§ 3.40 p.m.
§ The Chief Secretary to the Treasury and Paymaster-General (Mr. John Boyd-Carpenter)
I beg to move,That this House takes note Paper on Public Investment in (Command Paper No. 1849).This is the third in the series of White Papers on Public Investment which have been presented to the House by the Government and which the House has subsequently debated. I think that the House, on previous occasions, has felt that it has been very useful to have the opportunity of discussing the very large block of expenditure involved.
The House will recall that the Plowden Committee drew attention to the desirability, whenever possible, of considering and discussing expenditure in fairly large blocks. The advantages of that are, I think, obvious, and it is as part of that process, it seems to me, that the kind of debate on which we are embarking this afternoon has very real value from the point of view not least of the traditional duties and functions of this House of scrutinising expenditure. It is, after all, fundamental to our history not only that the Commons should, as it does on some occasions, recommend additions to expenditure of one form or another, but that it should take the opportunity of looking at the way our national expenditure is going and considering it in fairly large blocks.
So far as this White Paper and, therefore, so far as I understand it, this debate are concerned, we are dealing with two broad categories. We are dealing, first of all, with investment in the nationalised industries, which for this purpose, at any rate, includes the Post Office, and also with the quite separate category of public service investment by both central and local government, including, simply by way of random example, roads, schools and housing. It is expenditure which I think it is useful to have presented in this way, particularly because if one looks at it from other angles—especially the way in which it is financed—it is much less easy to follow, for the expenditure that we are discussing in these two broad categories is financed in a very wide variety of ways.
211 The public service expenditure falls to some extent on Votes. Roads, for example, are dealt with on Votes and dealt with above the line in the Budget; and so are hospitals. Other things that we are concerned with—for example, schools—are in considerable measure financed from borrowing, with local government and central government involved in the servicing of the loans. The methods by which these expenditures are financed are certainly very variegated, and these blocks of expenditure, looked at from the financing point of view, are, of course, only a part of the total of national expenditure. They have any coherence and unity only if one looks at them from the point of view of what the money is spent on. That is, it is in essence what ordinary people would regard as the capital expenditure of central and local government.
The nationalised industries are financed—apart from the extent to which they are able to finance themselves from their own resources and, in particular, from their surplus of earnings over outgoings—broadly speaking at present by loans from the Exchequer. Plainly, different considerations apply to these two broad categories—the investment of the nationalised industries and public service investment as the White Paper seeks to define it.
Let me, therefore, take, first, the category of the nationalised industries. If hon. Members will look at page 5 of the White Paper, they will see that the figures for investment in this field in the year 1963–64, at £965 million, are £35 million, or approximately 3 per cent., up on the figures for the current year. But I must say at once that that figure, taken by itself, would be somewhat misleading, because, as the White Paper makes clear, two of the items are still unsettled. One is the item in respect of electricity. The Central Electricity Generating Board, in particular, and the area boards as well, have put forward some proposals for very large increases, perhaps, as the White Paper suggests, amounting to £70 million or more. In view of both their magnitude and their importance, these are still under discussion, and I cannot report to the House at the moment what the outcome will be. Similarly, the figure for the Post Office, 212 as the White Paper makes clear, is still under discussion. The overall figure—
§ Mr. John M. Temple (City of Chester)
As my right hon. Friend is discussing this particular column of figures, perhaps he might care to explain to the House why the 1962 White Paper differs in the description of this column from the 1961 White Paper. If I may remind him, the 1961 White Paper referred to this column as "approved expenditure", and the 1962 White Paper refers to it as "estimated expenditure". Why is it changed from "approved" to "estimated"? Does it mean that this year's figures are not comparable with last year's figures?
§ Mr. Boyd-Carpenter
As I understand, the figures, with the two exceptions which I have mentioned, are comparable with last year's figures. I will ask my hon. Friend the Financial Secretary, before he replies, to check whether what seems to me to be the likely explanation, and which I now give, is accurate. If I mislead the House and my hon. Friend, I apologise in advance, but I should have thought—
§ Mr. Temple rose—
§ Mr. Boyd-Carpenter
May I just finish? I should have thought that one of the obvious reasons was that the column includes, as I have suggested, two items which are not yet approved—relating to the Post Office and electricity.
§ Mr. Temple
I am extremely obliged to my right hon. Friend, but this is a matter all some substance, as during the debate all speakers, I think, will be referring to these items of expenditure, and I feel from my own observations that the explanation does not lie in the point my right hon. Friend has made. I hope that during his speech he may be able to enlighten us as to why this change has been made. There is obviously a significant reason for the change in terminology.
§ Mr. Boyd-Carpenter
The figures certainly are broadly comparable, and I am assured by my hon. Friend that the suggestion which I hazarded in reply to my hon. Friend's question—that in this case the two items to which I referred have not yet been approved—is, in fact, the explanation for the change in nomenclature. I hope that that makes the situation clear.
213 I should like to comment on some of these figures, though I am sure that the House will appreciate that without trespassing unduly on its time it would be impossible for me to cover fully the immense field covered by the White Paper, and at this stage of the debate I do not think it desirable or useful to do so. I think that it will probably be better if, after I have made my general comments and the debate has proceeded, I leave it to my hon. Friend, who, if he has the good fortune to catch your eye, Mr. Speaker, would propose to intervene at the end of the debate, to deal with the specific points that arise.
But I will hazard one or two general comments. First, the overall increase, which, as I say, may be—and almost certainly will be—considerably more than that which stands in the White Paper for the reason which I have given, especially in respect of electricity, reflects increases in electricity, gas and the Post Office, all three of them resulting, in turn, of course, from the increased demands for their services. The modernisation and development of industry resulting, among other things, from the very heavy private investment in industry over recent years has enormously increased, for example, the demand for electricity, and also, for industrial purposes in some measure for gas, and it is, of course, a matter of major importance to our economy that these convenient and valuable sources of power should be available for our expanding industry.
To some extent, however, these rising figures are offset by reductions. There is a reduction in the provision for the National Coal Board in face of changing views as to the amounts to be produced. There is also a reduction in respect of the British Transport Commission. On that, I invite the attention of hon. Members to what is said in paragraph 47 of the White Paper:The difference is mainly in expenditure on the railways, where only a few new major works, which are demonstrably worthwhile, are being authorised pending a reasonably assured definition of the future size and shape of the system. Apart from the London Midland electrification project and the extension of diesel traction, expenditure is confined mainly to essential replacements and to the completion of works in progress as quickly as is consistent with the economic use of resources.The basic decisions on these very large investment figures are obviously very 214 important. There is the long-standing one in respect of public utilities, that is, an estimate of the capacity that has to be provided to meet the demands of the economy as a whole and of industry in particular, but there is also the newer concept—what, perhaps, I might describe colloquially as the concept of banker and customer—which was first introduced in the White Paper, published in April last year, Financial and Economic Obligations of the Nationalised Industries, Cmd. 1337.
As the House will recall, in that White Paper, at considerable length, and, I think, with great force, there was argued the contention of the value of the financial criterion, the value in other words, of the return to be expected on the capital invested. It is, in the simplest terms, the kind of concept that in the private sphere arises when an industrialist makes an approach to his banker. In the case of the nationalised industries, broadly speaking the Exchequer is the banker. This is a good and useful barometer because if capital is earning a good return that is some evidence that it is being efficiently and valuably employed. This is a concept—that of the 1961 White Paper—which certainly is very much in our minds in determining the amounts of investment that are justifiable in these particular cases.
As the House knows, that matter has been carried in respect of some of the industries somewhat further. On 28th March this year my right hon. Friend the Minister of Power announced the targets for the gas and electricity industries. For the electricity boards for England and Wales he stated that the target was 12½ per cent. gross before depreciation on the net assets of the industry. A figure of 10 per cent., similarly looked at, was the target in respect of the gas industry. Without going into detail, it is quite plain that the position of the coal industry is somewhat different. For that reason my right hon. Friend, when, on 23rd July, he announced the target for the coal industry, announced a different kind of target, a target of earning a further £10 million a year after making provision for depreciation at historic cost. Targets for other industries are still being considered.
215 These targets are, of course, below the generality of what capital can earn in private industry. That, I think rightly, takes account of the fact that there is the public utility element in greater or lesser degree in all of these nationalised industries. I am sure that the introduction to this modified extent of the approach of the banker and customer concept, that is, trying to relate additional investment to prospective earnings, does get this investment on to a somewhat more realistic basis than has previously been the case and that it is a real advance in the control of this very difficult corner of our economy.
Turning to public service investment, the increase as set out in the White Paper is proportionately somewhat larger. The increase is from £1,000 million in 1962–63 to £1,095 million in 1963–64.
§ Mr. Gerald Nabarro (Kidderminster)
I gather that my right hon. Friend is departing from nationalised industries and not proposing to say anything more about the figures in the White Paper. Would he make perfectly clear that all those figures for investment in nationalised industries are gross figures and that they exclude the contribution made year by year from the internal resources of that industries concerned? For example, the figure for electricity at £422 million this year is, in fact, diminished by more than one-half by the contributions made from the internal resources of the C.E.G.B. and the 12 area boards.
§ Mr. Boyd-Carpenter
I think that my hon. Friend said "exclude" when he meant "include". The position is that these are the investment figures, not the amount of money that the Exchequer has to find. They consist, as I tried to show and as I think my hon. Friend will see if he reads HANSARD, of internal financing and also of the amount that has to be found by the Exchequer by way of borrowings to make up for what the industries do not find from their own resources. Those two figures, what the Industry finds from its own resources plus that found by borrowing from the Exchequer, are added together to produce these total figures for investment.
§ Mr. Nabarro
That is exactly what I am trying to bring out, but I must press on my right hon. Friend that "exclude" 216 is the correct term. These figures exclude the contributions made by these industries from their own internal resources.
§ Mr. Boyd-Carpenter
They include them. That is the difficulty. I think that my hon. Friend was wrong and that I am right. I know that that is most unusual. It is so surprising that I can hardly believe it. These figures include the contribution made by the industries from their own resources as well as the contribution made by way of loan from the Exchequer. I do not think that there is anything between my hon. Friend and me.
§ Mr. Stanley R. McMaster (Belfast, East)
Is it the position that these nationalised industries, gas and electricity, are required to make a profit and use that profit to finance future capital investment?
§ Mr. Boyd-Carpenter
I think that if my hon. Friend the Member for Belfast, East (Mr. McMaster) looks at some of the figures he will understand why I say that. I am glad that my hon. Friend the Member for Belfast, East interrupted me on this, because there is a direct relationship between what I am saying about the targets on earnings as a percentage of net assets employed and what I said to my hon. Friend the Member for Kidderminster (Mr. Natbarro) about the internal resources of the industries. The more that the industries earn the greater proportion of their future investment is financed out of those earnings and the less out of borrowings from the Exchequer.
There is a very direct relationship between what may perhaps have seemed to the House a rather academic exercise of setting a percentage target related to net assets employed and the extent to which it is possible to finance these industries out of their internal resources. My hon. Friend the Member for Belfast, East made a very valuable intervention, because it enabled me to bring out, perhaps a little more clearly than I otherwise had done, the direct relationship between these two concepts.
217 Mr. J. T. Price (Westhoughton): Will the right hon. Gentleman take the argument a stage further? There may be differing views about the academic soundness of this approach to the problem, but is not the final outcome of the argument that the prices to the consumers will be artificially inflated in order that the nationalised undertakings need not raise capital on the open market? This is in contradistinction to the very well-known practice of well-managed private industry and it may unduly inflate the cost of current to the consumer.
§ Mr. Boyd-Carpenter
I do not think so. I think that the hon. Gentleman is quite wrong in saying that this is the general practice of weld-managed private industry. I think that he will find that the great majority of industries, in financing capital developments, finance them in part from their own resources; in other words, in part out of profits and in part by resorting to their bankers Or to the market. That is precisely what I am suggesting is the right line for the nationalised industries to take.
I cannot accept the implication of the hon. Gentleman that it is impossible for nationalised industries to make profits. I am not as strong a critic of the nationalised industries as that. What we are trying to introduce is not a practice which is not generally undertaken in the private sphere, but, on the contrary, to promote something—but only a part—of what is the prevailing practice of well-managed private industry in this sphere.
If I may now return to the point to which I was referring about six minutes ago, that of public service investment—and it is so long ago that I think that I should remind the House of it—I was saying that, against the figure of £1,000 million for 1962–63, £1,095 million is the figure in the White Paper for 1963–64. That is surprisingly easy to calculate as a percentage. It is an overall increase of 9½ per cent. The House may remember that my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), then Chancellor of the Exchequer, said on 27th February in the House—and this is referred to in paragraph 15 of the White Paper—that it was intended to limit the increase in respect of public service investment for 1963–64 over that for 1962–63 to 6 per cent.
218 Therefore, I should first, on this topic, tell the House the reason for the change. Hon. Members will see in paragraph 10 of the White Paper a reference to an additional £70 million of public investment for work which could be done quickly. The biggest item is that of housing, and there are also minor improvements in schools, additional provision for the universities and one or two miscellaneous items. Its essential characteristic is that it is work which can be done and put in hand quickly, and of this about £15 million will be spent in the current year, and another £40 million will go to swell the total for 1963–64. It is, therefore, substantially this £70 million, for reasons which I will explain in a moment, which accounts for the greater part of the difference between the figure foreshadowed by my right hon. and learned Friend the Member for Wirral in February and the figure which actually appears in the White Paper.
If hon. Members, bearing in mind the figures I have just given, apply themselves to the figure in the White Paper, they will get this result. But for the £15 million spent in the current year, the figure for 1962–63 would have been £985 million, instead of £1,000 million. Similarly, the figure for 1963–64 would have been £1,055 million, instead of £1,095 million. Apart from this £70 million, there would have been an increase from £985 million to £1,055 million, which is approximately 7 per cent. The small difference between that and the 6 per cent. mentioned by my right hon. and learned Friend shows that slightly more rapid progress has been made.
This £70 million was authorised by the Government for work which could be done quickly in the particular context of labour and resources being available. I do not want to lead the House into a lengthy debate on public service investment either in the context of the management of the economy or of dealing with unemployment. Suffice it to say that, in general, public service investment is not a very effective weapon for either purpose. It is generally too slow in its effects, because public service investment projects take a long time to mature, and, not only that, they suffer too much from what is colloquially called "stop and go". As they are slow, in general, to mature, they 219 may very well be having an economic effect at a period so remote from the time or the period when the decision was taken that it may not be the effect desired. It is rather like steering a very large liner; she answers her helm rather slowly.
But there is a type of work to which that objection does not apply, and it is the type of work to which I have been referring—that which can be put in hand quickly, such as minor improvements to schools, minor local government works, work on housing and some of the work on the universities. It is precisely this additional work for which we judged there was room in the economy—work to be done within the sort of period in which it was likely to be done.
As I think the House knows, the forecasts for next year show some expected decline in private industrial investment, and, therefore, a certain amount of spare capacity. These are all good things to do in themselves, and, again, being by their nature things that can be done quickly, there seems to be an opportunity to do them, if they can be authorised and put in hand quickly. This is an important justification for this additional provision.
There is the related question of the effect of decisions of this kind, as I suggested a moment ago, upon unemployment, and particularly on local unemployment. I do not believe that, in general, the massive and rather slow-moving processes of public investment are speedy enough to be very helpful instruments for this purpose, but these quick-moving elements can play a part indirectly. What I mean by that is this. As direct providers of employment, most of these projects are of only comparative and relative value. For example, roads, to which I shall be referring in a moment, can be valuable in themselves, but provide very little employment relative to the expenditure involved. However, they can serve a very useful purpose in dealing with local employment.
Where an area has unemployment which is higher than the average the aim is to get industrialists to set up factories there and provide permanent employment. It was to help that object that my right hon. Friend the President of the Board of Trade recently announced a programme of nine further advance 220 factories. It is important that industrialists should go there whether into advance factories or entirely on their own initiative. By this type of public works, we can make areas more attractive to industries which could go there.
Take the case of communications. There are all sorts of industries for which good transport is essential, and there is no doubt that more industries are attracted to the South rather than to the North by good and nearer communications with their potential markets. Therefore, if we can improve road communications in areas that suffer from unemployment, the benefit from that is not so much the employment directly given by the road projects as the much more substantial and permanent benefit to be derived from making the areas more attractive and more likely to attract industrialists to settle permanently there.
In some measure the same goes for housing. If an industry moves to an area which is having difficulty, some specialist and skilled labour has, in most cases, to be brought in, and in that event the decision by an industrialist whether to go to an area may well be affected by whether there is suitable housing for the specialist staff which he has to bring with him. This particular provision of housing in this context is, therefore, very important.
The House may be interested to know that the emphasis on this housing addition, as in the housing policy generally of my right hon. Friend the Minister of Housing and Local Government, is on slum clearance. It so happens that a major part of this work lies in areas where pressure on the building industry is less heavy than the norm and where resources are available. That is true of 26 of the 38 local authorities concerned in the slum clearance drive.
Coming back to communications, I want to comment by way of illustration on what is being done for the provision of roads in the north-east of England. My hon. Friend the Member for Tyne-mouth (Dame Irene Ward) wrote me a most courteous letter to say that she would not be able to be here this afternoon. I told her that I would make special mention of her in respect of what I am about to say. The expenditure on 221 construction of roads in the North-East has doubled to all intents and purposes as between the current year and 1963–64, the year covered by the White Paper. My right hon. Friend the Minister of Transport is in the process of announcing some new schemes.
§ Mr. Paul Williams (Sunderland, South)
Since my right hon. Friend deliberately mentioned the North-East, may I ask, when he talks about road improvements there, and other comparable areas of high unemployment, whether he is talking about an improvement of communications on the major roads or whether he is talking about what I believe now to be the substantial problem—that of improving communications internally to an area?
§ Mr. Boyd-Carpenter
I agree entirely. The figures which I am giving relate almost exclusively to road construction in the area, particularly improving the communications between centres of the area and the main arteries of national communication.
§ Mr. Charles Grey (Durham)
May I ask for some figures? A few weeks ago the Chancellor of the Exchequer announced that an extra £70 million would be available for public works in the North-East. How much of that £70 million is for road works?
§ Mr. Boyd-Carpenter
I am reminded that my right hon. Friend the Chancellor of the Exchequer, in a Written Reply in HANSARD on 5th November, said that it was not possible to give the figures for any one area, but the figures which I have given relating to road construction are of interest.
I was coming back to the question of housing, which, in this context, is of almost equal importance. I do not know whether the House noticed the reply which my right hon. Friend the Minister of Housing and Local Government gave to a Question on 5th November. In case it did not, I should like to draw attention to it:I expect to let local authorities in the North-East build as many houses as they are capable of building during 1963."—[OFFICIAL REPORT, 5th November, 1962; Vol. 666, c. 35.]From the investment angle, which is the point concerning us this afternoon, this is only a relatively small part of the 222 measures which can be taken and are being taken in respect of unemployment generally.
I sum up what I have been trying to say in this part of my speech by saying that for reasons which I have given, notably slowness of operation, public investment generally is not a very good direct implement for this purpose, but that these kinds of public investment which both can be put into operation quickly and add to the attractiveness of an area may play an important part with other measures in dealing with this problem.
There is another related question: about half the public investment, in broad figures, takes the shape of construction, of building, of one kind or another. We have been considering the problem raised as to the geographical distribution of much of that construction. One starts from the practical consideration that if one authorises heavy additional construction work in areas where the building industry is already fully extended, the only effect is to force up prices and to delay completions.
On the other hand, if one authorises work in areas where the building industry is not fully extended, which are generally areas almost as a matter of definition suffering from a lower level of employment than other areas, then the work can be much more speedily completed and will have the sort of advantages which I have suggested to the House.
Even here, of course, there is not much margin, and the problem is complicated by the fact that when one builds schools one must build them where the children are, and if one is building houses one must bear in mind the housing needs of the area, even though it may be an area of very full employment. None the less, my right hon. Friend the Minister of Public Building and Works has been considering, in consultation with his colleagues, how to secure that public works in the public investment programme are steered more effectively than in the past to areas where the building industry is not fully extended.
In view of his relationship with the building industry, my right hon. Friend 223 has very detailed information, which he is seeking to improve, of the load of demand on the building industry throughout the country, and we are arranging for closer consultation in connection with the authorisation of investment programmes between my right hon. Friend, with his special sources of information about the load on the building industry, and those responsible for authorising investment. In this way, I think that we may be able to get a more efficient use of resources in respect of investment in construction.
I have been trying to deal with two very large directions of expenditure, and I think that there will be very few people who will dispute the importance of the items when taken by themselves. Indeed, it is my experience that when one takes these up by themselves one generally encounters serious demands that they be increased. I think, therefore, that it is valuable from every point of view to try for a moment both to look at them together and to set them into the pattern of our economy, and indeed into some relationship with our other expenditure and with the volume of private investment.
Obviously, this is a direction in which if public investment went too far, it could have the effect of bringing back inflation. If it did not go far enough it would mean that resources would be unused and, even more important, we should fail to give our economy the equipment, industrial and social, which it needs in the modern age. Like so many of these problems, it is a matter ultimately of broad judgment whether one has it completely right or not. It is a matter on which opinions in the House and outside can very well legitimately differ, but it is essentially a matter on which it is valuable that the House should have a discussion. As the future develops, the considered and objective views of the House will carry very great weight.
It is with the object of having an opportunity to debate these considerable matters on an objective Motion of this kind that the Motion has been put down and that I have moved it.
§ 4.18 p.m.
§ Mr. Thomas Fraser (Hamilton)
The Chief Secretary, early in his speech, related what was proposed in the White 224 Paper to the provisions set out in the White Paper on the Financial and Economic Obligations of the Nationalised Industries published about eighteen months ago. As he proceeded with this part of his speech I thought that he assumed too readily that hon. Members on both sides of the House accept fully the provisions of that White Paper. The right hon. Gentleman will know that we have never had a debate on that White Paper. If we had a debate, I think that he would find that hon. Members on both sides would express considerable disagreement with its provisions. In any case, the targets of all the nationalised industries have not yet been worked out in seeking to implement the Government's policy as set out in that document.
Inasmuch as we are considering in this White Paper the extent to which we will employ the resources of the nation in this sector of public investment, whether it be in the nationalised industries or in the public service sector, how the capital will be financed is of less importance than the extent to which we use our resources to build up these industries and services.
The right hon. Gentleman went on to say that the control of public investment by accelerating or braking is not a very effective means of directing the way in which the economy should move. He said that it was so slow in taking effect that when it was decided not to proceed with a project by the time the expenditure ran down the situation with which the Government sought to deal would have passed. I wondered then whether he was apologising for the decision taken twelve months ago. He seemed at least to be "explaining" the decision taken in 1961, because last year the Government decided to delay the implementation of public investment programmes. That was the term used then. The Chief Secretary explained on 28th November, 1961, twelve months ago tomorrow, that the purpose wasto increase the long-term strength of the economy."—[OFFICIAL REPORT, 28th November, 1961; Vol. 650, c. 250.]There is one thing for which I am grateful to the right hon. Gentleman this afternoon. He did not seek to convince anyone that this White Paper is in any way going to be a boost to the economy. This White Paper does no more than relax some of the more severe restraints 225 imposed last year, which have given rise to considerable unemployment in many parts of the country. They have even succeeded in bringing unemployment to London and the Midlands. I wonder whether the right hon. Gentleman or any right hon. or hon. Member opposite would care to explain now how the restraints imposed a year ago, the holding back of public investment programmes, has made any contribution to the strengthening of our economy. I cannot understand how putting another 170,000 people on the dole has helped to strengthen the economy. In this period industrial production has stagnated, and I do not think that the Chief Secretary will deny this.
It is worth while considering the movement of public investment and comparing what is now being proposed in this White Paper which is letting up on public investment with what has been achieved in past years. In 1961–62 the increase over the previous year was £145 million, or 8.8 per cent. The increase this year, as adjusted by the figures set out in paragraph 10, is £140 million, or 7.8 per cent. The increase for 1963–64 over this year will be £130 million, or an increase of 6.7 per cent. We are, therefore, making progress and incurring more capital investment by having a smaller increase each year. As the cost of building and acquiring land and all the incidental costs of capital investment programmes are rising all the time, there is not all that much increase in actual terms.
This applies both to the investment programmes of nationalised industries and to those of public corporations and the public service investment. In 1963–64 the increase in public service investment over what took place in 1962–63 will be substantially less than this year's increase over what took place last year. The increase this current year is £115 million over the previous year. The increase forecast for next year is £95 million. This is a considerable shock after the figures we have achieved with the brakes on. Now that we are lifting the brake we are to make less progress than we made with the brake on.
The Chief Secretary repeated what is said in the White Paper about the extent to which the additional public investment will be devoted to housing, uni- 226 versity building, schools, roads, etc. Building costs have been rising all the time. The Ministry of Works index shows that construction costs have risen from 113 in 1959 to 122 in the first quarter of this year, an increase of about 10 per cent. A study of the Reports of the Ministry of Housing and Local Government and the Ministry of Education shows that, whenever the private sector makes heavy demands upon the construction industry, building costs in the public sector rise very much more rapidly. Therefore, the increase in the public sector has been very much in excess of the increase shown in the Ministry of Works index.
Last week the newspapers gave some publicity to a report by the Association of University Teachers. We are told that 26.7 per cent. of the boys and girls at 1,362 grammar schools who obtained the minimum university entrance requirement failed to obtain places at universities. This is in England and Wales. It does not include the short fall in Scotland. This Report came out last week. A contribution to the solution to this problem is made by this White Paper. Paragraph 70 says that, if the programme for university building is completed by 1966–67, in four or five years' time, it will ensure university places for as great a proportion of the age group from which university students are selected as at present. Therefore, progress in Tory Britain means standing still.
The great aim is to achieve a position in 1966–67 which is exactly comparable with that of today, which means that for every three young people with the qualifications who will gain admission to a university there will be one who will be kept outside because there is no room at the inn. This is what we are seeking to achieve. I wonder how many of our competitors in Europe are facing up to the problems of the future with this kind of public capital investment—this kind of sharing out of the country's resources?
The table in page 22 of the White Paper shows that the total amount spent in England and Wales on schools rose between 1961–62 and 1962–63 by £13 million, and that the increase for next year, the year when we are giving this extra stimulus to the economy, will not 227 be £13 million, but £5.8 million—an increase from £136.8 million to £142.6 million.
I would remind the right hon. Gentleman that the Ministry of Education Report tells us that between 1959 and 1961 the cost of providing a primary school place rose by 16 per cent., and the cost of providing a secondary school place rose by 18 per Dent. That begins to make the increase in capital investment in schools of £5.8 million on £136.8 million a very small increase indeed.
For the benefit of the Secretary of State for Scotland, who is not here, I should say that we note with very great regret the amount to be spent in Scotland on schools. The Chief Secretary may find this amusing, but he told us that this additional investment would be directed principally to areas of high unemployment, and that one of the ways in which the investment could be made was to spend more on schools. On looking at the White Paper, we find that while, this year, £19.1 million will be spent on schools in Scotland, that will come down next year to £16.6 million—a very considerable reduction in part of the country that has constantly had the greatest unemployment of only recently exceeded by that in the Northern division.
The Chief Secretary said that the purpose was to divert the expenditure to areas of heavy unemployment, but in Scotland we find not an increase, but a very considerable decrease—
§ Mr. E. G. Willis (Edinburgh, East)
Would it be in order, Mr. Deputy-Speaker, to ask the Government Whip, through you, to see that a Scottish Minister is here to listen to this debate?
§ Mr. Fraser
It is, however, very much a matter for the House. I think that the Scottish Ministers, of whom there are so many, might have so arranged matters amongst themselves that at least one of them would have adorned the Government Front Bench to hear this debate—
§ Mr. Fraser
In the short term, the biggest of these increases is in housing. It is high time that we had a little more investment there, but I wonder how far it will take us. In the years between 1959 and 1961, the increase in tender prices as reported by the Ministry of Housing and Local Government went up by 21 per cent., and we see from these Reports, and we know from our constituencies, that council house building lags very far behind the needs of the areas the local authorities seek to serve.
It is not for me now to build this up into a housing debate, or to try to wring tears from right hon Gentlemen opposite by calling their attention to the problems of the homeless and those who live in slum dwellings in many parts, and to the gross and quite disgraceful overcrowding in some parts of our great cities. I shall not seek to state, let alone overstate, the amount of misery that is endured by so many of our fellow citizens in places like London, Liverpool and Glasgow. But our problem is just as serious as, and perhaps more serious than, the problem facing other nations. The rate at which we are building houses today by either public or private enterprise, falls very far short of our needs, and I wish that this were more widely recognised.
I have just been checking one or two of the European bulletins, and in front of me I have a table showing the number of dwelling per 1,000 inhabitants built during each of the last eight years in a number of European countries. I think that they are the countries with which hon. Members would most want us to be compared—France, the Netherlands, Norway, Sweden, West Germany and, perhaps, the United States of America. I am sure that those are the countries with which the Chief Secretary would want to compare this country. I do not think that he would want to compare us with Spain or Albania.
When we compare our own record with that of those developed countries in Western Europe, we come out of the comparison quite pitifully, Last year, in the United Kingdom we completed 5.9 dwellings per 1,000 inhabitants—and the Chief Secretary will know that our performance in some parts of the United Kingdom, particularly in Scotland, fell very far short of 5.9. The next 229 lowest amongst the countries I have mentioned was France, with 6.9 per 1,000, but that figure is less than France has been achieving for a number of years while our figure of 5.9 is the best we have had since 1957. We went far below that, and then got back to 5.9.
In the Netherlands, 7.2 dwellings per 1,000 inhabitants were completed, though the rate has been running at between 6½ and 8 per 1,000. The figure for Norway is 7.9 but, during the last eight years, the Norwegian rate has fluctuated between 10 and 7.8 or 7.9. We find Sweden with 9.8 and West Germany with 10.1. The United States rate of 7.4 is about the lowest that it has come down to over the years.
The Chief Secretary is perhaps the one member of the Government who should be able to accept this statistical argument—if he were to listen to it, of course, which is a little doubtful. Perhaps I can have his attention. He has often accused us of debating on an emotional basis the tragedy of the poverty-stricken old people, the war pensioners, the industrially disabled and those in receipt of sickness benefit, and of paying no heed to the cost or to statistics. I have no doubt that he has felt the same way when we have talked of the tragedy of evil and inadequate housing, so I should have thought him to be the one member of the Government who would be ready to look at this statistical case—
§ Mr. Boyd-Carpenter
The hon. Gentleman now comments. I was, in fact, remarking to my hon. Friend on the unreality of comparative statistics of this kind unless they were related to a long sweep of years; and that, in particular, the hon. Gentleman's comparisons with West Germany reminded me that for years after the war West Germany clamped down on housing in order to build factories, whereas we, as he knows, are at the end of a decade of unprecedented house building.
§ Mr. Fraser
I have said on many occasions that in those years immediately after the war we in the United Kingdom, with a Labour Government, built more houses per 1,000 of the population than any other country that was involved in the war. This was the test of how anxious we were to give our people decent houses. What the right 230 hon. Gentleman has said is true. It was only after a few years that some other countries in Europe were able to get down to this job. I did not pick on West Germany particularly, as the right hon. Gentleman would have noticed, but if he wants to deal with West Germany I would point out that in the last ten years West Germany has never built less than 10 houses per 1,000 of the population. At the same time, she has built up her industries at a very much faster rate than has been achieved in Tory Britain.
§ Mr. Boyd-Carpenter
The hon. Member must face the complete unreality of comparisons of this sort. Whether he knows it or not, West Germany, for example, has been the recipient of a steady flow of refugees. Her accommodation problem and also her availability of labour have been totally different from ours. The hon. Gentleman is trying to pose an argument of a statistical character which simply will not stand up when he will not face the fact of the record over a long sweep of years of house building under this Government.
§ Mr. Fraser
I thought that I was taking the whole period of years of this Government since 1951. I am not selecting particular years. I am taking the whole period of the Tory Government, and in the whole of that period we have done badly. We did best in Europe under the Labour Government.
§ Mr. Fraser
We have done worst in Europe under a Tory Government. This is a fact and the right hon. Gentleman knows it to be so.
The right hon. Gentleman only talks. He never listens. The proposition which I should like to put to him is that after one has solved the housing problem, when one has a high standard of housing, one still needs to build more than five houses per 1,000 of the population to maintain one's standard. If one does not do that, the standard declines. Sweden was not in the war and she emerged from the war period with easily the best housing standard in Europe. But Sweden goes on building between eight and 10 houses per 1,000 of the population per year, and last year 231 she built 9.8 houses per 1,000 of the population.
In those parts of this country where the housing standard is lowest, the provision of house per 1,000 of the population is also the lowest. Scottish Ministers have said many times that Scotland has the worst housing in Western Europe. I have heard the Minister of State, Scottish Office, say and repeat that housing in Glasgow was the worst of any city of Western Europe. I am saying that at the present rate of building Glasgow will certainly continue to be the worst housed city in Western Europe. I do not want it to be so. I want to see our people getting better houses in which to live. I put that to the right hon. Gentleman and his colleagues on the Front Bench so that I might ask them whether they will not say whether we in this country cannot set aside that part of our resources which will give to us the improved housing that is being enjoyed in so many other countries.
To catch up with France, which is second from the bottom of the league, I have mentioned that we would require an additional 52,000 houses per year. Since the right hon. Gentleman cannot bear the mention of West Germany, I will leave it out and say that to equal the output of new houses in Sweden, whose housing standards are far away ahead of ours, we would require an additional 200,000 houses per year. No doubt we shall be told that the resources of this country could not stand anything like that. It is against this background of our need and the comparison with other countries that we should look at this miserable little increase in public investment in housing.
The right hon. Gentleman called our attention to the proposal in the White Paper that some extra money for roads will also help, and, in particular, help to deal with local unemployment. He told us, in other words, what the White Paper says about the rate of expenditure in the North-East. He said that expenditure on road construction there would be doubled. I should like to hear from some of our North-East Members what that amounts to—
§ Mr. Fraser
I mean what it amounts to in terms of providing employment. The Minister made clear that there was not much employment in building roads. As a matter of fact, most of the employment is provided in the factories where the road-building machinery is manufactured, and for the most part that employment is not in the areas of high unemployment.
I should like the Financial Secretary of the Treasury to tell us a little more about the effect which the Government believe this will have on unemployment in the short term. I agree that improvement of the road system and of communications generally will improve the attractiveness of any area in the long term. It will be seen from page 20 of the White Paper on Public Investment in Great Britain, published in October, that the increase this year, 1962–63, over last year, 1961–62, was £25 million, and that the increase for next year, 1963–64, is to be £14.7 million.
Therefore, the increase next year when the brake is off and the encouragement is given, is very substantially less. It is £10.3 less than it was when the brake was on. I find it difficult to understand how this will be demonstrated to intelligent people as a measure to boost the economy.
To return again to the position in Scotland, I find that the Exchequer contribution for classified roads in Scotland which, according to the White Paper, is running at £8.3 million this year, is to come down next year to £6.9 million, a reduction of £1.4 million.
The Chief Secretary told us that the additional expenditure on schools and roads would be directed into the areas where there is heavy unemployment. In the very area where there is the heaviest unemployment for the longest period and where it is still the worst, with the exception of the North-East, expenditure on both roads and schools is to be substantially reduced next year. I hope that the Financial Secretary to the Treasury will spend a little time explaining this. How does he reconcile what the Chief Secretary said about using these programmes to provide employment in areas of unemployment with the reductions in the programmes in areas where unemployment is highest?
233 The programme set out in the White Paper will do very little to stimulate the economy in areas of high unemployment. In the Press notice issued a few days ago by the Ministry of Labour which gave us the position at 12th November, one finds in the following totals the following figures: the North-West, 88,329; the Northern region, 61,729; Scotland, 93,391; Wales, 35,211. In those four areas, the percentage of unemployment among males is 3.4, 5.4, 4.9 and 3.8. This is a disgraceful misuse of, or failure to use, our resources, and it has been the result of Government policy.
The Government seem to think that, by achieving these figures, they have strengthened the economy. The Secretary of State for Scotland goes much further than that. He thinks that to have 93,390 unemployed is a great asset. Apparently, the more unemployed one has, the bigger is the asset.
§ Mr. Fraser
No doubt the right hon. Gentleman thinks that a man employed in an engineering shop is a liability. That is the other side of the coin.
All the four areas I have mentioned have unemployment substantially above the average, and other areas in Britain have unemployment substantially below the average. Those four are the areas which make up the bulk of unemployment in the country. With the new boosts they are giving to the economy or the new relaxations they are making, the Government might have been expected to make relaxations calculated to assist in the solution of the unemployment problems in those areas. But not at all.
Incidentally the figures of unemployment which I have given are not altogether a measure of the success or failure of the Government's economic policies because the true position is obscured by the migration of workers from those areas into the Midlands and the London area. Inevitably, a lot of the additional money required for public service expenditure in building houses, schools, and so forth, will represent public investment required to provide homes and schools in the congested areas of the Midlands and the South for those folk who are required by force of eco- 234 nomic circumstances to move from the areas of unemployment.
In the three Northern areas, the North-West, the Northern region and Scotland, we find that, during the past twelve months, the number of unemployed has increased by no less than 78,000. If we had the same percentage of unemployment in the rest of the country as we have in that part of the country north of a line from the Humber to the Mersey, we should have substantially more than 1 million unemployed. No one thinks that we could bear to have more than 1 million unemployed in Great Britain as a whole in the 1960s. If we cannot bear to have more than 1 million unemployed in Great Britain as a whole, why should we bear to have the same level of unemployment north of a line from the Humber to the Mersey? Why permit it in the North? Why not take steps now to deal with the problem?
In this country, two nations are glowing up. We are pleased to call ourselves the United Kingdom, but, in fact, we are rapidly becoming a divided kingdom. The opportunities for employment, the amount of earnings when one is employed, and the prospects in employment are not comparable north of the line to which I have referred with what they are in the South. Two quite different nations, two separate communities, are growing up.
The Government imply that there is nothing they can do about it because private enterprise decides where people will live. The Chancellor of the Exchequer told us the last time we were on the subject, when he made his announcement about investment allowances in the debate on the Amendment moved to the Address in reply to the Queen's Speech a few weeks ago, that all we could do with an industrialist who wanted to build or expand in London or in the Midlands was to try to persuade him to go elsewhere. If says the Chancellor, at the end of the day, he refuses and says that, if he is not permitted to have his I.D.C. to develop where he chooses, he will go to Europe, what does one do in those circumstances? Of course, the answer is that, if the industrialist is tough and says that he will not go anywhere else with his industry, he must have his I.D.C.
235 The alternative, of course, would be to let him go to Europe. Industrialists are great patriots. It may be anti-British, but it makes good sense. Capital and capitalism have no patriotism at all.
Over the years, the Government have agreed that one should not let private enterprise develop where and when it will. Ever since the passage of the 1945 Act, there has been acceptance of the idea that the Government will have power to control the extent to which industry will develop in any part of the country by requiring everyone who wants to put up more than 5,000 sq. ft. of industrial space to apply for an industrial development certificate which may be refused by the Board of Trade. We have to consider whether this policy has worked well and whether we are dealing with the problems which were seen to have existed by the procedures to which I have referred.
I put it to the right hon. Gentleman that the experience of the past seventeen years has shown that this is not enough, that industrialists have known over the years that, if they say "No" loud enough, they will get their industrial development certificates for where they want to go. If it was right in 1945 for the Government to seek to steer industrial development about the country to get a better social and economic pattern than we had had for a very long time, and if the measures which were then employed are seen to fail, surely the time has came for us to consider whether there are other steps which we should take.
§ Mr. P. Williams
This raises a very important point of difference between the two parties. Although the hon. Gentleman put it very fairly, he has not come to the logical conclusion of telling the House and the country what the Labour Party would do in the circumstances.
§ Mr. Fraser
I did not want to go on too long, but I will tell the hon. Member exactly what I would do. I would create a national instrument, a national industrial planning board, something like "Neddy", perhaps, but with a little more power, which would decide which industries ought to be expanded to get economic expansion for Britain as a whole and decide where in the country expansion would take place.
§ Mr. Fraser
There are hon. Members who seem to think that a few people who happen to sit on a board of directors are the industry. What I was suggesting was that a national instrument employed by the Government should decide not only what expansion should take place but where it should take place. I would then be perfectly willing to allow private enterprise to carry out expansion in the part of the country where it was required, but if private enterprise was unwilling to do it on its own, I would allow private enterprise to do it in partnership with the State. If private industry would not even do it in partnership with the State, I would say that the State should do it.
§ Mr. Fraser
I spent quite a long time at Woodside explaining this and exactly what we would do, and the Labour candidate was returned. [An HON. MEMBER: "But what a majority."] It was a majority. I have made many speeches at weekends and at other times explaining exactly and at greater length what I have just said.
§ Mr. Fraser
In the areas to which I have called attention, which is the northern half of the so-called United Kingdom, we have a lot of industries in which I believe the Government could take steps within the terms of this White Paper or in some kind of publication to inform us of what they were doing to help.
The shipbuilding industry is going through a very rough time in the North-East and the North-West, on the Clyde and in other parts of Scotland. I have heard a good many speeches from hon. Members on both sides of the House who had been concerned that steps might be taken to promote a little more activity 237 in the shipbuilding industry. I shall not go over all the steps that have been suggested. There are some steps which the right hon. Gentleman and his colleagues in the Government could take to stimulate activity in the shipbuilding industry, and I am asking the Government whether they would not, at this time, do something to help.
§ Mr. Rankin
Does my hon. Friend recollect that we have actually placed on the Statute Book an Act for that very purpose by a Tory Government?
§ Mr. Fraser
But since then the Tory Government have connived at a merger between an air corporation and a shipping company which has made an additional "Queen" liner superfluous to requirements, so the purpose of the Act is apparently not to be given effect to.
I wonder whether the Financial Secretary will tell us whether this industry, for example, is to enjoy any advantage either from anything provided in this White Paper or in the announcement made by the Chancellor of the Exchequer a few weeks ago on the subject of investment allowances. Is it anticipated that any of the measures, or steps taken, or decisions reached in recent times to remove the impediment to expansion in our economy will have any effect on the shipbuilding industry? I intended to say something about steel, but I had better move on.
This White Paper also tells us about factory building. The factory building for which provision is made by the Government through public investment is very largely the factory building in the areas of high unemployment at the instance of the Board of Trade. This, I think, will be accepted right away. Last year, public investment in factories, according to the White Paper, was £11 million. For 1962–63, this year ending in March of next year, public investment in factories will be £11 million, but in 1963–64 the investment will be £9 million. We have had a programme of advance factories announced in recent times quite clearly for the purpose and for no other purpose than to keep at least partially employed in the areas of high unemployment the resources which had been regularly employed in the last two 238 years, using this capital investment of £11 million.
So private enterprise was not moving, no doubt partly due to the restrictions imposed in 1961 and the position got so very bad in some of those areas that the Government had to do a little by authorising the building of a few advance factories; but they are clearly hopelessly inadequate to the needs of those areas. In any case, inasmuch as this White Paper is regarded as setting out a programme which will stimulate the economy let it be recognised that Expenditure on factory building will be less next year than it is this year and that this factory building is falling off in those areas in which unemployment is heaviest.
A large part of the public investment is in respect of the plant and machinery of the nationalised industries. I should have thought that this was an occasion to consider whether the nationalised industries were being required to give too much work to private enterprise, thus curtailing unnecessarily the work done in their own workshops. This applies most noticeably to the coal mining industry and to the railways. The private enterprise coal companies and railway companies saw great advantages in making and maintaining their own plant and machinery in their own workshops. In the case of some of the smaller coal companies, their undertakings were not big enough to justify this. But with the coming of nationalisation in both industries, surely what was being done not only as sensible administration, but, as a bit of good business under private enterprise, became much easier under nationalisation.
In recent years the trend has been in the opposite direction. Why? I should have thought that the easiest possible way to stimulate employment in areas of unemployment and greatest need—I need not say what areas I mean—would be to develop the work required to supply plant and machinery for publicly-owned industry and for the public services. I do not mind whether this is called direction of industry. A great deal can be done in this respect.
The sums involved are not small. We are told that next year the National Coal Board's public investment in plant and 239 machinery will be £49.5 million. Expenditure by the British Transport Comission on Tolling stock alone will be £53.5 million. This makes a total of £103 million. There is considerable expendittune on plant in the railway industry other than on rolling stock and modernisation. I was disappointed to hear what the Chief Secretary said about modernisation of the railways. It is clear that very little more will be done apart from a bit of dieselisation in some parts of the country.
We should be going ahead with electrification in many places, but I do not like to think of what happened about electrification in Scotland. We had excellent railway workshops in Glasgow and other parts of Scotland. We had railway electrification in the West of Scotland forking out from Glasgow. Apart from the stamping out of passenger cars by Pressed Steel at Linwood, in Renfrewshire, not another pennyworth of modernisation has been undertaken by any Scottish firm, not even a Scottish private enterprise firm.
Why more of this sort of work could not be done in railway workshops I do not know. This should have been done in many parts of the country, but particularly in the North-East, the North-West and in Scotland. The Government, if they had the mind to do so, could make a big contribution towards easing our employment problems by allowing the Coal Board workshops and railway workshops to do a great deal more work than they are doing in making and maintaining plant and machinery employed in their industries.
I return to a point which I put to the Minister of Power last week. When the Government come round to considering this additional £70 million which is half promised in paragraph 14 of the White Paper for electricity generaation, transmission and distribution, they might decide that two new coal-fired stations should be built in the North—one in the North-East and one in Scotland. This is an easy way to help to maintain a reasonable level of employment in those industries If a 2,000 megawatt coal-fired station were built in the North-East and another in Scotland to supply electricity to the grid for use mainly in the South it 240 would provide employment in each case for no fewer than 10,000 miners. There would be employment for miners until well beyond the end of the century.
If a decision to build these stations is not taken at an early date, mines will be closed and the men in them will be out of work. There will be no possibility of the pits being reopened. If a decision to go ahead with these projects is not taken, these stations will not be built at any time. In view of the Government's failure to provide alternative employment in those areas for displaced workers, I should have thought that they would now intimate that they are willing to authorise the building of those two coal-fired stations.
The policy announced in 1961 has been seen to be disastrous. I think that that was all but admitted by the Chief Secretary today. The policy outlined in this White Paper is a step in the right direction, but it is a small, faltering step and hopelessly inadequate to the needs of our times.
§ 5.16 p.m.
§ Mr. John M. Temple (City of Chester)
To use cricketing language, I should very much like to congratulate my right hon. Friend the Chief Secretary to the Treasury on carrying his bat last night and on opening his innings once again today in such exceptionally good form. Possibly last evening's debate was a more lively affair because we were dealing with something more comprehensible. We were dealing with money in terms of shillings and pence. Today we are discussing a White Paper dealing with money in terms of thousands of millions of pounds. As my right hon. Friend the Home Secretary said last year when he was Chief Secretary to the Treasury, the sums of money involved in this public expenditure programme are vast.
I could not agree with very much that the hon. Member for Hamilton (Mr. T. Fraser) said. Certainly I could not agree with him when he said that this White Paper would not be a big boost to the economy. I believe that the public expenditure envisaged in it will be a very big boost indeed to the economy. Today I shall examine the effect on the economy of this large boost and, more particularly, its effect on local authorities and ratepayers.
241 First, I deal with the effect of this vast programme of public expenditure on the national economy. Last year, the then Chief Secretary forecast that the rise in public investment between 1961–62 and 1962–63 would be 5 per cent., but in the event that rise has turned out to be 9 per cent. Today we are considering an overall programme in which there is a built-in increase in constant prices of 7 per cent., but, having regard to what happened last year and the fact that the eventual out-turn was an increase of 9 per cent., I think we can confidently forecast that the increase for 1963–64 will be about 12 per cent. at current prices, rather than 7 per cent., which is the estimated figure in the White Paper.
Last year, the then Chief Secretary said that the proportion taken by this public investment programme as a whole would be one-thirteenth of the gross national product. What concerns me very considerably is the fact that this proportion is likely to grow, because unless the gross national product grows at a very much greater rate, this public investment programme, with a dynamic built into it far greater than the growth of the gross national product, will take an increasing share of the gross national product.
Page 5 of the White Paper deals partly with expenditure at current prices and partly with expenditure at constant prices. When my right hon. Friend was speaking, I drew attention to the last column on page 5, which shows the estimated expenditure. That, of course, is at constant prices, and that is why when considering this subject we are liable to be confused by the comparatively low growth rate forecast compared with the actual growth rate which emerges in the following year's White Paper.
I said that I was greatly concerned about the effect of the growth rate of this public investment. I noticed that my right hon. Friend drew particular attention to the fact that for 1963–64 the Government had decided to inject an extra £70 million into certain sections of this investment programme. I can understand why the Government have done this. They have done it with the intention of taking up the slack in the economy in those places where the hon. Member for Hamilton wishes that slack to be taken up. I trust that this policy 242 will be successful. But the figures with which we are dealing are immense, and I find this overall growth rate extremely disturbing when one considers the fact that sterling is a reserve currency. I think that we in this country will have to be very careful not to let public expenditure grow so rapidly that we run into another balance of payments crisis owing to the type of pressure on sterling which we had only about twelve months ago.
I turn now to that part of this White Paper entitled "Public Service Investment". I dare say that my hon. Friend the Member for Kidderminster (Mr. Nabarro), if he catches your eye later, Mr. Deputy-Speaker, will be speaking about that sector represented by investments in the nationalised industries. I propose to concentrate on the public service investment sector. Quoting from page 4, paragraphs 2 and 3 of the White Paper, one sees quite clearly where this major increase in expenditure is coming from. Paragraph 2 says:Public investment expenditure continues to grow rapidly.Paragraph 3 says:The largest increases are in expenditure on the electricity programme, on education, on housing and on the aggregate of small local authority programmes.I am going to concentrate particularly on the effect of this great growth of public expenditure on local authority budgets. I do not think that local treasurers, although they were exhorted last year by the then Chief Secretary to plan ahead with their investment programmes, can really do this against a background where changes in their expenditure are affected by national decisions. In this respect the Government are the "pace-setters" with regard to expenditure right across the economy, and no local treasurer last year reading the then White Paper could have envisaged that there would have been a decision by the Government this year to step up public expenditure. This decision on public expenditure is definitely going to affect local budgets.
I propose to draw attention to four particular points. They are mentioned specifically in paragraph 3 of the White Paper and refer to the great increase in expenditure on education, water and sewerage, hospital, local authority health 243 and welfare services and the aggregate of small local authority programmes. Mentioning education first and turning to pages 22 and 23 of the White Paper, I find that educational expenditure in the last year, between 1961–62 and 1962–63 has risen by 14 per cent. Paragraph 71 of the White Paper says:Expenditure by local education authorities is, for the most part, financed by borrowing and the loan charges, together with capital expenditure from revenue, are taken into account in fixing the general grant".The important words here are that this expenditure is "financed by borrowing".
Unlike the expenditure on the nationalised industries, there is no direct return on educational expenditure. I fully realise that there is an indirect return, but what the local authorities have to deal with are the actual loan charges on the capital involved in their educational programmes. Admittedly, this paragraph refers to the general grant, and, naturally, the central Government will be responsible for bearing their share of the loan charges as determined through the general grant structure.
Paragraph 73 of the White Paper makes a special point of mentioning that colleges of advanced technology have been transferred, regarding their financial burden, from the local to the central Government. I will now quote from paragraph 74 of the White Paper. I apologise for the number of quotations that I shall have to make, but this is a matter of considerable complexity and detail. Paragraph 74 says:The most important element of expenditure on other educational services in England and Wales is the expansion of teacher training colleges.I say quite definitely that teacher training colleges are an aspect of local education authorities which could well be transferred as regards their financial burden direct to the central Government. The catchment area for teacher training colleges is quite obviously very much larger than the catchment area for any local education authority, and I would say, recognising the extremely rapid rate of growth of expenditure on education, that there should be a shift of a certain amount of responsibility for the financing of that programme from local to central Government.
244 Turning to another aspect of this public investment programme which affects the local authorities, I would mention water and sewerage, which are referred to on page 25 of the White Paper. Here, again, we find exactly the same thing. Paragraph 84 says:For the most part expenditure is financed by loansThat means that on those loans there will be a considerable service charge in respect of interest and a very large increase in expenditure by the local authorities themselves in order to cope with the maintainance of these schemes when they are in operation.
Turning to the "Hospital and Local Authority health and Welfare Services" referred to on page 26 of the White Paper, I am concerned only with the local authority health and welfare services. But here we get a quite amazing rate of growth. Looking at the mental health services referred to on page 26, we see that in the four years 1960–64 expenditure will have gone up by 400 per cent., a fourfold increase. I am here talking about England and Wales. When we look at the total programme for England and Wales, we find in this sphere that the capital investment programme in four years has been nearly doubled. We are certainly talking about services which are growing extremely rapidly. I think that there is a strong case for transferring the financial responsibility for the mental health service from the local authorities to the central Government. The growth rate in this sphere is 16 per cent. in current terms as between 1961–62 and 1962–63.
Paragraph 3 of the White Paper makes special reference to the "Other Investment by Local Authorities" and is referred to on page 31. Here, again, we have some phenomenal growth rates, the overall growth rate being 17 per cent. Referring to certain items among "Other Investment by Local Authorities", I would mention car parks which over the last four years have grown five-fold in capital expenditure. Expenditure under the Town and Country Planning Acts has doubled, and expenditure on Civil Defence has gone up three times. Paragraph 114 goes on to say:For the most part this expenditure is financed from local authorities' internal resources or by borrowing.245 I can say from my own experience that tar and away the bulk of the expenditure is provided by borrowing.
I would think that among these items there is yet another which could be transferred from the local authorities to the central Government. I refer here to Civil Defence. Paragraph 123 of the White Paper says:Expenditure on Civil Defence is almost wholly incurred on the provision of training premises and operational controls.I believe that the provision of training premises and operational controls is quite definitely a national expenditure, and I hope that my hon. Friend when he replies will comment on these suggestions because I believe that here we have decisions which will have to be taken by the Treasury. Therefore, looking right across this field of local authority capital expenditure referred to in the White Paper, we find that the growth rate has varied between 13 per cent. in respect of water and sewerage and 17 per cent. in respect of other local authority investments. I have worked out a weighted average of increase of expenditure on the services which I have just mentioned which comes out at 15 per cent. That was in respect of the increase as between 1961–62 and 1962–63, and it was on a forecast overall increase of 5 per cent. What will happen in 1963–64, when we have a forecast increase of expenditure of 7 per cent. as opposed to 5 per cent.? In these sectors, we may well end up with an increase of something like 20 per cent.
If we are dealing with cumulative increases of about 20 per cent., we are facing a rapidly increasing rate of growth of capital expenditure in the local authority sector which in time must give rise to an increase in the current expenditure of local authorities.
I have made a point of picking out those aspects of local authority expenditure on which there is very little direct return. I have not mentioned housing. I did not regard this as being specifically a housing debate, although I should be pleased to debate housing specifically at any time with the hon. Member for Hamilton. In the context of local authority expenditure, however, I have always regarded housing as being very largely a self-balancing item and felt that only a small proportion of this 246 expenditure should fall upon the local authorities themselves.
I have mentioned that these programmes which will have to be undertaken by the local authorities must be financed largely by loan charges. Only comparatively recently, while I was in the United States of America, I had the opportunity of talking to several of the financial officers of some of the largest local authorities in that country. The problem of local authority finance is not confined to Britain alone. It is a problem which faces developed countries all over the world.
I found, however that the United States had a lower long-term interest rate than we had. I hope very much that when my hon. Friend the Financial Secretary to the Treasury replies to the debate, he will indicate whether the Government see any chance of harmonising our long-term rates of interest with those which obtain in the countries of the European Economic Community and in the United States of America. I have always campaigned for a lower long-term interest rate. I have never asked for a special lower long-term interest rate for any sector of the community, but I believe that a lower long-term interest rate is essential for the financing of these vast local authority programmes. I make no special point, however, of seeking a lower long-term rate of interest specifically for local authorities.
A substantial part of the expenditure on these services as applied to local authorities will, of course, be met by the central Government through the general grant. That is a matter entirely for my right hon. Friend the Chief Secretary to the Treasury and his right hon. Friend the Chancellor of the Exchequer. I can only presume that they are quite happy about meeting their share of this burden, because one knows that central Government revenues are comparatively buoyant. But what about the local authorities? Here we have a very different story. The only source of revenue for local authorities—and I agree with this particular source of revnue as being the only source—is the general rate. This is based on the aggregate value of hereditaments with rateable values throughout the country.
247 Quoting from local government financial statistics, the rate of growth of rateable values has been of the order of 2 per cent. per annum cumulatively in real terms. In terms of current values, it might have been 2½ or 3 per cent. The rate of increase of rateable values throughout the country in real terms has been nothing like 15 or 20 per cent, per annum! Therefore, if I follow this argument consistently, I adduce that rate poundages are bound to increase if local authorities have a rate of expenditure of anything like 10 per cent. cumulative per annum in current terms, which is three or four times as much as the increase of rateable values.
I do not think that the picture is quite as black as I have painted, for the reason that the increase in current expenditure of local authorities in real terms is of the order of 6 per cent. per annum. Taking this 6 per cent. and adding to that the service charges which will have to be paid on these vast increases in public investment, I believe that the increase in local authority expenditure in current terms may well end up to be of the order of 10 per cent. per annum.
I have concentrated more or less entirely on the effect of this vast programme of capital expenditure on the local authorities. I make no apology for that, but I accept that this year there is a powerful case for a certain stimulation of public investment. I hope very much, however, that my right hon. Friend the Chief Secretary will not hesitate to cut back this rate of expenditure if the existing slack in the economy is seen to have been taken up. I do not believe that we should go on with a rate of public expenditure which is far in excess of the resources which the economy can generate having regard to the growth of the gross national product.
§ Mr. Denis Howell (Birmingham, Small Heath)
Is this latter part of the hon. Member's argument applied to local authorities? If so, it would have disastrous effects upon the social welfare of the country.
§ Mr. Temple
I have been trying to draw attention to the effect that these programmes will have. I am not sure whether the hon. Member was in his place earlier.
§ Mr. Temple
I suggested that certain parts of services or certain services should be transferred as regards their expenditure from local to national Government, because I envisage a time when the cost of this programme on the local authorities might well be too great.
I am very concerned about the present growth rate of public investment. I hope very much that when my hon. Friend the Financial Secretary replies he will say that, taking one year with another, the Government will try to keep this growth rate in line with the growth rate of the gross national product. If not, we may be facing a serious state of affairs in which public investment will take far too large a share of the national cake.
§ 5.38 p.m.
§ Mr. J. Idwal Jones (Wrexham)
The hon. Member for the City of Chester (Mr. Temple) will forgive me if I do not follow him in his arguments. The White Paper is a valuable and informative document, but one is bound to suggest that the proposition concerning factories does not measure up to the needs of the change in the industrial pattern of the country. One of the most striking phenomena of recent years has been the redistribution of industries in Britain, to the advantage of some areas and to the grave disadvantage of others. This change has brought affluence to some areas but it has brought poverty and unemployment to others.
Until the recent past, the industrial areas were based upon collieries. Coal mining was the basic industry, and other industries developed on the coalfields. There was at that time a semblance of balance in Britain's economy. We had the industrial North and North-West and the agricultural South and South-East.
This balance has been upset. Today we have a divided Kingdom, as my hon. Friend the Member for Hamilton (Mr. T. Fraser) pointed out, with a very prosperous south and south-east of England and the North-West rapidly going into decline and threatened with dereliction unless something is done. We are having a new industrial revolution with over-concentration of industries in the Midlands, the South and the South-East, and there is no imaginative attempt to regulate this development. Nothing in the White Paper helps.
249 The population within the southern area is growing with startling rapidity, and we are assured that if this growth is maintained the density of population in this part of the country in 20 years time will be twice that of contemporary Holland, which is now the most densely populated country in the world.
This distribution also affects ports. We are witnessing the concentration of industry and people in that part of the country nearest to Europe. Goods are flowing towards the Port of London while the old ports of Liverpool, Glasgow and those in the North-East and South Wales are being left high and dry on the periphery. They are doomed to decline and ultimate decay unless something is done.
For the same reasons, there are major problems on the railways. With the tendency to stagnation in the old industrial areas, we are told that some railway lines are becoming unprofitable and they are threatened with closure. This is a vicious circle. There will be no railways in these areas, and that in itself will be a reason advanced later on for industry not going to them.
That, I think, is a fair picture of the pattern of industrial activity today in Britain—a rapid expansion in the Midlands and the South and South-East, and decline in the older industrial areas of the North and North-West. We are now approaching nearly half a million unemployed in the older industrial areas. We are rapidly moving towards the American situation, where economic expansion goes hand in hand with unemployment.
What does the White Paper offer? Since the areas mostly affected are based upon coal, I turn first to the public investment in the coal industry.
§ Mr. Jones
I cannot hope to enlighten the hon. Member for Kidderminster (Mr. Nabarro) on this point.
In the figures of investment in coal, there is a reduction from £94 million in 1960–61 to £83 million in 1963–64—a reduction of £11 million. There is also a reduction in the estimated costs of new major schemes, from £67½ million in 1957 to £5 million in 1961–62, which is a very substantial reduction. The 250 industry is being modernised and streamlined, exhausted collieries are being closed and there is a general reduction in manpower. That has led to considerable saving in public investment in the industry. That saving could be used to solve the problems created by the running down of manpower in the pits.
The closing down of old and exhausted pits has created new employment problems in those districts. Suitable alternative employment must be found. This is vital not only for the adults but for the boys and girls leaving school—the future population of those areas. I can visualise what would happen in my division if one colliery were to close down. It would be chaotic from the point of view of the schools, the technical college and the general industrial life and employment of the area.
The Government cannot wash their hands of their responsibilities for dealing with these problems, and that on a large scale. But it is here that the White Paper is very disappointing. What does it offer for the provision of the factories which are essential if the industrial life of these older areas is to be retained? Do we see a large-scale, concerted, imaginative, continuing and progressive plan to meet the situation? We do not. What are the Government's estimates?
Public investment in factories in 1960–61 was £7 million, in 1961–62 and 1962–63 an estimated £11 million, and falling to £9 million in 1963–64. There is no effort there at a build-up. Against the total national investment of £5,000 million the amount is a mere drop in the bucket. At best, the figures show only temporary expansion of factories, for the square footage provided was 3 million in 1962–63, while for 1963–64 the estimate is 1½ million to 2 million. Is that sufficient to make an appreciable impression on the situation?
Wales falls outside the area of affluence. On Tuesday the President of the Board of Trade was asked what plans he had for the provision of further advance factories there, and the reply from the Parliamentary Secretary was, "None at present." That, of course, means none in the immediate future. It was a definite answer. The answer is "None", and there can be nothing less than none. Or can there? Let us see 251 whether it is possible to have even less than none.
To answer this, I again turn to the position in Wrexham, where the Government's policy on investment has been so utterly disgraceful that it is time the story was told to this House, and that is what I propose to do. I refer to Wrexham not only because I represent the division, but because there we have an example not of public investment but of public investment in reverse. It is less than none, for it is an example of inverted public investment.
Not only have the Government not invested in the area, but they have done, and are still doing, the opposite. They are in the process of unscrambling the public investment already there. Not only are they not going to invest in advance factories in Wales, they are actually disposing of their investment in Wrexham. We have five large collieries in addition to chemical works, brick and tile works and steel works. These are major heavy industries. We also have an industrial estate set up in 1947 to diversify our industries and so bring a more satisfactory balance to the economy of the area. Thus, new light industries helped to balance older, heavier industries.
The industrial estate consists of factories and stretches of land which are owned by the Board of Trade. It is a public investment. The land was purchased by agreement at prices advantageous to the vendors. The land is suitable for industrial development and has been reserved by the Board of Trade for that purpose. In 1959, about 40 acres were acquired on the estate at a cost of £44,000 to prepare for industrial purposes.
Here is an area conducive to further public investment, and if there are no plans at the moment for advance factories, surely this public investment should be retained as a public investment until such plans are available. In fact, however, Wrexham became one of the first casualties of the Local Employment Act, 1960. With an unemployment rate of 3.9 per cent., Wrexham was removed from the list of scheduled areas. I appealed to the Parliamentary Secretary to the Board of Trade to reconsider that decision, but he justified it on the ground that the prospects for Wrexham were good. He said 252 that in any case 400 jobs were on the way to Wrexham. They are still on the way. They are still travelling hopefully. Where they are, I do not know, and nobody else seems to know. All we know is that these 400 jobs have not arrived since January, 1960.
In May, 1960, in the Welsh Grand Committee, I drew the attention of the then Minister for Welsh Affairs to the employment situation in Wrexham. He replied that employment in Wrexham was expanding and not contracting, as I had asserted. But his argument was not based upon fact, unless he had discovered a new law of economics—that expansion in employment takes place in direct proportion to the increase in unemployment. If that is a law, it is new to me. In any case, the right hon. Gentleman was not prepared to press for public investment in the Wrexham area when there was a greater need in Gwynedd.
However, the story did not end there. It was bad enough that the Government had refused financial assistance for Wrexham, but worse was to follow. In spite of the mounting unemployment in the area, which the Government refused to face, we had sprung upon us an example of public investment in reverse. The Government adopted that policy towards the industrial estate. Not only were they not to spend on the estate, but they were to make cash out of it by selling it.
They decided in the first instance to offer the factories to sitting tenants. One can only suppose that if the sitting tenants refuse to buy, the factories will be offered to other interested firms. In any case, the industrial concerns on the estate have either to buy or to get out. I do not know how far the sales have proceeded and I have not been able to find out, but I know that on account of Government policy two firms have already left the estate. That is our experience of the Government's public investment policy.
In a debate on Welsh affairs in July last year, I again drew the attention of the Minister for Welsh Affairs to the deterioration which had followed this policy. The Minister said that I was wrong to insinuate that the selling of the industrial estate was a threat to the prosperity of Wrexham. He said that there was no truth in my insinuation; but he was wrong and I was right. In 253 October, 1960, 3,360 were employed on the estate, but today the number is fewer than 3,000. In November, last year, 1,139 adults in the area were unemployed, but today the number is 1,515, an increase of 25 per cent. Last November, 94 school leavers were unemployed, but today the number is 197, twice the earlier figure. Last night I was told that of the summer term school leavers in Wales there were 519 unemployed in the whole of Wales of whom I find 197 are in the Wrexham area alone.
If instead of a policy of public investment the Government decided on a policy of disposing of the investment, would it be possible to have public investment in another form? If an alternative to public investment could be devised, would the Government have any objection to the alternative? An alternative plan was devised and was presented to the then President of the Board of Trade. Alarmed at the prospect of the industrial estate being splintered and future development in the area jeopardised, Denbigh County Council, Wrexham Rural District Council and Wrexham Borough Council got together and eventually offered to buy the estate and develop it as a public concern under a public authority, thus substituting one form of public investment for another. But the offer was rejected and the Board of Trade proceeded to sell. It is still in the process of selling and I am entitled to ask why, and I am entitled to an answer.
The story does not end there. I have already said that on this estate there were stretches of land reserved for industrial development, some of it cleared at public expense. Its preparation in 1959 was a form of public investment. Today, the Government are selling that land. To whom? To the original owners? Do the original owners have the first option? Was not this land acquired in the first instance by agreement and at prices advantageous to the vendors? Why is the Minister so obsessed with the Crichel Down procedure as to believe that it should apply in this instance? Is it the case that the original owners have shown no interest and have refused to buy? If they have, then the ground has been torn from under the feet of the Minister for proceeding to sell the land. Why does he persist in this inverted 254 policy of public investment? Why does he not retain this public investment so that the land can be used for industrial development, thereby doing something to arrest the growth of unemployment and to offer some hope to the boys and girls of our schools?
We have nothing to thank the Government for.
§ Mr. Jones
Hon. Members opposite nearly lost all five by-elections. We have nothing to thank the Government for. Public investment has been denied to us. New industries have not arrived. On the contrary, what little public investment we have had since 1947 has been placed under the auctioneer's hammer to he sold against the Inland Revenue for a handful of silver. Just for a handful of silver, we have been left to our problem of industrial stagnation, as if we had not had enough industrial stagnation in our area in the past. For a handful of silver, the Government have left us, and there sit the Ministers in fine array with the ribbons of national disservice sticking to their coats.
§ 5.59 p.m.
§ Mr. Gerald Nabarro (Kidderminster)
The presence of the hon. Member for Wrexham (Mr. Idwal Jones) is lugubrious. The story he related to us was depressing. If it were true and factual, I should suffer some alarm. I wrote down a few words from one of his later sentences. He said that new industries had not arrived. The hon. Gentleman was talking about the North-West.
§ Mr. Nabarro
The hon. Gentleman was talking about the North-West. All right, exclude Wrexham in the North-West.
§ Mr. Idwal Jones rose—
§ Mr. Nabarro
I did not interrupt the hon. Gentleman once during his half-hour speech. Wrexham is part of the industrial conurbation of the North-West. Whether the hon. Gentleman likes it or not, is it.
§ Mr. Idwal Jones
I said that in February, 1960, the Parliamentary Secretary to the Board of Trade told me that there were 400 jobs on the way to Wrexham. I then said that these 400 jobs had not come to Wrexham, and that as far as I know they are still travelling hopefully on the way. They have not arrived. That is the statement I made, and I stick to it.
§ Mr. Nabarro
Wrexham is a highly prosperous town, and the amount of unemployment there is a modicum. The hon. Gentleman has grossly exaggerated his own constituency case. I wrote down the words that he used in the context of employment and unemployment in that part of the country when he said that new industries had not arrived there.
The fact is that Her Majesty's Government have done more to attract new industries to the North-West than any Government in this century. They have heavily subsidised the ingress of the Ford Motor Company into Halewood on Merseyside, and what is the outcome of their efforts? This morning's Daily Telegraph carried the following report:Sir Patrick Hennessy, the Ford Motor Company chairman, warned Merseyside yesterday that the firm may have second thoughts about building a £9 million transmission plant in the district.The report continues:He complained bitterly about the company's experience of unofficial strikes during the construction of its factory at Halewood, near Liverpool. Although it would create work for 9,000 people there was 'a militant minority who seemed determined that the factory should not be completed.'Perhaps a few hon. Gentlemen opposite, who are eternally bellyaching about local unemployment on Clydebank, on Merseyside, in the North-East and elsewhere, would apply themselves to the members of their own party who foment disorders—
§ Mr. T. Fraser rose—
§ Mr. Nabarro
I refuse to give way to the hon. Gentleman. He refused to give way to me today, and last Tuesday on three occasions he refused to give way. He can now sit in patience. Perhaps the hon. Gentleman and his Socialist friends 256 opposite will apply themselves to the members of their own party in the unions, and their Communist associates who foment disorder. It is no good the hon. Gentleman gasping. I will repeat it in case he did not like it. The hon. Gentleman and his friends should apply themselves to their Communist associates in the unions who, by fomenting disorder in the construction of new factories, are delaying by long periods the bringing of succour and relief to areas of local unemployment.
Mr. J. T. Price
On a point of order. The hon. Member for Kidderminster (Mr. Nabarro) is making wild charges which he cannot substantiate. Is it in order for the hon. Gentleman to apply a general criticism to this side of the House and say that my hon. Friends are condoning unofficial strikes which we have all condemned? I suggest that the hon. Gentleman ought to name the hon. Member to whom he is referring, and not be allowed to get away with this kind of thing.
§ Mr. Deputy-Speaker
I think the hon. Member knows that that is not a point of order for me. The hon. Member who has the Floor is expressing an opinion.
§ Mr. Nabarro
And a jolly good opinion too. Of course, I always catch the hon. Member for Westhoughton (Mr. J. T. Price) on the raw when I say these things. I intended to catch him on the raw. He knows perfectly well that many of these unions harbour Communist agitations. The hon. Gentleman knows perfectly well—
§ Mr. Nabarro
The hon. Gentleman knows perfectly well that these unions harbour Communist agitators, among others, and that they are responsible on Merseyside at present for holding up the completion of the construction of the new Ford factory.
I return to the second point made by the hon. Member for Wrexham in the course of his lugubrious delivery, his point about the coal industry. The coal industry today, as was brought out so vividly and graphically in our debate last Tuesday on the Coal Industry Bill, is in the satisfactory position of earning a profit, the first for a long time.
§ Mr. Nabarro
Lord Robens, who is a thorough-going Tory, is applying good Tory philosophy to the conduct of the affairs of the coal industry. Of course, the hon. Gentleman who sits here on a National Union of Mineworkers' ticket does not like words of that kind. I am telling the hon. Gentleman a few of the facts of life. The coal industry today is earning a profit, and a very good thing, too. I remind the hon. Member for Wrexham and the bunch of ex-coal miners sitting round him that because the industry is—
§ Mr. Deputy-Speaker
Order. I hope that the House will conduct the debate in an orderly fashion. An hon. Member has the Floor, and he alone has the right to speak while he is on his feet.
§ Mr. Nabarro
As always, Mr. Deputy-Speaker, I am grateful for your protection.
The coal industry is now being conducted at a profit. I prefer the word "profit" to "surplus". I love profits. If I can earn a profit, I am an efficient chap. If I earn a loss, I am an inefficient chap. Earning profits should always be an essential feature of the conduct of nationalised industries, and because the coal industry today is earning a profit, it follows that the sum of money required for capital investment year by year will diminish so long as those profits continue. That is the correct answer to the hon. Gentleman who complained about diminishing investment.
§ Mr. Idwal Jones rose—
§ Mr. Nabarro
The hon. Gentleman does not recall his own form of words. I believe that the Government are making stalwart efforts to bring employment to areas where there is a high level of unemployment today, and the contention of the hon. Member for Hamilton (Mr. T. Fraser) that the Labour Party would direct employers to these areas—that was the first statement he made—and would direct them to increase their output and production, and would, if those employers failed to consent, have the State do it for them—in other words, enlarge 258 nationalisation—was probably the most important single thing which emerged from his speech. He was speaking from the Opposition Front Bench and advocating an enlargement and increase of nationalisation. Pity he does not put this in the election addresses of the by-election Labour candidates. It would be profitable to the Tory Party if he did but I will see—
§ Mr. Nabarro
I will see, as usual, that his words are properly publicised as a statement by an Opposition Front Bench Speaker.
Now I am finished with controversy, and I will start with construction. My hon. Friend the Member for Yeovil (Mr. Peyton), who is now the Parliamentary Secretary to the Ministry of Power, my late and lamented hon. Friend Mr. Angus Maude, and dare I mention the recently execrated name Hinchingbrooke, when he sat here, and I, all pressed year after year for a White Paper of this kind so that annual public expenditure could be analysed within the compass of a single debate, and the emphasis displayed by the Government of the day, year by year, as between nationalised industries and public services could be examined properly in this House and full accountability had by these services to Parliament. We have that White Paper. It is only the second consecutive year in which we have debated it, and a very valuable debate I conceive it to be.
I quarrel at once with the hon. Member for Hamilton when—and I wrote down his words—he refers to "this miserable little increase in public investment". He may know something about hewing coal; he knows nothing whatever about money. If investment, as the White Paper says, may be increased in the nationalised industry sector, in the years between 1960–61 and 1963–64, from £865 million to £965 million—an increase of 11½ per cent. over a three-year span—I say that that is a very generous measure of improvement in investment, and explodes at once the Labour Party's soapbox propaganda that the nationalised industries are failing the community because of the lack of investment in them. In fact, over the years the Tory Government have a far, far better record of 259 financial support for nationalised industries than ever the Labour Party could achieve.
§ Mr. T. Fraser rose—
§ Mr. Nabarro
I warn the hon. Member for Hamilton; three times last Tuesday and once today he refused to give way to me during one of his speeches, because he was afraid of the intervention that I would make. The difference between us is that I am not afraid of him, and I will give way to him now.
§ Mr. Fraser
The point about the hon. Member's trying to interrupt me last Tuesday was that he was making impertinent remarks from a sitting position, which he wanted to repeat standing up. When I try to interrupt him it is on a matter of importance. He has said that capital investment in nationalised industries has increased by 11 per cent.—
§ Mr. Fraser
—by 11½ per cent. in the last three years. If the costs of production have also increased by 11½ per cent. in the last three years, does it not mean that we are getting the same as we had three years ago?
§ Mr. Nabarro
No. The hon. Member must go away and do his homework. He must read the White Paper [Interruption.] The figures that I have given are relevant to the situation after the appropriate adjustments have been made.
In public services investment there has been an increase over the same years from £780 million to £1,095 million—an increase of 40 per cent. I recall no period in the last fifteen years when, over a three-year cycle, public service investment in this country rose by a margin of as much as 40 per cent. Over the whole field both of the nationalised industries and public services the net increase in public investment during the three years that I indicated is no less than 25 per cent. That is a substantial achievement.
I would not go further than that, for the reasons cogently explained by my hon. Friend the Member for the City of Chester (Mr. Temple), who said that if investment in the public sector, including the nationalised industries, were allowed to rise too fast we would run into the 260 same kind of economic difficulties that we have suffered at regular intervals during the last few years. It must be regulated appropriately, and some special regard should be had to the needs of the most productive of all the nationalised industries, in a general sense, the electricity industry.
I shall talk about that industry for a few moments, because it is by far the most voracious of any nationalised industry or public service in the demands that it makes upon the Exchequer, year by year. During the five years commenceing this year-1962–63—the electricity industry, comprising the Central Electricity Generating Board and twelve area boards, will require the sum of £2,035 million—an average rate of investment of more than £400 million annually. This is manifest from page 5 of the White Paper that we are discussing by the figures of £422 million in 1962–63 and £438 million, estimated expenditure, in 1963–64. That is a huge sum of money.
I am delighted that my right hon. Friend is following out precisely the policy enunciated, with a good deal of public comment, in the White Paper, Command 1337, published in April, 1961, The Financial and Economic Obligations of the Nationalised Industries, to the effect of these boards should make a substantial contribution to annual capital investment from their own resources. I quote particularly from page 7 of the White Paper. Paragraph 19 (a, ii) refers toadequate allocations to general reserves which will be available inter alia as a contribution towards their capital development and as a safeguard against premature obsolescence and similar contingencies.Within the £2,035 million required far capital investment by the electricity industry in the next five years, £815 million will come from depreciation; £336 million from a postulated profit or surplus, and the balance, of £884 million only, will be borrowed from the Treasury. In other words, my right hon. Friend is now creating a situation whereby 56 per cent, of this huge investment requirement for electricity is being supplied from within the internal resources of the industry itself, and only 44 per cent. is falling, by way of borrowing, on the Treasury. That is an extremely satisfactory position, and one 261 which should be widely publicised by the Treasury as the determined effort being made by the Government to cause these nationalised industries to project their financing requirements further forward into the future, and to find the maximum sum from within their own resources.
It has its dangers in the public mind. For example, in the last completed year —the year ended 31st March, 1962—the electricity industry made a profit of £26.9 million, compared with a profit of £16.3 million in the preceding year. Accompanying the announcement of the £26.9 million profit or surplus was a statement from the leaders of the electricity industry that the domestic, commercial and industrial tariffs were to be raised. The general public immediately inquired, approximately in the following terms: "If a nationalised industry makes a loss its charges are put up, on the best Beeching principles. If a nationalised industry makes a profit, its charge's are also put up. Oh, God, deliver us from nationalised industries anyway". That would be right in respect of the second part of the statement, if further expansion of nationalisation were contemplated, but in relation to the first part there is a very difficult and exceptional case to be explained to the public about electricity charges.
The Herbert Committee which inquired into the electricity supply industry four or five years ago brought this point out cogently. It said that not too much of forward investment requirements should be loaded on to the backs of the current consumers and taxpayers, but that a right balance should be struck. My view is that the electricity industry, which has the most voracious and expensive capital investment requirements within the nationalised industries, should try to find about 60 per cent. of its investment needs, year by year throughout the remainder of the sixties, from its own resources, and should borrow only the remaining 40 per cent., on the best terms that it can secure.
But none of this exonerates the electricity industry from charges of extravagance. The taxpayer is providing huge sums of money for the development of this industry, at a rate which I always regard as a reflex of the prosperity of Britain. If we go on increasing our 262 electricity demand by 10 per cent. per annum, in arithmetical progression, and doubling it every decade, it is a reflex of the demand for electricity on two counts —the first of which is the rising scale of production in industry and commerce and the second the improved living standards in our homes, arising from the much greater use of electrical appliances.
All electricity investment is not sacrosanct. To listen to Labour Party speakers one would imagine that the bigger the investment in an industry, the better it must be. But it is good investment only if it is economically and productively applied within the indsutry and—I am sorry to say this to my right hon. Friend in the Treasury —there is a good deal of extravagant expenditure in electricity today. I cite one example. The hon. Member for Tradeston referred to it a few months ago with me on the same day. The Estimate for the Hunterston power station of the South of Scotland Electricity Board—
§ Mr. Rankin rose—
§ Mr. Nabarro
I will give way in a moment. The estimated investment required for the Hunterston nuclear power station of the South of Scotland Electricity Board was of the order of £31 million. When the station is approaching completing we learn that it is costing £64 million—more than double as much.
§ Mr. Rankin
I thank the hon. Gentleman for giving way to me. I merely wanted to bring hint up to date. My constituency is not Tradeston; it is Govan.
§ Mr. Nabarro
I apologise at once. The hon. Member for Govan raised this matter at the same time as myself. That is one example of grossly exaggerated and unaccounted additional investment and I think that there ought to be a post mortem upon it. I say this to the Financial Secretary. I think that the House of Commons ought to be told why there is a mistake in the Estimates of more than £30 million.
§ Mr. Nabarro
I quite agree, let us have all the facts.
263 I have visited Hunterston, Calder Hall, Dounreay and many of the nuclear power stations, and I know that a certain amount of the work is of a development character and original nuclear and scientific thinking. But I want an explanation why the Estimates are so far out.
A second example from the electricity industry is the huge sums of money devoted to advertising, largely of an unproductive character. When the Annual Report of the Electricity Council was available, it was printed, full page, in practically every national and provincial newspaper in this country, together with a substantial figurehead photograph of the chairman of the Electricity Council, Professor Edwards—
§ Mr. Nabarro
No, not Jimmy—Professor Edwards.
I am not criticising the Electricity Council for publishing its Report. I give credit to the industry for making the substantial surplus of £26.9 million and giving reasons why the electricity tariffs had to be raised to provide for this largely expanded investment programme. But I do criticise the extent of the advertising. The electricity industry spent well over £1 million in its accounts on advertising last year. Why publish the picture on a large scale of the Chairman of the Council? That is of no interest whatever to consumers. Why publish an entire newspaper page of detailed information concerning the conduct of the Electricity Council? The whole lot might have been put into a 9-inch double column—[HON. MEMBERS: "No."]—yes, it could. And I could do it by just printing those items of interest to the consuming public—
§ Mr. Nabarro
Of course I should leave out the photograph. Any man who publishes in a newspaper his own photograph for publicity purposes of a commercial character is guilty of reprehensible conduct by wasting the shareholders' money. And as members of the general public are the shareholders, the learned professor ought to be reprimanded on that account. I say this to 264 my hon. Friends on the Treasury Bench, because it has a good deal of psychological importance. If we are to make a large profit out of an industry, and if concurrently we propose to raise the tariffs, it is not reasonable to demonstrate the extravagance of the conduct of the industry by widespread advertising of an unnecessary character.
I wish to devote the last few minutes of my speech to an unusual aspect of public investment. My right hon. Friend will find in the White Paper, on page 19, reference to "Other public corporations":Investment by the British Broadcasting Corporation is normally financed from the Broadcasting Vote (Class IV, Vote 13); the greater part is for the home services, for which the amount of the Vote is related to licence revenue. Provision is mainly for the extension and improvement of coverage of the television and very high frequency sound broadcasting services, and for new and improved buildings and equipment".In paragraph 60 it says:Additional investment will be needed for the developments in the broadcasting services outlined in the White Paper, Memorandum on the Report of the Committee on Broadcasting 1960 (Cmnd. 1770).In the White Paper of 1960, under the heading of "Finance", in paragraph 59, are these words:The Government accepts its responsibility to see that the B.B.C. can secure sufficient income to finance adequate services.Though we are still awaiting a further White Paper, to denote what legislative action Her Majesty's Government are taking in connection with the recommendations of the Pilkington Committee, we do know that it will be the policy of the Government to proceed with colour television and 625-lining instead of 405-lining at the earliest possible moment—I am delighted to see that my hon. Friend the Assistant Postmaster-General is in the Chamber.
The estimated cost of these scientific advances is approximately £40 million. It is a sum of money which could not be met within the present financing and licensing arrangements of the B.B.C. whereby it derives income—that is, the Corporation derives income—of not more than £34½ million per annum from television and sound radio licences and the Treasury participates by appropriating approximately £14 million.
265 If the large capital investment for colour television and 625-lining is to be financed on a proper basis, I wish to say to my right hon. Friend that I cannot understand why the British Broadcasting Corporation is now the only nationalised industry or service which is not required by Statute or by Charter to conduct its affairs on a commercial basis paying its way taking year with year. We have recently reformed the whole of the finances of the General Post Office to secure that desirable end. The Post Office now is virtually in the same position as the National Coal Board. It is required to produce revenue each year over a five-year span which matches its expenditure, after making appropriate allowances for depreciation of fixed assets and the remainder. I want to see the Charter of the British Broadcasting Corporation drastically reformed in a fashion to enable it to conform with all our other nationalised services and to make provision for furnishing this large sum of money required for scientific advance in television broadcasting, by borrowing and finances reformed to meet contemporary needs.
At present the Treasury takes a substantial sum every year, and the borrowing powers of the Corporation, in any event, would have to be largely increased. There is no mention of any of this in the White Paper, though under "other services" there is a modicum for television and sound radio development. The B.B.C. should be a self-supporting service in exactly the same way as the General Post Office, whereas the present Charter relates more largely to the crystal set days, or the Crystal Palace days of 30 years ago or more. I think that we might recognise the fact that television has arrived; that there are 12 million sets in this country today; and we might bring the Charter of the B.B.C. up to date, with all the necessary financial provisions for furnishing the capital investment money required, including the £40 million which it is estimated will be needed in the next few years for giving a comprehensive colour television service and for the improvement from 405-lining to 625-lining.
§ Mr. Denis Howell
Some of my hon. Friends and myself, who are following the hon. Gentleman's argument with very 266 great interest, are wondering whether he would carry it to its logical conclusion and announce that he believes that the licence fees for television should be substantially increased. Would he tell us whether he supports this proposal?
§ Mr. Nabarro
I should be out of order if I attempted to do so in this debate, but I will give the hon. Gentleman an interim answer. There will be a Broadcasting White Paper shortly, and the proposed amending legislation announced in the Queen's Speech. I shall endeavour, Mr. Speaker, to catch your eye on the Second Reading of the Television and Broadcasting Bill which I believe will come before us in the next few weeks, and I will then give the House my views as to how the finances of the B.B.C. may be reformed in such a fashion as not to require—repeat, not to require—any increase in the £4 television licence or the £1 radio licence which is perfectly practicable if the finances of the B.B.C. are placed on a realistic basis.
§ Mr. Nabarro
It will be a fascinating speech, I promise the hon. Gentleman, as indeed this has been a fascinating speech, judging by the avidity with which the hon. Member for Hamilton has listened to every word of it.
I congratulate my right hon. Friend the First Secretary on his presentation of this White Paper, which again justifies the earlier comments expressed by my hon. Friends on the back benches and myself. The investments pronounced in the table on page 5 are significant and impressive, and they explode at once the false statements made by many leaders of the party opposite that Tories, out of political malignancy, deprive the nationalised industries of adequate sums to furnish capital investment for the future.
§ 6.32 p.m.
§ Mr. James Boyden (Bishop Auckland)
To judge by the enthusiasm of hon. Members opposite for the national investment programme, it is surprising that we have had for so many years social services which are not so broad and modern as their suggestions would seem to imply. Most economists criticise the Government for not receiving 267 enough capital investment, for not creating an atmosphere favourable to investment both in the private and the public sector. One of the reasons for the lack of growth in our economy is precisely this.
The White Paper, as it stands, is misleading on the rate of investment. A remarkable document has recently been produced on the building industry by the Builder, and this, as far as I know, is not an organ of the Labour Party. I understand it is a rather reactionary body. The building industry has produced a report on itself pointing out that, in regard to capital investment in building—and this, surely, is one of the principal items in the capital investment programme—public authority expenditure on building, excluding housing, remained stable at 33 per cent. between 1955 and 1961. If one includes council houses, then, of course, there has proportionately been a decline in the amount of public building. What the party opposite ought to be saying is that public investment is a means of making the modern sort of nation they say we will be if we go into the Common Market, but what, in fact, they have done, for example, in education is only to stand still relative to the problems that face us.
The Ministry of Education, in its reports over the years, has been grappling with the "bulge", with the movement of the population and with what is called, parallel to the "bulge", the "trend". Even if it had succeeded in this respect—and I do not know that I can concede that it has—even if the Ministry reckons that it has succeeded in maintaining a rate of progress sufficient to cope with the "bulge", with the increased numbers of children taking the G.C.E. of various levels and with the increased movement of the population, it has not made one step forward towards the fulfilment of the Education Act, 1944, to which for many years they have referred on public platforms as showing that the Tory Party was concerned about education.
The main reform of the Education Act, 1944, one of the biggest investments which could be made, remains to be fulfilled. The Minister of Education has refused to announce a date by 268 which the school-leaving age would be raised to 16. Hinged on that is whether there shall be compulsory day release in a further ten years' time. What was sketched out in 1944, and what surely could have been attained in a period of sixteen or seventeen years, still remains precisely where it was, and the only solid contribution has been the raising of the school-leaving age to 15 by the Labour Government.
The university situation is no better now, in regard to young people getting into universities, than it was even ten years ago. When the figures for university expansion are given, on the face of it, they look very good, but if we take what the University Grants Committee has said about the obsolescence of university buildings and laboratories we see that over the years 1947–57 there was an obsolescence factor of £62 million and that very little of it has been overcome. If we set that against the figures shown on page 21 of the White Paper, we see that there was £20 million for capital expenditure during 1960–61, rising to £38.6 million in 1963–64. We we calculate for a period of three or four years, making allowance for obsolescence, the figures look very different from the impression given by the White Paper.
If we look outside the figures themselves and see what is going on in the university world, we see the evidence of the effect of inadequate investment. Let us take that field in which everybody agrees there ought to be a much higher advance—that of the proportion of students in halls of residence. We find that it is very little better than in 1938. In 1938–39, the figure was 25 per cent. in residence, in 1953–54 it was 28 per cent. and in 1958–60 27 per cent. This is one reason why a newspaper yesterday or the day before was complaining of students sleeping in gymnasia and of the very large number of students whose lodging conditions up and down the country are simply appalling. This is because there has not been, over a long period of years under a Tory Government, adequate investment to deal with this problem.
In this modern world, we find that it is necessary to run in order to stand still, and in university teaching there is a great danger of the dilution of teaching in the very field on which our national 269 survival most depends. I refer to paragraph 45 of the last Report of the University Grants Committee, referring to this important factor of the changes in student-staff ratios. Whereas the changes in the ratios in some faculties may have been satisfactory, the Report states:In particular, the fall in the ratio in the Pure and Applied Sciences from 7–6:1 in 1938–39 to 10.4:1 in 1961–62 is a matter of very serious concern.The Report goes on to say:If staffing in relation to students in 1938–39 was in balance, then it follows that these two faculties were understaffed to the extent of 30 to 40 per cent, in 1961–62.This is public investment which is vital for the success of the country, quite apart from any considerations of social advance and social reform. Although at the moment the figures for the future look good, they can only be set against the neglect over the last ten years. One cannot suddenly expect to make up that deficiency in one year or two.
I criticise the Government severely, even within their investment programme, for faulty utilisation of such investment as they have made. The stop-and-go policy has not only been disastrous in areas such as mine but it has been wasteful of such investment as has taken place. I quote here from page 9 of the Plowden Report:There is no doubt … that chopping and changing in Government expenditure policy is frustrating to efficiency and economy in the running of the public services. It impairs cost-consciousness and financial discipline at all levels. It is difficult to engender these in any large organisation and they are of fundamental importance.This has been the background of the last ten years. The situation is somewhat different at the moment; we are now in a "go" year, but who can forecast that in the next year or two there will not be some "stop"? It would be interesting if some omniscient organisation and methods expert surveyed Government expenditure over the years to see how much cash has been lost by this stop-and-go policy. I have a little experience, and I can illustrate the point from education. For example, in the technical college expansion programme of Durham, practically all the technical colleges were provided in stages. By doing it in stages, the second and third tenders were relatively more expensive 270 than the first tender. Walls were blocked up, parts of the building were sealed off and had to be reopened at greater expense, and, quite apart from this, there were considerable losses from the fact that college did not get off to a good start. There was also considerable social and educational loss in the administration of the buildings in the first few years.
Another example is the dispersal of the motor road learns which the road-building interests criticized. One can also think of the B.T.C. electrification on the North-East Coast, the raising of the bridges on the main line and the cost incurred in it; these will be losses, or, even if they are not in the next few years the capital expenditure will have been premature, and this is equally wasteful.
The building survey brings out very remarkably how the policy of stop-and-go by the Government has been damaging to the private sector of the economy. It states that Government action in curtailing building activity has bankrupted many small builders and at times left architects without the knowledge of where their next job was coming from. This is the way in which the Tory Party treats the little man. At election times one is given the feeling that the Tories are great protectors of the little man, but in this neutral report on the building industry—or perhaps a report favourable to the building industry—there is this damaging criticism of the way in which the small private operator has been bankrupted by the Government's policy.
I turn to another aspect of this financial planning. If there had been better financial planning there would have been still more positive savings. I have been criticising the lack of planning and the fact that it is causing waste. I turn now to where there could have been savings over the years by intelligent planning.
Again I quote the Plowden Committee, reporting a couple of years ago. It said that present arrangements are "somewhat uneven" but that the investment authorisations of some departments cover adequate periods. It refers to the Ministry of Education and the University Grants Committee. I admit that the recent policy of the Ministry of Education in having a five-year plan and working to a schedule of this description is very much better. I could criticise and point out some mistakes even in this 271 set-up and policy, but at least it is a better piece of financial planning. But the Plowden Report said—and I am sure that this is still true—There may still be significant areas of public investment in which the present system of financial authorisation gives insufficient scope for forward planning, and we hope this will be remedied.One of the reasons it will not be remedied is that there is not an adequate number of properly trained technical staff to do the job. In their last Report the Civil Service Commissioners said that there were not enough statisticians to collect our taxes. They diluted the competition for statisticians but still could not get enough. It is well known, as the Plowden Report says, that there is anacute shortage of professional statisticians and other experts of this kind.Even if the Government are now serious about this problem, they will find that the lack of investment in higher education over previous years is such that they will not be able to tackle the job even if they wish to do. We run across this in the hospital services. The new hospital planning programme is very much hindered, and has been hindered up to the present, by an inadequate supply of architects, of quantity surveyors and civil engineers, as well as by the sorry story of wage negotiations which has kept the hospitals short of this type of staff for a number of years.
Perhaps I might refer once again to the way in which the Government's stop-and-go policy has affected the private sector of the building industry. The Report to which I have referred says that the Government have created uncertainty and sapped confidence. This is what has been happening in this sector of capital investment. The Report says that as a result the private owner has been discouraged from starting new projects. In this respect the country is poorer by private enterprise not working to its full extent. It has discouraged building material producers from installing new capacity—and I recall the brick crisis, of which this is a good example. It has made long-term planning in the building industry impossible, and it precludes the widespread use of market research and forecasting and other forward-planning techniques.
In other words, not only have the Government not adopted these tech- 272 niques in the fields under their own control but they have prevented the private field from doing it in an area which is closely connected with the public investment sector. "Stop and go" creates an image in the building industry which suggests that the industry is subject to waves of activity and slumps, so discouraging good managers from entering the industry and discouraging skilled labour from staying in it. Because businesses are reluctant to expand in building, there is a discouragement generally of good organisation. The building survey quotes an example that private architects in 1959 had 18 per cent. more new commissions and in 1960 26 per cent. more; but in 1961 they had 14 per cent. less. Taking this area of professional activity, how on earth can private architects plan their work on this erratic basis?
I have been criticising the methods and techniques of the Government's investment policy and suggesting that there is considerable waste. I can point to specific examples which bear this out fully. Blunders of policy and blunders of inadequate preparation for particular circumstances have been apparent. Militarily, there has been Blue Streak—a waste of money to a very great extent.
§ Mr. Boyden
There has been the holding on to surplus land by military departments. I could go on and on and on. In the civil field we have had the example of the Ministry of Transport. In its last Report the Public Accounts Committee wanted to know why there had not been an investigation as to the saving of costs through steeper gradients on the motorways. They said that there wasno detailed study of the saving in cost on an average motorway from the reduced amount of digging and filling if the permitted gradient were increased.I am certain that if this had been investigated, it would have been found that with the improvement in modern motor cars and lorries, it was possible to increase the gradient and thus save a considerable sum of money.
Turning to the Public Accounts Committee's Report of the previous year, we find very severe observations, for example, on the building of the Birmingham-Preston Motorway. The Ministry's 273 estimate for this was £11 million. The lowest tender was nearly £19 million. After a lot of Government messing about it was brought down to £14½ million. This is evidence of the sort of criticism I have been making of the Government's general sloppiness in capital expenditure.
In 1959–60 the arrangement for financing four road projects—the Runcorn-Widnes Bridge, the Preston by-pass, the Cromwell Road extension, and the London-Yorkshire motorway—were referred to by the Public Accounts Committee "as inspired guesses". I am sure that these are somewhat better now, but to take the "long sweep of the years", these are some of the things which have been going on with the capital expenditure policy of the Tory Party.
Perhaps I may refer to the line pursued by my hon. Friend the Member for Hamilton (Mr. T. Fraser), for which he was very severely criticised by the hon. Member for Kidderminster (Mr. Nabarro), who, following his usual custom, has skipped. Quite apart from any philosophy of nationalisation, this is the policy of the Labour Party: if an industry is not serving the country and if it would be more economical and effective for its work to be undertaken by the Government there is a strong case for saying that the industry or section of industry should be taken over. I suggest to the Tory Party that there is a considerable field for investigation into the advertising costs connected with the drug industry. The drug industry spends about £6½ million on advertising and badgering doctors. The point of this expenditure, the drug industry says, is to provide doctors with information, but to quote the Public Accounts Committee:The Ministry of Health did not think that if they or the medical profession provided doctors with information on new drugs it would cost the £6½ million spent by the industry.In other words, if the drug industry is falling down this would be a very proper field for a Labour Government to economise in by running the information service themselves and making it unnecessary for the drug industry to do what it says it must do, thereby saving public money. I know that the whole of the £6½ million would not be saved in this way, but the cost of advertising goes 274 on to the Health Service bill because it is an element in the costs which the Minister takes into account in fixing the price of drugs.
I am not advocating the nationalisation of I.C.I., but I do suggest that I.C.I. does not always pass on to the country the benefits of mass production and its great technical achievements. In 1957 I.C.I. supplied 3,500 bottles of fluothane to the Health Service, at a cost of £16 per bottle. The next year it got this down to £10 per bottle, providing 14,000 bottles. In the fallowing years the amount of production leapt up and up —33,000 bottles, 54,000 bottles, and 70,000 bottles, yet the price remained the same. It was obvious that the advantages of mass production which I.C.I. was enjoying were not being passed on to the public. It was only when the Public Accounts Committee probed this and there was some argument about it that I.C.I. in this current year reduced the price to £8 10s. a bottle.
There is still no cost clause relating to the provision of this anaesthetic to the Health Service. I.C.I. refuses to agree to such a provision. If this sort of thing happens, who is to decide that I.C.I. is playing the game by the country? This is the sort of thing about which the Labour Party its concerned when making suggestions for future nationalisation. There are many more examples of industries and sections of industries which need a very salutary discipline to make them serve the public.
I will conclude by referring to a problem Which is very important in my constituency. I have today received the figures of unemployment in my constituency. They now stand at 6.8 per cent. In a rural area to the south in my constituency—,Barnard Castle and Middleton-in-Teesdale — where unemployment has not been very high in the last few months it has trebled. In other woods, the rottenness which has been spreading in the North-East has now spread to rural areas where one would have expected the employment position to be fairly stable.
It is no use the Chief Secretary giving us his soothing account of the way in which spreading public contracts would have an effect. It is no use him talking about the number of factories which will 275 go up. Today I asked a Question about the number of jobs coming to the two constituencies in which I am particularly interested—my constituency and that of my hon. Friend the Member for Durham, North-West (Mr. Ainsley), Even with the jobs in the pipeline there would still be over 2,000 people in these two constituencies unemployed during the next two years. The true position is probably that there will be 3,000 unemployed all this time because most of these jobs will not materialise.
I calculate that if these men—most of them are men—were earning the average rate of wages, my constituency and that of my hon. Friend the Member for Durham, North-West would be losing about £1½ million in wages. That is what these men could have earned. It could have been part of the national investment. In addition, there would be about £1½ million a year in unemployment insurance. Adding the 1,000 women and juveniles who are likely to be out of work over the same period, there is a total figure of at least £2 million a year being kept idle because of inadequate Government investment policies in the North-East. Two million pounds a year lost in this way would go a long way to providing the capital investment for the power station for which the Northern group Labour M.P.s, particularly my hon. Friend the Member for Chester-le-Street (Mr. Pentland), have been pressing the Government.
When one sets that annual loss of investment locally of £2 million against the investment on factory buildings nationally in the White Paper of £7 million for 1960–61 and £11 million for 1961…63, one realises the entirely inadequate grasp of this problem which the Government are showing.
I was rather astonished when the right hon. Gentleman, talking about making the area more attractive—he did not say the North-East, but he could have done —made no reference at all to one of the ways in which men could be put to work most quickly and which would get the best results, namely the clearing of derelict land and derelict industrial sites. The Government's record in this is a disgrace. I have repeatedly asked Questions to find what they know about the problem and what they are doing 276 about it. The answer is that they do not know what the problem is, what local authorities are doing, and that they cannot ascertain what is being spent. Details are obscured by the block grant.
One knows from one's own eyes as one travels round our area that precious little is being done. What is being done is being done by the enterprise of the Durham County Council, which has had for some years a very imaginative tree planting policy. The private enterprise system of taking the maximum profit from land works even in relation to things like reclaiming derelict land and planting trees on pit heaps. The Durham County Council discovered that when it wanted to acquire a pit heap which was in private ownership. Because the county council was not prepared to spend more than a nominal sum on land acquisition, it had to leave the pit heaps because the price per acre had risen from nothing to £100–£400. This is one example of the way in which very often private enterprise in an area such as mine does not pull its weight in relation to the general problem of rehabilitation in the area. If the right hon. Gentleman wants to come to help the North-East, and my constituency in particular, he should institute a drive by providing local authorities with more public money to be available for planting pit heaps, grassing them, pulling them down and putting them into some sort of shape. The record of the present Minister of Housing and Local Government and his two predecessors in this respect is absolutely deplorable.
I will finish where I began. Just as the building industry complains of the erratic policy of the Government in relation to their general financial capital expenditure, so it complains about their lack of interest in regard to the spread of building development. The Public Accounts Committee says:The building, industry's interest is to get the widest possible geographical spread of new building.We have had unemployment in the construction industry in the North-East for years and years, and if the Government were serious about more schools and houses, and the rest, that problem would have been tackled some years ago. The Emerson Report is six months old, but when I asked the Minister about it he brushed me off, as it were. On 277 one occasion, because I suggested that some action should be taken about building in Scotland and the North-East, he told me that he was engaged on much more serious and greater things. If he is, I hope that we shall see the results in the North-East.
The following words are not mine nor the Labour Party's, but the words of the building industry:There appears to be almost complete lack of co-operation between different Government Departments on planning which enormously increases the burden on local authority planning departments in that they must negotiate with them all …I hope that the hon. Member for Sunderland, South (Mr. P. Williams) may have the chance to follow me, when he may wish to develop that point.
In the North-East, we are very conscious of the inadequate co-operation between Government Departments in planning and in public investment, and we ask that the plans for this expenditure of £70 million—£15 million this year should be brought forward. I could make many suggestions for improvements in the social sphere in my constituency; schools in Shildon, a school in Barnard Castle, a by-pass for Bishop Auckland and West Auckland. These things are all known to the Departments concerned, and are part of the local authorities' plans, and I urge the right hon. Gentleman to take these up very firmly with the President of the Board of Trade, the Ministers of Education and Health and the Minister of Public Building and Works.
I finish with a quotation from Goethe's Faust which may explain why the Government are losing by-elections:Lose this day loitering 'twill be the same storyTomorrow, and the next, more dilatory;Each indecision brings its own delays.And days are lost lamenting o'er lost days.
§ 7.2 p.m.
§ Mr. Paul Williams (Sunderland, South)
I am glad, Mr. Speaker, that the remarks of the hon. Member for Bishop Auckland (Mr. Boyden) have not encouraged you to look elsewhere but in my direction, because I want to follow him in some of his remarks. First, however, I want to take up something said by the hon. Member for Hamilton (Mr. T. Fraser). I am delighted that the hon.
278 Gentleman had the courage—or, as I believe, the stupidity, from the party point of view — to nail his flag to the mast in regard to the direction of industry. On these matters, it is as well that the lines should be clearly drawn between parties. I believe, vehemently and vigorously, that the right way is to persuade and to provide a magnet to draw in industry rather than to direct it. But I pay tribute to the hon. Member's honesty in explaining his party's point of view there.
We are not today seeing the development of two nations in Great Britain, but the consolidating of two nations, and, as the hon. Member for Bishop Auckland has said, we are seeing as a consequence of that a grave and depressing social waste of fixed assets, movable assets and human life. I suspect that although the two sides of the House may wish to treat these things differently, both sides recognise and abhor them. We are seeing the two nations of Birmingham and Brighton on the one side, and Wigan to Wick on the other—and never the twain shall meet. This is a tragedy, and I believe it to be a Tory task to redress the imbalance existing between the two nations.
The question is how we are to do it, and where can the use of the nation's capital be best employed to even out those differences, to human and national advantage. I am particularly delighted to follow the hon. Member for Bishop Auckland because of what he said about co-ordinating Government policies. Last week, I put a Question to the Prime Minister on this point. I asked him not to appoint a new Minister but to make one of our existing departmental Ministers responsible, and be seen to be responsible, for co-ordinating Government efforts in this direction. This would add no departmental responsibility and would make no extra work, but would make it quite clear to our unemployed that the Government are serious about co-ordinating their efforts.
I was, therefore, doubly horrified at Question Time today when the Parliamentary Secretary to the Board of Trade, pressed by me on the subject of action, said that it was not for him to decide, or that he did not know, or that he was not quite sure where responsibility lay—or something to that effect. This was a grave misfortune, and I hope that the 279 Government will take an early opportunity to make quite clear which Government Department is responsible for coordinating policies for the development districts.
How can the Government best use their finances to redress this balance of evil, this imbalance in the national economy, between areas of full employment—and, in many cases, over-full employment—and areas of unemployment and under-employment? The Local Employment Act is one way of doing it, but it is not the only way. The hon. Member for Hamilton wants direction, but I want enticement. I believe that, by the proper use of capital resources, the Government can entice industry into the existing areas of high unemployment. What the Government should now be doing is to provide a counter-magnet to the Birmingham-London-South-East England axis, to draw industry voluntarily from developing there.
How best can they do that? They can do it by the use of capital resources in further improvements to roads, further eradication and elimination of the slums, and building better hospitals, schools and technical colleges. Lest my right hon. Friend should think that this is a demand for extra expenditure, I may tell him that is not what I particularly want.
But I do want it to be seen that in any new wave of Government expenditure the first crack of the whip, if I may so call it, goes to the areas of high unemployment, so that they are seen to be getting the first wave of schools, the first wave of slum clearance programmes, of technical college buildings, of internal communication improvements, and so on. If one could see that the first attempt at solving the nation's problems was being made in the development areas, we could go a long way to providing the counter-magnet to the London-Birmingham axis and, by doing so, provide an incentive to bring in new industry to the development districts.
The Government can do much more to help the areas of relatively high unemployment — north-east England, Merseyside, Clydeside and Northern Ireland As has already been said, all those areas are based on coal but, as the hon. Member for Hamilton rightly pointed out, they are also based on shipbuilding.
280 I can see, and I must be very careful lest I exaggerate here, the possibility that within fifteen months half of our shipyards could be on the brink of closing down, if not actually closed.
I realise that this is a fearsome prospect for areas that already have high unemployment, but in a world where there is already surplus tonnage. where there is already twice as much available shipbuilding capacity as there is likely demand, one can only be led to the conclusion that there is the possibility of every other yard in the land being closed down, not because of inefficiency at cost, or bad management or bad labour relations, but simply because the work is not there. It could harp-en that the best yards in the kingdom have to close, not through inefficiency but because of the international situation and the failure of the shipping industry to recover.
If that is so, the Government must surely use their capital assets and policies to prevent such a situation arising. One wonders what further the Government could do in promoting barter deals—and if this is sidestepping the G.A.T.T., I am quite, prepared to sell the dummy on that one as well. I am qui e willing to do that.
Why should not the Government think rather more positively in terms of barter deals, perhaps exchanging Russian oil for British ships? Why should we not think rather mare not in terms of trade or aid but of tied aid? In that way we should be exchanging British capital assets for raw material products from same of the younger nations who, rightly or wrongly, want to have their own merchant fleets.
The Chancellor of the Exchequer has gone a certain way in financial matters in relation to shipbuilding. Why should not the investment allowance be raised from 40 per cent. to perhaps 50 per cent.? Why should not the Export Credits Guarantee Department be a little more flexible and the Government use their assets in this way in stimulating the shipbuilding industry?
The unemployed for whom all of us have the greatest sympathy are those who are skilled and those who are young. What more can the Government do in improving retraining facilities for skilled 281 people? I am utterly convinced that this nation in future will depend for its survival on its skills, and its high precision skills in particular. If m an older industry skilled people fall out of employment, surely that is the moment when the Government should provide retraining facilities so that these people will be available in areas of high unemployment when the new growth industries begin to develop again.
Here is a small way in which the Government can help positively, quickly and immediately. In County Durham we are particularly badly off for youth clubs. Here is something which, through voluntary bodies with Government financial assistance, could be improved almost overnight. A club put up by a local authority costs probably £40,000 to £50,000, but a similar type put up by a voluntary body may cost only £8,000. What is to stop the Government in all areas of high unemployment looking particularly at the problem of youth clubs and providing extra finance to get people in these regions off the streets to do something worth while and, perhaps, receive extra training?
I should like to put forward one further proposition and suggest a way in which I believe the Government can use their assets to great advantage. In the past I have believed that it would be wrong for this nation to build a nuclear-powered ship until it could be seen that it was an economic proposition. I begin to wonder whether that is not too rigid a view. Is not it about time that we got our feet wet in seeing whether we can operate a nuclear-powered ship and learning the lessons needed to be learned in its operation and its moving over the seas? The Government could commission such a vessel at an early date and have a nuclear-powered naval tanker built. The Navy is well in need of this.
These are a myriad of ideas and propositions where I believe the Government can rethink their emphasis on expenditure. But, having said all that, I would go back to what I said at an earlier stage. Apart from the issue of the nuclear-powered ship, I do not want to see any large increase of expenditure. I want to see this expenditure used wisely in those areas which most need 282 it. If we can do that, we can draw the growth industries into areas of high unemployment. Unless something of this nature is done, the North-East will become—to reuse a phrase used by a Prime Minister about something quite different in the 1930s—" an extinct slag heap". Those who represent North-East constituencies will not tolerate such a situation arising. The North-East and other development areas look to a Tory Government for Tory remedies of this situation. I believe that we can get them if we follow the lines I have just put to the Government.
§ 7.15 p.m.
§ Mr. W. T. Rodgers (Stockton-on-Tees)
I am pleased to follow in the debate the hon. Member for Sunderland, South (Mr. P. Williams) and I agree with much of what he has said. Certainly all that can be done should be done to redress this imbalance between the two nations. But I find it difficult to believe that when there has been failure for 11 years it will be achieved now. At least the hon. Member's speech had the merit of containing new ideas and new propositions. This was a merit sadly lacking in the speech of the Chief 'Secretary to the Treasury, which I thought was dreary in the extreme.
It is a tragedy that the problem of which the hon. Member far Sunderland, South spoke, and to which I will turn shortly, is sometimes a concealed problem. In times of comparative prosperity it is easy for a Government to forget that these areas continue to exist and badly need help. We therefore find a situation like the present arising when the Government leap or rather drag themselves into action, but action is too late because the problem already exists.
Before I say something further about one aspect of the long-term use of public investment and the need to regard it as a purposeful instrument of change, I should like to make one or two specific comments on the White Paper. I have been looking at a table on page 28 which shows investment by the central Government. I have looked, as several other speakers have done, at the figures for factory building. The figure for 1961–62 is given as £11 million, and I think that I am right in saying that the average of the four figures given is £9.5 million a 283 year for factory building. This figure comprises expenditure by the Board of Trade wider the Local Employment Act.
I have been trying to put these figures together with the figures given in the Board of Trade Second Annual Report on the operation of the Local Employment Act in the years 1961–62. I have been looking in particular at Appendix 2 where the figure given for factory building is £5,450,000. I appreciate that there is a difference between approved expenditure and actual expenditure, but I cannot see why that gap should be £4 million.
Equally, When I tried to add to the figure of £5,450,000 the cost of building grants and other grants I found that the total still fell much short of £9.5 million. This may be simply a failure of understanding on my part, but there would be some merit in the Board of Trade and the Treasury marching together and presenting figures in these two different reports which are easily comparable. I should be grateful to the Financial Secretary if he would explain this discrepancy and give an undertaking to look into the problem of making these figures marry up in future.
There is another point which I should like to make about the White Paper. I do not know Whether it would be possible to give more geographical information. I appreciate that there are difficulties with some of the public corporations, but when we look at other investment by the central Government it would be interesting to see it divided up regionally. All of us Who examine these problems could then see the contribution made by investment as a whole, instead of having to do a jigsaw puzzle job of 'putting together information which is to be found in so ninny different places. I should be glad if the Financial Secretary would consider whether this further information can be presented next year. It would be very helpful.
Paragraph 102 of the White Paper deals with factory building. I do not know whether the Chief Secretary or the Financial Secretary has yet had an opportunity of looking at a new study by W. F. Lutteral of "Factory Location and Industrial Movement". If neither has had that opportunity I cannot suggest that someone runs across to the National 284 Institute of Economic and Social Research for a copy because it is now after its closing time. However, I hope that the right hon. Gentleman and the hon. Gentleman will give this study their attention. This study considers the experience of several firms which opened new branches mainly in the development areas btween 1945 and 1952, a period in which we had a firm location of industry policy. It shows that 90 per cent. of these branches which were opened in new locations, that is, in areas where the firm had not previously manufactured, stayed opened. In other words, from the point of view of whether the new locations were satisfactory or not, there was success.
Perhaps the most striking analysis in the book is that of 24 firms which opened virtually self-contained factories in these areas. In the first year, as one would expect, the unit costs were considerably higher, sometimes double, but in the fifth year half had lower costs than their parent companies, and very few indeed were not regarded as a success.
I suggest that there is a lesson here for those manufacturers who are reluctant to venture from their present sites for the purpose of expansion and for those who, we are told, say that, if they are not allowed to develop where they want to go in this country, they will go abroad. I hope that the Board of Trade will draw to the attention of such firms and prospective developers the experience of others during that period. If persuasion will suceed, we prefer persuasion to anything else. Nevertheless, if that is the policy of the Government, the Government must show a real sense of application in producing evidence which will attract firms to the development districts.
Inevitably, all of us in taking part in this debate are concerned about rising unemployment and especially about the problem in the twilight areas, whether they be in the North-West, the North-East or Scotland. Perhaps the Government are tired of what may seem to them to be the old, old story. The problem is that these areas are afflicted not by a sudden illness which is easily diagnosed and, therefore, fairly easily treated, but by a slow or creeping decline, the sort of illness which makes the friends of the 285 patient shake their heads and try quickly to forget. It is the job of those of us who represent these areas to take very little notice of the now absent hon. Member for Kidderminster (Mr. Nabarro) when he objects to our belly-aching about them. It is our job to press ahead and draw attention to their problems.
I do not accept for Tees-side and the North-East the necessity of decline. On the other hand, I cannot see the avoidance of decline unless we have far more purposeful policies from the Government than we have had in recent years or were revealed in the speech of the Chief Secretary today. What I find so worrying is the persistence of what I call the "ambulance and break-down wagon" approach to industrial location, the idea that, when problems arise, something should be done about them, which results for the total failure to anticipate and plan or to see that public investment as a whole is used positively in a coordinated fashion to reverse present trends.
There has been much discussion lately of the overall location of industry and population throughout the country. The hon. Member for Sunderland, South said that he wanted a counter-magnet. Much of the discussion has revolved around a term which has been used by Mr. Rigby Childs, a "counter-drift". We all know that there is today a vast industrial area going north-west from London which has become known as the "coffin". This forms an axis between London, Birmingham and Liverpool. The proposal of Mr. Rigby Childs is that we should create a new axis broadly going from the South-West to London and, more particularly, going up the East Coast into Scotland.
I wish that there had been some signs in the Chief Secretary's speech that this sort of proposal was receiving serious attention and was not regarded simply as an academic solution produced by someone not faced with the everyday problems of Government. In a sense, my feeling now is that the Government are too obsessed by the everyday problems of Government. The measure of a Government's capacity to govern is their capacity to look ahead. Perhaps this Government believe that they have no future and, for this reason, they pay no attention to the future of the country as a whole.
286 I find it difficult to discover how much the Government are actually aware of what is going on. I wonder what forecasts are available to them of likely fluctuations in the demand for labour in different parts of the country during the next few months and the next few years. Are they merely aware of how many people are out of work now and, therefore, of the potential labour force today, or is there someone somewhere helping them to see what the potential labour force is likely to be in the 1970s on Tyneside, on Tees-side, in Lancashire or on Clydeside? There is no evidence of this. Perhaps they are relying on the N.E.D.C. to be their sole intelligence service.
Are the Government looking fully at the consequences of technological change in even the most forward-looking industries? My own constituency is dependent in large part upon the Billingham plant of the I.C.I. which is in the constituency of my hon. Friend the Member for Sedge-field (Mr. Slater). My hon. Friend and I are very concerned at the recent announcement which means that there will be 5,000 fewer jobs at I.C.I. Billing-ham in five years' time. Are the Government aware that this situation is likely to develop, and what do they propose to do about it? Will they simply say that this is not a question of 5,000 men being dismissed, that it is the natural wastage of 5,000 jobs and, therefore, not their responsibility?
I should like to believe that the Government did accept it as their responsibility and that they were concerned not only about what happens to the men on the streets of Stockton and Middlesbrough now but were applying their minds to what should be done in anticipation of such problems in five years. It is all very well to deal with the declining industries, but even industries which in many ways are progressive and forward-looking have their problems, perhaps technological problems, as well.
The prospects of regional planning are exciting. At least, they are exciting to me, if they are not exciting to the Chief Secretary. In my view, there is much merit in the comment of the hon. Member for Sunderland, South about coordination. I agree with him. He had a very dusty answer this afternoon from the Parliamentary Secretary to the Board of Trade. He really bad no answer at 287 all; there was no indication of any understanding of the need for co-ordination.
It is not my wish to suggest further possibilities for promotion for hon. Members opposite. We hope that their promotion prospects will end quite soon. However, this does not mean that we should not press on with proposals for a Minister who would deal with regional planning and development. Such a Minister would take the White Paper before us today and, perhaps, urge the Chief Secretary, as I have urged him, to ensure that the regional figures are published. Then, in the light of the regional figures, he would make sure that the geographical distribution of public investment was the right one As I have tried to show, he would consider whether the likely geographical direction of public investment was such as to give full assistance to the twilight areas.
I put a further suggestion which strengthens the case or co-ordination. In areas such as the North-East, there is both a short-term and a long-term problem. The short-term problem, by which I mean the problem over 10 or 15 years, is one of dealing with the sharp social consequences of the decline of the coal industry. Everything must be done in this respect to ease the burden of those who have lost their jobs. Much of what my hon. Friend the Member for Bishop Auckland (Mr. Boyden) said commends itself to us on this side of the House. This is an urgent problem requiring a solution. I should like to believe that the Government were looking also at the possibility of designating what I call "growth areas." Tees-side, particularly, would have many merits from this point of view. A "growth area" would be an area in which the industrial complex was such as obviously to create opportunities for expansion, an area more attractive, perhaps, than other parts of the region for new industries. It would have ready access by rail—I hope that, one day, Tees-side will have ready access also by aircraft from London—and it would be an area into which communications could be improved.
There is a great deal of difference in saying that men must seek work away from the homes which they have built up, as many Stockton people are doing 288 now—working in Southall and going home every six weeks, which I think is deplorable—and saying that it is reasonable, if employment is sound and growing, for people to expect to travel say half an hour each way every day. Speaking very much in an individual capacity, I believe that this is not an unreasonable thing to expect. If we have "growth areas" and look at the communications in terms of these areas, then I think that it is possible to provide employment there which will not mean any social dislocation and which will perhaps give a greater possibility of dealing effectively in some of the smaller areas with an acute but short-term problem.
That is why I, turning to the question of co-ordination, am very concerned as to what will happen to our rail system. It is all very well for Dr. Beeching to say that there is not sufficient demand and not sufficient traffic here at the present time. It is all very well for him to say, "I cannot see sufficient traffic coming in the next five or ten years." It is not his job to project the industrial development of this country. Therefore, very naturally, he will contract where there is no sign of industrial development. But it is the job of the Government to look beyond this and relate plans for transport, including rail and road, to these possibilities.
It has been said that we built the M.1 in the wrong place, that we built it between two great centres of population and industry, that we should have built the M.1 between two sectors which are relatively undeveloped, because this would have meant the best means of ensuring that development occurred. I am not saying that we ought not sometimes to ease existing problems. Of course, we have to do this, but again one would like the Government to say, "Why not put a new transport network down here?" after a very careful geographical survey, in the belief that having put it there, and using all the other instruments of public investment set out in the White Paper, they could begin to build a new industrial and urban network. There is a great deal of merit in this sort of thing. If I may borrow a term from the vocabulary of military planning, one of the principal roles of public investment set out in the White Paper is surely to get the 289 infrastructure of our economy right. If we can get that right then we can expect some natural growth m the night direction.
It is the case at the present time that all of us must be concerned with the relief of the immediate unemployment and, in so far as the Chief Secretary showed an appreciation of this and spoke of communications and housing, we can all endorse what he said. But I should like to see somewhere from the ranks of the Government a little vision and a little less complete involvement with the ordinary practical immediate problems which have simply got to be done. I do not expect vision in a White Paper, but I, like many others in the country, expect some vision in a Government, and it is true that at the present time I, like the country, find it very sadly lacking.
§ 7.35 p.m.
§ Mr. R. W. Elliott (Newcastle-upon-Tyne, North)
There was much in the speech of the hon. Member for Stockton-on-Tees (Mr. Rodgers) to commend. Unlike some of his hon. Friends on the other side of the House, he has been constructive in his approach to the problems of an area such as the North-East of England. But I should like to take issue with him on one of his points. I think that it is unfortunate to refer to an area like the North-East of England as a twilight area. The hon. Gentleman used that descriptive term twice. I think that there is a danger of suggesting to would-be developers that there is something wrong with the North-East of England. For goodness sake let us cut through this engendered Socialist gloom and try to suggest to would-be developers that this is an area which is bright with possibilities with its excellent labour force and excellent labour relations.
In the middle of last week it was announced that Messrs. Perkins of Peterborough were coming to County Durham with a new component factory which would employ 500 people and during the course of last weekend there was the splendid announcement that Swan Hunter and Wigham Richardson had gained two tenders which would provide employment on the Tyne for ten thousand people for at least two years. Today there is an announcement by a clothing firm that they are to establish a factory at Ashington in Northumberland which 290 will employ 400 people. This is the sort of thing that we ought to be talking about. There is development going on in the north-east of England. The Local Employment Act is working, although of course we have an enormous problem as the hon. Member for Stockton-on-Tees quite rightly said, but we are moving towards the solution and a little more optimism would be a very good thing.
I rather disagree with the hon. Gentleman and my hon. Friend the Member for Sunderland, South (Mr. P. Williams) on the point of co-ordination. I think that this is to suggest that there is some magical answer. I find it rather difficult to understand how one can avoid coordination in Government. After all, the Board of Trade, the Ministries of Labour and Housing and Local Government are bound to co-operate and coordinate with each other, and as my right hon. Friend said earlier this afternoon, the schools have to be put where the children are and where the houses are being built.
The hon. Member for Stockton-on-Tees suggested that there is no research going on as to our potential labour force. With respect to him, he is a very new member for the North-East of England. I am not very old in years of service, but I have been here for some years, and I think that after a while he will have known the experience that many of us have known. He will go along with an industrialist to the excellent regional organisation of the Board of Trade for the Northern area and he will find that a very great deal is said to developers on the potential labour force in the seventies. I think that a great deal of thought is given by anyone who is going to develop, on the potential labour force in the late sixties and early seventies. The regional organisation in Newcastle, I can assure him, has full evidence at its disposal.
There has been a suggestion this afternoon that something is badly wrong with our holding back on investment. On this side of the House we consider that it was a virtue that investment was held back reasonably within our resources. It is very dangerous indeed to invest beyond our probable resources. The hon. Member far Hamilton (Mr. T. Fraser) had a very good point in his suggestion that development had been 291 hampered considerably by inflation. That is, of course, true. Yesterday in Newcastle-upon-Tyne, I attended the official opening of the new neurological centre land the new casualty and orthopaedic departments of Newcastle General Hospital. It was very interesting to be told by some of the officials of the rate of development there in 1938, and following this to hear the hon. Member for Hamilton suggest that inflation has taken its toll of development as indeed it has. Costs have risen. But now I think that it is more than welcome to those of us who come from an area which is ready for new development that there is an out-turn of expenditure envisaged in 1962–63. We in the North-East certainly welcome the relaxation. The prospect in 1963–64 of a 7 per cent. increase over the out-turn for 1962–63 is doubly welcome.
I wish to quote some words on page 8 of the White Paper:… as a safeguard against the difficulties which held up the implementation of some investment programmes in 1961 … sensible and practicablesteps are being takento ensure that, as far as possible, the additional … investment authorised is undertaken … where the pressure on resources is least.We certainly have some slack to take up in the North-East and adequate resources for general development.
I welcome most heartily the suggestion on page 21 that the first aim of the road programme is toimprove communications with and within areas of relatively high unemployment.This is very important to the North-East, and I wish to stress it. We are an area known for our traditional heavy industry, but there is still a great deal to do in emphasising our need for and the welcome which shall be given to light industry of all kinds.
One of the greatest handicaps which we experience and—I speak from some experience of having tried to encourage industrialists to go to the area—is what so many Midland and southern developers call the long haul from the North-East. A great deal has been done in railway modernisation, and it is very heartening to know that costs of haulage are being reduced by the modernisation programme. But the 292 small producer in light industry is more and more dependent on what is called direct transport—in other words, road transport. The small industrialist today knows ever-sharp competition and direct transport becomes more and more important. Extensive road works in the North-East are essential to our future economic well-being. Let the Yorkshire-London motorway be extended up into County Durham. The line is decided on: let us get on with it.
We in the North-East welcome wholeheartedly the intimation in the White Paper that there will be double expenditure on roads in the North-East. Para, graph 65 says that:A large and expanding road programme takes time to get fully under way.My right hon. Friend referred to this today and suggested that road building in itself was not an immediate answer to the employment problem. We realise this. We know how road construction has been mechanised so rapidly over the past few years that its employment content is very low. However, I emphasise that we in the North-East cannot have roads quickly enough in order to aid our general employment position. We want not only trunk roads running north and south but an improved network of roads east and west across Northumberland and especially County Durham as rapidly as possible.
If one travels in the Gateshead or Low Fell areas, one can see heavy lorries from trading estates such as Team Valley travelling towards the East Coast ports or the A.1, going north or south, but usually south. We want priority for our roads and a determined effort to improve them at the earliest possible moment.
We should also like to think that the proposals and most of the recommendations in the excellent Rochdale Report will be implemented as quickly as possible. The suggestion that there should be a national ports authority which would supervise all major capital investment is very welcome. Greater investment in ports is, I believe, long overdue in areas of the country like mine. Again, let there be speedy action.
The recent proposal for advanced factories is most useful. Again, I welcome the statement on page 29 of 293 the White Paper that further advance factory building is allowed for in the figures of investment expenditure. In the North-East we have a number of empty factories. We hope that they will be filled and that we shall have many new forms of production.
I wish to refer to a speech made recently by my right hon. Friend the Minister of Pensions and National Insurance in Newcastle-upon-Tyne. I take this opportunity to mention it because I believe that he was badly misunderstood. I was the only Member of the House present at the meeting to listen to what he said. His point which was misunderstood was that it is easy to instal new machinery for some other form of production in a building which previously housed a cotton mill but that there is absolutely nothing else that one can do with a coal mine or with the few ancillary buildings at the pithead. This is true. My right hon. Friend went on to say that this means that in certain villages, especially isolated villages, there may have to be a movement of the labour force unless—and sometimes this is difficult—a particular type of factory can be set up where a pit has been before.
My right hon. Friend did not at any time suggest, as was so broadly assumed following Press reports, that there should be mass migration from the North of England; far from it.
§ Mr. Norman Pentland (Chester-le-Street)
Did the right hon. Gentleman refer to migration from the pit villages in the North-East or to migration to the South?
§ Mr. Elliott
I do not think, as far as my memory goes, that he ever used the term "migration". He said that there would have to be a certain movement. However, I assure the hon. Gentleman that he did not at any time suggest that there should be an exodus of labour from the North-East. He did suggest that our communications East to West might well be improved, as I suggested earlier, and that there might have to be some movement between villages, between towns. He made this suggestion within the broad context of dealing with the grave difficulty of converting a coal mine, perhaps the only industry in some villages, into any other form of produc- 294 tion. I take this opportunity of paying tribute to my right hon. Friend's work as a Board of Trade Minister.
We need an improved airport in the North-East. This is a hardy annual. Many hon. Members have been talking about this need for a long time. I notice that in the White Paper considerable allowance is made for the development of civil airports, particularly those at London and Birmingham. It is being said in my city that an American firm which was about to go to the North-East to look at a site was deterred when it realised that there had been a change from the summer time-table to the winter time-table of the air service between the Metropolis and Newcastle-upon-Tyne.
This raises the grave difficulty about air services in provincial areas. Obviously, with our winter service still being reasonably adequate, we cannot have an aeroplane flying between London and Newcastle every half an hour. The enormous subsidisation involved would make it impracticable. But there is a grave and urgent need for a modernised airport, modernised in terms of passenger and freight traffic. I hope that there will be some improvement in this respect in the very near future.
It is desirable on this annual occasion to pause and realise that the vast sum involved in public investment represents about 40 per cent. of our total fixed investment. The vast sums for the public sector must come at least partly from the private sector. It is a difficult business to determine priorities and fair shares as between varying forms of demand as between welfare and production. In welcoming this year's White Paper, I congratulate my right hon. Friend and the Government on an investment programme which is bold and balanced.
§ 7.50 p.m.
§ Mr. John Rankin (Glasgow, Govan)
In view of what the hon. Member for Newcastle-upon-Tyne, North (Mr. R. W. Elliott) has just said about civil aerodromes, I want right away to put a point to the Chief Secretary to the Treasury. I note from page 28 of the White Paper that the amount set aside for civil aerodromes and air navigational services for 1963–64 is £9.3 million, which represents 295 an increase over 1961–62 of £3.3 million. My point concerns the transfer of Renfrew to Abbotsinch.
It is generally accepted that the cost of that transfer will be about £2 million and according to a reply given to me earlier this year by the Minister of Aviation, the Government are setting aside £¾ million. I should like to know from the Chief Secretary whether the increase to £9.3 million includes the amount which, if the transfer goes according to promise, will be incurred at Abbotsinch by 1964. If it be the case that the £2 million is included in the £9.3 million, there will be little left in the allocation for any expansion of airport facilities elsewhere in the country. If the right hon. Gentleman cannot give me a reply tonight, perhaps he will do so in writing, because there is a fear that the plan which the Government have put forward may not be in operation by the time they have indicated.
I note also from the same table of "Other Investment by the Central Government" the amount to be spent on civil research and development by the Ministry of Aviation. The sum includes work on improving safety, reliability and economy in the operation of aircraft, problems associated with high-speed flight and the exploitation of new techniques such as vertical take-off. All these are most important aspects of civil aviation, particularly the safety factor and development of the new type of aircraft. It is astonishing, however, to find all these advances comprehended in an increased allocation of £300,000. I do not deny that the age of miracles may still be with us and I shall watch how the right hon. Gentleman, in this practical age, performs his.
Leaving those two points aside, I return now to one made by my hon. Friend the Member for Hamilton (Mr. T. Fraser) towards the end of his excellent speech—at a point, incidentally, when he was considerably interrupted by Government supporters—when he said that he had a soft spot for public ownership and, if necessary, would be prepared to use direction to get industry to go to places where it ought to go. I entirely concur with my hon. Friend in that view. He was, however, interrupted from the benches opposite and it seemed that there 296 was a good deal of objection from the Government side to what he was saying.
Consequently, what I read in Part One of the White Paper is comforting to me, because we are told that public investment expenditure continues to grow rapidly. That is public investment expenditure by the party whose representatives were interrupting my hon. Friend. My only criticism is that the rate of public investment expenditure is not growing sufficiently rapidly. That may be taken as another method of saying from the financial point of view what my hon. Friend was saying from the physical point of view. I should like to see greater public investment by the public authority. I will give my reasons later.
In paragraph 4 in Part One of the White Paper, we are told thatThe rapid growth in the total of public service investment is a most striking feature in the general pattern of spending.It is obvious that in carrying on its everyday life, the State depends increasingly upon public investment. There is less and less faith in the private sector. I am not suggesting that the private sector does not necessarily have something to do in carrying on our industrial and public life, but from the terms of the White Paper it is clear that the Government pride themselves on the fact that they are spending more and more in the public sector.
I should like to see the amount increased. From 1955 until 1961, the State was spending an average of £80 million a year. Between 1961 and 1964, this figure will have increased to an average of £150 million a year, and I welcome this. So long as the Government remain in power, we shall encourage them to increase this money still further, because I regard it as being too little.
The Chief Secretary indicated that the sums being spent by the different Departments on education, housing and other services shown in the White Paper were the methods whereby employment would be kept at a reasonable level. It was one way of helping to keep down unemployment—or, at least, one way of contributing to keeping it down—although the right hon. Gentleman said that these methods worked somewhat slowly 297 That may be true enough, and because of it I would like to see this working a little more quickly, for despite all that is being done at private and public levels, in the City of Glasgow there are 27,000 persons without work. The situation there is that there are now ten unemployed persons for every single job. This is evidence, if one wants immediate evidence, that the Government's investment is insufficient. Taking Scotland as a whole, there are 94,000 persons—I use round figures—looking for jobs. The ratio which I gave for Glasgow is true of Scotland as a whole. There are ten unemployed persons to each job available in Scotland. That is a terrible waste.
The Financial Secretary to the Treasury may say that he is spending a lot of money on this problem, but he is also losing a lot more money by not curing it. I see that the Under-Secretary of State for Scotland laughs at that. I hope that we shall get the benefit of his joke at some point during the debate.
I was saying that the Government and the country are losing a lot of money. I remember many years ago reading a book by Colin Clark, one of our recognised top-level economists. At that time he estimated that a worker turning his skill on to a raw material and producing a finished article created something like £250–£300 of increased wealth in one year. If one applies even that figure of many years ago—leaving out of account the increased productivity of today, which has in all probability more than doubled the value of the individual worker's output—the loss in wealth to Scotland runs at about £30,000 million a year. [HON. MEMBERS: "Oh."] I beg the House's pardon. I should have said £30 million a year. Hyperbole has its uses in argument, but not when used in a hyperbolic sense. However, that is a lot of money to go on losing each year.
If the Government think in terms of paying out, they should also think in terms of what the nation would be getting. That £30 million refers to Scotland alone. All Financial Secretaries have a soft spot for getting money in, and I hope that the Financial Secretary will take this opportunity to do so. Let us look at the details of spending. I 298 have here a report, dated 31st October, 1962, which was sent to me by the convenor of the housing committee in Glasgow. In thinking of what is set aside—that meagre amount to which my hon. Friend the Member for Hamilton referred—for housing in the White Paper, I want the House to think of it in terms of what it means in the city from which I come. If I state first merely the facts of the housing situation there, without comment, the House will, I hope, appreciate the magnitude of the problem. The convenor says:Almost half the houses in the City have only one or two rooms and over 400,000 people are living in them. In Central Glasgow two-thirds of the houses are only one or two-roomed houses. 34,000 people live more than 4 persons to the room; 90,000 people live more than 3 persons to the room. In one district 12,000 people live on 18 acres of land.
§ Mr. Rankin
My hon. Friend the Member for Orpington (Mr. Lubbock) says that it is impossible, but it is true. These 12,000 persons represent the population of a reasonable town. Today they are living on 18 acres of land in the City of Glasgow. Is it any wonder that I have told the Government that the amount they are investing in housing is, in relation to these facts, a disgrace to the name of any Government?
At April, 1962, there were 330,000 hauses in the City of Glasgow, and in the White Paper we are told that over a period it is the aim of the Government to get rid of the 750,000 slum houses which still are to be found in England, Wales, Scotland and, I think, Northern Ireland. Glasgow has 132,000 of these houses, many of them in my own division. Of these 132,000, all of which are certified by the medical officer of health as being unacceptable in today's living conditions for a human being to occupy, there are 40,000 which the medical officer says could be made habitable for a period. This leaves 92,000 houses designated by the medical officer as being houses that human beings ought not to be living in, but in which people will be sleeping tonight in Glasgow.
Is it any wonder that I say that the amount it is proposed to invest in housing is quite insufficient? I hope that 299 the Financial Secretary is taking very close account of what I am saying. At the weekend I attended two conferences, both of which were packed. At one of them, on Saturday afternoon, I was the speaker along with an English friend, the prospective secretary of the Cooperative Party.
On the Sunday afternoon, I was a listener, along with some of my hon. Friends. At the Sunday afternoon conference were 875 delegates representing trade unions throughout the whole of Glasgow and its neighbourhood. Although the biggest hall in the City had been taken—there was a larger but it burned down a few weeks ago—not all the delegates who wanted to come could get in. There were also observers and 42 representatives from local authorities. In view of the unemployment situation in Scotland, the conference made three demands on the Government about which they will be hearing a great deal more. They were all for more investment at Government level.
The first, and I am certain that it will comfort my hon. Friend the Member for Hamilton, was for direction, if necessary, of new growth industries to Scotland. We do not mind inducements and incentives, but we say that if they do not result in attracting industry, we must see to it that industry comes. There must be direction if that is necessary, because the situation in Scotland is desperate.
Some weeks ago it was forecast that by Christmas there might be 100,000 unemployed in Scotland, but the number will be more than 100,000 before Christmas and already we are assured by those in touch with industry that on 1st January, 1963, Scotland will have a good New Year with 110,000 unemployed. Even the Financial Secretary may worry about that. He may now not sleep so well as he would have done if I had not spoken. I do not want him to have a sleepless night and he can spare himself some sleeplessness if he will take this problem very seriously and will tell us what he intends to do to try to mitigate it.
The next demand said that if the new growth industries were to flourish, there could be no contraction of our com- 300 munications. They must be extended and not restricted, as seems to be present Government policy.
The third demand concerns something about which I have been talking for a long time and on which I shall have something to say tonight. It is comprehended in the two words "scrap" and "build". The shipbuilding industry in Scotland is in a serious state. In my constituency, 10,000 men and women are employed in that industry. Fairfields launched the last ship on its order book a month ago and Harland and Wolff sent the last ship on their order book down to the Clyde some time ago. Those two major yards now have no new orders on their books. The hon. Member for Sunderland, South (Mr. P. Williams) spoke very sensibly when he said that this was an industry on which depended not only the jobs of men and women, but much of our exports. We shall lose not only jobs and money for the men and women in the industry, but also vital exports, both visible and invisible.
We have to think of a policy and that policy is contained in the phrase "scrap and build". There is legislation on the Statute Book which provides money to help in this respect, although the money has never been appropriated. The Financial Secretary will not be able to say that it is included in any of the sums mentioned in the White Paper, but there is an Act to provide that money to aid the shipbuilding industry in the extremity which now faces it.
That legislation was the outcome of a promise made by the Prime Minister in Green's Playhouse in order to help him win a General Election. It has been dishonoured and the Prime Minister cannot divorce his personal responsibility for that. He made the promise and he should see that it is fulfilled. If Cunard is not to build the ship promised, then an agent should be found, and if the agent has to be the Government, well and good. The Government can build ships in civil yards just as they do in naval yards. If a big ship is no longer a practicable proposition, then two ships each of 40,000 tons will have to be built. Their construction would make a tremendous difference to the unemployment picture on Tyneside and Clydeside, because one would have to go to the Clyde and another to the 301 Tyne—although I am sure that the hon. Member for Belfast, East (Mr. McMaster) would put up a fight for Belfast.
"Scrap and build" provides the Government with a programms which would at least carry them over a difficult period. The policy simply means that the Government decide that all ships more than a certain age will cease to be used. They could be sent to the smelting mills and turned into steel—and I believe that we want that steel—so that their value would not be wholly lost. It means more investment, but I do not quarrel with that. Old ships would be replaced by modern, up-to-date ships. I am thinking not only of commercial shipping, but of the plan which my hon. Friend the Member for West Lothian (Mr. Dalyell) is putting before the Government in another way, the building of school ships and health ships and so on.
All these things are possible. There is no reason in the world why this industry should be even looking depressed, because there is so much for it to do not only in an up-to-date commercial sense, but in bringing in new ideas like school ships, health ships, and so on, to the world of shipbuilding.
I do not propose to say any more. Perhaps I have spoken for long enough. I notice that nobody has said "Hear, Hear" to that. I could speak longer were it necessary, but I hope that I have said enough to encourage the Government to think once again about their investment programme. They may not be able to do it in this White Paper. As I said, I welcome the increases which the Government are providing, but I think that they are too small in view of the magnitude of the problems which face us, and I hope that the Financial Secretary will do all that he can to see that when the next programme is brought in the increase is at least double the present one.
§ 8.22 p.m.
§ Mr. Stanley R. McMaster (Belfast, East)
I have listened with particular interest to the speech of the hon. Member for Glasgow, Govan (Mr. Rankin). I frequently follow him in these debates, and I have a great deal of sympathy with what he said tonight because I speak for and represent a shipbuilding area in Northern Ireland and feel as strongly, if 302 not more strongly, than does the hon. Gentleman on the problems to which he devoted so much of his speech.
The hon. Gentleman said that in his constituency 10,000 men were engaged in the shipbuilding industry. Until a year ago I had an even larger number of men employed in that industry, perhaps a larger number than any Member, because I had 23,000 men employed in the shipbuilding yards. In fact, in my constituency I have had as many as 30,000 men engaged in building ships under construction by Messrs. Harland and Wolff Ltd., one of whose building yards is in the hon. Gentleman's constituency. I should therefore like to devote some of my remarks to the position in areas such as Northern Ireland, Scotland, and the North-East Coast.
The White Paper deals at great length with public investment in Great Britain. On page 5 one sees that there is to be a rapid extension of public investment. The total out-turn of public investment for the year 1960–61 was £1,645 million, and it is forecast that between 1960 and 1964 this gross expenditure will rise to over £2,000 million, an increase of between 10 and 20 per cent. per annum.
Although the White Paper goes in great detail into the various divisions of public expenditure, and considers, first, investment by nationalised industries and public corporations, and, secondly, public service investment, there is no particular plan or scheme of public expenditure aimed at helping those areas in the United Kingdom which need assistance from such public expenditure.
I would very much appreciate the attention of the Financial Secretary. The Hall Committee, which has recently reported, and whose report was considered in a rather short debate last week, came to the conclusion, amongst other things, that public expenditure should be increased in Northern Ireland, and referred in that context particularly to the expenditure on housing. Unfortunately the Hall Committee did not recommend that public expenditure on all items should be increased in Northern Ireland.
§ Mr. Deputy-Speaker (Sir Robert Grimston)
I am sorry to interrupt the hon. Member, but he cannot go too far 303 into detail about Northern Ireland. He will appreciate that this White Paper does not cover Northern Ireland. As it is excluded, I cannot allow him to go into detail, though he can, of course, make a passing reference to it.
§ Mr. McMaster
The White Paper says that public expenditure must come from the United Kingdom Government, and it is clearly the fact that under the Government of Ireland Act public expenditure in Northern Ireland is within the control of the United Kingdom Government and is something which—
§ Mr. Deputy-Speaker
Order. That may be so, but it does not alter the fact that Northern Ireland is excluded from this White Paper, and as we are discussing the White Paper I am afraid that the hon. Member cannot discuss in detail the affairs of Northern Ireland.
§ Mr. Charles Loughlin (Gloucestershire, West)
On a point of order. The White Paper deals with local authority health and welfare services, and hospital services. Does not that imply that the Government have control over expenditure in Northern Ireland, and that Northern Ireland is therefore included in this document?
§ Mr. McMaster
Further to that point of order. The White Paper also deals with expenditure on such matters as aviation. In my constituency I have the firm of Messrs. Short Bros. and Harland Ltd. which benefits directly from expenditure on aviation. I therefore suggest that it is in order to discuss expenditure in Northern Ireland.
§ Mr. Deputy-Speaker
I am sorry, but I refer both hon. Members to paragraph 2 of the Appendix which says:In coverage this White Paper differs in certain respects from the Blue Book. Northern Ireland…and certain other companiesare excluded…
§ Mr. McMaster
Paragraph 1 of the Appendix refers, amongst other things, to ships and aircraft. I therefore suggest that I am entitled to develop my argument about shipbuilding and aviation. The latter industry is also referred to in paragraph 105 of the White Paper. It refers to investment in civil research and development by the Ministry of Aviation. I suggest that that applies 304 directly to expenditure in Northern Ireland.
§ Mr. Deputy-Speaker
I am sorry, but I am not prepared to argue my Ruling. These are all matters which may be discussed in relation to Great Britain, but Northern Ireland is expressly excluded. The hon. Member may make a passing reference to it, but I must rule quite strictly that he cannot go into detail about Northern Ireland.
§ Mr. McMaster
I must abide by your decisions, Mr. Deputy-Speaker, but the remarks which I intend to make—
§ Mr. George Lawson (Motherwell)
Would it not be in order if the hon. Member for Belfast, East (Mr. McMaster) spoke of Short Bros., and aviation, irrespective of where the firm happened to be situated. He would not be discussing Northern Ireland as such, but the question of Short Bros. and aviation. Would not that be in order?
§ Mr. McMaster
I am most grateful to you, Mr. Deputy-Speaker. I suggest that in dealing with the question of public investment in Great Britain Her Majesty's Government should consider dividing the White Paper into two parts, in acordance with the policy set out in another White Paper, to which reference was made by my right hon. Friend the Chief Secretary—The Financial and Economic Obligations of the Nationalised Industries. The Government should consider inaugurating a policy of public investment aimed specifically at assisting those areas which are suffering from unemployment.
The hon. Member for Glasgow, Govan mentioned the firm of Harland and Wolff in his constituency. I suggest that steps must be taken to secure that this firm, together with the other firms in the shipbuilding industry in the United Kingdom, remains alive. Hon. Members have not sufficiently stressed the peril in which our shipbuilding industry now finds itself. If the present depression continues, within a short time our shipbuilding industry may have to close down completely. Even our shipping industry, which is suffering from depressed freight rates and practices such 305 as flag discrimination and flags of convenience—unfair practices adopted by other countries—is gradually being forced to its knees.
I support the view of the hon. Member for Govan that the Government should adopt a positive policy to assist our shipping and shipbuilding industries by financing them out of public funds. The shipping industry could be greatly assisted by the policy of "scrap and build". This has been made essential by the failure of Her Majesty's Government to meet unfair competition abroad. Unless our shipowners can manage to replace their existing ageing fleets with new vessels, when world trade expands and shipping recovers our shipping industry will be left very much behind.
Now is the time for our shipowners to re-equip themselves and prepare for the future, and for the expansion which I am sure will come in the shipping industry. If the Government take the action that I have suggested they will help the shipbuilding industry, because the re-equipment of the shipping industry will mean that many orders will be placed with British shipbuilders.
It has been recommended that the Government should provide direct assistance to the shipbuilding industry by means of capital grants to shipbuilders to help them to modernise their yards. So far this has been done by the shipbuilders out of their own resources. The Government should have a positive plan, devoting to our shipbuilding industry part of the £2,000 million to be spent on public investment.
It might be argued that this will be expensive. It has already been suggested by my hon. Friend the Member for the City of Chester (Mr. Temple) that we must take care to match our public investment with our resources. I suggest to my right hon. Friend the Financial Secretary that unless the Government can restore confidence in the areas where there is a high rate of unemployment, such as in my constituency and in parts of Scotland and the North-East Coast, the country will suffer directly from a loss of work and manpower. A second and, in the long run, a more important fact is that depression in such traditional 306 industries as shipbuilding will lead to a general depression. Firms will be discouraged from coming to such areas. It is important that the Government should do their best to remove the atmosphere of depression and help to provide better public services and greater prosperity.
Prosperity in the shipping industry which, in the past, has earned as much as £200 million by carrying foreign cargoes about the world could assist other industries such as the steel industry and engineering generally. Even the shopkeepers would benefit from the fact that people employed in the industry could spend their money in the shops. All this would help to relieve the depression in areas where there is a high rate of unemployment and a demand would be created which would assist in absorbing output. There is no doubt that, with automation and greatly increased production and specialisation, the capacity of the country to produce is growing more rapidly than its capacity to consume. It is the duty of the Government to ensure that a gap between production and consumption is avoided so that unemployment in industries relating to durable and non-durable consumer goods may not occur.
The appearance of such a gap denotes the cycle of employment and unemployment which has bedevilled our economy since the 18th Century. Even today this trade cycle exists, although its effects are not so sharp or severe as during the interwar period.
The psychological assistance afforded by a policy of direct help through public investment in under-developed areas would be created by the useful employment of resources and manpower which would keep the whole of the economy active. Certain specific ways are referred to in the White Paper in which help might be extended. Mention is made of electricity and gas boards and atomic power stations. I ask my hon. Friend to pay particular attention to the policy regarding power stations. It would be possible to install an atomic power station in Northern Ireland from which the country would benefit.
Also, I am told that as much as 10s. a ton could be saved were coal handled more efficiently at the ports. Were such a saving effected, the community as a whole would benefit and particularly my 307 constituents. The British Transport Commission could improve its services including the shipping services between Great Britain and Northern Ireland. In addition, money which is to be spent on housing and schools could be directed to areas of more than average unemployment in order to help to create work in those areas and to help the people living there to enjoy the greater prosperity now being enjoyed by people in south-east England.
I now come to another matter. My right hon. Friend the Chief Secretary, in opening this debate, referred to the policy of financing the nationalised industries, and mentioned particularly a White Paper which, unfortunately, has not been debated in this House—the White Paper entitled The Financial and Economic Obligations of the Nationalised Industries, Cmnd. 1337. This White Paper sets out the Government's policy with respect to the financing of the nationalised industries, a policy which was also set out in a reply given by my right hon. Friend the Minister of Power to a Written Question on 28th March of this year. In this reply, the Minister, dealing particularly with electricity boards in England and Wales, said:These surpluses are not funds available for disposal. They are contributions from revenue needed to carry on the business and to finance the development which the Boards must undertake if consumers' needs are to be met. During the five-year period the electricity boards will still need to borrow very large sums over and above these surpluses and the depreciation funds which they provide. The gas industry, in view of its slower rate of expansion, will seek to finance the greater part of its investment out of its own earnings."—[OFFICIAL, REPORT, 28th March, 1962; Vol. 656, c. 123–4.]This policy, which may be called the policy of paying their way, is also referred to in that White Paper, on which I asked the Chief Secretary a question during his speech. It is summed up in the last sentence of paragraph 5 of the White Paper, Cmnd. 1337. It says:The undertakings were thus expected to make some profits in the ordinary sense of that term in order to accumulate reserves from them.It goes on to say that the earnings of the nationalised industries, particularly referring to the gas and electricity industries, are necessary, first, to provide a reserve which acts as a buffer in future years against fluctuating costs, and, 308 secondly, to cover the redemption of capital. Paragraph 7 says:The wording of the Acts implies that the industries should provide out of revenue not only for payment of interest on capital but also both for depreciation and the redemption of capital. If these requirements were stringently interpreted they would impose upon the industries the responsibility not merely of providing from revenue for the maintenance of their capital assets but eventually of ridding themselves of capital liabilities. In practice, with the agreement of successive Governments, the industries, like their predecessors, have not been required (nor have they sought) to make provision on this scale.I should like to deal seriously with this point.
It is apparently the Government's policy that the nationalised industries should accumulate reserves in order to meet future capital liabilities. This is stated specifically in paragraph 19 (b) (ii) of the White Paper, which reads,Provision should also be made from revenue for adequate allocations to general reserves which will be available inter alia as a contribution towards their capital development and as a safeguard against premature obsolescence and similar contingencies.
§ Mr. Temple
I have been trying to follow my hon. Friend's speech extremely closely but I have not been able to find any of the points which he is making in the paragraphs to which he has referred. I wonder which is the White Paper from which he is quoting.
§ Mr. McMaster
If my hon. Friend had been following closely he would have realised that I quoted first from Public Investment in Great Britain, and secondly from the White Paper, The Financial and Economic Obligations of the Nationalised Industries, Cmnd. 1337, published in April of last year. These are points which I made in an intervention in the speech of my right hon. Friend the Chief Secretary. He dealt with them at a little length and answered several questions.
The heart of the problem lies in paragraphs 19 to 23 of that White Paper in which it is stated that it is the Government's policy to finance as far as possible future capital developments out of current charges. I should like to ask the House to consider this proposition very carefully, because I suggest that it is not laid down in the Acts which set up the nationalised industries.
309 The duty laid down in those Acts is set out in paragraph 7 of the White Paper which I have read to the House. I should like my hon. Friend to consider this point, even if he cannot answer it tonight, because it has been raised in chambers of commerce which I attend. First, is it legally correct for the nationalised industries to overcharge in this way when the Acts which set them up do not allow them to do so? Secondly, is it justifiable that they should do so, because it seems that an injustice is being done to the consumer who is being overcharged in order to make provision for future capital expenditure. I suggest that that future capital expenditure should be financed when the time comes either by direct borrowing or by the Treasury.
§ The Financial Secretary to the Treasury (Mr. Anthony Barber)
I can assure my hon. Friend that the proposals laid down in Cmnd 1337 are quite consistent with the Statutes setting up the various nationalised industries.
§ Mr. McMaster
This is a matter of interpretation. I suggest that the correct interpretation of the Statutes setting up the nationalised industries does not allow them to charge any more than is necessary for these functions: first, to provide interest on the capital, to service the capital, after providing for running costs; and secondly, to provide for the redemption of the capital.
It has been suggested that there should be a sinking fund, but in the White Paper to which I referred it was stated that it was not possible to arrange such a sinking fund in most cases. However, to provide both a sinking fund and depreciation, which is what is suggested in the White Paper, amounts to over-charging the consumer. It amounts to charging him twice for the same thing. It is wrong that n industries should charge, as the Electricity Board at the moment is suggseting charging, the consumer a price for his electricity which incorporates an element of future saving. To put this burden on the consumer is not either legally provided for or in the interest of the country as a whole. It means that we are charging too much for our electricity.
310 Therefore, industry, which consumes the electricity, by paying too much at the moment for future capital expenditure is not in a proper competitive position as compared with industries in other countries which are not required to finance future capital expenditure in this way.
Mr. J. T. Price
I very strongly agree with the hon. Gentleman's argument. Whatever may be the legal interpretation of the Statutes which set up the nationalised industries, the fact now is that the nationalised industries—not only the Electricity Board and the Gas Board but also the Post Office—are being forced into this position by the policy of the Government, causing them to finance future capital requirements out of current revenue. This amounts to charging people who are now living, many of them old people, for services which people living in the future will enjoy. I am sorry to have taken so long, but I very much agree with what the hon. Gentleman has said.
§ Mr. McMaster
I am grateful to the hon. Gentleman. He has stated very clearly the idea which I am trying to express and the question which I am putting to my hon. Friend. I should like my hon. Friend, if he is not in a position to reply to this tonight, to consider the question, which I have more time to develop in a speech than in Question and Answer. The point has been put to me by my Chamber of Commerce in Northern Ireland. It is a matter about which some members not only of the local Chamber of Commerce but also of the Association of British Chambers of Commerce in London are concerned.
They are concerned about the burden which is being placed on the consumer by this requirement to meet future capital expenditure. They suggest that, although it is right to meet our current costs and to have perhaps a buffer fund so that charges do not have to be raised and lowered year after year to meet fluctuations in demand and price, and although it is correct to pay interest and to redeem past capital expenditure, it is in no wise correct to provide over and above that for a profit, which is what it is described as in the White Paper, to meet future capital expenditure.
311 I ask my hon. Friend the Financial Secretary to pay particular attention to this point and to try to let me have some kind of answer to it.
§ 8.48 p.m.
§ Mr. E. Fernyhough (Jarrow)
I am sorry that the hon. Member for Belfast, East (Mr. McMaster) took so long to say so little. I had hoped that I would be able to speak for as long as he has spoken. Because you, Mr. Deputy-Speaker, and others did not quite know at one stage what the hon. Gentleman was talking about, he took up some of the time which I had thought I should use to better advantage. He was very concerned that more should be done for Northern Ireland. He was very concerned about the problems of the shipbuilding industry. He was very concerned about the growing unemployment problem there. My constituency is in a similar position, but, fortunately, the people of Jarrow are very anxious to see this Government go because they believe that they are partly responsible for many of their difficulties. The trouble with the people of Northern Ireland is that they send to this House people like the hon. Gentleman, who criticise the Government in almost every speech but support them blindly in every Division—
I marvel at the inconsistencies in the hon. Gentleman's speech, and in the speeches of his colleagues—
§ Mr. McMaster rose—
§ Mr. Fernyhough
Although I am normally provocative I shall not give way, because the hon. Gentleman has taken much more time than I shall be allowed.
As I say, I marvel at the inconsistencies of the hon. Gentleman and his colleagues. They are always asking for taxation to be reduced, and always asking for public investment to be increased. They are always asking the Government to spend more on their own particular spot, but always seeking that, in the end, the total bill will be less. It just does not add up.
I wish that his constituents could have heard the hon. Member for Newcastle-upon-Tyne, North (Mr. R. W. Elliott). I thought his speech was absolutely wonderful. He said that the Local Employment Act is working very 312 satisfactorily, but the fact is that there are now twice as many unemployed as there were when the Act came into operation. If the Act can be said to be working satisfactorily in those circumstances, I certainly do not want to be here when it is working unsatisfactorily. There are 60 men for every job in that area, yet the hon. Member for Newcastle-upon-Tyne, North said that the Act is working satisfactorily. We have 500,000 unemployed at a time when productivity is increasing. What will happen when production goes down? Is it not likely that unemployment will grow even more rapidly?
How determined the Government are to deal with unemployment, and how massive is their attack on it, is reflected in this document. At a time when we have 500,000 unemployed they intend to spend £11 million on new factories in 1962–63, and £9 million in 1963–64. Does anybody believe that an average Government expenditure in the development districts of £10 million a year will even touch the unemployment problem? How can the Government think of pro, viding work for all those people in the areas most badly affected on a miserly average annual contribution of £10 million?
The truth is, and this was about the only bit of sense that the hon. Member for Belfast, North spoke, that we are going through one of the normal recurring crises of the system. The hon. Member said that we have been having them for about 100 years. During that time, we have had boom and slump, periods of high employment and periods of mass unemployment, and it begins to look as though we are entering one of the latter phases again. The truth is that the Government have no idea how to tackle this, no idea of the worry, the anxiety and the apprehension in the minds and in the homes of those affected.
Unless the Government are awakened to the seriousness of this problem they will have a serious fright one day. They do not understand that while for a relatively long time the workers of the country, except in one or two isolated areas, have had full employment, it now appears that more and more of them will become unemployed. The unemployed will became very bitter men 313 and they have a right to become bitter, because the Government say that they cannot direct industry to those areas where there are unemployed. Why cannot they? We cannot move capital, but the Minister of Pensions goes to Newcastle and says that we can move people.
The unemployed man who is leaving Jarrow or Hebburn or Sunderland or Newcastle is being directed by economic forces. It is because he cannot maintain himself and his family in self-respect and dignity that he is being compelled to tear up his roots and take up work, as it were, in a foreign land. This is compulsory direction. He either does or he starves. It means poverty and starvation to try to live on only £2 17s. 6d. a week for the single man or £4 12s. 6d. for the married couple today. The unemployed man and his family are being compelled to go where they do not necessarily want to go, and I do not see why we should not take the same line with capital. Why should it be easier to move men than to move money? Why should the Government be less reluctant to move money than they are to compel men to move?
I wonder how much each Government Department discusses the various problems that face the nation. We are very anxious to have a new power station in County Durham. There is no argument that it must be constructed. The only question is where it is to be sited, whether it shall be in Yorkshire or in County Durham. We say frankly that it should be in Durham, because that power station would provide work for 10,000 miners in supplying coal for it. If we do not have the power station there the Government are faced with trying to find 10,000 new jobs in County Durham. Have they tried to work out how much that will cost and how much they would have to spend to provide alternative employment for the 10,000 men who will lose their jobs if we do not have the power station? I am quite sure that it would be far cheaper to build the power station, even though it may be a little less economic there, than to face the expense of trying to provide jobs for the 10,000 who otherwise will become redundant.
The White Paper is what I would call the salvation of hon. Members opposite.
314 If it were not for the magnitude of public ownership and public investment they would not know how to begin to tackle the country's growing unemployment problem. By increasing public expenditure at a time when unemployment is growing they are able to reduce its impact to some extent. But I do not believe that they are prepared to use the instrument of public investment either sufficiently or courageously enough to deal with the problems which affect my constituency, the constituency of the hon. Member for Belfast, East and the constituencies of all those who represent the country's 500,000 unemployed.
§ 9.5 p.m.
§ Mr. Roy Jenkins (Birmingham, Stechford)
I agree with nearly everything which my hon. Friend the Member for Jarrow, (Mr. Fernyhough) has said. I think that "salvation" is a slightly strong word to apply to this White Paper. It is a fairly modest little White Paper which was introduced by a fairly modest little speech by the Chief Secretary to the Treasury.
My hon. Friend the Member for Hamilton (Mr. T. Fraser) pointed out very powerfully the reasons why the increase of public investment announced here is only a very moderate increase. In the first, the picture presented by the four different years has, looking back to 1960, to be corrected for the very sharp rate of increase in prices from 1960 to the present time. This was completely misunderstood by the hon. Member for Kidderminster (Mr. Nabarro) in another modest little speech. I was surprised that the hon. Gentleman got this point quite wrong because he usually has considerable ability in getting the facts right combined with a considerable inability to interpret them correctly having got them right. On this occasion, he got it wrong and thought that the tables in the White Paper were adjusted for prices, which, of course, they are not.
Secondly, as my hon. Friend the Member for Hamilton pointed out, the rate of increase in the year which we are now looking forward to is, of course, a lesser rate of increase than in the past period covered by the White Paper. Thirdly, there are certain matters of detail which must be borne in mind. In most of my speech, which, I hope, will 315 satisfy the Chief Secretary who was constantly appealing this afternoon for a broad sweep of years when looking at these matters, I want to look at investment in a fairly broad way, but there are in the details of the planned predictions for 1963–64 a few extraordinary reductions to which I should draw attention.
My hon. Friend the Member for Hamilton referred to education for Scotland. There is also factory building covering both advance factories and anything else which the Board of Trade does, as I understand it. In present circumstances, particularly since the Chief Secretary devoted so much of his speech to talking about the need for dealing with areas with higher than average unemployment, to have Government factory building cut down from £11 million to £9 million seems quite extraordinary.
I turn now to the White Paper in the context of investment generally. I do not think it could seriously be argued that the level of investment in this country at present, or the level that we are likely to see in the near future, is excessively high. It has risen a little recently. At least, it rose a little for a few years, although it has been falling in the immediate past. There is no doubt that, despite the recent changes, we have remained, and we remain today, a relatively low investment country. Hon. Members may have seen the figures published in The Times yesterday, I think it was, with comments upon a recent O.E.C.D. report dealing with this matter. It is no surprise now, since we are all so used to these figures that they hardly make any impact at all, to find that Britain is at the bottom of the table for the precentage of national income going to investment.
The report points out also that, of course, one is concerned not only with the total going to investment but with the productivity of the investment which takes place, with its ability to secure an effective return. The comparative figures showed that one could in certain cases have a relatively low rate of investment accompanied by a very high rate of return on that investment. This, for instance, was the position in France. Sweden, on the other hand, had a very 316 high rate of investment with a relatively low return upon it. West Germany and the Netherlands managed to combine a fairly high rate of investment and a fairly high rate of return. What we managed to do was to combine the two evils, a low rate of investment and a low rate of return upon the investment which we had.
I do not think that anyone can possibly argue that we are, in any sense of the words an excessively high investment country. But within the total of our investment, is it possible to argue that the proportion going to public investment is too great or that there is any danger of it becoming too great? I think that the first thing that must be said, although the tempting thought may have occurred to some hon. Members opposite, is that there is certainly no reason to suspect, unless one wishes to suspect, that there is any connection between the relatively low rate of return on investment in this country in the past and the size of our public sector of investment.
In France, for instance, which I pointed out as an example of a country with a rather low investment percentage but a very good rate of return upon it, the public sector of investment is larger than it is in this country. I do not think that there is any evidence either that the return on investment in public industries in this country has been in any way lower than that in private industry, although it is the case that within the public sector, within the field covered by this White Paper, there is a good deal of investment from which the return cannot be measured in purely monetary terms.
I think that it would be a mistake if it were to be assumed from this that investment in the public sector, the return on which cannot be measured in purely monetary terms, is therefore what one might call social welfare eleemosynary investment, investment which we could do without unless we were in a fairly easy state to afford it. I take as examples here investment on roads and investment in education. The return cannot possibly be measured in monetary terms in either case, but it would be quite impossible, or at least extremely foolish, to say that the country is in a 317 tight position and therefore let us get out of it by having no investment on roads and no investment on education.
Therefore, do not let us have the confusion in our minds, as I think sometimes tends to be the case, that investment the return upon which cannot be measured in strictly monetary terms is in a sense slightly luxury investment which we could forgo if things were rather difficult.
There is also the view, which is sometimes popular on the benches opposite—it was put forward, I think, somewhat more in the debate on the White Paper last year than on this year's White Paper—that investment in productive public industry—I am turning from things like roads and education to the nationalised industries— particularly needs more careful scrutiny than investment in productive industry because investment in productive private industry is rigidly controlled by market forces. As one hon. Member opposite put it last year, if people making these investments misjudge the market and make wrong investments they are not in a position to go on making investments any more. That is a view which, I think, is quite widely held by hon. Members opposite.
Seeing how much force there is in this view, it is interesting to bear in mind that between the debate on the last White Paper on Public Investment and the debate on this White Paper we have had the extraordinary revelations into how big private industry was conducted, which was provided as a result of the I.C.I.—Courtauld battle. We had as a result of that emerging very interesting indications of just how possible it was in private industry for people to make completely misdirected investments on a very large scale and certainly being prepared to go on making them again in the future.
For instance, in this struggle Mr. Kearton of Courtaulds, talking about I.C.I., said,At this stage"—that is after the fall in world prices of raw material that I.C.I. were supplying to Courtaulds—the I.C.I. had to shut down the factory on which they had spent £4 million or £5 million and which had only been in operation for a year. It was an obsolete plant, obsolete process and although only a year old could not compete.318 Several other revelations came out of that battle, including the interesting expression of the view that anyone in private industry who makes misdirected investments can go on making them in future. For that reason, we have heard less on that point than we did last year.
The other reason why there is no need to worry or why it would be wrong to worry about the proportion of public investment being excessively high in the total of investment as a whole is that at present, if the Government want to prevent investment as a whole from falling sharply, they have no alternative but to push up public investment, because private investment has been falling and shows every prospect of continuing to fall. Therefore, if they do not in the short run push up the total of public investment there is no doubt that the prospect which faces us is a fairly sharp fall in investment as a whole.
Fixed investment in private industry, for instance, was nearly 7 per cent. down in the first half of 1962 compared with the second half of 1961. Total fixed investment, even including public investment, although this helped to drag it up a hit, was about 1½ per cent. down in the first half of 1962 compared with the second half of 1961.
The National Institute of Economic and Social Research in its November Bulletin, which was certainly published after the Chancellor of the Exchequer announced his £70 million increase, said this about private industry:On balance we expect a further fall of some 6 per cent. to 9 per cent."—that is, in fixed investment—for private industry between the second half of 1962"—that is the period that we are in now—and the second half of 1963".It went on to say:The increases in public investment and the levelling out of private house building are unlikely, however, fully to offset the fall-out in private industrial investment. We expect a small fall in total investment between the second half of 1962 and the second half of 1963, but this may not be more than about 1 per cent.".This enables us to see in proportion both how necessary some expansion of public investment is to keep the level of investment anywhere near constant over the next year or so and how relatively modest 319 is the expansionary force, if it exists at all, which is likely to be generated by the White Paper.
Unless the Government wanted investment to fall off very sharply with serious further short-term employment consequences, they had to fall back on public investment. I thought that the speech of the hon. Member for the City of Chester (Mr. Temple) was interesting. I agreed with the earlier part of it, but I thought that his conclusion was extremely disturbing. He said, in effect, "Let us have some more public investment, but, as soon as we are in a position not to need any more public investment because private investment begins to revive, let us make sure that we cut back public investment".
§ Mr. Temple
I am glad that the hon. Member has quoted me. I still say that what I said was perfectly correct.
§ Mr. Jenkins
That being so, there was no need for the hon. Member to interrupt me, although he did so most carefully. I thought he might have said that I was misquoting him, but I am glad I was correct, even if I did not use the hon. Member's exact words.
The prospect seems to me to be disturbing. It makes nonsense of the Government's much-heralded view that they are turning their backs on a stop-go policy concerning investment. How does this fit in with the Plowden Report? Does the Financial Secretary to the Treasury agree with his hon. Friend the Member for the City of Chester that public investment is something on which we depend when we have to but that as soon as we get into a position where private investment shows signs of recovering again, we immediately cut back on public investment? If that is the position, it is extremely disturbing.
In that connection, I should like to raise a question which has not been touched upon so far today. How does the programme of public investment put forward in the White Paper fit in with the proposals of the National Economic Development Council? It is extraordinary to have set up N.E.D.C. as a great measure of forward planning, for N.E.D.C. to announce that it is working out schemes for a 4 per cent. increase in national output over a five-year period 320 and then to have a Government White Paper on investment, covering 40 per cent. of the field, which makes no reference N.E.D.C. or its plan and gives no indication whether the one is dovetailed with the other. I should like to know from the Financial Secretary, if we are to take N.E.D.C. at all seriously, whether these proposals fit in with the idea of N.E.D.C. for an annual 4 per cent. increase, whether they were acceptable to N.E.D.C. and whether they were seen by N.E.D.C. before they were published.
Beyond what I have said, there is a special need at this time for concentrating a good deal on public investment. As everyone who has listened to the debate will recognise, one thought which has dominated much of the debate, even though it touches only part of the field covered by the White Paper, is the growth of a lack of balance between different regions in both employment and production. Every hon. Member who has spoken, except the hon. Member for Kidderminster (Mr. Nabarro), has expressed concern about this tendency and about the resultant pressure upon people to move from the North and from Scotland to the South. At one stage, the hon. Member for Kidderminster was saying, "Good, good, good" when people were being forced to move. I hope for his sake that too many of them do not move to Kidderminster. If they do, it may have a disturbing effect upon his majority.
§ Mr. Nabarro
We cannot have better than full employment. At a place like Kidderminster or Birmingham, when there is full employment it is no good talking about Scotsmen emigrating. We do not want them. They can go somewhere else. It is not only a question of taking factories to unemployed men; it is a question of taking the men to factories as well.
§ Mr. Jenkins
If the hon. Member simply wanted to answer himself, there was no need for him to interrupt my speech to do so. Beyond that, his intervention has no relevance.
Clearly, there has been a fairly significant—let us put it modestly—mediumterm change in the balance of employment within the country. This I think affects mostly the Northern Region in the statistics, which means the North-East Region, as we normally refer to it.
321 One can see this clearly by looking at the position in September and comparing it with the position in September, 1958.
It so happens that in these two Septembers the national average of unemployment was almost exactly the same, and it looked at one stage as though the phase of the trade cycle might be more or less similar. I am not sure that that is so at present, because the trend seems to be still going down now, as it did not in 1958. It looks as though there will have to be a longer pull up before the next General Election than the pull up from October, 1958, to September, 1959, before the last one.
That apart, the two Septembers were comparable months and the national average of unemployment recorded in them was almost exactly the same. But in the Northern Region the position in 1962 showed a deterioration compared with the position in 1958, with an increase from 2.5 per cent. unemployment to 3.5 per cent. That is a very big non-cyclical change—a change in the structure of employment and production prospects between different regions.
In these circumstances, which have been described in various phrases—"two nations" was the one used in this context by my hon. Friend the Member for Stockton-on-Tees (Mr. W. T. Rodgers)—public investment has a particular part to play. To quote my hon. Friend's words again, quite clearly the infrastructure is of great importance in rehabilitating the economic prosperity of the area. But I am rather doubtful whether the relatively modest increase in the roads programme for the North-East, outlined in the White Paper, will more than balance the prospect of the rail closures also mentioned in the White Paper.
At any rate, there is no doubt that in this situation public investment must lead the way for private investment. That is perhaps the case in more things than hon. Members opposite seem to think, but it is very much the case in the rehabilitation of those regions which are slipping behind. We are faced with a new situation in our post-war experience. In a large part of the country there is fairly serious under-employment of resources. Therefore, all the old terms in which we have discussed the alternative uses of 322 resources since 1945—in terms that one can only switch to something at the expense of something else—have ceased to be relevant, at least in certain parts of the country.
Looking back at our debate on this subject a year ago, I was amazed to read that the then Chief Secretary to the Treasury, now the Home Secretary, used these words:Growth must be our aim; growth at the right pace so that we do not trip up by trying to cover too much ground too quickly;I think the Government would have to be particularly clumsy to trip up on the speed of their recent record of growth. The right hon. Gentleman went on to refer to the danger of public expenditure taking an ever-increasing share of our national resources, and added:Unless we guard against that danger there will not be enough of our resources left available for all the rest—for manufacturing investment in the private sector, for trade and commerce and for exports."—[OFFICIAL REPORT, 28th November, 1961; Vol. 650, c. 249.]This is not now the relevant consideration for large parts of the country.
This is a new situation and it should be met by a new approach. A good deal more could have been done in the White Paper. The generation of expansionary forces, such as they are, which the Chancellor of the Exchequer set in motion during this autumn was somewhat too late. I am not at all clear about what is the case for having generated them this autumn rather than nine or twelve months ago. They are not strong enough and they hardly apply at all in the areas where they are most needed and where there is the greatest under-employment of resources. Although the White Paper certainly marks an advance, a very small advance, I fear that it is more notable for the opportunities which it misses.
§ 9.30 p.m.
§ The Financial Secretary to the Treasury (Mr. Anthony Barber)
When three years ago it was decided to publish a White Paper on public investment and to have a debate on it, some hon. Members wondered whether the area of discussion would not be too great and too varied for a sensible debate. However, my hon. Friend the Member for Kidderminster (Mr. Nabarro) and some of his hon. Friends, including my hon.
323 Friend the Parliamentary Secretary to the Ministry of Power, pressed that we should have this White Paper. They took a different view and, I think, in the light of the way in which the debate has proceeded over a very wide field, that any such doubts which hon. Members may have had three years ago will have been dispelled. This annual stocktaking, if I may call it such, and consideration of future investment plans in the public sector ought to be, and I hope is, one of the most important Parliamentary occasions of the year.
This is not surprising when one considers the magnitude of the sums involved—despite what the hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) said—totalling, for both nationalised industries and public corporations on the one hand and public service investment on the other, more than £7,000 million. I agree with what I thought was the implication of one point made by the hon. Member for Stechford—that this year, quite understandably, the debate seems to have taken on an added significance because of both the high national level of unemployment and the serious position in certain regions.
I might also say that the debate has been notable for the very forthright statement on behalf of the Labour Party by the hon. Member for Hamilton (Mr. T. Fraser), the principal Opposition spokesman in the debate, advocating more nationalisation—[HON. MEMBERS: "Hear, hear."]—Perhaps it is also significant that the Opposition cheer when I say that. After all, the hon. Member for Hamilton is an official spokesman of the Labour Party and—for the benefit of some of my hon. Friends who were not present at the time—what he proposed was that in any case where a firm wanted to expand and declined to so where it was instructed by a Labour Government to go, the ultimate sanction should be to nationalise it.
§ Mr. T. Fraser indicated dissent.
§ Mr. Fraser
I hope that the Financial Secretary will take the trouble to read my words tomorrow. May I assure him that I have not been upstairs to try 324 to adjust the words? I never take the trouble to go upstairs to the HANSARD room. It ought to be within his recollection that I said that those communities were important and that industry had to go there, and that if private industry did not go—and I spelled this out a little—public industry would. I did not say that we would nationalise a firm which refused to go.
§ Mr. Barber
I think that if the hon. Member looks tomorrow at HANSARD to see what he said, he will find that what he said was this: "I would create a national instrument; if private enterprise would not go where the national instrument directed and would not co-operate with the State, the State should take it over".
§ Mr. Barber
I am very pleased that the hon. Member says that he did not say it and, if he denies that he said it, of course I accept that.
§ Mr. Fraser
May I assure the hon. Member and the House that what I definitely said was that the instrument created by the State should go into the area into which the national industrial planning board said the industry should go?
§ Mr. Fraser indicated assent.
§ Mr. Barber
In other words, an extension of nationalisation. Whichever way one looks at it, this means more nationalisation, and I am grateful to the hon. Gentleman for nodding his head.
I want to deal in due course with the suggestion which has been made that despite this great increase in public investment we should nevertheless be doing still more, which I think was the burden of the argument of the hon. Member for Hamilton. I want to consider, too, the conflicting question which has also been posed, namely, whether we are storing up trouble for the future by committing ourselves to a level of public investment greater than the economy may be able to stand in the future.
I should like first to say a word about one aspect which I am sure is of universal concern to every hon. Member, certainly 325 to the hon. Member for Stechford, and that is, to see whether the existing methods of control of public investment are giving value for money. It is impossible to generalise because of the diversities of investment not only as between the nationalised industries on the one hand and public service investment on the other, but also within those broad categories.
In some cases the control of capital expenditure is on what I might call the comparatively loose rein. In others the expenditure is normal supply expenditure controlled in the normal way. Some is financed above the line, and some below the line, and even where expenditure is not financed by the Exchequer, for example, in the case where the finance is provided by local authorities borrowing in the market, loan sanction frequently brings the expenditure within the purview of the Government.
Next year the estimated investment expenditure by the nationalised industries in the public sector is put at £965 million, excluding any further increases in electricity investment, the possibility of which is referred to in paragraph 14.
A great deal of work at the present time is being devoted to the techniques concerned with the profitability of new investment by the nationalised industries. Some time ago, at the instigation of my hon. Friend who is now the Parliamentary Secretary to the Board of Trade I went with some senior officials to I.C.I. to have explained to us the techniques of critical examination which I.C.I. uses in. assessing capital projects, and since then I have had talks with other people who are concerned at first hand with the problem of financial control in large organisations in the private sector. I am sure that a detailed interchange of views on this aspect between the public and the private sectors is invaluable. I would also say that I think a proper application of the principles laid down in the White Paper on the Financial and Economic Obligations of the Nationalised Industries, to which my right hon. Friend the Chief Secretary and other hon. Members referred during the debate, will go a long way to ensure that we get value for the enormous investment expenditure which is now involved.
326 There is, however, another aspect which is quite distinct from the question of the profitability of investment or the social advantages which flow from it, and to which the hon. Gentleman referred, and that is the relationship between the totality of public investment and the resources available.
As the White Paper shows, we estimate a considerable increase in investment expenditure during 1963–64, and it is right that the extent of this increase should be critically examined. The question is whether the present programme of public sector investment will preempt too great a share of the national resources and so bring about excessive pressure on total demand. I do not believe that it will, but nobody would deny, as my hon. Friend the Member for the City of Chester (Mr. Temple) said, and indeed was implicit in almost every speech made during the debate, that there is at the present time slack in the economy.
My right hon. Friend's recent changes in Purchase Tax, and the increased capital allowances, will give considerable stimulus to demand. Even so, I agree with the hon. Member for Stechford that it is likely that the downward trend in private sector investment which has been in evidence since the third quarter of last year will continue for a little longer. It follows that there is now an opportunity to accelerate and improve an expansion of the assets which are held in the public sector. The substantial rise in public investment embodied in the present programme, set out in the White Paper, shows that we intend to make use of this opportunity.
The investment will be advantageous in itself, because we need far more new houses than we have at present. We need more schools, and we need the other assets which will flow from this additional investment. But the additional investment is also right because it will bring into play productive resources which otherwise would be underemployed. What we have been considering primarily in today's debate is investment expenditure in 1963–64, and what I have just been saying was concerned with that period.
When one tries to look further ahead, other considerations arise. My hon. Friend the Member for the City of 327 Chester was quite right to strike a warning note. To him and to the hon. Member for Stechford I say that the estimated total of public service investment for 1963–64 represents an increase in total of 9½ per cent. over 1962–63. Such a rate of increase goes well beyond the normal rate of growth of the national income, and it cannot be denied that if it were to be maintained year in year out over a long period it would mean that a steadily growing proportion of the national resources was being earmarked for investment in the public services.
It may be that to some hon. Members opposite that would not matter, but we must face the fact that the inevitable consequence would be that some other sector of the national economy would have to adapt itself to a declining share of the national income. We could find ourselves faced with a situation in which we were threatened with an overloading of demand, and in which the only way out was by the restriction of the private sector through severe fiscal policy or in other ways, or, alternatively, by putting the balance of payments in jeopardly.
I therefore believe that it would be wrong to assume without question that we can afford a continued rise in public service investment in the longer run at the rate which the present programme rightly provides in the short run.
§ Mr. Roy Jenkins
May we assume that the 1963–64 programme will be carried out, as far as can be foreseen at the moment, without any cuts?
§ Mr. Barber
If the hon. Member will will read the White Paper he will see that the Government's intentions for 1963–64 are laid down in considerable detail. I am certainly not prepared to stand at this Box and give firm opinions about what is likely to happen in the future. What I can say is that, on the best judgment that we can make at the present time, this is what we think appropriate.
When the proposed increased investment is considered in combination with the measures announced by my right hon. Friend the Chancellor of the Exchequer on 5th November it can be claimed that the Government have taken action on a very large scale to foster the expansion of production. It is quite 328 wrong to consider these increases in public investments, large though they are, in isolation, as some hon. Members have done.
I do not want to spend much time on this, but in June my right hon. Friend the previous Chancellor of the Exchequer released £76 million of special deposits, and in September he released a further £80 million. In October there was an end to the restrictions on bank lending, and the repayment of post war credits was accelerated at an additional cost of £42 million. The increased capital allowances which were introduced recently will have some effect immediately, but an idea of their ultimate effect can 'be gauged by the fact that in a few years' time they will cost the Exchequer £120 million a year.
On top of that we have practically halved the Purchase Tax on motor cars at a cost of £50 million to £60 million in a full year. Together with increases in public investment this is a substantial stimulant to the economy and I simply cannot understand how the hon. Member for Hamilton can say, as he did, that no intelligent man can say that we are boosting the economy. The truth is that the hon. Gentleman is out of touch. Even the headlines in the Daily Herald following the publication of this White Paper read, "Maudling's £70 million booster". Mr. Trevor Williams went on to say:More money is to be spent on housing and schools and to create jobs in areas where there is heavy unemployment. Roads, hospitals and other public projects will also be stimulated by the £70 million earmarked by the Government yesterday. Areas to be particularly affected are North-East England, industrial Scotland and, to a lesser extent Merseyside.
§ Mr. Barber
I thought that the Daily Herald was a newspaper which would appeal to the hon. Gentleman.
§ Mr. T. Fraser
It may be that the Daily Herald reporter, or the journalist who wrote that, had not read the White Paper. I called attention to facts which I extracted from the White Paper showing that expenditure on roads and schools in Scotland would go down next year.
§ Mr. Barber
I will come to Scotland in a moment, but I do not think that 329 Mr. Trevor Williams would be pleased with what the hon. Gentleman has said.
A good deal has been said, quite rightly, in this debate by the hon. Member for Sunderland, South (Mr. P. Williams) and the hon. Member for Belfast, East (Mr. McMaster) and others about areas where the unemployment figure is particularly high. My right hon. Friend the Chief Secretary dealt with this matter at considerable length in his opening speech and I do not want to go over the ground again. I was sorry that during the short time while I was out of the Chamber I missed the speeches of my hon. Friend the Member for Newcastle-upon-Tyne, North (Mr. R. W. Elliott) and the hon. Member for Stockton-on-Tees (Mr. W. T. Rodgers). I agree with my understanding of the report I have been given of the speech of my hon. Friend the Member for Newcastle-on-Tyne, North, when he said that it was damaging to talk of areas like the North-East as "twilight areas".
With no disrespect to the hon. Member for Hamilton, I believe that he is doing a disservice to Scotland when he speaks as he does about Scotland. I cannot believe that the best way to attract new industries to these difficult areas, which is what we all want to do, is to portray them in the sort of language which the hon. Member for Hamilton used this afternoon.
I will look carefully at what was said by the hon. Member for Stockton-on-Tees and consider the suggestions which I understand that he made.
The general policy of the Government on public investment in relation to our responsibility for keeping the economy in balance is a development of the principles set out in the 1944 White Paper on employment policy. I would remind the hon. Member for Stechford of this passage in the 1944 White Paper which seemed to me to conflict with what he was saying:…for the purpose of maintaining general employment it is desirable that public investment should actually expand when private investment is declining and should contract in periods of boom.Of course the implication of the 1944 White Paper was that we should be dealing with economic fluctuations and that from time to time we should be dealing with the problem of mass unemployment 330 which brought such misery in the interwar years. The problem is not the same today—[HON. MEMBERS: "Oh."]—with respect, it is not the same today. It is not of the same order of magnitude, and if we were to assume that the nature of the problem is such as in the inter-war years, I believe that would be a very misleading and dangerous way to proceed. I believe that we are dealing with something very different.
§ Mr. Fernyhough
Surely the hon. Gentleman would accept that in Scotland and in parts of Wales and the North-East it has been the same problem. It is in a lesser degree but it is the same problem of persistent unemployment since the end of the war.
§ Mr. Barber
All I was saying was that it is not of the same character and it is not of the same order of magnitude. I must get on, because there was a lot more that I wanted to say about this.
Perhaps I could confine my remarks on this aspect of the matter to reminding the House again that this year the Government have decided, in the light of the general development in the economy, to approve this additional work to start this year and next year and totalling in all £70 million. I will not weary the House with the details; they are all set out in paragraph 10 of the White Paper, and they cover types of expenditure which are likely to get started quickly. Of that £70 million which we expect to start in this financial year and the next financial year, £15 million we expect will be spent in this financial year and £40 million in the next financial year. Furthermore, I can assure my hon. Friend the Member for Sunderland, South that, as far as possible, the additional investment will be undertaken in those parts of the country where the pressure on resources is lowest.
My right hon. Friend the Chief Secretary referred at some length to the North-East, and I should like to refer briefly to Scotland, because I understood that the hon. Member for Hamilton and others were suggesting that Scotland was not getting its fair share. I should like to remind the House of a few facts. Under the Local Employment Act, the Board of Trade offered £42 million in the first two and a half years of its operation for 130 projects in Scotland. This is more 331 than 60 per cent. of the total approved assistance under the Act, and is equivalent to £8 per head of the population, as compared with 30s. per head in the rest of Great Britain. Scotland is getting more than 50 per cent. of the programmes of advance factories announced during the last few months. I ask Scottish hon. Members to remember that Board of Trade factories in Scottish development districts now employ nearly 75,000 people. In fact, there is hardly any field where Scotland does not get preferential help. [Interruption.] I wish the hon. Gentleman would listen. We gave his hon. Friend a fair hearing, and I have only six or seven minutes left.
Taking 100 as the investment per head in England and Wales, on education the figure for Scotland is 123, for hospitals it is 124, for roads it is 130 and for housing it is 168. I was astonished to find that once again this year hon. Members opposite, and particularly the hon. Member for Hamilton, were repeating, almost parrot-fashion, that we were not spending enough on the public services. After all, the prospects in the White Paper are for an increase in public service investment in 1963–64 of no less than 91 per cent.
Perhaps I can begin with roads, to which the hon. Member for Hamilton referred. Expenditure on new construction and major improvements in England and Wales was less than £5 million in 1951–52. By 1958–59, the figure had already exceeded £50 million. Next year, we expect to spend about £114 million, compared with less than £5 million 12 years ago. The expansion in Scotland is just as striking. Altogether, in 1963–64, we plan to spend a total of almost £150 million on investment in roads. That is the picture in money terms. Translated into physical terms, the record is equally impressive, for 150 miles of motorways have already been opened, and we are aiming to complete 1,000 miles by 1970. There are many other projects, and I have got a list here with which I have not the time to deal.
The hon. Member said that we were not doing enough for education, but we have consistently given this high priority. Investment under the control of the Ministry of Education has totalled over 332 £100 million in each of the last four years. By 1963–64 the figure will be over £140 million. A considerable part of this expenditure has been on school building. In five years between 1957 and 1961, 1¼million new places have been provided in maintained schools in England and Wales.
I had intended to talk also about teacher training colleges and other further education institutions, but perhaps I might just make this point to the hon. Gentleman: anyone who is toying with the idea of being critical of the Government's education policy would do well to remember that education's share of a rising national income has increased from 3.1 per cent. in 1951 to 4.4 per cent. in 1961. In fact, public expenditure on education per head of the population has gone up from £8 a year to over £20 a year and is higher than in almost any other country in Western Europe. Total public expenditure on education is running at £1,150 million a year, half as much again as five years ago. The hon. Member pointed out that the cost of providing school places was rising and said that we ought to take account of the extra cost of building. I hope that he will derive satisfaction from the fact that, due to increased efficiency in building, the capital cost of providing a new school is still less than it was in 1949, in spite of the fact that building costs generally are about half as much again as they were at that time.
May I give some figures for universities? The hon. Member said that Tory progress means standing still. I will not give all the facts—simply one or two. Ten years ago the grant for university building was £5.7 million a year. Last year the figure was £26.4 million. This year, as the White Paper shows. it will be £31.6 million. This is a sixfold increase in ten years. Next year we are planning a further increase to £38.6 million.
Ten years ago expenditure on hospital investment was only about £15 million. By next year it will be £54 million. This story of increasing expenditure also applies to health and welfare. In almost every part of the White Paper at which one looks, unless there is some exceptional reason, one sees an increase in public service investment. Looking at public service investment as a whole and considering the national interest, 333 I cannot understand how the hon. Member can pretend that our proposals are hopelessly inadequate.
Let me conclude with this comparison: in 1958–59, public service investment was £680 million, this year it will be about £1,000 million, and next year we expect it to be nearly £1,100 million. In money terms that means a rise of 60 per cent. in five years. Is that what the hon. Member means by "standing still"? If I may put it in the terms for which the hon. Member for Stechford asked, even in real terms, it means a rise of over 40 per cent. in five years. The planned increase between this year and next year, again in real terms, is 9½ per cent.
When to that public service investment is added the increases for the other forms of public investment, the proposals show that the Government are determined to expand and to modernise the public services to the maximum extent possible compatible with the national interest. I shall watch very carefully to see what the Opposition do now, bearing in mind 334 that at the conclusion of his speech the hon. Member far Hamilton said that our proposals were hopelessly inadequate. We shall see what action he cares to take.
§ Question put and agreed to.
That this House takes note of the White Paper on Public Investment in Great Britain (Command Paper No. 1849).