§ I will deal first with expenditure by the whole range of public authorities. I shall be making our decisions and actions clear as I go along. But, first, I must define the real nature of the problem which confronts us. I sometimes hear it said—indeed, I read—that there is one simple 211 solution for all our economic difficulties, namely, to make dramatic reductions in Government current expenditure. Most people who say this are the victims of two fallacies. First, that Government expenditure is making increasing demands upon the nation's resources; secondly, that vast economies can be made by squeezing administrative costs without changing the functions of the Government or reducing the scope of any important service.
§ In fact, the truth is that we have been wielding the knife continuously for four years now; and during that period we have been much more successful in restraining Government expenditure than is commonly realised. I will give this figure—and this is the first time it has been published: Four years ago Government current expenditure was eating up 29 per cent. of gross national production. This year we have got it down to 26 per cent. The squeeze on administrative costs goes on all the time, and it will tighten still more; but it is not in administrative costs that the big money lies. It lies in quite a small number of very large and important functions which the Government have to discharge—defence, law and order, social services, National Insurance, assistance to agriculture, Colonial and Foreign Services, and so forth. When we look at Government expenditure, not in detail but in the large, the question of major changes of policy arises at once—for I emphasise that we are now at a point where major reductions in expenditure can only flow from major policy changes.
§ I ask: Do those who say that Government expenditure could be drastically reduced propose a reversal of policy in education, or a cut in the cost of pensions? Or are we to hold up work on the roads? Perhaps I can answer by saying that in each of these spheres we have to do all we can to meet imperative needs—in the case of education, of a rising school population, in the case of the old, of an increased number of retired persons, and, in the case of the roads, with a programme which I cannot increase but which is already insufficient to deal with the industrial needs of the country.
§ Are we, then, to make a big cut in our defence obligations? The Defence Estimates will be published at the usual time; 212 and they will show that we are carrying out our commitments with the utmost economy which is consistent with maintaining the efficiency of the Services in a period of revolutionary changes in strategy and equipment. This same criterion of economy and efficiency will have to be applied at the right time to the range of subsidies which fall within the field of my right hon. Friend the Minister of Agriculture, Fisheries and Food.
§ But at the present time I tell the Committee—and I have been over the whole field of Government expenditure very thoroughly—that the main possibilities for major economies do not lie in cutting back existing services. They lie in restraining the rate of development, in moderating the capital outlay on the expansion of services over the whole of the field where its cost affects Government finance—whether directly, or through grants or loans or guarantees—and so reducing the increased operating costs to which that expansion inevitably leads. It is in this way that we can best constitute a balanced and considered pattern of economy in public expenditure, such as the country needs.