HC Deb 19 February 1957 vol 565 cc209-16
The Chancellor of the Exchequer (Mr. Peter Thorneycroft)

With your permission, Mr. Speaker, and that of the House, I wish to make a statement about next year's Estimates for defence and civil expenditure.

First, as to defence. My right hon. Friend the Minister of Defence explained in last weeks debate that a comprehensive review of the defence programme is now in progress. For this reason, it is not yet possible to announce the figures for defence expenditure for the coming year, except to say that the total will be less than the £1,500 million which was the original total for 1956–57.

Votes on Account for the three Services are being formally presented today and will be published tomorrow. The House will be asked to pass these in order to provide the Services with cash for the first four or five months of the financial year. The totals of the full Estimates will be available to the House in a Defence White Paper before the end of March, and the Estimates themselves will be published as soon as possible thereafter. Because of the Defence review, certain Estimates, mainly on the Ministry of Supply Votes, are being marked as provisional in the Civil Vote on Account.

The Estimate for the Civil Vote on Account will also be published tomorrow. As usual, this will include some defence expenditure by the Ministry of Supply and the Ministry of Defence; excluding this, and excluding self-balancing expenditure, the total estimate of civil expenditure in 1957–58 will be £2,654 million, an increase of £110 million over this year's total Estimates, including Supplementaries, or of £173 million over the original Estimates. The main items in the latter increase are for education (£63 million), National Health Service (£49 million) and Atomic Energy (£31 million).

The social services as a whole show an increase of £146 million over the original Estimates for this year. This is largely due to higher prices, salaries and wages. In part, it is due to the fact that there are more children to be educated and to the increasing use being made of the National Health Service. Grants to local authorities for other services, as well as for education, show a marked upward tendency.

Although much of this expenditure—particularly that on the programmes of atomic energy and technical education—is of a productive character, yet the very large and continuing increase in our total expenditure, defence and civil, imposes a burden on the economy which the Government cannot ignore. It also represents a threat to the high level of public and private investment on which productivity depends.

First, as regards defence, we are, as I have said, reviewing the whole of the programme. There is clearly a limit to what can be done in the first year, but our object is to curtail expenditure even in this period. In the long run, defence expenditure must be brought substantially below existing levels.

It would not be right to seek to meet our difficulties by making changes in defence policy alone. On the civil side, therefore, we have decided to make changes of policy in three fields.

First, I would refer to the announcement that my right hon. Friend the Minister of Housing and Local Government has already made to the effect that, in the field of local government finance, we propose to introduce, among other measures, a general grant in substitution for a number of percentage grants. This should introduce a stabilising influence in the central Government's contribution to local expenditure.

Secondly, we have reviewed the subsidies involved where the State provides supplies below cost, and have decided to reduce the subsidies in two cases. The price of welfare milk will be increased to 4d. a pint—that is, roughly half-price. This will leave the subsidy at about the amount per pint at which it was first introduced in 1940. With a corresponding increase in the price of National dried milk, the saving in 1957–58 will be £14 million. Next, the charge for school meals will be increased by 2d. to 1s., saving £3½ million.

Hon. Members


Mr. Speaker

Order. I think that the House should hear the statement.

Hon. Members


Mr. Speaker

If the statement is disagreeable to some hon. Members, that is no reason for not listening to it.

Mr. Thorneycroft

Both these changes will take effect from the beginning of April. The existing arrangements for hardship exemptions will continue. The savings under both these heads have been allowed for in the expenditure figures which I have given earlier.

Finally, we have given anxious consideration to the growing cost of the National Health Service. When the Service was introduced it was expected to cost a total of £175 million a year. By 1949–50, this had risen to £450 million. At that time, Sir Stafford Cripps was so concerned by this that in 1950 he imposed a ceiling of £400 million on Exchequer expenditure below which the cost of improvements and extensions to the Service had to be contained.

In 1957–58, the total cost of the Service will be £690 million. Towards this, as things stand now, £40 million would come from the contribution made from the National Insurance Fund, which, as the House will remember, is 10d. in respect of the adult man and lesser sums in respect of other contributors; £100 million would come from a variety of other receipts (including charges to patients), and the whole of the balance of £550 million—or £49 million above last year—would be provided by general taxation.

The alternatives to this increase in the charge on the Exchequer are to reduce the scope of the Service, to charge more to patients, or to increase the contribution. It is widely believed that the National Health Service is paid for by weekly contributions. This is not so. The contribution has never paid for more than a small proportion of the cost of the Service, and this proportion has steadily declined each year.

When the original National Health Service Bills were before Parliament, it was expected that the Funds' contribution would provide about one-fifth of the gross cost of the Service. Today, it provides only about one-seventeenth. We therefore propose to increase the contribution by 10d. in respect of an adult man, and by smaller sums in respect of adult women and juveniles. The employer will pay the same proportionate share as at present.

Our purpose is to establish a separate National Health Service contribution towards the cost of the Service. Next year, the contributory element will rise from one-seventeenth to about one-ninth of the gross cost of the Service. Separate legislation for this purpose will be introduced as soon as possible. The change will provide an additional £40 million for the Exchequer in a full year. In the meantime, no credit has been taken in the Estimates for the relief to the Exchequer next year, which, we hope, will be about £20 million.

The total savings to the Exchequer represented by these measures, excluding, of course, anything which can be achieved in the field of defence, will be about £57 million in a full year and about £37 million this year.

Hon. Members


Mr. H. Wilson

Once again, as always, the Government have delayed an announcement of this kind until an important by-election was out of the way, deliberately, but in this case ineffectively. Once again, having entirely failed to control inflation, under heavy pressure from their back benchers the Government are taking it out of those who can afford these increases least.

Will the right hon. Gentleman tell us why this is always the case? The Prime Minister, last October, took it out of the sick with the prescription charges, and the right hon. Gentleman is now taking it out of the children.

Will the right hon. Gentleman answer these questions? First, with regard to his reference to local authority finance, which he described as a stabilising influence on central Government expenditure, if not on the rates, would the right hon. Gentleman give an undertaking that there will not be any reduction in the estimates of the total amount paid to local authorities, compared with last year? That is an assurance that we should like to have.

Secondly, will the right hon. Gentleman tell us what estimate he has made of the effect that these proposals—with welfare milk more than doubling its price per pint—will have on the cost of living of a family of young children, and especially a large family of young children, both as regards welfare milk and school meals?

Finally, will the right hon. Gentleman tell us what, in his calculation, the effects of this new poll tax that he is introducing on the Health Service might have on the pressure for increased wages and on the wage-price spiral, and, ultimately, on our export costs?

Mr. Thorneyerdft

The announcement is timed with the publication of the Estimates.

The general grant will not be in effect next year. What I said was, I believe, true—that a fixed general contribution by the central funds of the Exchequer will have a stabilising influence in that field. I think that that is desirable.

For a family with two children, one under five and one at school, the cost would be 2s., and for a family of three children, with two at school, 2s. 10d. As to the effect on wages, I do not believe that an additional 10d. is an unreasonable contribution. I think that, faced with dealing with a Service which is now costing over £690 million compared with £175 million when it was introduced, it is not unreasonable that we should choose, rather than cut the Service, to go back to what is a quite traditional arrangement —for people to contribute a little when they are well in order that they may be looked after when they are ill.

Mr. Wilson

After the cost of Suez, it does not lie in the right hon. Gentleman's mouth to make those remarks. The right hon. Gentleman has pronounced the final epitaph on "Mac the Knife", with the figures showing how Government expenditure has risen. Will the right hon. Gentleman tell us, first, how Government expenditure has risen compared with the last year of the Labour Government? Secondly, since he has just said, about the Health Service, that he would rather take it out of the contribution than out of actual expenditure, will the right hon. Gentleman give the House an assurance that during the year in question there will not be any increase in any charges under the Service?

Mr. Thorneycroft

I am not going to give any assurance about the future, and I do not wish to enter into any of the figures for the last year of the Labour Government.

Mr. Lindgren

As the Government have just handed £100 million to the landlords, will the right hon. Gentleman tell those of us who have some responsibility in the trade union movement what we are to say to our members whose rents, rates, cost of food and, now, insurance contributions, are to be increased? As far as I am concerned, and the members whom I represent, the right hon. Gentleman has "had it" on wage increases.

Mr. Thorneycroft

The fair thing to say to all men who would wish to see the social services sustained is that those services must be placed upon a reasonably sound financial basis.

Mr. Marquand

Will the right hon. Gentleman be prepared to say that this increase in the price of milk has not completely wiped out the benefits of the increase in family allowances which were announced in the last Budget? Is he aware that only 15 days ago, when we debated the price of milk, the Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food took pride in the increase in the subsidy for welfare milk and went on to say: There has been no cut here at all. On the contrary. I claim that these very striking figures show how much wiser has been our policy of concentrating on those whose need is greatest.

Commander Sir Peter Agnew rose

Hon. Members

Sit down.

Mr. Speaker

Order. Is the hon. and gallant Gentleman raising a point of order?

Sir P. Agnew

Yes, Mr. Speaker. It is that unless the right hon. Member for Middlesbrough, East (Mr. Marquand) speaks louder it will be quite impossible to hear the trend that the debate is taking.

Hon. Members

Sit down.

Mr. Speaker

Order. I think that some of the difficulty that the hon. and gallant Gentleman the Member for Worcestershire, South (Sir P. Agnew) feels in hearing the right hon. Member for Middlesbrough, East (Mr. Marquand) is due to the noise in the House. Hon. Members will assist, as I am sure they would wish, if they keep silent. I must point out that all these matters have to be debated some time on the Estimates. I hope that we shall not delay the further proceedings of the House.

Mr. Marquand

I shall use the microphone on the Dispatch Box to make sure that everybody hears the question that I put, Mr. Speaker. It is whether the increase in the price of milk now announced has not entirely wiped out the value of the increases in family allowances announced last year, and whether the Chancellor of the Exchequer is aware that the Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food made the claim 15 days ago for the Government on milk subsidies and welfare food that There has been no cut here at all. On the contrary. I claim that these very striking figures show how much wiser has been our policy of concentrating on those whose need is greatest."?—[OFFICIAL REPORT, 4th February. 1957; Vol. 564, c. 195.] May we now conclude that what the right hon. Gentleman is telling us today is that he is concentrating his attacks on those whose need is greatest?

Mr. Thorneycroft

The answer to the first part of that question must vary from family to family in accordance with the amount of family allowances which they are given. With regard to the second part, the amount per pint is almost identical with that which was introduced in 1946.

Mr. J. Eden

Is my right hon. Friend aware—[Laughter.]

Mr. Speaker

Order, order. We have a new Member coming in.

Mr. Eden

Is my right hon. Friend aware that it is impossible to expect to get lower taxation, higher purchasing power of money and a lower cost of living while we have such a vast burden of State expenditure? Will he, therefore, emphasise that it would be the greatest act of folly further to add to that by calling for higher increases in wages, and realise that what he has just announced will be welcomed by all far-seeing people with the interests of the country at heart as being wise, courageous and very necessary?

Miss Herbison

Is the Minister aware that these latest increases will fall heaviest on the families with small children, and particularly on the families of the lowest wage earners? Have the Government given any thought to these people? This is another immoral attack on their standard of living, and is completely in line with everything that the Government have done to those who can least afford to bear it.

Mr. Thorneycroft

The Government have given very careful thought to all these factors, but the worst damage that could be done to the social services would be to allow the cost of them to rise to unmanageable proportions.

Several Hon. Members rose

Mr. Speaker

Order, order All these matters can be debated later.