HC Deb 11 April 1927 vol 205 cc66-71
The CHANCLLOR of the EXCEQUER (Mr. Churchill)

But I think this is the moment to take a rather more general view of national expenditure, and the Committee will, I am sure, permit me to make a digression for that purpose. This is the third Budget for which I have been responsible, and three years have passed since the Budget of the Labour Government. Public attention is concentrated upon the total figure of the Estimates. Let us compare this total figure on the basis of a £50,000,000 Sinking Fund with the Estimates of the right hon. Member for Colne Valley (Mr. Snowden) in 1924. Our Estimates for the coming year are £818,000,000; his were £790,000,000. So that our Estimates have increased by £28,000,000 in the three years that have passed. How are we to explain that? It is not difficult. I have had the tables which I prepared for the Economy Bill of last year brought up-to-date, and they will be found in the Blue Paper, on page 7. Broadly speaking, I have had to face during my tenure a little over £40,000,000 of increased expenditure, which arises from the automatic working out of the decisions of previous Parliaments and Governments, and from the effects of economic forces. The Sinking Fund has been raised from £45,000,000 to £50,000,000 since the time of the right hon. Gentleman. Non-contributory old age pensions and ether pensions, apart from anything which this Government have done, have automatically increased by £8,250,000. The growth of grants, mainly on a percentage basis, to local authorities for health, police and the development of the housing schemes—all fixed by law—accounts for another £4,000,000. The growth of the self-supporting, revenue-producing services—the Post Office and the Road Fund—amounts to nearly £14,500,000. Another £5,000,000 of increased expenditure arises from the working out of the laws of Unemployment and Health Insurance, and from the incremental scales operating in the Civil Service.

Here are no more heads than I can count on the fingers of my hand, and yet it accounts for £37,000,000 of increased expenditure, none of which could have been avoided except by repudiating the obligations of the State, or throwing increased burdens on the local rates, or drastically remodelling the laws governing Unemployment and Health Insurance, or refusing to accept the beneficial expansion of the Post Office and the Road Fund. £37,000,000 out of £40,000,000! The other £3,000,000 is made up of smaller items equally arising out of decisions not taken in the present Parliament. Against this £40,000,000 of automatic or remunerative increase, for which we are not responsible, there is £12,000,000 of automatic decrease also arising from the laws and decisions taken in other Parliaments, and for which, of course, we are entitled to no credit. Of these the decline in the total of War pensions is the largest, and this, with the reduced cost of the Irish Services, amounts to over £8,000,000 of the £12,000,000. Subtracting the £12,000,000 decrease from the £40,000,000 increase leaves a net adverse balance of £28,000,000.

So much for the consequences of the laws and decisions made by other Governments. But that is not all the picture. We ourselves have added £17,000,000 of new expenditure for which we are directly responsible. Of these, the main items, as the House well knows, are the Widows' Pensions and improved Old Age Pensions, which account for £7,250,000. The next important item is the beet sugar subsidy, to which the Labour Government had already committed themselves, and which this year reaches its menacing peak of £4,500,000. Against this increased expenditure of £17,000,000 we have made economies of £13,250,000, and we have reduced by £4,000,000 the payments into the Road Fund, thus, by these methods, balancing almost exactly the increased charge.

Therefore, broadly speaking, but at the same time accurately and truly speaking, it may be said, first, that though we have so far failed to reduce expenditure, we have virtually met out of savings all the new and very important services and policies for which we have been responsible, and that the reason for the increase of £28,000,000 in the total expenditure, so far as it does not depend upon self-supporting and remunerative services, lies wholly in the decisions, wise or foolish, necessary or improvident, taken in the past by our predecessors, Labour, Conservative, Coalition, and, not least, Liberal. I have involved all these administrations of the past, but I think I am bound to make the confession, Quorum pars parva fui.

The situation which I have just evolved can be epitomised in another way. The right hon. Member for Colne Valley estimated his expenditure at £790,000,000, but, without any unexpected emergency like coal or China, he actually spent £799,000,000 in respect of the year. Therefore, his expenditure and that of the Labour Government of 1924 was not £790,000,000, as usually stated, but £799,000,000. We are estimating for £818,000,000, and we have therefore to account for £19,000,000 of increase. But £14,000,000 of that £19,000,000 is accounted for by the growth of the Road Fund and the Post Office, and it is common ground between all parties that this expenditure ought not to be included in the ordinary accounts. The right hon. Gentleman himself last year, and Lord Oxford in another place last week, both declared that it would be wrong and even silly to include them; but that has never prevented the right hon. Gentleman from including it, if it suited him to do so. Of that £14,000,000, I ought to take into account only £10,000,000 because £4,000,000 has been already credited to revenue, and I cannot count it over again. Ten million pounds from £19,000,000 leaves 29,000,000, and of that £9,000,000 £5,000,000 are accounted for by the increase of the Sinking Fund from £45,000,000 to £50,000,000. I am sure we shall not hear the right hon. Gentleman argue that an increase in the Sinking Fund is an extravagance, or that it ought to be accounted against the Government for extravagance; it is, in fact, the highest form of economy. Four million pounds is left, and that £4,000,000 is almost exactly balanced by the cost of the concessions in Old Age Pensions, made, not by any previous Government, but by the right hon. Gentleman himself during his tenure of office. I am not making excuses, nor at the moment am I trying to moralise; I am only stating facts.

I am frequently reproached with having, in my first Budget, expressed a hope of effecting a net reduction of £10,000,000 a year progressively. I am even represented as having promised that that should be done. But the words I used were "aim at." One may aim at a reduction, as one may aim at a target, but one does not promise to hit it. What would you have had me to say as Chancellor of the Exchequer? Ought I to have said, "I will not aim at any reduction such as £10,000,000 a year; it is a vain delusion, and every year expenditure will steadily increase." Would that have been the right attitude.? No, it is much better to set up an objective, even if it be beyond your reach, than it is to give up the struggle at the outset. Therefore, I in no way regret the hope which I expressed, nor shall I allow imperfect achievement in the past to prevent perseverance in the future.

I often read statements to the effect that we should immediately cut down the expenditure of the country by £40,000,000 or £50,000,000 or even by larger sums. I must observe that, if you gave the Chancellor of the Exchequer official powers to veto expenditure, or to ration Departments against their will, it would be a departure from the whole system of constitutional Cabinet Government. It would amount, as I think Mr. Gladstone once said, to a financial dictatorship. I do not envy the task of a financial dictator charged with such a duty as cutting down £40,000,000 or £50,000,000 of national expenditure. We have no longer to deal with the position which prevailed at the time of the Geddes Committee. We have no longer to deal with the conditions even of a year ago at the time of the Economy Bill. The field has been gleaned and re-gleaned.

Let the Committee examine the figures in section (d) of Table VI of the Blue Paper, the National Administrative Services. In 1914 that section of the Estimates amounted to £96,500,000, and in 1927 it is £156,250,000. But, making the necessary allowances for the inflation of money values, which is in the ratio of 100 to 175 approximately, the fact emerges that, comparing like with like, the expenditure in the whole of these classes and the Services which comprise the whole controllable expenditure of the central Government, Imperial Defence, Civil Services, etc.—all this expenditure of the central Government of the State, making allowance for the alteration in the value of money, is actually lower by nearly 10 per cent, than it was in 1914. This is in spite of the growth of population, in spite of the far more complicated forms and higher standards in all directions which are demanded and to a very large extent supplied. If these facts are true—and I shall be very much surprised if they are challenged, and still more surprised if they are challenged successfully-they ought, I think, to be meditated over by those who so intemperately demand reductions of £40,000,000 or £50,000,000 on the controllable section of our expenditure. To cut down expenditure on the Fighting Services by £15,000,000 or £20,000,000 would probably create panic and reaction resulting later in heavier increases. To cut down drastically the Exchequer contributions to education, health, local government, to arrest the constructive development of agriculture, and housing, to withdraw completely the State contributions to unemployment and health insurance, to make wholesale reductions in salaries and wages, to fill the country with discharged public servants, soldiers, sailors, school-teachers, arsenal men, dockyard workers, post-office employes, and many thousands of other functionaries—all these measures would be inevitable, every one of them, if anything in the nature of a —40,000,000 cut were to be achieved, and all these measures would cause a, convulsion in which, I dare say, one financial dictator might easily find himself replaced by another. And it is a position into which no constitutional Government or Parliamentary majority could be expected to plunge.

I have used the word "perseverance." Let me now mention some favourable tendencies. The automatic increase of expenditure, apart from the self-supporting and remunerative expenditure, which of course is going on at the rate of £5,000,000 per year—apart from that, the automatic increase of expenditure has come to an end. Next year, 1928, the automatic decrease in expenditure, if no new commitments are entered into, for the first time overtake or almost overtake the increase. Any savings which can be made by the efforts of the Government will, therefore, emerge next year as a net reduction.

I see that Sir Herbert Samuel said the other day that the taxes would not fall until the Government falls. Without attempting to pose as a prophet, there is one thing which I will not hesitate to predict, and that is that the taxes will not fall after the Government has fallen. Nothing is so expensive as general elections and new Governments. Every new administration, not excluding ourselves, arrives in power with bright and benevolent ideas of using public money to do good. The more frequent the changes of Government, the more numerous are the bright ideas; and the more frequent the elections, the more benevolent they become. When three elections have taken place in three years, in which, as I compute it, about 4,000 candidates in the aggregate have been conducting 4,000 spirited campaigns, bidding against one another for the public favour, and when parties as well as individuals have been giving all sorts of pledges, under highly-organised pressure and with a great desire to win, the results, however worthy and however desirable, are bound to be expensive. By the end of this year, we shall, in fact, have ploughed our way through the consequences of three changes of Government, and three general elections in 1922, 1923, and 1924, and, with stable administration and continuity of policy prolonged over the full constitutional life of Parliament, and with, may I say, a certain degree of salutary disillusionment, the momentum of expenditure will gradually subside. That is what is happening now. Therefore, it is certainly not a moment for us to be discouraged by previous ill-success; on the contrary this is the moment when we should make new efforts.