HC Deb 26 June 1956 vol 555 cc267-78
The Chancellor of the Exchequer (Mr. Harold Macmillan)

With your permission, Mr. Speaker, and that of the House, I would like to make a statement about economies in Government expenditure.

In my Budget speech I said that the Government had decided to put in hand a review of all Government expenditure, civil and military, in order to reach savings amounting to £100 million in this current year on services provided for in the Estimates as published.

I think it right now to give the House an interim report. I will make a further report at a later date.

Considerable progress has been made towards the achievement of our purpose, and up to the present date decisions have been taken by the Government which are estimated to yield this year savings on the published Estimates amounting in all to about £76 million. Of this total, £36½ million is on the defence programme, £14 million on defence expenditure by civil Departments and £25½ million on other Civil Estimates.

Of the defence savings, about £11 million is on Navy Estimates, nearly £17 million on Army Estimates and about £8¾ million on Air Estimates. In each case the main savings arise from abandoning or deferring orders which would otherwise have been placed, from increasing the use of existing stocks and from expediting the disposal of surplus stocks.

These decisions, reached within a period of two months from the Budget, represent further good husbandry by the Service Departments. They do not reflect any change in the size or shape of our fighting forces as a result of the review of our defence policy which, as I announced in my Budget statement, the Prime Minister set in hand last April. Any major decisions in this field would, course, need to be taken after consultation with our Allies.

On the defence expenditure of civil Departments the main savings arise from curtailing purchases of mobilisation equipment (£2½ million), food stocks (£8 million) and equipment for oil storage and distribution (£2 million).

On the other Civil Estimates, the reductions in the bread and milk subsidies announced in February and in the Budget, after deducting the resulting extra cost of school and welfare milk, the extra cost of the Farm Price Review, and the increases in family allowances, leave a net saving of £12½ million.

We can now add to this a number of miscellaneous savings, including a variety of administrative economies, amounting to £13 million. Among these I should mention that the charge for school meals will be increased by, 1d. from September so as to cover the cost of the food supplied, in accordance with the policy of successive Governments, and capital expenditure on the Schools Meals Service will be slowed down; the savings will be £2¼ million.

I will circulate in the OFFICIAL REPORT details of the savings on individual Estimates. Advance copies will be available in the Vote Office immediately.

Revised Civil Estimates embodying the Government's decisions will be presented in the first week in July in all cases except those in which the savings are small in relation to the totals of the existing Estimates.

Some defence Votes have already been passed by the House. Revised Estimates will be presented for those defence Votes which have not already been taken and on which significant savings arise.

I would repeat that the Government's decisions relate to savings on services provided for in the published Estimates for this year. As I explained in my reply to the Budget debate, the decisions take no account of additional necessary expenditure not provided for in the Estimates: for this, we shall, of course, have to present Supplementary Estimates in the usual way.

On the other hand, the present savings take no credit for underspendings on the Estimates during the year, apart from those deliberately planned. But, whatever the final total of the year's expenditure may be, it will be less than it otherwise would have been by the amounts now to be saved as a result of the decisions which I have announced.

Mr. H. Wilson

In his oral statement, the Chancellor has, of course, given the House very little information. He will understand that we shall want to study the detailed Estimates that are being circulated so that we may decide whether it will be necessary to debate this matter immediately or whether it should be done under the separate Estimates. Would the Chancellor of the Exchequer, however, answer one or two questions on what he has already said?

With regard to the defence Estimates, will the right hon. Gentleman say how much of the savings simply represent a running down of stocks and, therefore, are a merely once-for-all saving that will not be capable of repetition next year, or how far he expects to get genuine savings in defence? Will he also tell us when he expects to be able to inform the House of the final result of the negotiations with the German Government on the question of the support costs?

My other general question—which has to be general until we see the detailed proposals of the Chancellor—is this: is the Chancellor aware that today, to judge from the ticker tape, the £ now stands at a lower figure than at any time over the last 10 months? Does he not realise that it is about time he got to grips with the economic situation as a whole, instead of thinking that he can solve this problem by economies in school meals and things of that kind?

Mr. Macmillan

To reply to the last question which the right hon. Gentleman asked me, it is characteristic of him, it seems, to bring in a much more general point which we have discussed many times and which I am quite ready to debate with him again, as to the record of this Government and of the one of which he was so distinguished a member—for so short a time.

With regard to the question of the effect on the defence Estimates of the various schemes, in many cases there will be economies which will be once for all, but in many more cases, by not placing orders or by decisions to run at lower levels of stocks, these economies will be continued into the following years. It would be difficult to generalise, but, broadly speaking, a considerable relief will be made both to the Exchequer and to the economy by withholding of orders, the cancellation of orders and by the use of stocks rather than the purchase of fresh stocks.

Mr. C. Davies

Does the right hon. Gentleman realise that this is a disappointingly small mouse he has introduced? When may we expect from the Government a statement of what ought to be a drastic realistic reduction in our defence programme, and not merely a saving of £50 million in our defence programme of nearly £1,500 million?

Mr. Macmillan

I made it clear that this is an interim report dealing with what it was in our power to do within a period of eight weeks. As I am sure the right hon. and learned Member will realise, those wider questions involve very big decisions which affect the Commonwealth and our Allies. While we should not shrink from them, I am sure he would agree that we should not enter into them and reach decisions without consultation over the future.

Mr. Davies

I agree, but when may we have a statement?

Mr. Macmillan

I hope it will be possible to make a statement within a reasonable time, but not within a few weeks. No one is more anxious that I am over that matter.

Sir R. Boothby

At the end of his statement the Chancellor referred to Supplementary Estimates. May I ask whether he expects that those will be sufficiently large to affect in any great degree the total amount of the economies that my right hon. Friend has achieved?

Mr. Macmillan

That is very difficult to tell. There will be Supplementary Estimates. I should answer the question about German support costs. That negotiation is still proceeding and, therefore, I cannot deal with it now, but it is quite possible that there will be an additional Supplementary Estimate over the amount. It is quite possible that that will have to be provided for, but I made it clear that I was trying to deal with the Estimates as published.

There will be Supplementary Estimates, but, if the experience of other years runs true, there will be savings. Those are things which we cannot help one way or the other, but these are deliberate acts of policy and if there are to be extra costs it is surely good to make sure that there are also savings.

Mr. Bellenger

Does the Prime Minister recollect that some weeks ago, in answer to a Question of mine about setting up a Select Committee to go into the much wider question of defence reorganisation, he said that his mind was not closed on that question? In view of the statement made by the Chancellor, which only just scrapes the surface of defence expenditure, may I ask the Prime Minister whether he is still open to receive representations with regard to setting up a Select Committee to go into the wider implications of reorganisation of national defence?

The Prime Minister

I am sure that the right hon. Member, with his experience, distinguishes between economies of this kind—Service economies which can be made by our own action within existing international policy—and the very much wider question of any kind of defence arrangement which must be agreed between several nations which are all closely our Allies. It is the latter question on which neither my right hon. Friend nor I am in a position to make a statement to the House.

Mr. Osborne

Is my right hon. Friend the Chancellor aware that those on these benches are delighted with the steps he has taken to compel the nation to live within its income and that we hope he will continue with that process? My right hon. Friend stated that the economies were largely the result of orders cancelled or deferred. Can he tell the House what proportion has been cancelled and what proportion has been merely deferred because, obviously, those which have been deferred will have to come forward again?

Mr. Macmillan

When my hon. Friend asks a question I am always a little uncertain whether it is going to be a compliment or an accusation. This time I am very grateful to him.

Some of these economies are cancellations, some are the using up of stocks and some are deferments, in the light of the various points made by the right hon. and learned Member for Montgomery (Mr. C. Davies), anticipatory to the position in view of longer-term decisions likely to follow.

Mr. Jay

So that the House might be clear on the facts, would it be true to say that, as the Chancellor originally budgeted this year for expenditure above the line of £242 million more than last year, he is now budgeting, apart from Supplementary Estimates and overspending, for expenditure above the line of over £150 million more than last year?

Mr. Macmillan

No, Sir, I do not think that that would be exactly accurate, although I have not the precise figures in my mind. What it means is that I said in the Budget statement that I would weigh carefully whether I ought to ask the Committee of Ways and Means to raise fresh taxation to fortify a surplus or to make some economies, and I thought that the Committee and the country would prefer a real effort at economy. Without getting into some of the rather deeper policies which will take a little longer, in two months we have succeeded in making economies reaching this considerable sum, which will be a corresponding relief to our burden.

Mr. Stevens

Can my right hon. Friend say how the negotiations on German support costs are related to the very welcome interim economies that he has announced?

Mr. Macmillan

They are still being carried on and I do not know when a statement will be possible. I do not think it will be very long now. Whatever may be the result, those are matters we have to deal with and take in our stride. If they should result in an additional Supplementary Estimate, there is all the more reason for making these savings at present.

Mr. H. Wilson

Further to the question asked by my right hon. Friend the Member for Battersea, North (Mr. Jay), and in view of the desire of the Chancellor to have a general debate with us on the merits of the two successive Governments—which we welcome with relish—will the right hon. Gentleman answer a purely factual question in preparation for that debate? As a result of these economies, when taken fully into account, will he say how much the level of Government expenditure this year will exceed the level of Government expenditure in our last year of office? Will it be £700 million, £800 million or £1,000 million?

Mr. Macmillan

No, Sir, but I can say that this year, as the year before and the year before that, Government expenditure has been a continually decreasing proportion of total expenditure.

Several Hon. Members

rose—

Mr. Speaker

Order. There must be a debate some time or other on these matters.

Following are the details:

ECONOMIES IN GOVERNMENT EXPENDITURE: EFFECTS ON ESTIMATES, 1956–57 (Revised Estimate will be presented for Votes marked *)
I. DEFENCE
Vote No. Title of Vote Reduction Notes
£000
NAVY ESTIMATES
1 Pay, etc. of Royal Navy and Royal Marines. 1,000 Manpower adjustment.
2 Victualling and clothing for the Navy. 280 Reduction of clothing purchases by use of stocks.
8, II Shipbuilding, repairs, maintenance, etc.: material*. 3,100 Run-down of stores and of oil fuel stocks; accelerated disposal of surpluses.
8, III Shipbuilding, repairs, maintenance, etc.: contract work*. 2,980 Rephasing of aircraft programme, cuts in machinery production programme.
9 Naval armaments* 2,080 Run-down of armaments stores, cuts in ammunition production programme.
10 Works, buildings and repairs at home and abroad. 1,150 Accelerated sales of property; review of minor works.
11 Miscellaneous effective services 320 Reduction in air training programme.
TOTAL 10,910
ARMY ESTIMATES
1 Pay, etc. of Army 700 Local expenditure in Germany is being reduced.
5 Movements 150 Administrative economies in Germany.
6 Supplies, etc. 3,500 Mainly reduction of stocks.
7 Stores* 11,000 Increased use of reserves for maintenance, disposal of surplus stocks and a cut in the production programme.
8 Works, buildings and lands 1,500 Review of the building programme.
TOTAL 16,850
AIR ESTIMATES
1 Pay, etc. of the Air Force 1,000 Manpower adjustment.
6 Supplies* 2,050 Adjustment of purchases due partly to run-down of stocks.
7 Aircraft and stores 4,620 Accelerated disposal, use of stocks and cancellation of projects.
8 Works and lands 1,070 Review of works programme.
TOTAL 8,740
DEFENCE TOTAL 36,500
II. CIVIL
Class and Vote No. Title of Vote Reduction Notes
£000
I 4 Treasury and subordinate Departments. 65 Economies in exchange control and other administration.
II 1 Foreign Service* 325 Administrative economies (£150,000) and increase in passport fees (£175,000).
2 Foreign Office Grants and Services* 525 Reduction in grants and loans to international organisations and agencies.
5 Commonwealth Relations Office 70 Administrative economies.
6 Commonwealth Services 80 Reductions in Colombo Plan expenditure.
9 Colonial Services* 1,000 Reduction of loan to Kenya.
10 Development and Welfare (Colonies, etc.)*. 750
11 Development and Welfare (Federation of Rhodesia and Nyasaland, etc.). 60 Reduction of grants and loans for research and for development and welfare schemes.
III 2 Home Office (Civil Defence Services)*. 1,125 Reduction in purchases of equipment and materials, and other economies.
4 Prisons (England and Wales) 199 Administrative economies and deferment of certain capital works.
5 Child Care (England and Wales) 76 Earlier closing of approved schools and restriction of capital expenditure.
9 County Courts* 180 Increase in fees.
15 Scottish Home Department (Civil Defence Services)*. 124 Reduction in purchases of equipment and materials, and other economies.
IV 1 Ministry of Education* 1,386 Savings from increase in price of school meals (£1,200,000); reduction of capital expenditure (£600,000); and increase in fees for further education (£150,000); offset by increased cost of school milk subsidy consequential on reduction of general milk subsidy (£564,000).
14 Public Education, Scotland* 190 11/80ths of English savings on school meals, capital expenditure and further education (£268,000); offset by increased cost of school milk subsidy consequential on reduction of general milk subsidy (£78,000).
V 1 Ministry of Housing and Local Government*. 265 Economies in administration and civil defence expenditure; and reductions in grants to local authorities for town and country planning, National Parks, and restoration of property used for temporary defence works.
4 Ministry of Health* +1,830 Administrative economies (£45,000); offset by increased subsidy on welfare milk consequent on reduction in general milk subsidy (£1,875,000).
5 National Health Service, England and Wales*. 573 Civil Defence.
10 Department of Health for Scotland* +205 Increase in subsidy on welfare milk consequent on reduction in general milk subsidy.
VI 3 Board of Trade (Strategic Reserves)*. 750 See footnote †".
4 Services in Development Areas* 750 Adoption of more stringent criteria for new building.
8 Ministry of Labour and National Service. 475 Administrative economies following a review of the work of the Department.
9 Ministry of Supply 1,500 Economies on miscellaneous items, partly reflecting the reduced level of defence expenditure.
Class and Vote No. Title of Vote Reduction Notes
VII 1 Ministry of Works 357 Administrative economies following on reductions in the programme.
3 Public buildings, United Kingdom* 1,126 Economies in capital and maintenance expenditure.
4 Public buildings, overseas 71 Economies in capital and maintenance expenditure.
9 Stationery and printing* 500 Reduced expenditure on paper, printing, general office supplies and machinery.
VIII 1 Ministry of Agriculture, Fisheries and Food*. 350 Staff savings as a result of administrative economies and reductions of functions.
2 Agricultural and Food Grants and Subsidies*. 23,935 Reduction of subsidies on bread and milk (—£41,300,000) offset by effects of Agricultural Price Review (+£17,365,000).
3 Agricultural and Food Services* 632 Various economies.
4 Food (Strategic Reserves)* 8,314 Reduction in purchases.
8 Agricultural Research Council 70 Economies in capital expenditure.
10 Development Fund 50 General economy.
11 Forestry Commission 53 Economies in training and research and reduction in purchases of equipment.
12 Department of Agriculture for Scotland*. +1,908 Administrative economies (£15,000); reduction of general milk subsidies (£1,463,000) offset by effects of Agricultural Price Review (£3,536,000).
13 Fisheries (Scotland) and Herring Industry*. 106 Various economies.
IX 1 Ministry of Transport and Civil Aviation*. 125 Administrative economies and an increase in driving test fees.
2 Roads, etc., England and Wales 180 Economies in maintenance expenditure.
3 Transport (Shipping and Special Services)*. 105 Expenditure on ports.
4 Civil Aviation* 343 Economies mainly in capital expenditure.
5 Ministry of Fuel and Power 160 Administrative economies.
6 Fuel and Power (Special Services)* 2,295 Economies in capital expenditure on oil installations and in civil defence measures in the gas and electricity industries.
8 D.S.I.R. 150 General economy.
X 2 Ministry of Pensions and National Insurance. 100 Administrative economies.
4 National Insurance and Family Allowances*. +6,500 Increases in family allowances.
5 National Assistance Board 160 Administrative economies.
Estimates showing reduction of less than £50,000 each. 376
NET TOTAL, CIVIL ESTIMATES 39,583
TOTAL: DEFENCE AND CIVIL 76,083
†In accordance with the policy of reducing these reserves, turnover purchases of materials are being reduced by about £10million below the total provided in the original Estimate. A revised Estimate will be presented to give effect to this reduction; but since, for technical accounting reasons, proceeds from sales to be appropriated in aid of the Vote will also be less, the net Estimate will only be reduced by the £750,000 shown above.