HL Deb 28 June 1972 vol 332 cc926-8
LORD BARNBY

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government whether, since it is now widely accepted that changed conditions have superseded the basic policy on which the White Paper on Full Employment (Cmd. 9725) was based, they will now consider reverting to the earlier policy of meeting public capital expenditure out of long-term borrowing from the private sector instead of out of taxes as at present.

THE LORD PRIVY SEAL (EARL JELLICOE)

My Lords, the achievement of price stability and full employment remains the objective of the Government. However, I cannot agree that the method of financing public sector capital expenditure urged by my noble friend would necessarily help towards this end.

LORD BARNBY

My Lords, does the noble Earl the Leader of the House recall that previously some statutory public bodies were required to turn for their finance to the market? This had a disciplinary action as it necessarily was founded on past performance and the efficient administration of their utilities.

EARL JELLICOE

My Lords, I do so recall; but my noble friend will also recall that the system was changed in 1956; and it was changed, as I understand it, because it was felt, and I think rightly, that the nationalised industries were inevitably backed by the Government and that their debt is therefore equivalent to gilt-edged. In these circumstances it makes sense for the Government to do all the necessary borrowing on their own account and to on-lend the nationalised industries through the National Loans Fund. I would point out to my noble friend that this policy was endorsed by the Radcliffe Committee in 1959, and indeed by the Select Committee on Nationalised Industry in their Report in Sessions 7 and 8.

LORD BARNBY

My Lords, may I put a second question? Since my noble Leader has referred to Cmd. Paper No. 9725 of 1956, may I ask whether the attention of the Government has been drawn to the research paper put out on March 7 of this year by the Economic Council, in which they stated that excessive taxation leads to increased "stagflation"?

EARL JELLICOE

My Lords, I thought it was my noble friend who had referred to Cmd. Paper No. 9725. Be that as it may, the Government are of course aware of the Paper to which my noble friend alludes, although I must confess that I personally have not yet given it the close attention which it deserves and which it will have from me. I will merely say, pending that close attention, that this Government do not need to be convinced of the evils of excessive taxation, as I think their record has amply demonstrated.

LORD POPPLEWELL

My Lords, would the noble Earl say what the rate of interest is when these publicly-owned undertakings borrow from the Government? Are they still expected to show a return of 10 per cent., and is that taken into account before any subsidies are underwritten?

EARL JELLICOE

My Lords, I think that is another question, and as I have no idea how to answer it at this moment I should like to defer my reply until the noble Lord has tabled it as a separate Question.

LORD AVEBURY

My Lords, would not the noble Earl agree that one can compare the rates of interest charged on loans from the Consolidated Fund with rates of interest that are available in the private sector, and that if one looks at the public expenditure programme of the Government to 1975–76 one can calculate the difference in the burden on the taxpayer which would follow from adopting the suggestion made by the noble Lord, Lord Barnby, which would impose a very great additional burden on the taxpayer? Would it not be a good idea if future issues of the public expenditure forecast were to include a table showing how much of the expenditure was to be financed from borrowing and how much from taxation, and the additional cost that would arise if the borrowing element were financed by going to the market?

EARL JELLICOE

My Lords, I shall certainly be glad to bring the noble Lord's suggestion to the attention of my right honourable friend the Chancellor of the Exchequer or the Chief Secretary.