well-worn theme, but I am still unsatisfied by the explanation which the Treasury has given, for its refusal to publish any kind of medium-term economic assessment. The Minister of State, in one of the more technical passages of his speech when he was eschewing partisan point-scoring, said that part of the purpose of the public expenditure strategy in the White Paper was to achieve a certain degree of economic growth, a certain degree of expansion in total output.
If that is one of the purposes of the public expenditure strategy which the Government have outlined and set before us in the White Paper, how on earth are we expected to appraise it, to scrutinise it and to decide whether it is the right strategy if the Government do not at the same time tell us how they expect the prospective resources to grow over the period? I hate to be a bore about this but I do not think that the explanations so far given by the Treasury on this matter are satisfactory.
Yesterday my hon. and learned Friend the Member for Lincoln (Mr. Taverne) said he hoped that his Sub-Committee would look into the question of projections of public resources during this year. I, too, hope that that will be done and that when it is done, prodded by the General Sub-Committee of the Expenditure Committee, the Treasury will make the same kind of concession as it made this year and abandon some of its reticence when it is faced with the inquisition which I am sure it will encounter in that respect.
The second area in which the White Paper is still defective—and this is not a criticism of the present Government since it applies equally to the previous Government—is that we are still not given anything like enough information about the objects which the various public expenditure programmes are supposed 1572 to serve and about the extent to which the programmes meet those objects.
Here, too, I acknowledge that this year's White Paper is a great deal more satisfactory than that of last year or the year before. In the second section of the White Paper dealing with the individual expenditure programmes we are given far more information about the extent to which the needs in those various fields are expected to expand than we have ever had before. But although there is a wealth of information in the White Paper on that, there are certain areas where the veil still remains far too impenetrable.
In the first place, we are not told nearly enough about who actually benefits from particular items of expenditure. We are told about the increase expected in the school population and about the expansion in the school-building programme. We are not told which people actually benefit—which parts of the country, which sections of the community—from that increase in the school-building programme. We are not given any way of finding out whether my constituents, in an area of static population which has suffered over the years because areas of expanding population have had a greater allocation of money for school buildings, are to get a fairer share of the cake than they have had in the past. That is one of the essential questions which has to be asked when we are discussing public expenditure.
This is particularly true when we come to that part of the total public expenditure programme which is known as transfer payments. Transfer payments, in a sense, ought not to be counted as public expenditure at all. They are certainly a totally different kind of public expenditure from expenditure on resources. Transfer payments are a way of taking money out of some people's pockets and putting it into other people's pockets.
Transfer payments, are so to speak, a mirror image of taxation. Taxes take money out of some people's pockets and transfer payments put it into other people's pockets. If we are adequately and properly to appraise this part of the public expenditure system we ought to be able in some way or other—I freely confess that I do not know how best to do this—to compare what is happening as a result of taxation on the one hand with what is happening as a result of 1573 transfer payments on the other. We ought to be able to see exactly who gets what and who pays what.
After all, whatever value judgments we may have about the desirability or otherwise of a greater degree of redistribution in society, and the desirability or otherwise of a higher level of public expenditure on transfer payments, any Government which are spending a large sum of money by way of transfer payments presumably have some objectives in mind and intend to benefit certain groups in the community by doing so. Presumably they also have certain other objectives in mind when they take money out of people's pockets by taxation. If we are to appraise the success or otherwise of the Government in attaining the objectives they have in mind, it seems to me that we need to be able to see the system of transfer payments and taxation as a whole.
This aspect of the White Paper is of particular importance this year. It is clear that the Government's policy has changed, as the right hon. Member for Wolverhampton, South-West (Mr. Powell) showed in his devastating speech. I must say I felt rather sympathetic to the Government Front Bench when he was speaking, because its occupants must have felt rather as Mr. Brezhnev and Mr. Kosygin would feel if they were suddenly visited by the ghost of Karl Marx, since the right hon. Gentleman was presenting the pure milk of a doctrine which the Front Bench opposite has long since abandoned. It is true that it has abandoned it; there is no question about that so far as expenditure on resources is concerned.
If we look at the very important and useful article by Mr. Wynne Godley and his collaborator in The Times Business News yesterday, we see that that aspect of public expenditure over the whole five-year period will rise by about the same rate as it did under the previous Government.
This is what has happened. The present Government have abandoned their previous commitment to cutting down the public sector's claim on resources. I agree with the right hon. Member for Wolverhampton, South-West that it is almost certain to be the case that at the end of the period we shall find that the public sector's claim on resources will 1574 be a good deal greater than is projected in the White Paper, for the reasons which the right hon. Gentleman gave. I personally welcome this development and I am not attacking the Government because they have now seen the error of their ways. But although the Government have abandoned their previous doctrinaire policy in regard to the public sector's claim on resources, they have not abandoned it in regard to transfer payments.
That the Government have not abandoned their previous doctrinaire policy on transfer payments was clearly shown in the Godley article to which I have referred. Over the whole period up to 1974 –1975 we will get a reduction in transfer payments of £430 million from the programme they inherited from the previous Government. This, of course, must be judged against the background of the massive reductions in taxation which were introduced by the Chancellor of the Exchequer in the Budget earlier this year, which are having exactly the same effect.
With one hand the Government are taking far less money from the rich in taxation. With the other hand they are giving far less money by means of transfer payments to those in need. That is what is happening under this Government. They are carrying out a deliberate and massive redistribution of income away from those who were benefited by the previous Government and towards the better-off section of society. There is no question but that that is what the figures show.
Of course, there is nothing very odd about a Tory Government carrying out a policy of that kind. That is what one would expect them to do. Hon. Members opposite are presumably enthusiastic about this. But even hon. Members opposite would surely agree that if we are satisfactorily to appraise the extent to which this change is taking place, and exactly who is benefiting and who is not, there ought to be far more information of the kind I have suggested in future expenditure White Papers.
As I have said, and as the right hon. Member for Wolverhampton showed very clearly, there has been a radical shift in the Government's strategy for public expenditure. I do not think there is any dispute about this. I suggest that this 1575 very fact raises certain questions which ought to be of great concern to my party as well as to the party opposite.
Why has this change in Government strategy come about? Why is the party which so frequently and so passionately declaimed from platform after platform before the General Election that the public sector was a sort of incubus on the economy and was wasting resources which could be put to much better use if they were left to fructify in the pockets of the people, now following the same path as regards the public sector's claims on resources as was followed by the Labour Government? The answer, of course, is that the objective needs are so great and the pressures, not to improve the services but merely to keep them in the same position, are so great that the Government had no alternative unless they were to cut their throats politically.
The implication, it seems to me, is that we on this side must accept that it is not enough for us simply to campaign for higher levels of public expenditure in toto. It is not enough for us to say that the total size of the public sector must be enlarged as a proportion of the gross national product. We should, of course, continue to argue the case for higher levels of public expenditure and for allocating a greater share of the gross national product to the public sector, but we must be more sophisticated than that and more sophisticated than we have been in the past. We must also develop a strategy for public expenditure to ensure that it is used deliberately to create a greater degree of equality in society and to redistribute income to those in need.
I do not think that the expansion of public expenditure under the last Government was completely satisfactory in this respect—that nearly enough thought was given to the extent to which, for instance, hospital or school building should be geared to the needs of the deprived areas. The very fact that the Tory Government have been so quickly persuaded to return to the path of expansion in public expenditure which was followed by the Labour Government should make us a little wary as to whether that path was satisfactory. If we develop a more sophisticated strategy of a deliberately egalitarian kind and if we use the opportunities created—
§ Mr. David Mitchell (Basingstoke)
Is the hon. Gentleman saying that he believes it is more important to have an egalitarian redistribution of wealth than to encourage the creation of new wealth?
§ Mr. Marquand
No, of course I am not saying that. I do not want to get involved in a long interchange with the hon. Member on this point. I have consistently said in the House that I believe that it is only possible to redistribute income to those in need against the background of a high rate of economic growth. I am confident that this is so; and the experience of the Labour Government bears this out.
However, I am not satisfied that even under the Labour Government the public sector was used with anything like a sufficient degree of sophistication as a way of diminishing inequality and redistributing resources to those in need. The moral of this and of previous White Papers is that we need to be much more sophisticated in this respect. We now have much more information. With the help of my hon. and learned Friend the Member for Lincoln and his Sub-Committee we shall be given even more information in future years. I hope that the next Labour Government puts that information to use in the way that I have suggested.
§ 6.45 p.m.
§ Mr. Jasper More (Ludlow)
It is difficult to believe, with precisely five hon. Members on the benches opposite, that we are debating an Amendment in the name of the Leader of the Opposition and his colleagues. I say this not merely because I disagree with the wording of the Amendment but because it is regrettable that an Amendment of this character should have been tabled, because it has had the effect of distorting the debate on this important White Paper.
I listened with great interest to the speech of the hon. Member for Ashfield (Mr. Marquand). The difficulty facing many hon. Members has been that of having a debate in sequence. I am to some extent in the same difficulty because I would not wish to use this occasion primarily to debate on party political lines questions of priorities either in the public sector or as between the public sector and the private sector.
Mr. Peter Jay, who writes for a paper which I sometimes read—The Times—said some time ago that we should find 1577 buried rather deep in the White Paper what he described as a political bombshell. The low attendance in the House in the last two days does not lead one to believe that the White Paper has had quite that effect at Westminster.
The first question to which we must address ourselves is: how can we hot up the discussion of this topic? I am not sure that I followed the hon. Member for Ashfield correctly but I think that I am on the same theme when I ask whether it would not add to the interest in the House and to the public interest if the White Paper were made a two-sided document, with the Government giving their projections of the revenue for the corresponding number of years for which they are projecting their expenditure.
On the definition given to us last night by my hon. Friend the Chief Secretary it would be perfectly easy to do that, because it would merely mean projecting the yield of taxation according to the present rates on decisions taken in the preceding Budget. The Expenditure Committee, which has so vital a part to play in all this, could perhaps hot matters up by suggesting what types of increased or reduced taxation the Government should consider in future years. If suggestions such as those were to be ventilated in the Press, a semi-Budget excitement might come to be associated with these important debates.
I shall want to say a few words about the form of the debate, to which the hon. Member for Heywood and Royton (Mr. Joel Barnett) referred last night. But I first would like to indulge in what I might call a little textual criticism in the sense that I shall pretend that the Amendment has not been tabled and consider the debate in its virgin purity—namely, that we are taking note of the White Paper.
The White Paper is an anonymous production. All authors have great problems facing them when going public. I am reminded of the story about what happened between an Oxford man and a Cambridge man on the completion of those vast volumes which can be found in the Library of the House—the Cambridge Histories, ancient, medieval and modern. This is a story against my university but it is true. After the Cambridge man had displayed all the volumes 1578 with pride, the Oxford man said, "A very wonderful production, but exactly who is it intended should read them?" We rather ask ourselves the same question when we see the appearance of a White Paper of this character. Judging by what has happened so far, I think that the answer in this case would be about 35 Members of Parliament and about 12 commentators in the more sophisticated Press.
Can my hon. Friend the Minister of State tell us what the sale of the document has been? It has the interesting price of 68p. When I say "sale" I am not talking of the taking-in of each other's washing that might happen between Government Departments. I am not aware of any one of my 53,000 constituents buying a copy. It would be interesting to know how many sums of 68p. have been collected by the Stationery Office.
Another thing that should always be considered when producing a document like this is that all the best publications have in small print before the preface a small quotation epitomising the whole object and inspiration of the exercise. The one I suggest for every succeeding White Paper like this is an extract from paragraph 1 of the former White Paper, Cmnd. 4578. The two sentences are not in happy sequence, though that is not my fault but the authors'. Slightly condensed, it would read:When the Government took office they carried out an immediate review of public expenditure in order to permit taxation to be reduced. The individual can then expect to keep more of what he earns and has a greater incentive to productive effort.If that could be suitably emphasised as a kind of preface to all the following editions it would be received with great satisfaction on this side.
Another problem of authorship, apart from knowing who one's readers are, is to know how much knowledge one may assume among those who will read the work. It is a confession of failure if one is not entirely up-to-date on these things. I always go about in this Chamber with the pretence that I completely understand expressions like "productive potential" or "flowback" which trip so easily off the lips of hon. Members. In fact, I have not the faintest idea what they mean, but we must go through these pretences.
1579 In this document I was brought up rather sharp for reasons that I do not think are entirely my fault. For example, let us consider paragraph 13 on page 28. I suppose that all my colleagues understand this, but it beats me:the study and development of applications technology satellites.I have to confess ignorance there.
Almost equally interesting are the things it is assumed one does not know. For example, someone says on page 20—it may be a different author, as with the book of Isaiah—thatThe Diplomatic Service is responsible for representing and promoting British interests abroad.I believe that I knew that. Again, on page 21, speaking about the Central Office of Information, the document says that its aim… is to ensure by personal contacts, the provision of material in all media, reference services and a programme of visits to the U.K.I think that I knew that also.
I am slightly more sophisticated about other things. For example, I knew that—as stated on page 24,The Medical Research Council's main function is to advance knowledge that will improve the physical and mental health of individuals in the community.I also knew thatThe National Environment Research Council's main concern is with the earth sciences, oceanography and ecology.I knew what ecology means, too.
What I should have liked in the White Paper—perhaps my hon. Friend can arrange it for another time—is a paragraph telling us what the Treasury does. That is the important thing we need to know. Does the Treasury really regard itself as the master of events in this sphere or does it drift with the trend? That is the fashionable word now, appearing twice in the White Paper.
I also appeal for slightly more precision in certain parts of the document. That is a slightly old-fashioned point of view. The White Paper is better in some ways than the document we had about six years ago but important words are used a bit freely. "Expenditure" was bound to be used in a document like this but we have quite a lot about "investment", 1580 and we sometimes have an uneasy feeling that in this modern, trendy world, expenditure and investment are regarded as being the same. It is a curious fact, for example, that money spent on roads is regarded in the document as expenditure, or is so described, whereas money spent on railways is investment—not all railways though. The spending on railways in the London and South-East commuter network is a more subtle type. It is called infrastructure expenditure because, apparently, something has to be done for social reasons for people who live in the South-East.
Some of the phrasing also has a certain quaint fascination. I have been campaigning for some years on two different fronts, both very unprofitable: one to persuade my party not to take us into the European Economic Community and the other to increase the country's resources by planting as many trees as possible. I was interested in paragraph 1 on page 20 of the White Paper which is delightfully expressed. It is about theE.E.C. and Other Overseas Servicesand it says:This programme now includes payments to the European communities. The other expenditure is directed to the promotion of British interests overseas.On page 23 we are told that part of the public expenditure on forestry isthe net cost each year of growing timber in the State-owned forests (i.e. the increase in the value of the Forestry Commission's plantations)—".That is very puzzling. To begin with, "growing" is ambiguous; it can be used there either as an adjective or as a verb. Whichever meaning is intended, it cannot possibly make any sense, because every tree-planter like myself knows to his bitter cost, and must live with the fact, that the net cost of growing timber, in whichever sense the word is used, bears no conceivable comparison to the increase in value of his plantations.
But the main object of the exercise was explained to us very clearly yesterday by my hon. Friend the Chief Secretary and it is a very valuable explanation. He defined it in answer to the hon. Member for West Lothian (Mr. Dalyell) in a way that is very useful. We need to hark back to it when we consider the rather devastating speech of my right 1581 hon. Friend the Member for Wolverhampton, South-West (Mr. Powell). If, as my hon. Friend informed us, the figures are only a projection of actual decisions taken, the corollary should be that not all the expenditure is taken up in anticipation during a period as long ahead as four or five years. That appears if we look at a table like the one on page 25 headed "Trade, Industry and Employment", where there are not only items with political implications like investment grants but more factual things like the Concorde. If my hon. Friend's doctrine was rigidly adhered to there, there might still be an area in which it was still debatable in what way expenditure could or should most usefully be applied.
I am sorry to be so critical of the document but there are certain regrettable places, if what my hon. Friend said was correct, where again and again we are told that something is subject to alteration, to wide margins of error or to uncertainty. If the Chief Secretary's statement is correct, there is nothing wrong in a firm estimate. The whole essence of an estimate is that it might have to be altered or revised. The whole basis of this document ought to be that we should have in large black letters at the beginning, after the introductory quotation in which I will be interested, a warning that these figures are to that extent provisional. It would be better if it were left out of the end of so many paragraphs where it now appears.
I think that this has been a disappointing debate and I do not feel that it is entirely our fault. This is being very ungrateful to the Procedure Committee and to my right hon. Friend the Leader of the House, to whom we are greatly indebted for launching the idea at all. It was generous of him to give us two days but I am not sure that the House of Commons has risen to the occasion.
At the same time, as a number of hon. Members have said—the hon. Member for Heywood and Royton referred to this last night—I think that the debate has, in a sense, perhaps not been staged as cleverly as it might have been. To have a useful debate we should first have the considered comments of the Expenditure Committee. I personally would like also 1582 to have a brief reply from the Treasury to that Committee's comments.
I am not convinced, to use the elegant metaphor borrowed by one of my hon. Friends from Lord Butler that, like game, it should not hang too long. We would not lose in a debate of this kind by waiting for three or four months. After all, what we are talking about is not the actual year but future years and I was slightly puzzled—not critical—by what the hon. Member said about the necessity for two debates. The aim is to get the criticisms of the Expenditure Committee. I suggest—and I am glad to see in the Chamber my right hon. Friend the Member for Taunton (Mr. du Cann). to whom we are so much indebted—the possibility of his Committee formally or informally having further discussions with the Procedure Committee as to how best the whole of this can be done. Having started this exercise it is important that we should continue it and decide, as a House of Commons, that we shall make it a success.
§ 7.4 p.m.
§ Mr. Michael Meacher (Oldham, West)
Despite the most amusing and pointed pastiche put forward by the hon. Member for Ludlow (Mr. More) and despite his revelations of the terminological curiosities of the White Paper, I still wish to join those who congratulate the Government on the improved presentation of this document. Compared with the White Paper of only 11 months ago, it shows considerable and prompt improvements. Nevertheless I still feel, as my hon. Friend the Member for Ashfield (Mr. Marquand) has so eloquently said, that there remain fundamental improvements which have to be made if this whole exercise is to involve proper sense.
My main criticism is that in view of the very unequal distributions of earnings in this country, and particularly in view of the growing number of cases where there is a declining level of net disposable income for many lower-income groups, an assessment should be made of the distributional effects in terms of different income levels of the main public expenditure projections, particularly in regard to the social services. Also, since the expenditure decisions determine the structural shape and volume of vital decisions for years to come in a way that is 1583 scarcely reversible, it is disappointing that the White Paper develops hardly any arguments about the strategic objectives of social policy. This is quite extraordinary when, at the 1970–71 out-turn, the social services accounted for well over one-third of the public expenditure total which itself required taxes or compulsory contributions amounting to almost one-half of all income arising from productive activity.
What the White Paper says in Table 1.2 is that expenditure on all social services will increase from 39 per cent. of all public expenditure in 1970–71—with the relative price effect attributed—to 40 per cent. in 1975–76. This is in any event a small increase and it is doubtful whether it represents a real improvement in the standard of life of social service consumers. There is a host of powerful and perhaps irresistible underlying forces pushing up the level of social service disbursements, not only considerably faster than other items in the total expenditure package but also faster than the rise in the gross national product. It is well known that these factors include the disproportionate growth of the dependent population of the very young and the very old, the trend towards longer education and earlier retirement after 65 and improvements in the quality of services like smaller school classes or the increase in expensive drugs. It includes the replacement of outdated and substandard capital plant, something which desperately needs doing and which is to some extent being done, and above all the dead-weight of heavy administrative overheads arising from the strongly labour-intensive bias of the social services.
This accumulation of factors means that even with the existing policies, and without the improvements in the scope or standards of the social services, social service allocations might be expected to increase by of the order of 60 per cent. by 1975 over their level in 1965. It seems doubtful from the figures presented in the White Paper whether an increase even near this degree is being budgeted for. Such a lack of fundamental data which obscures this central question is surely one of the White Paper's most glaring omissions. There is virtually no analysis of social objectives. Taken at 1584 face value, the White Paper appears to regard it as self-evident that £9,228 million should be spent on social services in 1970–71 and that by 1975–76 the figure will be £10,800 million.
There is no real explanation why, with the relative price effects attributed, roads are to be given an average annual increase of 7.7 per cent. over the next quinquennium and law and order 7.1 per cent. while education will increase by only 4.5 per cent., personal social services and health by 5.1 per cent. and social security by only 1.5 per cent. Apart from assuming that the changes since publication of Cmnd. 4578 in January of this year reflect the changes in political bargaining power in the Cabinet, any other explanation of the ups and downs of expenditure seems conjectural because no clues are given. There is no attempt made in this White Paper as in all other White Papers—but particularly in this one, despite the improvements—to relate spending decisions to any social objectives such as certain income distribution targets, better integration of society, greater community participation or better access to amenities or welfare. To that extent any changes in allocation seem mysterious and arbitrary. Nor, might I add, since social expenditure is often regarded as unproductive, is any attempt made to spell out to what extent or in what time scale social expenditure might be expected to contribute to higher economic growth rather than to act as a drain on the economy.
Since at least certain blocks of social expenditure might be expected to, and undoubtedly do, yield economic returns in the form of higher rates of economic growth it is a great pity that at least some assessment has not been made to spell out the balance of return, economic and social. The major objections, however, is the lack of any attempt to evaluate the distributional effects of the expenditure allocations.
It is extraordinary that it should be proposed to spend an extra £1,600 million over the next five years on the social services without trying to establish which persons at which income levels are expected or intended to benefit. It is surely extraordinary that nowhere at present within the machinery of government is any sustained attempt made to 1585 clarify the incidence of all the Government's measures which have direct individual income effects.
Here again I echo the excellent speech of my hon. Friend the Member for Ash-field. Apart from the technical difficulties involved, which are not really insuperable, I can only believe that at least part of the reason is political, because if the exercise were done at present I believe it would show that, combining the fiscal and welfare measures of the past year, persons with incomes over £5,000 a year—that is, roughly 1½ per cent. of the employed population—have received of the order of magnitude of 25 times the monetary gains of those with incomes under £1,000 a year, who represent roughly 40 per cent. of the employed population.
Embarrassing though such revelations might be, that is no reason for this neglect. I still believe that by far the greatest omission is the failure to relate social service expenditure to any model of priorities of need. Obviously what is required is a network of comparative data about available resources for individuals on a family, neighbourhood, regional and class basis by which social allocations could be awarded to provide best value according to certain stated objectives.
§ Mr. John Nott (St. Ives)
Surely the hon. Gentleman is not suggesting that if he were responsible for running the country he would put in a document of this sort all the information he is requiring and thereby restrict his activities and his room for manoeuvre five years ahead?
§ Mr. Meacher
It is precisely to bring the public into what the Government are doing, to make the exercise a real one as opposed to the charade it is, that I would wish to do this. Some attempt is made to do it at present. The Government's social survey has certainly done some of the groundwork to prepare this kind of pattern in certain areas, but entirely unsystematically and without the gearing of a social plan. I believe that only a fully-fledged Department of Social Planning perhaps incorporating the Central Statistical Office and within an enlarged Ministry of Social Welfare, could devise a proper allocation of resources.
1586 Contrary to what the hon. Member has said, if this or some similar system is implemented, or until such cost-benefit analysis as may well be going on behind the scenes is made public and Ministers have the courage of their convictions and make their planned objective clear, in spite of all the superficial improvements in the White Paper it must remain a charade concealing the reality.
§ 7.15 p.m.
§ Mr. Cecil Parkinson (Enfield, West)
I listened with great interest to the hon. Members for Oldham, West (Mr. Meacher) and Ashfield (Mr. Marquand). They made a point which has been made repeatedly, namely that so much more ought to be included in this White Paper, and that the Government should in every area apparently outline their objectives, their methods, and report to us on the results. One is left with the impression that if this White Paper included all the things for which we all ask we would meet once a year to debate the White Paper, we would know exactly what the Government were trying to do, what they had achieved and what they hoped to do. Yet throughout the year, day after day, we have our chance to ask Ministers, and in the course of debates, to question them and to find out their objectives.
§ Mr. Marquand
Surely what the hon. Member has said is based on a very naïve view of the effectiveness of parliamentary Questions. Many of us have tried to find out by means of parliamentary Questions, information which is actually contained in this White Paper but have been told that it was impossible to provide it. When the Expenditure Committee, armed with all its resources and expert assistance, forces the Treasury to come along and give evidence it turns out that the objections formerly held to be insuperable against the giving of this information do not hold water and, lo and behold, here is the information in the White Paper.
§ Mr. Parkinson
I would agree with the hon. Gentleman that this is an improvement on previous years, that we are getting more information, but it is not our only chance to get such information. The object of Parliament, if it has an object, and we all believe that it has, is for us to come here, question 1587 Ministers and debate with the Government about their priorities, aims and objectives. I do not wholly disagree with the hon. Gentleman. I know his unbounded admiration for the hon. and learned Member for Lincoln (Mr. Taverne), but we cannot expect everything of this Committee nor can we expect everything in this White Paper, and we must not undermine the rest of the workings of Parliament by demanding that the Government should outline the whole of their programme in the White Paper.
Listening to the right hon. Member for Manchester, Cheetham (Mr. Harold Lever) making a very amusing speech—I am earning a reputation as a humourist in my constituency by repeating his 20-year-old jokes—I felt he made two points which were unworthy of him. First he said we must use the social services in a contra-cyclical way, we must turn Government expenditure on roads, hospitals, on the infrastructure, we must pay out more in pensions and social benefits. My right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) asked what happened when the cycle began to go the other way. Would there be cuts? The right hon. Member said that that would not be the case—there were plenty of areas of fat for the Government to cut. He was a member of the Government that spent a lot of time trying to cut expenditure. Our Government came into power and did a wholesale review of expenditure. He owes us a little more than to say simply that there is plenty of fat. He has made a pretty unreasonable and unfair suggestion in that it raises the hopes of people who will not be able to be helped in that way.
He came up with another unrealistic suggestion about the regional bank which would have a capital of £1,000 million and would make interest-free loans to people in the development areas. The idea must sound attractive in many ways, and I am sure it would get a good headline in Manchester tonight, but it is not particularly relevant at the moment because the problem is not a shortage of cash. As he said earlier, it is a shortage of confidence.
1588 I do not see what the creation of a bank which is prepared to lend cheap money would do to improve the confidence which he said was the crucial factor. It could have the opposite effect. This was illustrated recently by the financial director of a large international company who said that what worried him when he heard of immense incentive being offered to firms to go to a development area was that it almost blighted an area to be singled out too much. People ask themselves whether this is because the area is wholly unacceptable. I do not think the right hon. Gentleman's two suggestions, the extension of social service payments and the £1,000 million regional bank, were offered any more seriously than much of the rest of his speech.
I have listened to the whole of this debate and I have heard two excellent speeches from the Chairman and Vice-Chairman of the Expenditure Committee. I listened with admiration but with a growing unease. One could not help but admire their determination to discharge their duties, their enthusiasm for the job, and their objectives of getting at the guts of the Government five-year strategy in key areas of bringing in an important democratic innovation, of producing a major change towards democratic control, all of which are wholly welcome.
I listened to the Chairman of the Committee who explained that his object was to reinforce the ability of hon. Members to play a part in the formulation of policy. The Chairman and the Vice-Chairman were rightly proud of the achievement of the Committee in putting forward suggestions which have resulted in a tremendous improvement in this year's White Paper. It is much more meaningful and much easier to read, in spite of its amusing inconsistencies, and it enables one to go some way towards getting at the guts of the Government's five-year strategy.
Some hon. Members were thrown into confusion, by the exchange between the Chief Secretary and the hon. Member for West Lothian (Mr. Dalyell) and poor Mr. Wynne Godley must be wondering whether all that research was really worth while. If the projections a few years on are on the basis of current decisions, and if inevitably in the succeeding years 1589 there will be major changes, as there were this year, many of the long-term projections of Mr. Godley and much of the hard work which went into producing them become almost worthless. Perhaps we should content ourselves by talking more about the immediate years ahead and not putting too much stress on the longer-term implications of the projections.
The Chairman and the Vice-Chairman stressed the importance of their work and their determination to proceed with it. When hon. Members learn of the progress the Government have made towards implementing the recommendations in the Plowden Report, when they hear of the determination to put these recommendations into effect and to create a parliamentary machine to vet and survey the new Government approach to expenditure, they might wonder why I feel uneasy about the speeches to which I have referred.
My unease came initially from a remark made by the Chairman about the inevitably rather amateur approach of the Committee and about the need for staff. I was left with the distinct impression that he was beginning to feel that the Committee had bitten off more than it could chew. How can a small Committee of this House, meeting once or twice a week, vet the work of the Government backed by the Civil Service? The answer is simply that it cannot. If the Committee thinks it can, it will be misleading itself and creating for itself future disillusion.
There is a danger in the Committee even trying to do this. If the Members of the Committee feel the need to become so specialist, they will divorce themselves from the rest of us and it will be only a matter of time before there is a demand for another Select Committee to keep an eye on the existing Select Committee and to interpret what it is saying to the rank and file Members—
§ Mr. Edmund Dell (Birkenhead)
I so much agree with what the hon. Member for Enfield, West (Mr. Parkinson) is saying; in fact I said it yesterday. Is he aware how worrying the situation is? The Financial Secretary said yesterday that the Treasury has abandoned the detailed scrutiny of public expenditure. If 1590 we do not have a Select Committee on Expenditure doing the job, and we do not have the Treasury doing the job, where then are we?
§ Mr. Parkinson
I do not think that the right hon. Gentleman is quite repeating what my hon. Friend said, the Financial Secretary said:The Treasury's primary task is to exercise financial control over the entirety, and it is doing this with increasing success … With the best will in the world the Treasury cannot turn the spotlight on particular parts of the machine with the intensity that a proper scrutiny demands."—[OFFICIAL REPORT, 8th December, 1971; Vol. 827, c. 1432.]That is quite different from saying that the Treasury has abandoned the attempt to supervise and control Government expenditure. The Treasury accepts that it cannot do it in the great detail that it feels might be necessary.
Having complimented the hon. and learned Member for Lincoln, and having said what an important Committee I think it is, the hon. and learned Member must wonder, in view of my backhanded compliments, whether I believe there is a rôle for the Committee. I think there is, and it is this. First, to press for the improvement in the White Paper. I agree with hon. Members who have said that we must have access to information about resources and receipts and the Government's assessment of economic change if we are to make any sense of the White Paper. The Government admitted yesterday that the costings for future estimates are based on today's decisions. Surely we can have estimates of future receipts also based on today's decision, and hedged around by the assumption that there will he changes arising from Government policy and future decisions. That is an important rôle for the Committee—to continue to suggest improvements to the White Paper.
Secondly, there is a most important rôle which the Committee really can play. In the last 15 years the accountancy profession has totally recast its ideas about auditing. From some of the results which have been emerging which have subsequently been proved wrong, it may be felt that we have not done enough in that direction, but that is another story. The emphasis is on taking a small selection of a company's activities on a random 1591 basis and getting down to the quality of the decision, why it was taken, when it was taken, how it was carried out and going straight to the heart of a smaller range of activities.
The Expenditure Committee, on a part-time basis and properly backed up, can do this, and from this type of examination can produce information on whether the Government are carrying through the programmes which Parliament has authorised. The Committee is in danger of making the mistake of trying to mark the Government on the whole range of expenditure, and this simply is not within its capacity. I hope that the Committee will concentrate its activities not on the candle ends but on a random series of selective activities and go into them in immense detail. From this we shall get a worthwhile clue to how the Government are implementing the programmes which we have authorised.
I quoted earlier the remarks by my hon. Friend the Financial Secretary yesterday. I was going to end my remarks on that note. The Treasury in supervising and controlling Government expenditure is not geared to spotlight or highlight certain features of Government expenditure, and would welcome help in this direction. From that type of case-study approach the Committee could do a very important job, and certainly a much better and more relevant job than the one which at the moment I am afraid it has set itself.
§ 7.30 p.m.
§ Mr. Eric Deakins (Walthamstow, West)
It is a pleasure to follow the speech of the hon. Member for Enfield, West (Mr. Parkinson) since he sought to give some advice on procedure to the Expenditure Committee, of which I happen to be a member. I am sure all of us who are on the Committee are grateful for any help and advice we can get from the 580-odd members who do not serve on the Committee. We have before us a large task and have only just begun to scratch the surface of what needs doing.
The hon. Gentleman mentioned case studies. He should be aware that individual Sub-Committees of the Expenditure Committee have already begun a number of case studies on particular parts of Government expenditure in 1592 depth. Although it may take a decade or more before we have covered all the major items of expenditure in a Department, this is the only long-term, rational basis on which the Committee should proceed.
I agree with the hon. Member for Ludlow (Mr. More) that this is a poorly attended debate. Those of us who are members of the Expenditure Committee could have benefited from comments, informed and otherwise, of those who are not members of it because we are feeling our way very slowly. The reason may be that there is only a two-line Whip. I am told—and I do not know how reliable my information is—that the Amendment which has been tabled by my right hon. and hon. Friends is not even to be put to the vote. It is a crying shame to have the troops marching up to the barricades to the sound of gunfire and then marching away again. I hope that in future public expenditure debates, if the Opposition, of whatever complexion, choose to table an Amendment, they will support it on an important issue such as this.
The fact is that we spend very little time debating how the Government spend the money they raise in taxation. In my view, Parliament spends far too long discussing how to raise money and far too little time in considering how it is spent. This may explain why there is always a big attendance for debates on taxation and a poor attendance for debates on expenditure. If and when we go into the Common Market, with the increasing harmonisation of indirect—and later direct—taxation and in the decades ahead with the removal of control of taxation from Parliament in Westminster either to an elected Parliament in Strasbourg or to officials in Brussels, hon. Members who now absent themselves from expenditure debates will have even less reason to attend the House of Commons. If they do not attend debates on expenditure, they will have little opportunity of attending meaningful debates on taxation in this Chamber.
This is all rather sad. It is an example of Parkinson's law: our salaries go up at a time when there seems to be less and less work for Members of Parliament to do, at least in this Chamber.
The Expenditure Committee has made a slow start but, under the leadership 1593 of its Chairman and the Chairmen of the Sub-Committees, it has at least made a sound start on the task of probing Government expenditure. It cannot be put at more than probing at the moment but it is a vital part of our job.
In a debate such as this, those of us who are members of the Expenditure Committee are rather confused as to what we are supposed to be talking about. There have been two or three reports by the Expenditure Committee during the past year and I wish to allude to one particular report. I wonder, however, whether that is the intention of this debate. I know that we are supposed to be debating the White Paper but, judging from the knock-about political speeches we had from the two Front Bench speakers earlier this afternoon, I wondered whether we were not having another general economic affairs debate, of which we have so many in this House to such little effect throughout the year.
I should like to take up some of the suggestions which have been put forward on how to tackle public expenditure debates in this Chamber. I would go further than those who suggest that we should have two types of debate. I think we need three, and I hope I may be permitted to outline them. First, we need to debate each year the work and recommendations of the Expenditure Committee, without reference to the White Paper. Secondly, we need a debate on the White Paper itself, after the Expenditure Committee has given its detailed consideration to the annual White Paper, followed perhaps by Treasury comments. That debate on the White Paper would in my view be concerned with the broad principles of allocation of Government resources between different Departments and with the overall level of Government spending in the five years ahead.
There is also need for a third type of debate, namely, discussion of individual Departments. This type of debate, which need perhaps be only a one-day affair, would concern itself with the departmental priorities within a given level of expenditure for the Department in question. The reason why this debate today is so confused is that we are trying to do all three things in a two-day debate, and not very successfully.
I should like to turn to the report of the Education and Arts Sub-Committee, 1594 on which I had the honour to serve as a member. I should like to deal with the concern felt by some of us about the relationship between central and local government in framing estimates. This came out strongly in the evidence given to the Committee by the local authorities. The local authorities were a little concerned that the P.E.S.C. figures were produced without direct reference to the local authority associations. The associations said in their memorandum that they wereunaware of basic assumptions which have been made in arriving at the figures".This is a little regrettable because surely local and central Government should be partners—albeit with the Government as senior partner—in the control of expenditure. It does not make for good administration if local authorities and their associations are to be left in the dark or confused.
The local authorities said that they were particularly concerned about the projections for years four and five and said that these weresetting the pattern for some kind of rigid structure within which our future estimates will be considered.There was also a feeling among the local authority associations that the Department of Education and Science would be committed to the White Paper figures in the subsequent support grant negotiations and that the Department would be negotiating with one hand tied behind its back. This may or may not be the case. In fact, we had Treasury representatives and representatives from the Department of Environment saying that they were doing their best to allay some of the local authorities' anxieties.
What emerged from the Sub-Committee's report was that a misunderstanding exists among local authorities as to the purpose of the Government White Paper and there was a great deal of concern about whether they were missing out on something by not being brought in.
I should like to quote a question which was asked by the hon. Member for Clapham (Mr. William Shelton) when we heard evidence from the local authorities on 17th May this year. The hon. Member asked, at Question 599:am I right in understanding that whereas in the past there was no consultation, in the 1595 future there will be?—(A) We have no guarantee yet. All we have is an assurance that there was a general desire to associate the local authorities' associations more closely with the development of public expenditure policy and that ways and means of doing this would be examined. The desire is there but no practical arrangements have been made.I think that all of us, including the Government, are feeling our way. I do not make this point as a criticism. I am pointing out that here is a matter which needs putting right in the future and that we must have regard to the feelings of local authorities on it.
The second point on the relationship between central Government and local government on the P.E.S.C. exercise concerns the rate support grant increase orders that we get in November to take account of inflation and wage and salary increases after the rate support grant negotiations. When those orders came out in November last year they caused a great deal of extra work both at the Treasury and at the Department of Education and Science in adjusting previously prepared figures for the start of the P.E.S.C. exercise in January this year. If in future we are to have the rate support grant increase orders in November and the publication of the White Paper also in November, is not there likely to be a danger either of the White Paper not including the rate support grant increase orders or, alternatively, the White Paper having to be held up while account is taken of the new figures which have to be inserted for local authority expenditure as a result of the rate support grant increase orders?
My third point on the relationship between central Government and local government is that there seems to be a dilemma for local authorities about management techniques, and they are very much looking to the central Government for guidance. We are all aware that one of the main tasks of the Expenditure Committee must be to ensure that in each Department of the central Government there are effective management techniques for controlling the vast volume of Government expenditure. It follows from that that there should also be effective means of controlling expenditure at local authority level and that the management techniques now being developed, albeit 1596 rather slowly, should be made known to local authorities as soon as possible.
In the course of our evidence we were told by the Association of Municipal Corporations:We have not learned yet how to use management techniques at the broad local authority level.That is a confession of ignorance. At the same time one cannot criticise it, because it is only recently that P.A.R. and P.P.B. techniques have started to be developed in central Government. One would like to see them more widespread, and perhaps this will happen in time. But necessarily it affects relationships between local authorities and the central Government. The sooner the central Government can control expenditure properly, the sooner local authorities will be able to do likewise.
I turn to the specific points about education which emerge from the Second Report. Education is the second largest spending Department in the Government We are investing money at the rate of about £3,000 million a year. It is an investment and not just expenditure. We are investing in human beings. Our major concern in the Sub-Committee on Education is to see that we are getting value for money. Unlike the situation in most other Departments, this is extremely difficult. One is dealing with expenditure which involves human beings. It is difficult to work out cost-effective analyses, and so on.
There are three points I wish to make. The first is that trying to get value for money means that one has to ask whether the money is being spent in the right way and whether the money could have been better spent in another way to give a better and higher rate of return on the investment.
In education we are like babes in arms. We have to feel our way very slowly. We realise that education is a tricky political issue. When one starts talking about value for money in terms of output of graduates, teachers, people from sixth forms and people leaving school at 16, one is treading on delicate ground.
The tendency to insist on value for money in checking on all Government expenditure must affect education whether we like it or not. The difficulty is that the tools do not exist yet whereby 1597 we can say what is value for money in education. One can use measures like the intermediate output, the number of graduates that we produce and so on. But one does not know whether producing more technically qualified graduates is better than producing graduates of a different kind. One does not know whether it is more desirable to expand higher education than, say, nursery education or primary school education. We do not know the answers.
The second point on value for money is how we assess it. I have mentioned planning programmes and budgeting, which the Department of Education and Science is looking at closely. But it will be some years before the Education Sub-Committee will be able to say that not only has the D.E.S. got a measure of both intermediate and long-term educational output but that it is one on which there is wholehearted agreement both in this Chamber and outside. As I say, when we deal with human beings we are dealing with a problem which is not necessarily susceptible of quantification.
My third and final point on education expenditure is that it is a tragedy that we spend only £2½ million a year on research and development in education. That is less than one-tenth of 1 per cent. of the education budget. If a firm with a turnover of £3,000 million a year was spending that very small amount on research and development, it would deserve to go under. We should be thinking in terms of 2, 3 or even 4 per cent., especially with the pace of education change and technological advances in matters like new teaching methods.
We have to concern ourselves not only with the priorities between spending on one item and spending on another. We have to look at the long term, and that means developing effective methods of assessing value for money, ensuring that the money we spend justifies itself and that the future money that we spend in five or 10 years' time is justified on the basis of an effective and comprehensive research and development programme now.
§ 7.47 p.m.
§ Mr. Tom King (Bridgwater)
It is a pleasure to be called immediately after the hon. Member for Walthamstow, West (Mr. Deakins), not least because he was good enough to issue an invitation to 1598 those who do not serve on the Committee to participate in this debate. Since I am not a member of the Committee and since I approach the debate with some trepidation, since a mystique seems to surround the debate, I do really feel I need an invitation from a member of the Committee to take part in it.
A weird and secret society seems to have been formed. As my hon. Friend the Member for Enfield, West (Mr. Parkinson) pointed out, we have been all for disclosure and more accountability to Parliament. We have now formed a new body to whom the disclosure has to be made privately and not widely to the whole of Parliament. The secret society seems to have practices which are all its own and which are not normally appreciated and understood by the ordinary run of humble Members of Parliament.
I am pleased that the hon. Gentleman drew attention to one very strange convention. I refer to the extraordinary practice of putting down a ferociously critical Amendment which must require positive action on the part of the Opposition and then, suddenly, in the most timid way, deciding not to press it to a Division. Unfortunately, I missed the very opening sentence in the speech of the right hon. Member for Manchester, Cheetham (Mr. Harold Lever). But I have taken the liberty of checking on it. I appreciate that in his usual felicitous way he glided over it by saying that it expressed an attitude of mind rather than any positive intention to vote must plead ignorance; it is obviously part of my apprenticeship to learn about this sort of situation.
However, in examining the Amendment tabled by hon. Gentlemen opposite I find it inconceivable, if the terms of the Amendment represent what they really believe, that they will not force a vote. Or is this another example of an Opposition of words but not of action? We are left to draw our own conclusion why hon. Gentlemen opposite are not taking the matter further.
§ Mr. Harold Lever
I thought I made it clear, though only in a sentence, that we tabled the Amendment not for the purpose of forcing a vote, which would seem to us to be inappropriate on a Government Motion to take note of a White Paper to which many of my hon. 1599 Friends are in principle not unsympathetic. The purpose of tabling the Amendment was to make possible and to encourage a somewhat wider-ranging debate of areas on which we have already voted in the clearest possible manner in condemnation of the Government.
§ Mr. King
I expected a facile and equable answer from the right hon. Gentleman and I must accept what he says. There was a foul rumour in the Lobby that, because hon. Gentlemen opposite had been unable to keep their supporters here, it was decided last night that a vote would not take place today. As I say, we must accept the right hon. Gentleman's explanation.
The right hon. Gentleman was unfortunately temporarily away from the Chamber and therefore did not hear the criticism from his hon. Friends for lowering the level of the debate to a narrow party political battle, instead of considering the wider philosophical implications that an opportunity of taking note allows. I have no doubt, however, that this point was also fully discussed before the Opposition adopted their attitude in the matter.
The hon. Member for Walthamstow, West cited Professor Parkinson. The other weird aspect of the secret society that I encounter is the fact that the Chairman of the Committee, my neighbour, my right hon. Friend the Member for Taunton (Mr. du Cann), described the White Paper as the most important State document of the year. As I survey the Chamber, I suggest that we are encountering not the Parkinson's law to which the hon. Member for Walthamstow, West referred, Law No. 1, but the Parkinson's law of diminishing interest—that as the size of the subject increases, the interest of the audience diminishes.
If this is the most important State document of the year, then, considering the extraordinarily large sums that are involved, Parkinson would no doubt be able to demonstrate how it is necessary to have, for the purpose of discussing such a document, the smallest parliamentary audience of the year, and that we seem to have today.
I welcome the White Paper, though I have some real reservations about it. For example, my hon. Friend the Member for Ludlow (Mr. More) said rather cynically 1600 that nobody reads the document and that that is at any rate one safeguard. Several suggestions have been made about the way in which one should read the document, one being that one should not take it too seriously, certainly not in relation to the years beyond 1972–73.
I am pleased that my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) is in his place because I was impressed by the force of his arguments about many of the dangers that lie in this document. We are told that the first two and a half pages are a hymn to flexibility and that there are in the White Paper all the caveats and cautions about the way in which it should be read. The hon. Member for Walthamstow, West pointed out that local authorities do not understand this. They believe that this is, in fact, the programme for the next five years. There must, therefore, be an element of commitment in this, and this is extremely dangerous.
I underline what my right hon. Friend the Member for Wolverhampton, South-West said so eloquently on this issue. It was a privilege to hear him utter in such an expert manner the sort of remarks that I would have made if he had not made them. Or perhaps I should say, to put it another way, that it was gratifying to note how he grasped opportunities that I would have missed.
I recall in particular the points he made about the political element that there must be in the White Paper, the fact that no Government could put out a document of this kind which lacks political presentation and that, from the growth rate point of view, it is inevitable that the Government will tend to overestimate the resources that will be available because of their desire to present what seems to be a politically acceptable growth rate. This same effect occurs in certain elements of expenditure. It is natural for the Government of the day to want each expenditure item to look as attractive as possible, particularly in desirable areas such as education, health and pensions, and when that happens one is bound to start to build up commitments.
On a cynical note, it would be interesting if we could get an utterly objective minority report from the Treasury. 1601 Perhaps we could appoint one gentleman who would be given total immunity to put forward a projection of what he thought would actually happen, totally devoid of political presentation.
My hon. Friend the Member for Ludlow suggested that the White Paper should have a preface on the front page. While I do not think I could accept my hon. Friend's political slogan, I can accept the thought behind it. The slogan on this White Paper might be "Handle with Care. Only for qualified personnel." I say that because while the first two and a half pages may not be read and understood, the White Paper is widely accepted as being a forecast of what will happen.
It was made clear by my right hon. Friend last night that this is not an attempt to reflect future policy decisions. It is clear that the Cabinet will not take four years' holiday in the coming period. There will, obviously, be changes in the situation. We know, therefore, that what we have now will not be the situation in years to come because there are bound to be many significant changes.
I wish briefly, as a total hostage to fortune, to make a few suggestions about where I think the main deviations will occur and when we come, as some of us will, though not in the same proportions, in four or five years' time to debate the situation as it then is, we can compare it with what is predicted in this White Paper. These are not necessarily my choices but represent an honest assessment of where I think particularly significant variations will occur.
The first is in overseas aid. I find it inconceivable that within five years—recognising the problems that there are in the world today and the growing consciousness of the need to do something about the situation—this 1 per cent., limited target which is reflected as a major target, will any longer be acceptable. I would expect that by general consent we would be moving towards a much larger contribution.
Second, in agriculture, we have seen enormous deviations from forecasts in the last two years. My right hon. Friend found himself unexpectedly well off last year, but this year he faces a totally different situation.
1602 If one looks under the trade headings one sees items that will be phased out. Is it sustainable that there will not be any new items that will be started? With a growth, perhaps for political reasons, of European co-operation, will we say, "No more help; no more research, no more aid for new projects in this time"? Is this the run down or will there be European scale projects which we are prepared to support? There is nothing in the White Paper about this.
Under the section on redundancy costs, in this particular area I have had all too much personal experience of dealing with payments under the redundancy scheme. We may see an advance in this scheme in the years ahead. I was sorry that the right hon. Member for Cheetham took a slightly simplistic view of the unemployment situation and the problem which faces us. I am very concerned that this may prove a much more deep-seated and basic problem, and we may have to accept that the basic transition, or the time lag between losing a job, perhaps for reasons of redundancy, and finding another one, may be greater. This may produce a need for a rather drastic reappraisal of the scales on which the redundancy scheme are based. As many hon. Members know, in many industries the redundancy schemes do not bear much resemblance to the present basic State scheme. I think that there will be a major move to upgrade them across the board.
Dealing further with the basic structural problem—if this proves to be the case, on the unemployment side—we shall need some much more imaginative measures for pensions related to early retirement. The impact of that on my right hon. Friend's figures could be colossal, if we have to start making much more adequate provision for early retirement and possibly for a much more adequate pension level in toto.
We have this projection, which is now surrounded by all the caveats and explanations. At the same time, it commits far too far ahead and it seems to be accepted by far too many people—local authorities, other Departments and other interests—as being the projection for expenditure.
We have a tiny item, which seems so ludicrous as to be hardly worth including, in the contingency items for five years 1603 ahead, when it is admitted that the whole thing is open to the widest possible variations, suddenly, out of some accountancy fetish, we have included contingency items as though they would be the little balancing items that would regulate the whole thing. What we need is not contingency items but, if this projection is to be meaningful, an increasingly massive strategic reserve of resources which can be deployed as the new requirements develop.
With those more general thoughts, and with apologies for intruding on this very private scene but having appreciated the opportunity and, I hope, reflected one aspect of the way in which hon. Members who are not members of the Committee can participate, I welcome my right hon. Friend's White Paper. I recognise its improvement. I am not churlish about the efforts made on this matter. I recognise the need for better information, but I recognise also the very serious dangers in presenting information in this way.
§ 8.4 p.m.
§ Mr. John Roper (Farnworth)
Like the hon. Member for Bridgwater (Mr. Tom King), I am somewhat reluctant to enter into the debate, but for opposite reasons. As a member of the Expenditure Committee, I shall have other opportunities elsewhere to discuss the material contained in the report. The bulk of the time of this two-day debate should be taken up by hon. Members such as the hon. Gentleman, who are not members of the Expenditure Committee and will not have the opportunities that we have of examining the White Paper and the other documents in greater detail.
The hon. Gentleman's remarks have been very stimulating. I hope to refer to some of them. First, I resist his suggestion that we are a secret society—although the Treasury sometimes gives that impression in the way in which it draws up White Papers. I make one reference to that. In the report of the General Sub-Committee we provided a glossary of some of the terms used in the White Paper. We believe that this has been of value to hon. Members. But I was sorry to see that in this year's White Paper the methodological appendix which appeared last year, and which explained some of the terms, such as "relative 1604 price effect" and others, which are somewhat strange to people coming upon them for the first time, has disappeared; people refer to the previous year's White Paper. The White Paper should be complete in itself, with a glossary, so that someone coming upon it for the first time can find a way around it more easily. Otherwise we are open to accusations, as the hon. Member for Bridgwater said, of being something of a secret society.
Like my hon. Friend the Member for Walthamstow, West (Mr. Deakins), I am unhappy that we shall be unable to divide the House tonight. I thought that my right hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) was very agile in his defence of the reason for not pressing this matter to a division. I know how good he is in "take note" debates. I remember his remarkable contribution in a "take note" debate earlier this year on another subject, where he took note in all sorts of directions. But, more seriously, we have not yet found the proper way to organise this debate to get the interest among our colleagues that the subject should have.
The hon. Member for Enfield, West (Mr. Parkinson) said something very important when he referred to our amateur approach. I believe that the members of the Expenditure Committee must remain amateurs. If they start to become professionals, they will be a secret society quite unable to communicate with anyone elsewhere in the House. We must see our job as one of trying to communicate some of the things that we have discovered to the rest of the House, to ensure that disturbing patterns in expenditure are spotted and discussed.
A few days ago, in a different context I was looking at the report of the Haldane Committee in 1919, 50-odd years ago. That Committee recommended not only that there should be a variety of estimates committees looking at different departmental estimates but also an Officer of the House to be an examiner of estimates, to fulfil a similar function to the Comptroller and Auditor-General for the Public Accounts Committee, to go through estimates or, as we now have it, the expenditure White Paper, to examine and try to find out the disturbing trends to bring these to the attention of 1605 the Committee so that the Committee could report to the House.
As the right hon. Member for Taunton (Mr. du Cann) said yesterday, it will be important for the Expenditure Committee to build up an adequate and satisfactory staff so that it can do this monitoring operation on the expenditure projections and can discover when things are going in directions which perhaps have not been noticed, and bring this to the attention of the whole House.
There are great difficulties in this debate. Much in the White Paper is inevitably technical and does not lay itself out for a normal debate. Either the debate becomes too wide and diffuse or it becomes too narrow and particular—ven down to the degree of S.T.D. exchanges in one hon. Member's constituency.
My hon. Friend the Member for Stockton-on-Tees (Mr. William Rodgers) referred earlier to the desirability, perhaps, that the general sub-committee of the Expenditure Committee should have a quick look at the White Paper and report to the House before the debate. That would be a useful innovation, and one which I hope we shall be able to take up next year.
I want to comment on two innovations in the White Paper and then discuss two serious omissions. First, we have this year a number of figures for estimating changes between the previous year's Estimates and this year's. It seems—this was pointed out by Mr. Godley in The Times yesterday—that the phrase "estimating change" could mean one of a number of things, and more information would be useful.
It could mean a demographic or a meteorological change—the sort of thing to which the hon. Member for Bridgwater was referring when he spoke of changes in agricultural expenditure and in the road programme. In a good year, more roadworks can be undertaken. It may be a demographic change in the fourth or fifth year in the need for schools, hospitals and even housing, or there may have been technological improvement in doing a particular piece of work or doing it with fewer resources, or it could be a straight error. It would be useful to know which category is being referred to.
1606 The other innovation is the one mentioned by the Financial Secretary yesterday when he discussed the figures at volume and cost which now appear in the report. I am not sure whether these are innovations or merely new names for something which was in the report last year. As for figures at cost, the use of the word cost "may be ambiguous. Presumably the concept is similar to the economist's idea of opportunity costs—the share of the nation's resources which are being taken.
§ Mr. Patrick Jenkin
The difference between a measurement of percentage increase in cost and a percentage increase in volume is that the cost figures take into account the relative price effect. It is in no sense an opportunity cost. It is an attempt to measure the growth in the cost of the public expenditure programmes, because the relative price effect has to be applied in order to achieve the result which will actually be the turnout.
§ Mr. Roper
I thank the hon. Gentleman for that explanation. My suggestion was that, once one applies the relative price effect to the volume figures, one gets an idea of the total resources needed in the years to come. This approaches the concept of opportunity costs—the share of the nation's resources which are forgone and cannot be used for other things but we could pursue that matter in Committee or elsewhere.
Several hon. Members have asked why we have a White Paper. The P.E.S.C. exercise is clearly useful for the Treasury and has been going on for many years, long before we had it presented to us as a White Paper. It relates to the control of expenditure, but apart from the fact that we can see the relative magnitude of different programmes, I am not sure how far the White Paper itself helps us to allocate priorities. On occasions like last year, when there is a change of Government, the changes which we see in the figures show the relative priorities of the outgoing and incoming Administrations, but within the lifetime of any Administration I am not sure that the figures which we get each year give us much information about priorities.
I do not agree with my hon. Friends who believe that one can trade off one programme against another. We have 1607 not really got the necessary cost-benefit studies to know what is happening if one gives up a mile of motorway to double the expenditure on the family income supplement. One cannot evaluate the outputs of those two alternative expenditures.
The great difficulty about the White Paper is the gaps which remain. The Financial Secretary knows, because this was raised last year, that many of us feel unhappy about the lack of information on resources. If one wants to expand the family allowances or the road programme, it is not particularly sensible to say that one has to give up so much school building. One must also consider the effect of raising taxation, so one needs projections of revenue in a White Paper to have useful discussions about future patterns of public expenditure.
The other inadequacy of the White Paper is that it does not cover all the expenditure satisfactorily. Some of the evidence that the general Sub-Committee had before it from Mr. Brittan and Mr. Jay in their memorandum referred to a tax expenditure budget. If the hon. Member for Kensington, South (Sir B. Rhys Williams) had been here, he would have spoken on this topic, I am sure: I know that it is very near to his heart.
Still excluded from the White Paper are many forms of tax allowances and reliefs which have been introduced for social or economic purposes, and their value is effectively a form of Government expenditure. An obvious example is investment grants and investment allowances, different ways of doing what may or may not be the same thing—but one counts as expenditure and the other does not.
A more sophisticated example, considered in passing by the Sub-Committee, was the question of the tax allowance on mortgage interest. It would be a misuse of the English language to call it a subsidy, but we considered whether that allowance, which did not appear as expenditure but would if we had a tax expenditure budget, should be considered in the same way as payments to building societies to cover the reduced rates of interest charged to those people who take out a mortgage under the mortgage option scheme.
1608 The payments made to building societies, which have exactly the same economic effect as the tax allowance to taxpayers who have mortgages, rate as expenditure. Again, it shows the need for a tax expenditure budget to get a picture of the way in which Government expenditure and allowances affect the operation of the economy.
On a more recent and topical matter, if the Motions to be taken on Monday week on Members' remuneration and other matters are carried and include proposals for expenses allowances this would be treated as an increase in public expenditure. But there will probably be reductions in the tax allowances claimed by hon. Members, which would be shown only if we had a tax expenditure budget.
These three examples show the need not only to consider expenditure as it has been traditionally considered but to have a rather wider picture, which would come from a tax expenditure budget, showing the ways in which we encourage certain economic and social policies by means of tax allowances and incentives.
All we have at the moment is the volume of public expenditure. The Minister of State could not answer a question by his hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) about the share of public expenditure in the gross national product, whether or not it is rising or falling. Unless we have much more satisfactory figures of the expected growth of gross national product, we are not even able to ask the important questions. Admittedly, there are some figures for what the Minister of State refers to as "potential productive potential" and these are far more satisfactory.
I realise that problems might be created for the statisticians in the Treasury and for the Central Statistical Office on the question of tax expenditure because the form of presentation in the past has been tied to the theology, as it were, of the National Income and Expenditure Blue Book, and it is probably heretical to say that we should move away from the Blue Book practice in the ways I have described. I gather that the Chief Statistician's hair has already turned white at the reclassification of national income and expenditure included on the final page of the White Paper. If that is enough to turn a chief statistician's hair white, perhaps what I might suggest would be too 1609 much for the Treasury to adopt in the coming year.
But I am not convinced that the traditional categories of the Blue Book are the best way of looking at this expenditure on the so-called public sector industry. I hope that the Treasury, which has responded well in this first year to the suggestions of the General Sub-Committee of the Expenditure Committee, will look at the question of a tax expenditure budget and perhaps next year we will have a fuller picture.
§ 8.21 p.m.
§ Mr. David Mitchell (Basingstoke)
A number of hon. Members have suggested that the timing of the debate is unfortunate and that they would prefer it to have taken place in a couple of months' time. I take a contrary view. I think that this is the right time to have it. I am particularly glad that it has been held at a sufficiently early stage in the Government's financial thinking about the next Budget to allow—who knows—Treasury Ministers in framing the Budget perhaps to take note of some of the suggestions made in the debate.
I listened with considerable interest, as I always do, to the right hon. Member for Manchester, Cheetham (Mr. Harold Lever). I was fascinated by his suggestion that he is opposed to counter-cyclical public expenditure on capital account. He mentioned that there was no means of controlling the cyclical nature of private sector expenditure. He suggested that the Government should not balance out the rise and fall of private expenditure by controlling Government expenditure. I hope I have not misconstrued him.
§ Mr. Mitchell
The right hon. Gentleman said that capital public expenditure should not be used in that way. I hope the Opposition would recognise that this would mean running the economy at a lower tempo and at a lower growth rate than would otherwise be able to be achieved because, if one has a steady level of Government capital expenditure, one has to have in hand a certain flexibility 1610 to take up inevitable movements in the private sector capital expenditure. I do not think that that was what the right hon. Gentleman intended to urge upon his colleagues, especially in discussing an Amendment dealing with unemployment, but it would be an inevitable consequence of following what he suggested. I will come back to that in connection with what I regard as the causes of our present problems.
I was delighted that the right hon. Gentleman said that the Government could use opportunities such as the present one to boost expenditure in certain other directions. The Government have done so, and very substantially, through, for example, the largest pension increase ever and through the family income supplement, thus breaking new ground in a sector in which the expenditure will not go into savings, which the right hon. Gentleman mentioned as uncontrollable, but inevitably, because of the type of person into whose hands it is put, will be spent immediately. Again, the invalidity and disablement benefits and other measures have done exactly the sort of thing which the right hon. Gentleman, with his perception, called for.
We are invited today not only to debate the Report and the proposed expenditure of the Government but also the Opposition Amendment which specifically refers to unemployment. Unemployment is a sensitive subject, certainly to me and my colleagues on this side of the House. There are now ensconced on the Opposition benches the right hon. Member for Manchester, Cheetham and the hon. Member for Walthamstow, West (Mr. Deakins). I am delighted that the hon. Gentleman is present and I listened to what he said with great interest. But the fact that there are only two of them sitting opposite speaks volumes—empty volumes—for the interest of hon. Members opposite.
I want to turn to an analysis of the causes of the present unemployment as I see it, because the Amendment refers to unemployment. It is clear that since 1968 there has been an increase in investment expenditure in industry which has led to an increase in the underlying productive capacity of about 3 per cent. per annum. If one secures a growth in productive potential without actual increases 1611 in production—the situation which has occurred since 1968—one sees a fairly long-term trend. I have taken the increase in the growth of industrial production as a percentage over the previous year since this seems to me the best way of making a comparison with the growth in the underlying productive capacity.
The figures are very illuminating. In 1968 the growth of industrial production as a percentage over the year 1967 was 5.2. In 1969 over 1968, it was 2.6 per cent. In 1970 over 1969, is was 1 per cent. In 1971 over 1970, it looks as though is will be 1.5 per cent. Faced with that situation it is perhaps wise of so many hon. Members on the Opposition side to have absented themselves from the debate on their unemployment Amendment and perhaps they will not press it to a Division. It is clear that the fall-back in production and the widening gap between productive potential and take-up started in 1968 and continued at an increasing rate until the present Government came to office, and there is now the beginning of a reversal of that trend.
It follows that we have a long way to go before we catch up with the increase in underlying productive potential and that, therefore, the Government can go a long way before they get to the point at which they will impose a total demand on labour sufficient to reduce the unemployment figures to a substantial extent. I say "total demand" because there are important factors within the demand. I want to come back to them.
That seems to be one of the key background causes of the present situation, but there are others to which one ought to draw attention. From 1964 to 1970 wage levels rose by 7.6 per cent. per year but the index of mechanical engineering prices went up by only 4.2 per cent. per year. What has been happening is that relative to the cost of machinery the cost of labour has been growing at a faster rate, with the result that over the last six or seven years there has been a shift of balance of advantage in favour of mechanisation. The rising cost of labour to that of mechanisation has tilted the scales against labour and in favour of mechanisation.
1612 That may or may not have been part of the intentions of the previous Government. It is in line with the philosophy of wanting greater productivity and greater mechanisation, but one of the consequences of that is that when it has been allied to a greater increase in labour costs it has, in many cases, meant that it has been worthwhile making the change to mechanisation which it was not worth making when the balance between those two indices was different.
Third, there is the well-known problem of the hoarding of labour. For many years firms hoarded labour because they took the view that if they sacked some of their employees, when demand picked up again, either seasonally or due to an improvement in the economy generally, they would not be able to get those men back. But once the unemployment figure went over the 500,000 mark, as it did in July, 1969—and that had nothing to do with the present Administration—it no longer made sense for anybody in the boardroom to say that the firm must not dismiss labour that it did not really want but must hoard it, because when there are over half a million people unemployed labour can be obtained quite easily. There has been a structural flushing-out of hoarded labour and that is partly responsible for the present situation.
I want now to say a few words about what I see as the answer, so far as it lies within the power of the Government to provide it, and it must be accepted that the power to provide the answer does not lie entirely in the Government's hand. Part lies in the terms of economic and financial policy, in terms of today's expenditure debate and in terms of specific, shorter-term remedies.
I listened carefully to what was said by my hon. Friend the Minister of State this afternoon when he opened the debate on behalf of the Government. We are faced with a situation in which there is a need for demand-led growth. I avoid using the word "reflation" so as to escape the charge of stoking up the fires of inflation. I believe that demand-led growth, given time, would go a long way towards bringing down the present high levels of unemployment.
We were told this afternoon of £164 million being spent on infrastructure in 1613 development areas, about housing improvement grants amounting to £53 million, about a capital programme and accelerated programmes for roads, and so on, amounting to £163 million and about a shipbuilding programme. All that is excellent because it will help to stoke up demand, but the second leg of all this is extremely important, and that is that we must see to it that the increased demand is satisfied by British firms in this country.
To ensure that, it is very important that we look at how unemployment arises and whether we are doing enough to create future jobs, because I do not think it is static. It is not a case of company X paying off so many workers and then, when demand picks up, taking on so many workers. There is something much more structurally changing and alive occurring in our economy.
There are old industries which have been and are dying all the time. The railways and the mines are contracting and so are other industries. In the past the contraction of old industries has not caused widespread unemployment because that has been matched by new firms and new industries starting. As they start they take up the unemployed who come off the other jobs. It seems to me, however, that at the moment we have not got that growth of new industry and small industry that we ought to have to take up the slack which is developing on the other side. No matter what the Government do in terms of demand, they will not really make a dramatic change in the rundown of the mining industry or other dying industries; and propping up a dying industry is a very short-term way of dealing with the problem anyway. I ask myself, therefore, what can the Government do to try to help the small businesses that will be the big businesses in the future?
§ Mr. Deakins
The hon. Gentleman is dealing with a very important point when he talks of the changing pattern of unemployment and demand. Is he aware that the position is even more serious than he has suggested in that whereas previously workers who were laid off retained their skills while unemployed and were taken on in the next phase of boom, the position today is rather different? Skilled workers 1614 are being made redundant and many are deciding to move into less onerous occupations where skills are no longer any use—into the service industries for example—so that their skills are completely lost to the economy. When the economy picks up again we may well find ourself suffering a shortage of skilled labour.
§ Mr. Mitchell
I find myself in partial agreement with the hon. Gentleman and I shall come to that presently. It seems to me that the Bolton Report shows very clearly that it is the small business of today that is the growth potential for employment in the early future. Page 29, for example, shows how so many of the large companies of today have grown from small companies. Therefore, I want to make three suggestions about encouraging small businesses.
First, let us look at the position of the small manufacturing company which pays S.E.T. to the Government and gets it back again so that it is for six months stood out of quite a substantial amount of its working capital. I suggest to the Government that they should repay that very much more quickly, if not virtually instantaneously, because in this way capital is locked up at a time when the Prime Minister, the Government and everybody in a responsible position are appealing to industrialists to go ahead early and make their investment in order to be able to satisfy the expected increase in demand in the future. Here is a practical step towards helping to do that.
Secondly, I do not believe we have yet come to the end of the road in reducing corporation tax. Profit is, after all, the driving force of industry, the mainspring on which it runs, and we ought to do still more to encourage it. Thirdly, I come to capital gains tax, particularly in relation to the smaller business, because, as it now stands on the Statute Book with no offset for inflation, it is a major disincentive to people starting up in business. One of the motivations which makes people start a business is that they will work it up and then pass it on to a son to give him a better start than they themselves had. How many times among medium and larger-size businesses does one find this pattern? Somebody starts in a workshop in a back street. It grows, it is passed on to a son and it goes on. A great many of our numerous unquoted 1615 companies have been built up on that basis and have provided a very large amount of employment.
A person in that kind of position will surely say "Is it worth it? When the time comes for me to pass it on to my son, I must pay out 30 per cent. of the increased value of my business in cash". He has not got it in cash. It is in the business working capital. If the underlying asset is in a farming business, for instance, it will increase in value; the land rises in value but there is not the amount of cash in the business necessary to pay the capital gains tax unless part of the farm is sold.
Thirdly, there is a real reduction in the amount of capital available for business if, every time the business changes hands, capital is taken out of it. It is wrong to assume that every business is sold because the proprietor wants to retire to the South of France or wherever it may be. Many businesses are sold so that the proprietors can make different careers. There is no point in a man selling one business and starting another, however, if he must pay 30 per cent. on his increased capital and, therefore, start his new business on a smaller scale.
All these elements in the capital gains tax add up to yet another barrier to starting business. People say to themselves "Heads the Exchequer wins, tails I lose. Why should I bother?" It is because it is essential that there should be much greater and much more vigorous growth of new businesses and small businesses turning into large businesses that the Government should pay more attention to this question in their fight to bring down the level of unemployment.
I had intended to talk about other matters relating to unemployment but other hon. Members wish to speak. I hope to have an opportunity in future to to reply to some of the points made by the hon. Member for Farnworth (Mr. Roper). There is much that we ourselves can do in our employment policies and by means of the Department of Employment to help to secure fuller employment in the coming months and years.
§ 8.43 p.m.
§ Mr. John Nott (St. Ives)
As I wish to make a very brief speech, I hope that my hon. Friend the Member for Basingstoke 1616 (Mr. David Mitchell) will forgive me if I do not refer to his remarks.
I want to refer to the function of the specialist Committee. It may seem a little disloyal of me as a Member who served on the Expenditure Committee to ask at this stage of our debate whether it has all been worth while. Unlike my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell), I do not wish to question the White Paper itself. Unlike him, I have no history of anti-Plowdenism, but I can believe that, had I had my right hon. Friend's experience, I might possibly feel as he does on that exercise.
I have now had a little experience of a specialist Committee over one year. I confess that I started as a sceptic of the whole exercise, but I attempted to keep a fairly open mind.
If I may say this without any disloyalty to my hon. Friends, the hon. Member for Farnworth (Mr. Roper) was the member of that Committee of whom I would say more than of any other, with the Chairman, that he had the time and the application and did his homework and thus was able to perform a most valuable rôle. My doubts about specialist Committees, particularly an Expenditure Committee, are now reinforced. My preliminary conclusion, although I am still a serving member of the Public Expenditure Committee, is that the whole exercise may be retrograde and may lead to very little extra parliamentary control of the Executive, but at the same time it does lead to the expenditure of an inordinate amount of everybody's time.
Last night I took the opportunity of looking back on the minority comments of the Fourth Select Committee on Procedure in 1964, and in particular the view of the hon. Member for Ebbw Vale (Mr. Michael Foot), for whose opinions on the subject of specialist committees I have always had a sneaking respect. He said then that he thought that a proliferation of parliamentary committees to examine Government work in progress might impede rather than aid the basic political functions of Parliament.
Views must differ as to what the function of Parliament is, but most of us were not sent here to pose as experts. If we had wished to be experts, we would have 1617 chosen a much better job, or at any rate a much more profitable one. I believe that we are sent here to perform the function of politicians, which is to assert our own personal views on how, in the broadest terms, we wish our society to develop and how it might use its influence in the wider world. In doing so, we should also represent in our various ways the basic prejudices, emotions and wishes of the British people. If we wished to influence the ongoing Administration of the country and monitor continually the executive rôle of Government, we would have striven to reach the commanding heights of the Administration by seeking a career in the Civil Service.
I do not criticise the speech of the hon. Member for Ashton-under-Lyne (Mr. Sheldon) yesterday, but I think that he wants to run the country from this House. He said:We need to question civil servants again and again so as to force them to justify their actions to us."—[OFFICIAL REPORT, 8th December, 1971; Vol. 827, c. 1350.]Although his wish to get the legislature, the House of Commons, more involved in the executive rôle may have certain arguments to commend it, it is neither, in my view, practical nor desirable from the point of view of the House.
§ Mr. Joel Barnett (Heywood and Royton)
The hon. Gentleman is perhaps doing my hon. Friend an injustice. My hon. Friend's point was that the Sub-Committees should be doing the task of seeking the information from the Civil Service, and the House itself would, as I myself said, have a separate debate to discuss the broad issue of the priorities.
§ Mr. Nott
I am not seeking to criticise the hon. Gentleman, but merely to underline that I do not share his point of view. There is very little time left for debate, and I want to give my hon. Friends a few minutes to speak, so I hope that the hon. Gentleman will forgive me if I do not take up that matter.
The prize of politicians is political power and influence—the ability to do their thing. Their rôle is not to act as administrators and allow their powers to be emasculated by the Executive by the scrutiny of endless figures. The whole exercise of the Expenditure Committee may be an exercise in nibbling away at the edges of executive power.
1618 I did want to refer to the evidence of Sir Laurence Heisby to the Select Committee on Procedure, when he made the very valuable point that, after all, the Civil Service has a job to do. If it was ever to come about—and again I refer to the remarks of the hon. Member for Ashtonunder-Lyne—that Parliament should attempt to parallel the procedures performed in Whitehall, I would suggest that the Civil Service and the Treasury would hardly have much time at all other than to appear before Select Committees and Specialist Committees of the House of Commons.
What of ministerial responsibility? I think that in some of our questioning we unwittingly began to undermine the theory of ministerial responsibility. We were examining the civil servants who appeared before our Committee as to why, for instance, we had no receipts side in the White Paper. This was a policy decision of the Government.
Our Specialist Committees could have an advantage for ministers. They could strengthen ministers in their struggle against any inertia and obstruction on the part of their officials, but it is not, I would suggest, the job of this House to make the job of ministers easier.
I quote again from the remarks by the hon. Gentleman the Member for Ebbw Vale in the minority report on the Select Committee on Procedure when he said:More committees upstairs are likely to nurture the miserable deception that more and more issues can profitably be taken out of politics.I wonder whether anyone could keep an Expenditure Committee of the House of Commons out of politics. By its very nature it is at the centre of the debate between the parties of the House. I conclude by echoing the views of the hon. Gentleman the member for Enfield, West (Mr. Parkinson) who made a most admirable speech. He had doubts about the whole exercise of the Expenditure Committee and they were the doubts of his predecessor in that constituency over many years. Mr. Iain Macleod was converted by what was the fashion when I became a member of the House in 1966, that somehow the House of Commons must get more involved in the examination of the executive processes of Government. This debate today may see the turn of fashion back to where it was 1619 for many generations—great scepticism on the part of the House of Commons about the rôle of Specialist Committees and whether this is what we should be doing.
§ 8.54 p.m.
§ Mr. Kenneth Clarke (Rushcliffe)
In my short speech I would not have the temerity to follow my hon. Friend the Member for St. Ives (Mr. Nott) into the criticism of the Committee on which he worked. Criticisms of the working of that rather monastic body come best from members of the Committee and not from outside.
§ Mr. Clarke
To be brief as regards the White Paper, I am in the same position as one of my hon. Friends who spoke earlier. I think that I welcome the White Paper or, at least, what I think are the purposes in producing it year by year.
One of the difficulties under which we labour is that Parliament and its Members are to a slight extent only involved in the formulation and consideration of policy. The very nature of parliamentary procedure means that the results of formulations are presented to Parliament either for approval or for rejection. The policies already having been decided, they are put to the House for the vote, exposed to pressures and modifications during their parliamentary passage, but the initiation of policy is something with which Members are rarely concerned.
The White Paper is an attempt to present to the House the choice of priorities being made by the Government and it is in choosing those priorities, looking forward over a considerable period, that the formulation of policy comes about. Having said that and dealt in a compressed way with the whole procedure of producing White Papers on expenditure estimates, I doubt how much further the White Paper takes us in its present form.
In the choice of priorities, the first choice a Government has to make is on the total level of public expenditure and the amount which we are to take out of the nation's productive potential—to use this year's description of it—by way of 1620 public spending. The White Paper makes clear that at present we are seeing a restoration of those cuts in public expenditure which the Government were making a few months ago, at considerable political cost to themselves. Restoration of the level of public expenditure is coming about in response to short-term economic needs. It is entirely right to do this and to increase public expenditure and investment when private investment is lagging so badly in the recession from which we are now suffering.
The overall level of public expenditure will always be subject to short-term pressures of this kind and I share to a great extent the doubts expressed so clearly by my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) about the future figures in the White Paper. Those figures will be just as responsive to short-term pressures on the Government of the day. To the extent that the figures try to indicate that the Government are keeping to their good intentions of trying to reduce the overall level of public expenditure in the economy, I welcome them. To the extent that they are a serious and precise estimate of the level of public expenditure in five years' time, I take them with a pinch of salt and beg leave to doubt their accuracy.
The second set of priorities is between particular services where one sees where the Government's main efforts have been made. I welcome the information given by my hon. Friend the Chief Secretary in opening the debate that one thing which emerges clearly from the White Paper is that taking the average annual increase in real terms, the educational programme is rising at about 4½ per cent. per annum while the health and social services are going up by over 5 per cent. One of the things that an examination of the programmes as a whole shows is where the Government's real changes in priorities have been. It shows how easy it is, by, for instance, taking an individual issue such as the school milk cut and making a great deal of it, to distort the Government's real priorities, which have been entirely beneficial in education, health and social security.
The other important thing, however, is what choice of priorities is being made by the Government within each field, for instance, education, health and social 1621 security. This debate comes at a time when it is almost impossible to make judgments of that type because the Select Committee has not yet considered the White Paper. What we are given in the individual sections on education, health and social security are fairly Delphic and obscure utterances that do not help very much until they are exposed to much greater scrutiny. Dealing with education the White Paper forecasts of expenditure show an anticipated heavy shift of capital expenditure and current expenditure to higher education, particularly universities. This is only to be expected. What is not clear is on what basis that shift will be made or what policy decisions are being assumed in producing these figures.
At the top of page 50 in paragraph 5 the most extraordinary sentence occurs:The higher education forecasts reflect planning assumptions based on the size of age-groups, levels of attainment and policy considerations.Nowhere is one told what the planning assumptions or the policy considerations are. The vital policy consideration that will determine the level of expenditure on higher education is whether or not the Government are committed to providing places in higher education upon demand for all those who attain the necessary qualifications. Whether that assumption has been made is nowhere indicated and the figures are described in such general terms in the text that they give no insight into the way the Department is going.
There is no room in these figures for any new commitments which the Government might undertake. The hon. Member for Walthamstow, West (Mr. Deakins) referred to nursery education. To make a choice of priorities, one does not simply want these figures; one wants to know what would be the impact of a decision which might or might not be taken in two or three years' time to embark on an expanded programme of nursery education on these estimates for spending in the other fields of education.
I agree with my right hon. Friend the Member for Wolverhampton, South-West that one danger is that the production of these figures might give a built-in advantage to existing commitments. If, for instance, one believed that nursery education was at the moment of higher priority than a commitment to Robbinstype 1622 higher education, a Government would be loth to agree because they would already have committed themselves to these estimates to higher education. In education, where the forecasts are already very high and expensive, it would be difficult for new commitments to get in.
I have those reservations on the White Paper, but any information which the House can have which enables it to debate the choice of priorities, which is the whole backbone of politics, is only to be welcomed. Having listened to right hon. and hon. Members who have taken part in the proceedings of the Select Committee, I feel that the House has a long way to go before it has this material at its disposal.
§ 9.2 p.m.
§ Mr. Douglas Houghton (Sowerby)
I apologise for having been absent from the debate for one-and-a-half hours this evening, but we had an unusually long meeting of the Parliamentary Labour Party.
Had the proceedings of the House of Commons been televised, I wonder what the viewers would have made of the last two days. They would probably have blamed hon. Members for not being here, but the criticism could perhaps more properly be directed to the way in which we deal with this complex business. A discussion on public expenditure is either highly political or extremely professional, and it is difficult to know into which category this debate falls.
We have been chided by hon. Gentlemen on the Government side, and disappointment has been expressed behind me, because we have failed to press our Amendment to a Division. I make no bones about it. The explanation is that last night we had to revise our judgment about the nature of the debate. It has not been a political debate but a discussion between practitioners, craftsmen, accountants, quantity surveyors, forecasters. It was described to me as being like a gathering of bridge enthusiasts. It has been a debate between those who have become more or less accomplished in the art of financial prediction, a highly sophisticated financial edition of Old Moore's Almanac. A layman coming into the Chamber might listen for 1623 a while and then leave the Chamber saying, "This is not for me; I have a pressing engagement in my constituency." So the Whips on both sides decided, I think wisely, that it would be unreasonable to ask hon. Members to stay if, for reasons we all understand, they were unable to take part in the debate and had more pressing things to do.
§ Mr. Barber
I can assure the right hon. Gentleman that Conservative Members are here in force and will be delighted to vote against the Amendment.
§ Mr. Houghton
The right hon. Gentleman, the Chancellor, should not deceive himself. I have just been round the House to see who is here and the right hon. Gentleman could not muster his forces at present.
The idea was that we should put down a nice firm Amendment to the Government Motion, that I should wind up with a robust, political speech, rollocking the party opposite and exciting the enthusiasm of my right hon. and hon. Friends, and that then we would go into the Division Lobby in good heart. Well, it has not turned out like that. But I warn right hon. and hon. Gentlemen that I shall make exactly the same speech I should have made if the Chamber had been crowded. But it will be on a lower key because I must not excite the emotions of the empty Conservative benches on this theme of public expenditure.
One thing to be noted with pleasure in this debate is that we have heard the end of much of the nonsense we used to hear about public expenditure being bad, but private expenditure being good. We now realise that in a highly complex and modern society, with social and industrial activities as complicated and as intricate as never before, there is a rising demand for State regulation and State action. So public expenditure must rise; I think we all agree about that. It may not necessarily rise in proportion to total national resources, but rise it certainly will.
I give one example of a new area of State activity in public expenditure, namely that in connection with pollution. In past years we have poured our sewerage into the rivers and seas and have 1624 allowed smoke from industrial chimneys to rise into the air; we have seen the devastation of land and the pest of litter and all the rest of it. And we have given little attention to the remedies for this growing menace to the public good. There was a time when Governments, for some reason, left smoke abatement and control and control of litter to the process of private Members' Bills—as if those matters could be equated with abortion and divorce. Governments were not willing to embark on Government legislation to control matters which are now regarded as an essential part of pollution control.
To listen to right hon. and hon. Members opposite, especially those on the Treasury Bench, on the subject of public expenditure, one would never think that behind them has been some of the most disgraceful propaganda on public expenditure in recent years. They have indulged in so much deception. One envisaged them in bowler hats, with umbrellas and dispatch cases, walking down Whitehall, respectable gentlemen—yet they are the front men for a most dangerous propaganda machine.
What I have in mind to do in this debate is to establish beyond peradventure the fact that this Government inherited from the Labour Government a budgetary surplus on revenue account of £2,000 million for the financial year 1969–70. This was the gift of a Labour Government to the Tories. Labour's good housekeeping did two things. It got Britain out of the red on our overseas trading account. We built up a large surplus on our balance of payments, and we did it at the cost of considerable austerity, devaluation, unemployment and political unpopularity.
We betowed that inheritance upon the present Government. When this Government came to office, Britain was in a strong position at home and abroad. The Tories had never had it so good. They were absolutely in clover. They had a huge trading and financial surplus handed to them on a plate. Within three months, they were bringing out the most disgraceful political claptrap under the guise of a White Paper entitled "New Policies for Public Expenditure" which were really the old Tory policies in a new form.
1625 They pretended that reductions in public expenditure were a necessary condition of reductions in taxation and that reductions in taxation were a necessary condition of economic recovery. We were led to believe that tax cuts would provide incentives to business, industrial and individual effort. The fable went further. The overdue modernisation of many old primary schools was said to depend on raising money from higher charges for school meals and the withdrawal of some free milk in schools to pay for the additional expenditure. That was all set out in the White Paper. It was all nonsense.
They tried to show that by saving £20 million in 1971–72 on school meals and £38 million by 1974–75, the money could be found for a primary school building programme of £28 million this coming year. To reduce taxation, it was said that savings of £88 million could be achieved by 1974–75 on welfare milk, prescription charges, dental charges, ophthalmic charges and charges to go into galleries and museums. There was a nice selection of humanitarian savings if ever there was one, and all in the interest of reductions in personal and company tax. The poorer people got cuts in welfare services while the better off gots cuts in income and other taxes.
The naked truth is that none of the cuts in welfare services was necessary to enable any of the cuts to be made in taxation. It was all rubbish that the Government put across in their White Paper. All the tax reductions would have been possible, and more than possible, without putting up school meals by a penny.
What is more, all the money saved by these welfare cuts has been spent on other things since. The Financial Secretary said yesterday that the money for these things had been spent on other things. But, if one could chase money round and see exactly where it finished up, one would know more truthfully whether that was so.
I am sure that all right hon. and hon. Members read the Business Section of The Times. An article on 26th November bore the heading,The great turnabout on State spending.Not everything that the Jay family does meets with my approval—[Laughter]— 1626 but one must acknowledge the great skill of Peter Jay. In that article, he wrote:Mr. Barber has now restored the whole of the cuts in public expenditure which he announced with so much political trumpetry a year ago. This is the most simple and dramatic message to emerge from yesterday's Public Expenditure White Paper.
§ Mr. Houghton
Very well.The political irony will not be lost on those who have been heavily engaged, for and against, in public debate over the past 12 months about such issues as school meal charges, free school milk, museum charges, and fair 'rents for council housing.I will read on yet further:For better or worse it was all for nothing so far as making room for reductions in taxation and increased incentives to hard work and entrepreneurship are concerned. The Chancellor could have made all his tax cuts for the purpose of reflating the economy without a single cut in Government spending.Have I read enough for hon. Gentlemen opposite?
The Financial Secretary has said—he said it yesterday—that the Government have taken money out in one place and have put it back in other places. It is equally true to say that the money they took out by way of higher charges for schools meals, medicines and so on, they gave away in cuts in personal taxation, mostly to the better-off, as well as in company taxation, by halving S.E.T. without reducing prices and by not equating cuts with increases in other expenditure, or at any rate by doing so only to a very small extent indeed. After all, these were to have been net cuts in public expenditure.
We have been reminded in the debate that the Government have reduced taxation by £1,400 million in a full year. This has been put to us like some sort of Tory magic—like a master stroke by Ali Baba. It was, in fact, done out of their inheritance—[Interruption.]—and had the Labour Party been returned to power, and had not this false propaganda temporarily dulled the political sense of many people in this country, Labour would also have reduced taxation, and much else.
§ Mr. Barber
I beg the right hon. Gentleman, if he really believes what he is saying, to vote for the Opposition Amendment.
§ Mr. Houghton
I am in a much better position to say what another Labour Government would have done than is the right hon. Gentleman. [Interruption.] Whatever else we may or may not have done, we would not have got our priorities so wickedly wrong as to snatch the milk from the very mouths of the children simply to reduce taxation. This is where the essential difference lies between the political philosophy of hon. Gentlemen opposite and ourselves. And where have all their policies got us?
This grievous problem of the baffling rise in unemployment, which is now loosening the purse strings of the Government, has resulted in a sort of mini public spending spree. But there is no doubt that on both sides of the House we are confronted with the perplexing problem of the structure of industry and the shakeout of a good deal of labour, which is now becoming unemployed at a time when production is rising, although slowly, and when wages, salaries and prices are all rising. This is undoubtedly a perplexing situation in many respects and my right hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) at least had a prescription, whereas hon. Gentlemen opposite have none.
I am sure that when hon. Gentlemen opposite go home at night they hide their grief and cry along into the night, "Oh, John Meynard Keynes, where are you now that we need you so much?" They literally do not know what to do, with rising unemployment alongside rising production and higher wages. Who would have thought it possible a couple of years ago that we should have had severe inflation and 1 million unemployed at the same time?
There is a possibility that we are begining to observe a new pattern in the structure of employment in this country. We may now be seeing two groups of workers, the first comprised of those in production—those in manufacturing exports; the wealth-creating sector—where the skill and maximum mechanisation and automation may be found. That is where the big money may be. Another 1628 section of workers may be the wealth spending sector—the work in the services and all that is needed to make for civilised living, such as roads, houses and amenities, and the brightening up of the countryside and of the towns; the devotion of wealth to making Britain not only a healthy country but also a beautiful, desirable and civilised country.
We may see that management may be interchangeable between the two sectors of activity. But it may be that the workers in the production sector, as the hon. Member for Bridgwater (Mr. Tom King) hinted, may find it necessary to have an earlier age of retirement or to move into the services sector for a few years before they finally retire.
It will be in the services sector, any, way, that the bulk of public expenditure will be required. That is where it will have to expand. We have unemployed at present, but we can all go about the country and see an enormous amount of work which needs to be done to make Britain a better place in which to live. A new initiative is needed, and the new local authorities will be agencies for a good deal of it.
In a question which I asked the Leader of the House this afternoon, I referred to the fact that yesterday the Prime Minister made an announcement at the meeting of the National Council of Social Service about more money for voluntary community services. This is very desirable. With the right hon. Member for Orkney and Shetland (Mr. Grimond) and the right hon. and learned Gentleman the present Mr. Speaker, I was a trustee of the Young Volunteer Force Foundation created by the previous Government. I was Chairman, and were were trustees for three years. Here is an example of the opportunities which young people can have for community service.
We do not yet know what to do with our young children since we stopped sending them to war in their teens. Since we ceased to conscript them for military service we have been puzzled to know how to live with young people and meet their desires and their needs for fresh thinking and opportunity in our society. If we can provide scope for voluntary service which will channel into useful work and contact with society many who may drift off to less desirable pursuits and 1629 become inward-looking and selfish, we shall achieve a great deal towards this better society that we all have in mind. I hope sincerely that something will be done in that direction.
Let us consider for a moment how we regard education as the birthright of all children. We must provide the maximum educational opportunity for all young people and endeavour to give them the best so that they may realise their potential. There is no cost-benefit analysis there. Education is justified for its own sake. But the moment that they leave school we cease to be interested in them. The State says, "Find a job if you can, and if you cannot, register at the local employment exchange; and if you have not paid your contributions as a student you will get no unemployment benefit." So there is scope for public expenditure. We can all think of directions in which we could do it, but we have to do by education what other countries less desirable than ours do by indoctrination and coercion.
Public expenditure has not been the curse it has been made out to be, because it is the only way of buying civilisation, the only way of giving aid to other countries. Yesterday my right hon. Friend the Member for East Ham, North (Mr. Prentice) lifted the level of the debate from a statistical and accountancy analysis of the controls of public expenditure into the policies for which more public expenditure is needed.
In many respects, the aims of society obviously cannot be realised by private effort and expenditure. This can be done only by the expression of a collective will and by collective action. Public expenditure is, on the whole, the benefactor of the people, and we should not despise it or run it down. We should elevate it among the calls on individual resources to equate with people's own desires for a better life for themselves. Let the Tories therefore stop humbugging the people about public expenditure and appealing to baser instincts, selfishness and self-seeking for political ends.
§ 9.26 p.m.
§ The Chief Secretary to the Treasury (Mr. Maurice Macmillan)
Until the right hon. Member for Sowerby (Mr. Houghton) started, I felt that the tone of the debate was critical, not particularly 1630 of the Government, the House or the Select Committee but rather of our procedures generally. It was almost like a parochial church council debating a revised prayer book, which is received with general approval but with some doubts as to some of the contents. But the right hon. Gentleman succeeded in changing the tone. I see exactly why he decided that it was not worth voting. He also decided that it was not worth debating public expenditure, let alone the White Paper. In one part of his speech, when he was attacking my right hon. Friends, I thought that he had mislaid his notes and had found instead those which he had prepared for the debate on public expenditure in November last year.
In making his attack, the right hon. Gentleman quoted The Times. I would merely quote back at him, in defending my right hon. Friends against his charge of having the wrong priorities, that the New Society, not a paper notable for its enthusiasm about Tory policies, writing not about a few weeks ago but about the White Paper and our present public expenditure plan, said that the programme showed that we were for once thinking intelligently about social priorities.
The improvements made in the White Paper have been welcomed by most hon. Members. Some wanted more clarification, more detail and more analysis, notably the hon. and learned Member for Lincoln (Mr. Taverne). The hon. Member for Heywood and Royton (Mr. Joel Barnett), on the other hand, felt that he had got lost in a maze of technicalities and that there should be a rather more general exposition.
The right hon. Member for Birkenhead (Mr. Dell) suggested that we had brought forward the timing of this debate for political reasons. It was nothing of the sort. This two-day debate was always due to take place in the autumn, as a result of a promise to the Select Committee on Procedure by my right hon. Friend the Leader of the House. It was a firm commitment. I know that my right hon. Friend the Member for Taunton (Mr. du Cann) would have preferred to have had it done differently.
There has been some disagreement about the nature of this debate. The right hon. Member for East Ham, North (Mr. Prentice) felt that the speeches and 1631 discussions were getting too narrow and too detailed and did not deal sufficiently with the general policies. The hon. Member for Willesden, West (Mr. Pavitt), on the other hand, complained that there was not enough detail about the National Health Service. My hon. and learned Friend the Member for Dover (Mr. Peter Rees) thought that there should be more on nationalisation. My hon. and gallant Friend the Member for Eye (Sir H. Harrison) thought that the White Paper did not answer enough of the questions on defence.
If there was disagreement on the nature of the debate itself, there was also uncertainty about the purpose underlying the debate. The hon. Member for Ashton-under-Lyne (Mr. Sheldon) felt that Parliament and the Select Committee on Expenditure should assume at least some of the responsibilities of the Government and be prepared to work under some of the constraints which are put upon the Government. This was refuted by a number of other hon. Members, notably the right hon. Member for Birkenhead, who warned the General Sub-Committee against the danger of becoming what might be called a "mini D.E.A.". I thought that that advice, coming from one with the right hon. Gentleman's experience, should be listened to by those concerned.
There was also a certain amount of disagreement about the nature of the public expenditure we are discussing and what its purpose and meaning are. Nearly every speaker in the debate agreed that the White Paper was the most important document in the parliamentary year. Nearly everyone who spoke said that the House should elevate the debate into one of the most important functions of the parliamentary year. Obviously, that view was not shared by the majority of our colleagues in the House.
It was even said that the debate was far too important to be opened by the Chief Secretary or even by the Chancellor of the Exchequer and that to fulfil its functions and its purpose it required the Prime Minister to open it. Yet in contrast and contradiction to this, speaker after speaker, including some who agreed that this should be a very important parliamentary occasion, pointed out that Treasury Ministers as 1632 such were not capable of answering many of the points raised because they dealt in too great detail with departmental matters the programmes of which are set out in the White Paper.
So we had the contradiction that on the one hand this was the great parliamentary occasion and on the other hand it was a detailed discussion of detailed programmes. I think that some hon. Members even regretted that it could not be mixed up with the general debate on the management of the economy from which, in some mysterious way, deductions could be made about a proper level of public expenditure.
I think that this confusion is partly due to uncertainty about the nature of the White Paper, the programmes it describes and the status of the figures in it, together with uncertainty about the rôle of the Select Committee and its Sub-Committees in relation to the whole House. The hon. Member for Waltham-stow, West (Mr. Deakins) suggested that the solution to this lay in dividing the process roughly into three, working upwards, as it were, from the programmes to the totality of public expenditure and then to a major debate on the rôle of expenditure in the economy. There was a great deal of disagreement about how we should handle this matter in future, but I much agreed with the hon. Member for Stockton-on-Tees (Mr. William Rodgers), who suggested that it might be cleared up by discussion with the Expenditure Committee in the course of the year.
The hon. Gentleman made an interesting point in passing. I did not agree with what he said about Concorde but I think he had a genuine point of principle when he talked about the method of handling public money invested in a concern such as that in the private sector with international implications and said that it ought to be looked into.
Of course public expenditure is important, and so is the White Paper, but I am not sure whether it is important in the sense in which that word has been used by hon. Members taking part in the debate. I am not sure whether the debate itself is important. Much of the detail which is raised in it, and much of the discussion which is started in it, could be better handled and examined through the work of the Sub-Committees. It is 1633 there, if anywhere, that it is possible to examine programmes, as many hon. Members want to do, on a kind of cost-benefit basis. It is there that the kind of problems raised by the hon. Member for West Lothian (Mr. Dalyell) could be discussed in greater detail.
There is doubt about the more general aspects of the White Paper. It does not convey any news. By definition, as a rule it has nothing new in it. It is the result, not the cause, of policy decisions, and the policies it describes are themselves continuing in time and, therefore, are not essentially new policies. The White Paper analyses and displays policies in terms of the expenditure required. It gives the House the basis for understanding and expressing views on it, but it has limitations and constraints, and neither the House itself nor the Expenditure Committee can ever take over the function of the Government to formulate policies and to answer for policies to Parliament, as my hon. Friend the Member for St. Ives (Mr. Nott) said so clearly.
I do not think that the Government must seek to limit the right of hon. Members to criticise policies or to urge new policies on them by imposing on hon. Members, through the Expenditure Committee, the same sort of constraints with which the Government themselves have to deal. It would be wrong, impracticable and unconstitutional if Parliament, in any shape, in the House or in a Select Committee, saw itself as a kind of second Government because, if it did, that would destroy the freedom of action of hon. Members to represent their constituents.
During the debate there was argument about why public expenditure was rising at an average rate of 3.2 per cent per year. I think that in some way the hon. Member for Heywood and Royton, who developed this argument, thought that it was possible to derive policies from forecasts, to make a kind of plan and to find a theoretical level at which public expenditure should be settled. I do not believe that it works like that at all. The hon. Gentleman asked, "Why stick at 3.2 per cent?" in terms which suggested that he had in mind some sort of plan. The lamentable failure of right hon. and hon. Gentlemen opposite when they tried that plan is sufficient warning against that approach, with its enormously 1634 rapid rise in public spending followed by equally savage cuts in programmes.
The reverse of the fear that we were not spending enough public money was expressed by my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) who thought that we were going much too far and were running too big a risk. He developed his argument in a speech which I thought was as forceful and as logical as its premise was false.
My right hon. Friend congratulated the Government on their past in order the better to castigate them for their present backsliding into the evil realms of overspending. He quoted the Chancellor's mini-Budget as having reduced public expenditure from 3.5 per cent. to 2.8 per cent. and the next White Paper limiting the average annual increase to 2.6 per cent., pointing out that it was below the rate of growth productive potential. He said that in October, 1970, and January, 1971, there was a transfer from the public to the private sector and scope for tax decreases; and so there was, and so there still is, but my right hon. Friend said that he regretted that November, 1971, was different in that the rise was too high and the average annual rise was greater. But comparing like with like, it is not.
Taking the figures he used as a basis, quoting October, 1970, and comparing it with January, 1971, the figures in the table at the top of page 12 of the White Paper are as follows. In the January, 1971, White Paper the rise from the years 1971–72 to 1974–75 was 2.9 per cent. In the present White Paper that rise is 2.8 per cent.; and extending it by one more year to 1975–76, it is 2.7 per cent. Therefore, the actual average annual rise in public expenditure is roughly the same in this White Paper, which my right hon. Friend the Member for Wolverhampton, South-West has execrated as being extravagant and profligate, as it was in the White Paper of January of this year which my right hon. Friend praised as being wise and prudent.
I believe that the new and more accurate method of presenting these figures shows an annual average rise of 3.2 per cent. But if that method were applied to the previous year it, too, would show a similar increase. One must apply like to like. The figure expressed in our 1635 new terms is 3.2 per cent. Expressed in the old terms it was 2.9 per cent. Therefore, my right hon. Friend's comparison is totally meaningless in comparing one with the other. He also complained that the programmes are rising faster than productive potential, and so some of them are—for health, personal social service and education—as they were in the last White Paper and in my right hon. Friend's White Paper in October, 1970. Those are the programmes which we always intended should rise. Those are the ones to which my hon. Friend the Minister of State referred in saying we had expanded public expenditure, spending where the need was greatest.
The increase which my right hon. Friend expected need not continue. He was rather doubtful whether it was possible to limit public expenditure. The switch we have made, bringing forward public spending to help with unemployment, and the new expenditure to help with unemployment in the early years will not, in its nature, be continued in the later years of the period because it is confined to programmes that are physically to be finished in the period concerned. Therefore, the dramatic downward trend in the percentage of the rise in public expenditure which my right hon. Friend found so incredible is a reflection of a change in programme and not merely in calculation.
The same sort of error underlies the anxiety of the hon. Member for West Lothian. He will forgive me if I deal with his point rather briefly and write to him later, if he so wishes. The hon. Gentleman was worried about Scottish education and said that there was a decrease between 1972–73 and 1973–74 of from £324 million to £316 million. It was in fact not a decrease, but an addition made as part of the Secretary of State's bringing forward £60 million of expenditure under the July additional works as described in paragraph 2 on page 62 of the White Paper. The amount for 1973–74 has not been cut. The amount for 1972–73 will be increased by over £20 million. If it were not for that increase, the figure would show a steady upwards progression over the quinquennium. That increase is not bringing forward expenditure from a later programme but is a total addition.
1636 The point made by the hon. Gentleman about the nationalised industries is rather different. Scotland is heavily dependent on new electricity generating stations; and it is difficult, given their enormous size and expense pattern, to prevent fluctuations. It is not possible to phase that expenditure so that it can spread regularly over a given period. I accept that it makes it difficult for those supplying this industry, particularly as they do not have a very large number of other outlets, and that it complicates their planning and their investment programme.
I hope that the hon. Gentleman will accept that this is in some sense an inevitable part of the nature of that industry and is not easy to remedy. It is precisely for this reason that we brought forward the power station at Ince, not for its immediate effect on construction and other work in Cheshire but because of the confidence that it would give to heavy industry in the North-East, enabling firms not to lay off their design and other staff.
I therefore hope that the hon. Gentleman will accept that the later figures in the White Paper are bound to be somewhat vaguer than the earlier figures. This is true in any business or in any attempt to make forecasts on a rolling five-year basis. It is not possible to ensure that they have the same certainty as figures in the earlier period.
I do not go along with my right hon. Friend the Member for Wolverhampton, South-West in assuming that the figures have no meaning. That takes altogether too pessimistic a view although it accords with my right hon. Friend's general attitude that practically everything is vanity—the White Paper, the House, the Expenditure Committee, the Plowden Report and this debate. Sometimes I think that practically everything that we are trying to do is, in the words of the preacher and of my right hon. Friend, nothing but "vanity of vanities".
§ Mr. Dalyell
Then does it not become rather dangerous to publish this kind of figure at all—the Scottish public industries are only one example—at a time when so many members of the Chief Secretary's party are preaching the virtues of their having cut public expenditure? That is what misleads industry.
§ Mr. Macmillan
What the hon. Gentleman must make clear is that we are preaching the virtues of cutting unnecessary public expenditure. In all our White Papers and in all the debates we have made it clear that we are not cutting capital programmes. I made this point in last year's debate.
In great contrast to the cuts which the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) and other right hon. Members opposite were forced to make, we did not cut the capital programme. We made reductions and changes in priorities in public expenditure which enabled us to spend more on the necessities—hospitals, the old people, school building and all the many other things listed today by my hon. Friend the Minister of State and others.
It is not true that we felt it necessary to cut public expenditure as such. Part of the purpose of reducing unnecessary public expenditure is to make more available where it is most needed. This is a question of an investment programme. It is very difficult, given the problems of estimating the demand for electricity, to expect from the nationalised electricity industry a greater degree of accuracy than can be expected from any private concern. If the hon. Gentleman does not like the figures being published, he is really saying that we must leave them out. They are part of the complex which comes within the public sector as it is now presented. Unless the hon. Gentleman is suggesting that nationalised industries should be excluded, there is no way in which we can publish these figures except on the basis that the last two years of the quinquennium represent expenditures less certain than the earlier periods. Those who read and study the White Paper must accept the fact which we and the previous Government have stressed repeatedly that the figures become less certain as time goes on. This perhaps supports the argument of my right hon. Friend the Member for Wolverhampton, South-West and my hon. Friend the Member for St. Ives that we should go back to annual accounting, because that is the only way in which we can completely solve the problem of the uncertainty of figures in the later years.
The right hon. Member for Manchester, Cheetham (Mr. Harold Lever), in opening the debate, spoke, almost for 1638 the first time in the course of the technicalities, about people and the effect of policies on them. He did not speak very much about public expenditure or the Amendment, and I now understand why. I thought his account of stage 1 and stage 2 of the Labour Party's economic policies nearly as gross a distortion of history as the account by the right hon. Member for Sowerby of the Labour Party's policies. There has hardly been anything like it since the concerted attempt to make the Princes in the Tower appear to have been murdered by Richard III.
The Government of which both right hon. Members were members had an unprecedented record of doubling unemployment, of prices rising faster than ever and of public expenditure cuts which, as they themselves admitted at the time, were damaging to essential programmes, as ours were not—and all that with a massive increase in taxation. I do not wonder that with that record behind them they hesitated to press the Amendment to a Division.
It is most disingenuous for the right hon. Gentleman to give the reason he put forward that the debate had become so technical that it was not worth voting about. He knows perfectly well that it was by agreement that the first day was technical and the second day was meant to be political, stimulated by political attack of right hon. and hon. Members. It was the failure of those political attacks of right hon. and hon. Members, hon. Gentleman, to develop any bite that led obviously to the need to call off the Division—
§ Mr. Harold Lever
If the hon. Gentleman had subjected himself to the tedium of the whole of my speech he would know that what he has said was false and he would not have said it. The opening part of my speech, as he will see from HANSARD, before this battle in which we are alleged to have been defeated had even commenced, included a clear indication that we were not tabling the Amendment for the purpose of taking a vote.
§ Mr. Macmillan
I see the point of withdrawing about halfway through a battle, but starting by withdrawing seems even odder. I see that one or two hon. Gentlemen opposite also thought the same.
1639 The right hon. Gentleman mentioned the question of transfer payments in public expenditure as a method of dealing with cyclical movements. There are certain difficulties in using transfer payments for this purpose, particularly when consumer demand is already rising and more specific measures, some of which I must admit the right hon. Gentleman set out in an interesting speech, are required.
That difficulty does not apply to the suggestion made by the hon. Member for Oldham, West (Mr. Meacher) who suggested that we should make more use of public expenditure for redistributive effects. I am glad the hon. Member mentioned that because it is exactly what Conservative policies have been geared to achieve—more selective help through public expenditure to areas where the need is greatest, including such experiments as the Secretary of State for Social Services has set out.
A point which I must take up with the hon. Member was his argument that one item of public expenditure receives an increase whereas another does not. That argument highlights the fallacy in the way in which some hon. Members look at the White Paper. It seemed as if the hon. Gentleman believed that the level of policy was determined by a choice of how much a programme was to be increased in terms of cash when it is the other way. It is the policy decisions that are made and the White Paper projects, in expenditure terms, the effect of those policy decisions. It is important that this should be recognised to avoid the sort of misunderstandings we have had during the debate, which has nevertheless been a good one despite its obvious limitations and poor attendance.
We have had many serious contributions and a certain amount of light relief. I am sure that the serious work which will continue in the Expenditure Committee will enable us to make better 1640 use of parliamentary time in debating the essential subject of public expenditure than has been the case in the last few years and tonight.
§ Question, That the Amendment be made, put and negatived.
§ Main Question put and agreed to.
That this House takes note of the White Paper on Public Expenditure to 1975–76 (Command Paper No. 4829).
§ Mr. SPEAKER then proceeded to put forthwith the Questions he was directed to put by paragraphs (6) and (11) of Standing Order No. 18 (Business of Supply).