§ Mr. Speaker
Before the debate begins, may I announce that we shall be discussing the first Motion on the Order Paper and at the same time, if hon. Members wish to refer to it, the second Motion, dealing with the Vote on Account.
§ 4.0 p.m.
§ The Chancellor of the Exchequer (Mr. Roy Jenkins)
I beg to move,That this House takes note of the White Paper, Public Expenditure 1968…69 to 1973…74. (Command Paper No. 4234).The White Paper I presented to the House early last month is a more significant development in the handling of public expenditure by the Government and by this House than the fairly flat title of this Motion might suggest. It follows that a continuous line of development from the reports of the Select Committee, the Plowden Report of 1961, Reports of the Select Committee on Procedure, White Papers by both previous Administrations and this one, and the Green Paper of April, 1969, which foreshadowed, but only with illustrative figures, this new presentation.
We see this White Paper as the first in an annual series and I hope that we shall see developments continued within the service as the years go by. There has not before been published for discussion inside or outside of this House a plan for the use of resources in the whole of the public sector in so much detail and looking so far ahead. The plan is set against a background of developments over the past five years and looks forward another five in the context of the Government's strategy for the economy as a whole.
It presents the decisions which the Government have taken about the scale and pattern of public expenditure this year and for the next two years and it also gives a broad indication of what these policies might involve, subject to what is said in the text on particular programmes, if carried forward into two further years for which specific decisions have not yet been taken. It is interesting that the 1961 Plowden Report, valuable and farsighted though it was, did not expect to see this development.
524 That committee put forward its own recommendation for an annual public expenditure survey covering five years ahead, but was very doubtful whether any Government would feel able to publish their intentions as embodied in such a survey. The doubts were understandable, but we have set them aside and produced this White Paper in the hope and belief that an annual series will stimulate informed discussion and debate about this most vital aspect of the allocation of our resources and particularly about the priorities which should guide forward planning in the public services.
Before leaving these general introductory points, I would like to say a word about my right hon. Friend the Chief Secretary to the Treasury, who put forward the idea of a White Paper on these lines in a personal memorandum to the Selective Commitee on Procedure as long ago as 1965. As I believe the whole House will recognise, he has devoted a great deal of thought and effort to these important issues throughout the long period, now over five years, during which my predecessor and myself have been fortunate enough to have had him serving as Chief Secretary to the Treasury. There is no question at all that the main Ministerial inspiration behind this very important step forward has come from my right hon. Friend. A great deal of initiative and imagination has also been shown by a number of officials who have been intimately concerned.
The White Paper will, clearly and rightly, have an effect on the way in which discussion on expenditure programmes and policy is conducted in this House. There have been important new developments in the last year or two in the procedures of the House, including the work of the Specialist Committees. I know that many hon. Members, including notably those who have made such a valuable contribution in the recent Report of the Select Committee on Procedure, but other hon. Members, too, have views on how the arrangements may best be further developed for debate on the Floor of the House or in Committee.
The Government have this very much in mind, but we are at the beginning of a two-day debate and my right hon. Friends and I think that it would be a mistake 525 on our part to put forward proposals on these matters before hon. Members have had the opportunity, which this debate offers, to express their views. After reflection upon what hon. Members may say about future procedure we shall be better able to gauge what arrangements would be most valuable and generally acceptable to the House.
I turn to the White Paper itself. It is concerned with the whole public sector and with the demands which the public sector makes on the economy. The information which it gives is by all past standards very full indeed. Part One deals with tie main trends, totals and the analyses, Part Two with the individual programmes in considerably more detail. I suppose that there may still be some who will, perhaps not complain, but express t le wish that there had been more information about a particular service. There is virtually no limit to the detail that can be obtained, but a line must be drawn somewhere, if only to make a document of this scope readable and legible. Most readers inside and outside the House will agree that the line has been drawn generously, and that the paper presents enough information for a full discussion of the Government's objectives in the public sector, both general and specific.
I do not mean by this, that the form and content of the White Paper are now laid down for all time. The, points raised and the suggestions made during this debate and afterwards in the House and outside will be most carefully considered aid the form of the White Paper can certainly evolve year by year and as we learn from experience.
The White Paper is not an economic plan. [t is not within its scope to examine the whole allocation of the extra resources which should become available over the next few years between all the other claims on them, outside the public sector —exports, private investment, private consurnption. Such a discussion would take us into much wider issues of economic forecasting and management.
The Government's last published assessment of the development of the whole of the economy in the medium term was "The Task Ahead",published last February. This suggested a range cif possibilities for the growth of national 526 output up to 1972 from just under 3 per cent. to 4 per cent., using for most of the calculations in the document a figure of 3¼ per cent. There has been no fundamental change of expectation since then, but these assessments are, naturally and rightly, worked over from time to time. We are at present engaged in the N.E.D.C. in considering the results of the consultations with the key industries which were specifically suggested in "The Task Ahead".
For the purpose of planning the future growth of the public sector the Government have thought it sensible and prudent to take the lower end of the range of increases in resources envisaged in "The Task Ahead". This is because decisions on public expenditure have their impact some way ahead, sometimes far ahead in the future. They often involve a whole series of interlinked preparations, analysis of requirements, purchase of land, design and construction of buildings and equipment, training, and so on. This means that it takes time for decisions on public expenditure to work through to their full impact on resources. It means, too, that it is less disruptive later to bring forward more plans if there proves to be room for them than it is to stop what has been started if this proves to have been too much.
It means, also, that if money is to be used to the best effect and waste avoided, the prospects should be that once the plans are laid and decisions taken, they should not need to be changed. They ought to be framed so as to minimise the risk that in the event they would use so much of the nation's resources as to prejudice other essential objectives of policy, of which a continued large surplus in the balance of payments and a rise in capital investment by industry, both public and private, are among the most important.
The central message of the White Paper is, therefore, that over the years covered the Government intend to maintain their policy of relating the growth of public expenditure broadly to the expected growth of the nation's resources. I believe that, with the different claims we have to meet, this is broadly the most sensible and responsible approach at present, and I hope that those who wish to contest this from either point of view will face up fully to the implications of what they propose.
527 But if expenditure, with anything like its present composition, were to grow appreciably faster than the national output other claims to our resources would have to give way continually, and this would primarily mean personal consumption. There is a limit to what is feasible or desirable in this respect. If, on the other hand, we were to keep the growth of public expenditure down to a significantly lower level—as we had to in the period immediately following devaluation —we should before long find the standards of public services falling back.
There is a great deal to be done simply to ensure that we do not allow the wealth-making process to destroy a large part of the benefit of the wealth when it has been created—that our towns are not blighted, or made intolerable by noise or fumes, or torn apart by avoidable social tensions, that our rivers are not polluted or our countryside and the coastline defaced, that the young receive the education, and the old and the sick the care, they ought to have. With a growing population this inevitably means a high and rising volume of social expenditure, and this is true in every civilised country.
But one cannot allow the increase to be unrestrained and to assume that the required resources can be found when the time comes by preventing their use in the private sector without limit by higher taxation. The balance between the provision of services by the community and the right of individuals to spend their income as they themselves prefer is at all times, as I have pointed out before, a difficult one to maintain. Taxation raised on the scale that our society now requires affects a very wide range of people, and we must be realistic in realising that they are concerned both with the standards of the public services and with their own personal standard of living—not with either to the exclusion of the other; and the foundation for our hopes for the future is competitive industry earning a healthy balance in world markets.
The plans that we have made for the public sector on this basis are set out in the White Paper. They involve different rates of growth of public expenditure at different times—not some doctrinaire, hard-and-fast limit for all time and all situations. Following devaluation, the 528 right course, which the Government took and followed rigorously, was to make public expenditure grow more slowly than the nation's income. We had to get, and we have achieved, a great shift of resources into the balance of payments.
Now we are entering a period when public expenditure, in my view, can grow as fast as national resources—but not, I think, in the near future faster, bearing in mind the necessary restraint on the growth of private consumption by fiscal and other policies in the last two years. There may well be times in the future when public expenditure should grow faster again: for example, on the approximate and provisional basis governing the figures for the final two financial years covered by the White Paper, running forward from March, 1972, there is some increase in the total growth of public expenditure programmes from 3 per cent. to around 3½ per cent. per year.
This recognises that, by that time, some programme, such as the capital expenditure on the nationalised industries, which will have stayed pretty stable up till 1971–72, will need again to advance to take account of the demands upon them and the performance targets to which they are required to work.
I hope that policies which the Government have consistently pursued to improve the structure and competitiveness of British industry will be showing definite and measureable results. But I am not drawing on that in advance. The position will be clearer before the time comes to take decisions on these later years, and when we do so it will be possible to take due account of all the relevant factors, whether they be good or bad.
I turn now to some of the other main points which emerge from the White Paper. First, the size of the public sector in relation to the national product. When the total of public spending is measured in relation to the gross national product, this does not mean that the public services themselves absorb that particular proportion—50 per cent., or whatever it it—of the nation's output of goods and services. To the extent that public authorities themselves make direct purchases of goods and services, whether on current or on capital account, it is certainly fair there to talk in terms of the 529 direct use of resources by the public sector.
But to the extent that money raised by taxation or borrowing is transferred in the form of cash to private individuals or companies, while these transfers have redistributive effects on the pattern of personal incomes and will affect personal consumption and private investment, they do not in themselves involve the use of resources directly by the Government or by other public bodies. And, again, when the Gcvernment acquire shares or other capital assets for cash, these transactions usually have quite minor effects on the demand for real resources.
I hope, therefore, that in discussion of the broad magnitudes these important points will not be overlooked. Nevertheless, the gross total of public expenditure does have significance for taxation and monetary policy. Moreover, whatever their economic, social or industrial effects, all these decisions to spend in various ways are acts of public policy within the control of the responsible authorities. They are thus subject, as they should be, to public scrutiny, and may be modified by the normal process of debate in this House and discussion outside.
There is another and more technical point which I should make about public expenditure as a whole. We are concerned here with the use of resources by the public sector. So we need a presentation which shows that changes are planned in the demands on the public sector on goods and services currently produced which make up the gross national product. We can see these changes best, without the confusions introduced by rises in price levels from year to year, if the expenditure plans are shown, as in the White Paper, at constant prices.
However, we have added in the White Paper an important further refinement—an allowance for what we have called "the relative price effect". This is to allow for the fact that the money cost of part of public expenditure—not the whole of public expenditure, but a part, and an important part—current expenditure on goods and services—rises relatively f ister than the cost of output generally.
530 The reason for this stems from the fact that prices do not all rise at the same rate. Generally speaking, whether in the public or the private sector, rising costs can be offset to a greater extent in manufacturing industry than in services, by better machines and higher productivity. So the public sector, with its greater concentration on services, tends in any case to get less help from rising productivity in keeping down costs and prices than does the economy as a whole.
In addition, the statistics do not show the effects of increased productivity in the public services, simply for lack of a measure of it. For how can one express the increased productivity of a teacher or a nurse or a Service man in terms common to all of them?
What then, is the effect? As the years pass the services of all these people on the public payroll become relatively dearer; that is, more has to be forgone to employ people in this way than in other occupations. It is right to attribute to public expenditure this rise in the relative cost, which amounts on average to nearly ¾ of 1 per cent. each year cumulatively, or, say, £150 million a year. If we did not make this allowance which we have made publicly for the first time in this White Paper the true costs of these spending plans would be underestimated, and so, consequently, would the level of taxation likely to be needed to pay for them; and the error would grow over time.
There is one more point I want to make about public expenditure as a whole. Some people talk as if this expenditure were nothing but a burden on the economy, to be kept down as far as possible, and for preference to be absolutely cut. Such an approach is out of touch with the developments in every advanced society in the world. It is unlikely to be given practical effect by any Government, whatever may be said for propaganda purposes. The real area for argument is at the margins of these expenditures, their rate of growth in aggregate, and the priorities within the aggregate.
I welcome the close interest that is taken nowadays in what can be done to enconomise in public expenditure, or to get better value for it, by the rapidly growing ranges of management services 531 in the public sector. We have got real advantages over the past five years from the presence of senior and widely experienced businessmen in Departments as industrial advisers: from teams of scientists, engineers, accountants, consultants, administrators and others engaged in developing and applying management services: or from expanding the computer power in Government Departments, as we have done in the last five years, at a rate of 50 per cent. per annum. It is true that there are sometimes large returns to be earned from a once-for-all outlay on a management services assignment; that is why, for example, we have trebled the management services staff of the Civil Service Department in the last five years.
Management services can secure relatively large savings at the margin of expenditure, and it is right to invest in them. But this is investment in scarce and skilled manpower and no one should make the mistake of supposing that, excellent and important as modern management services are, they will be enough by themselves if it is desired to switch resources on a large scale from one public expenditure programme to another, or out of the public sector altogether. If changes on this scale are wanted there is no escaping changes of policy in the public sector. I do not say that this is impossible; but they would have to be large-scale and specific. If they are advocated, let them be specified.
The Government, as I said earlier, are planning on a rate of growth of public expenditure as a whole of around 3 per cent, a year in real terms for the period between 1968–69 and 1971–72. This, in our view, should promote a substantial and steady increase in the major programmes of most importance to the welfare of our people. It is, of course, a slower rate of growth than in the years before 1968–69. The very substantial shift of resources into exports and import saving which has been secured since then is already known to the House; and the restraint we have imposed on the growth of public expenditure has played an important part in securing this vital shift of resources. It is essential, not least for future progress of our social programmes, that this improvement, having been achieved, should be held.
532 I make no apology for a plan which, while it allows the rate of growth of public expenditure to be higher in the next few years than it has been in the last two, does not allow it to rise as high as the rates which prevailed in earlier years when a major improvement was made in the character and quality of the public services, particularly in social security, health and education; and present levels of expenditure on these services are higher than ever before. It is prudent and right for the time being now to proceed at a slower, but, I hope, steady, pace, paying due regard to the other requirements of our people and to the maintenance and consolidation of the economic progress we have made. On present reckoning this means that the public sector as a whole will fully maintain its share of growing national resources over the period we are examining.
Some of the broader financial and economic implications of this plan are brought out in a way which has not been attempted before, in the table numbered 1.2 on pages 11 and 12 of the White Paper. This table sets out for the first time both the receipts and the expenditure sides of the public accounts as a whole for the period up to the end of the second year ahead. I stress "as a whole":the table brings in the operations of the Government itself, local authorities, and the nationalised industries and other public corporations.
Transfers within the public sector, rate support grants, for example, are eliminated to avoid double counting; and balances of receipts and expenditure are struck at two points. The total balance —line 15 of the table—covers all receipts and all expenditures, whatever their sources, object or economic significance. It is this balance which corresponds, for the current year, with the borrowing requirement of the public sector as used in the Financial Statement and Budget Report published last April. The intermediate balance, in line 10 of the table, is struck between the total expenditure on resources, grants, subsidies and other transfers, on the one side, and receipts from taxes and contributions, on the other. It excludes, therefore, the purchases of existing assets, and on the receipts side taxes on capital; and 533 although I do not want to give undue weight to the precise lines of division on either side of this table, I think that the changes in this balance are a reasonable guide to the net effect on demand for resources in the short term.
Both these balances show a highly significant development in the marked swing between last year and this, from very substantial deficit to balance in one case, and from moderate deficit to a large surplus in the other. This reflects the reduction in net demands of the public sector as a whole, which has made a major contribution to the switch of resources we have achieved.
Two further significant points arise on this table. First, this presentation of public receipts and expenditure, useful and significant as I believe it is, does not encompass all the factors required for a full budgetary assessment. This is not a debate about the Budget. The House, indeed, looks a little emptier than I suspect it would if this were Budget day. Second, the figures are based, so far as receipts are concerned, on the assumption of constant tax rates at a rate of growth of the economy of about 3 per cent. a year. This is the best working assumption, conservative working assumption, we can make in a presentation which looks ahead several years. But when I come to take decisions on my Budget—or on my next Budget or on the one after that—[HON. MEMBERS:"Hear, hear."]
§ 1r. Jenkins
Not quite so old as the right hon. Member for Bexley (Mr. Heath).
shall, of course, have full regard to all the requirements of demand management, as suggested by the prospect for the economy in the phase immediately ahead. Nothing of real significance about taxation can, therefore, be deduced from either a'. these tables.
It follows that the emergence of a surplus or an approximate balance in total receipts and expenditure in a particular year, as compared with the familiar experience in all recent years of substantial deficits, does not mean, of 534 itself, that spare cash is thereby available to meet additional private sector or public sector claims. How much, if any, would be available would depend on the relation of all claims including those of investment and the balance of payments, to resources at the time.
The last aspect of the White Paper to which I particularly invite the attention of the House is the allocations between the individual programmes, especially for the next three years, the period up to 1971–72. These are shown in tables 1.3 and 1.4. The House will see that the main programmes which rise faster than the average in that period are roads, law and order, social security, local environmental services—that is, water, sewerage, local amenities, and so on—and education and health.
Amongst the medium-sized programmes, overseas aid stands out as rising fast; and amongst the small programmes, support for the arts. By contrast, the defence budget is planned to fall by an annual average of nearly 2 per cent; and so, for special reasons, is the capital expenditure of the nationalised industries. Thus, the general effect will be to continue the switch of emphasis towards the social and environmental services which was also a feature of the period 1964–65 to 1968–69.
§ Mr. Frank Hooley (Sheffield, Heeley)
Is my right hon. Friend absolutely correct in his mention of overseas aid, as this is not expressed in constant prices?
§ Mr. Jenkins
Even allowing for that, I think that my hon. Friend will find that it is now one of the fastest growing programmes in what we have put forward.
In considering the individual services, it must be remembered that it is the local authorities, not the Government, which have responsibility for managing and executing the major part of expenditure on some of the largest social services and on improvement of the environment—education, roads, housing, and so on. These services account for over 90 per cent. of local authorities' budgets, though the Government, through the rate support grant and other grants, provide more than half of local authorities' "relevant" expenditure on current account, and lend to local authorities about 40 per cent. of their net financing requirement on capital account.
535 There is close consultation between central and local government in the shaping and control of all these services. Annex 1 in the White Paper describes how this works. We look forward to the development of even more effective and mutually satisfactory arrangements as we work out a new framework following the Redcliffe-Maud and Wheatley Reports.
In general, the White Paper is concerned with the content of the public expenditure programmes rather than with the division of finance between central and local sources. However, it includes one important statement relevant to the forward planning of local authority programmes; this is, that a rate of increase of 4 per cent. in the total relevant current expenditure by local authorities, excluding loan charges, will be acceptable to the Government in respect of the year 1971–72 as a basis for the next rate support grant negotiations which will take place in the autumn of 1970.
The Statute provides that various factors are to be taken into account in grant negotiations. One of these factors is the extent to which, having regard to general economic conditions, it is reasonable to develop local authority services. The statement in the White Paper is the figure which the Government have arrived at after examining its implications for the main programmes, but before taking account of other factors which may arise in the negotiations. This statement does not prejudice the negotiations and neither do the figures for individual services in the White Paper.
As I have explained, individual local authorities themselves will decide, in the light of the availability to them of rate support grant and the broad guidance of the Government on matters of national policy, how much to spend on their different services. The figures for the individual services in the White Paper show only what the Government at this stage think is the likely outcome in aggregate of all these local decisions. This outcome suggests that we will be treating local authority expenditure significantly more generously than public expenditure as a whole.
The figures for each of the individual programmes are subject to some variation, 536 to a greater or lesser degree, as the years go by and particular contingencies arise and have to be dealt with. In operating a plan of this kind it is important to have an unallocated margin, which needs to be wider the further ahead one looks. This is why there is a final line in each of the analyses of public expenditure programmes which provides a contingency reserve, rising from £75 million next year to £500 million four years on.
I hope that I have covered at least a number of the central points which will be taken up in the debate. No doubt there will be many others. This White Paper, I think it will be generally agreed, gives a wider range of information covering a spectrum of important issues, from comparisons of wide rates of growth of the main programmes down to a substantial degree of detail and the descriptions in Part 2. This information reflects a similar range of decisions which the Government have always taken, some of them, as the House will understand, reflecting much careful and sometimes difficult examination.
In concluding, I do not want to leave the impression that, because we have set this all out, in a way which I do not think has been exactly paralleled in any other country, we now sit back and wait for events to prove us right or wrong. The process of planning public expenditure, like the process of planning the economy of which it is an important part, is a continuous one. Circumstances change, both abroad and at home; and new assessments are constantly being made of the relative importance and effectiveness of existing services.
I hope that we shall be substantially assisted in this continuous process by the views expressed in this two-day debate; and that this debate will be the first in an annual series which will give a new scope for effective parliamentary influence and a new reality to discussion both inside and outside the House about the scale and composition of public sector programmes and about the genuinely difficult choices which have to be made.
§ 4.36 p.m.
§ Mr. Iain Macleod (Enfield, West)
This is in many ways an unusual debate. It is a two-day debate, which, apart from the debates on the Queen's Speech and on the Budget Statement, is unusual in 537 itself. There is no vote—at least, I do not propose to vote against the proposition that we take note of this White Paper. We have no economic crisis, which is an econo.nic miracle in itself and very welcome indeed.
The debate centres on a document which is a considerable and welcome advance in the presentation of public expenditure. The Chancellor is right to expect that future debates—this is the sort oi occasion on which it is probably right to look a number of years ahead—will be better informed. We are very indebted to the Select Committee on Procedure and to its members, as we have so often been indebted to the Estimates Committee and the Public Accounts Committee. It is one of the ironies of the House that the reports prepared by some of the ablest Members of the House are usually debated in the House before almost empty benches. There are reasons for that, but it is perhaps a pity that so much excellent work is relatively unnoticed.
The Chancellor is also right to wait and hear the views of the House—I will express mine—as to the form future debates should take. In one sense, it makes this two-day debate a trifle unreal. The Select Committee envisaged the two-day debate on which we are now embarked as leading to a whole series of discussions in eight different functional committees which would in due course report to the House. At present, we have no follow-up, and I imagine that the discussions are proceeding to which the Leader of the House referred on 21st October. Rather like the Government's announcement about prices and incomes policy as a bridging operation, this bridge for the moment leads nowhere.
The most valuable single contribution that the House can make will be if, at the end of these two days, a consensus emerges about the relationship between the House of Commons and the Executive and the way that the House should debate these matters of very great importance. To me, this is the most important single issue in this debate.
The Government have put forward their ideas on growth for this year in the Budget Statement, and the Chancellor said yesterday that he was not altering his estimate of 2.3 per cent.—although it seems to be running at something less 538 than that at present—bringing up the figure to an average of 3 per cent. over the period to 1972.
We then have the two provisional years which are indicated in the White Paper, but there is no estimate of growth for them. I have some sympathy with the hon. Member for Ashfield (Mr. Marquand) who, in a number of questions in the Select Committee and in articles since, has asked for an estimate of growth for the fourth and fifth years. But I found the reply of the Chief Secretary on the whole convincing on this—namely, that it is one thing to make reasonable assumptions about the future, but as far ahead as that, it is dangerous for a Government to commit themselves on views which will inevitably be taken as firmer than the assumptions themselves would warrant.
Perhaps I may remind the Chancellor, because in the next two days he will be defending his 23, his 3 per cent., or any other figure, of his more cheerful attitude towards growth in his speech of 8th April, 1963, on the Budget of my right hon. Friend the Member for Barnet (Mr. Maudling). There was then no mention of 2.3 or 3 per cent.
This is what the right hon. Gentleman said:…there was everything to be said for going for a higher level of expansion, compatible with not overloading and overstraining the economy, and that if we could get a 7 per cent., 8 per cent., and 9 per cent. in a year, in view of what happened in the past, we would improve the position of our exports from both points of view."—[OFFICIAL REPORT, 8th April, 1963; Vol. 675, c. 1003.]That is a nice opening bid for the debate. My only conclusion is that one really should not make speeches when in opposition. Every time one is right it will be forgotten, and otherwise it will be lovingly disinterred at an appropriate future date.
The general claim which the Chancellor makes, and which the White Paper makes, is that public expenditure is now under control. In view of the fact that, in 1967–68, with a very small rate of growth, there was a 9 per cent. increase in nublic expenditure, one might well say that it was about time. I do not in any way detract from the credit which the Chancellor gave to the Chief Secretary. I have not been a Treasury Minister, but I know the 539 difficulty of the control of public expenditure, and there is a most marked difference between the years we are now considering and the years which followed the Socialist victory in 1964.
I remind the Chancellor that when he says—he repeated it today, but I quote here from the first paragraph of the White Paper—These plans and allocations give expression to the Government's policy that expenditure on public services shall expand throughout the period broadly in line with the growth of the nation's resources as a whole "—that is precisely the undertaking which was given in the National Plan, and it is precisely that undertaking which was broken by the increase in public expenditure to which we have referred.
Many times we have put forward our criticism of the growth of public expenditure, and I mention it only briefly now. It is implicit in the statement which I have just read. Although public expenditure went ahead in the years which we can now total up to come to the National Plan targets, the growth on which these levels of public expenditure should have been based fell in those years by very large amounts. We have calculated in total a figure of about £12,000 million below the targets set by the National Plan.
But we now have-—and this is something we can welcome—an approach which at least in one respect completely reverses that of the plan. These proposals are exact for the present years and become vaguer as one moves into the future. That is how any business makes its forward forecasts. The plan adopted the opposite approach. It was precise five years ahead and vague as one came nearer the year under examination.
We have, therefore, a most important development before the House. It is not new in the sense that five-year forecasts are not new. Ever since the Plowden Report in 1961, five-year forecasts have been prepared. The great innovation—and I pay tribute to it—is to make that forecast available in this way. Leaving aside for the moment the question of changes in policy—I accept what the Chancellor said, that major changes must be changes of policy, and there is clearly more room for argument as the fourth and fifth years are displayed—it seems to 540 me a tremendous advance in examining public expenditure to be able to do it on an output analysis instead of, as we have done for so long, on a cash basis.
As I understand, the speakers from the Government side will all be from the Treasury team, with the exception, if he catches the eye of the Chair, of an independent winding-up tonight. We have taken rather a different approach. Our speakers will be my hon. Friend the Member for Bournemouth, West (Sir John Eden), who has particular responsibility in regard to the nationalised industries, because we want to look at that question; my hon. Friend the Member for Worcester (Mr. Peter Walker), who has particular responsibility in housing and local government, because we want to make observations on that; and, finally, my hon. Friend the Member for Wan-stead and Woodford (Mr. Patrick Jenkin).
I want to look at one section of expenditure which has already come under fire a great deal and see whether we are getting value for money. I refer to the investment grants, for which a Supplementary Estimate of £100 million has recently been produced. Examining this, Sub-Committee D pointed out that in each of its last three Reports on the Supplementary Estimate, it had to comment on the underestimate of this Vote. The original estimate for this year was £460 million. It is now £560 million. It will be, we understand, £590 million because there will be a spring Estimate which we have not seen. It has been the fastest growing programme in the whole range of Government expenditure. It is, therefore, a matter which merits close examination by the House. Are we getting the value for money which we ought to expect from that sum of about £600 million?
I cannot break down the £590 million, because we have not seen the spring Estimate, but I can break down the £560 million. It breaks down in this way. There is £251 million at the standard rate of 20 per cent. Then £205 million in the development areas, where there is the 20 per cent. plus the regional differential of another 20 per cent., making 40 per cent. in all. Then £33 million for computers and £71 million for ships and hovercraft.
Let us consider the effectiveness of this enormous amount of help, which is only 541 part of the help which the Government give, most of which, though not all, is directly aimed at improving conditions in different parts of the country, at providing jobs, and at encouraging overall investment. I take the three years from March, 1966, when the Prime Minister said at the election that he saw no reason for unemployment to rise other than seasonally to March, 1969. According to the latest figures which we have from the Employment and Productivity Gazette, there has been a loss of jobs of 679,000.
That is an astonishing figure, and all the more astonishing when one realises that it is net and many jobs have been provided, and rightly provided, by the help which the Government have given. Of that total of 679,000, about 250,000 between March, 1966, and March, 1969, is an increase in unemployment. The remainder, which comes to 430,000, is jobs which have disappeared. Many people would say that the selective employment tax is one of the main reasons here. [HON. MEMBERS: "Oh."] Yes; there are very many people who were in employment in 1966 who, in 1969, because of the selective employment tax, have left employment.
§ Mr. Eric S. Heffer (Liverpool, Walton)
What is the evidence? What about the technological revolution?
§ Mr. Macleod
With respect, without going into the S.E.T., the one thing certain in is that it has failed in the labour objectives which were originally laid before the House and the country.
Of those 679,000 jobs, 106,000 have been lost in Yorkshire and Humberside. There has been a loss in every area save East Anglia, which has broken even. For the North-West the loss has been 111,000, and for Scotland 66,000.
The help given by investment grants, which is what I am examining at the moment, is not wholly related to jobs, but I recall at this point what the hon. Member for Middlesbrough, West (Dr. Bray) said in his speech on 3rd November:The Government development area subsidy to create one job at one particular plant often runs at well over £20,000 per job created. And even then this often calls for the closure of other plants actually destroying jobs. It would be cheaper to invest the money and pension off the workers to live in the South of France, taking into 542 account foreign exchange costs."—[OFFICIAL REPORT, 3rd November, 1969; Vol. 790, c. 721.]However that may be, the fact that a cost-benefit analysis is being undertaken by the Government shows the anxiety, which, I am sure, is shared by all hon. Members, about the value which we are getting for this heavy expenditure.
One of the most interesting tables—I have done the exercise and I have it before me—is that which covers the last 20 years and shows the level of manufacturing investment as a percentage of the gross domestic product. The reflection which I have on looking at it is: how little the percentage has varied, whether there were grants or allowances or no particular system put forward by the Government.
Let us take some specific years. The last figure which we have for 1969 is 3.6 as the percentage of manufacturing investment related to g.d.p. Looking back to 1964, the year when the Socialists came in, it was 3.7.
§ Mr. Macleod
I am sorry—the Labour Party.
For 1959, it was 3.6 per cent. For 1951, when the Labour Party was last in office, it was 3.8. There is, therefore, very little difference as far as one can tell—or very little to show for the efforts of the Government in this field.
I shall summarise now the outlook of my party on this large block of public expenditure which has recently come under so much criticism.
§ Mr. Tam Dalyell (West Lothian)
Reverting to the question of jobs, at a time when the number of students is running about 60,000 ahead of the Robbins estimate and many more pupils are staying on at school between the ages of 15 and 18, ought not this to be taken into the calculation, since it probably involves between 120,000 and 150,000 jobs?
§ Mr. Macleod
Even if I give the hon. Gentleman the whole of his argument, the figure which I am talking about, the 680,000 jobs lost in those years, cannot conceivably be explained in the way he suggests.
I was about to summarise the Conservative Party's policy in relation to 543 this block of expenditure. First, we prefer, and we shall return to, the system of allowances rather than grants. The main argument is that no allowance is of benefit unless profits have been earned which can be set against it. Second, we agree that there should be a regional differential. I have no quarrel with the differential which at present exists, and I agree, also, that there should be special identified treatment for ships, computers and hovercraft. There is no particular dispute about that.
§ Mr. Macleod
I am in the middle of this section of my speech. I shall give way in a minute.
I was saying that we shall keep to allowances rather than grants, and, second, that the regional policy, or that part of the regional policy, is not basically in dispute between us.
Third, we shall phase out the regional employment premium, as we have already said. We shall spend part of the money so saved on improvements in the infrastructure, which we believe are of much more help to the areas, particularly to the areas coming close to the development areas, the so-called grey areas.
§ Mr. Barnett
If the right hon. Gentleman argues correctly on the figures that, whether we had grants or allowances, there was no improvement which one could see in the percentage spent on manufacturing investment, why does he now argue for a change from investment grants to allowances rather than something else?
§ Mr. Macleod
For two reasons: first, because we consider that it is a better system; and, second, for a reason to which I shall come in a moment, on which the hon. Gentleman may comment later if he has opportunity, which arises outside the development areas. So much for the development areas.
Outside the development areas where there is a figure of £250 million at a standard rate of 20 per cent., we recognise that there is a difficult balance of argument. On the one side, the argument for the allowances, we as we would have them, as against grants, as we have 544 them now, is of the cash flow to industry and the vital need to encourage investment. But on the other side there is the possibility of a very large saving of money—I am talking outside the development areas—and the matter which we think should be discussed and on which we intend very soon to put a final view before the House and the country is whether, outside the development areas, it is better to maintain a system of allowances roughly matching the present system of grants—in which case there would be no saving of significance—or not to pay, with the special exceptions which I have mentioned, the standard rate and to use the money for reducing taxation.
This is an extremely important argument affecting a very large amount of public expenditure. When I ask, as I invariably do, firms whether they are influenced by the help which Governments give them, the answer always is that they are influenced to some extent in relation to the location of their plants, but not as to the fact of their investment. In other words, the question whether they should invest depends on their outlook, profitability and competitiveness with other people. It is, therefore, a matter of great importance to decide—and it is a difficult decision to make—whether it is better for industry outside the development areas to make this large saving or to continue with the change to allowances from grants.
May I remind the Chancellor of the Exchequer that at Question Time yesterday I asked him whether he would publish the report—I think that it is being made by the Ministry of Technology rather than the Treasury—hinted at in the White Paper and make it available so that we can see the official view of the cost-benefit of a sum ranging up to £600 million.
§ Mr. John Mendelson (Penistone)
Accepting what the right hon. Gentleman has just said about the major reasons for making an investment decision, is not the underlying matter which determines that decision whether we have an expanding economy or whether our policies are deflationary rather than any particular type of investment allowance or grant?
§ Mr. Macleod
I am happy for almost the first time since the hon. Gentleman 545 has been making interventions in my speeches to agree wholeheartedly with him. This is basically my point: it is hot so much what the Government do; it is the general atmosphere in which the firm is operating. We believe that policies which can save public expenditure, and the use of the money lower to taxation, combined with a policy to encourage savings, does more to encourage the atmosphere which the hon. Gentleman and myself want.
§ Mr. George Lawson (Motherwell)
As one who represents part of a development area, may I ask the right hon. Gentleman whether he agrees that the very fact that the grants are running at such a high level—much higher than ever before—is indicative of their being taken up? If they are being taken up, great investment must be going on, which is a good thing for the country.
§ Mr. Macleod
I should like to see—and this is the whole point of the sort of study which the Government are making—better results from this vast expenditure of money. The question of the loss of jobs in Scotland, for example, is raised over and over again at Question Time. I invariably hear, when I am present for Scottish Questions, which is not always, Scottish Ministers say, "But look hew much money we spent". That is similar to the answer which either Sidney Smith or Charles Lamb made when reproached for arriving late in the morning—"Ah, but look how early I leave".
I think that I have made it clear that, with the exception of the regional employment premium—we have always made that distinction—I do not quarrel with regional policy as such, but I simply do not believe that over the country as a whole the House thinks that it is getting value for £600 million, which is in the Estimates.
§ Mr. Lawson
Further to the point about the loss of jobs and the point made by my hon. Friend the Member for West Lothian (Mr. Dalyell), does the right hon. Gentleman know that there has been a very substantial fall in the number of young men and women available for work, that there was a quite steep fall in the birth rate beginning about six years after the end of the war, and that there are fewer young men and women 546 coming on to the labour market, irrespective of the increase in the number staying on at school and going to university?
§ Mr. Macleod
I should like the hon. Gentleman to develop that point in his speech. However one argues this case, let me remind him that we are talking about a loss of jobs—people who have gone out of employment—of 679,000 in those three years, partly accounted for by a very heavy increase in unemployment, partly by lost jobs.
Before coming to what I describe as the heart of the matter, I wish to discuss expenditure on education. I am deliberately taking one on the other side, as it were, which I have always regarded as a programme which can and must rise more than the average. I simply do not understand how the policies on education of either major party will be carried out with the amount of money suggested here unless there is a considerable increase in growth or a heavy raid on the contingency allowance. May I remind the House of the main figures.
From 1959–60 to 1964–65, the real increase in expenditure on education was 45.1 per cent. During the five following years it was 27.4 per cent. The first period breaks down to 8 per cent., or so, a year. The second period breaks down, as the White Paper says, to 4.9 per cent. In the period now before us, the figure comes down to 3.8 per cent., and the last two years are put at a level of 2 per cent. In only one year of the next four is the education budget expected to grow at above the rate for public expenditure as a whole. In view of the claims that there are bound to be in this sector, I find this surprising.
I remember saying, 10 years ago, in a speech, that the two blocks of expenditure growing most swiftly in the Tory years were education and overseas aid. They seem to me to be fairly sound priorities, even though overseas aid is, perhaps, in a frostier climate—I am speaking about the nation, not the wish of the Government—than it was at that time.
Therefore, I ask the Chief Secretary to comment on the level of education support which is being given here. We will, of course, return to it on the Supply Day. The particular point which I want to ask the right hon. Gentleman is whether there are any unannounced 547 decisions which have been taken and are allowed for, but not announced to the House of Commons. I simply repeat my view that education, to me, always has been a graph that is climbing, and ought to climb, above the average and I do not believe that there will be any improvement in standards if the attempt is made to keep it within the levels which have been put before us.
§ Mr. Robert Sheldon (Ashton-under-Lyne)
I hope to be taking up some of the points that the right hon. Gentleman has raised, and there will not be all that much difference between us on them. The right hon. Gentleman has, however, omitted that the contingency reserve changes between the period 1971–72 and 1973–74. Therefore, the increase is not 3½ per cent., because one has to deduct the contingency reserve increase. It is between 2 and 2½ per cent., against the increase in education of 2 per cent. Although it is bad, it is not as bad as the right hon. Gentleman made out.
§ Mr. Macleod
I welcome that point. When I started talking about education —the hon. Member will find this in HANSARD tomorrow—I said that I thought that inevitably this category would make a large, and probably the main, claim upon the contingency reserve as we have it.
I said at the beginning—the Chancellor said he wanted to hear views—that, in my view, the heart of this debate, because we are starting a discussion that will go on for a number of years, is the relationship between the Executive and the House of Commons. I want to state my conclusion first. My conclusion will be that we should carry out an experiment very much on the lines of the Select Committee on Procedure. I state that conclusion first because I propose to go on and consider some of the many objections that there are to this proposal.
The first objection is one that I associate more than anyone else with the hon. Member for Ebbw Vale (Mr. Michael Foot)—that is, the danger that if we multiply Committees of all sorts we detract from the authority of the Chamber. Some hon. Members accept the logic of their proposals and would have the House meet only on, say, Tuesday and Thursday and spend the rest of 548 the time, or some of the days, in Committee. I do not agree with that for one moment. I share, as it were, in spirit the objections of the hon. Member for Ebbw Vale. The hon. Member for Penistone (Mr. John Mendelson) made similar points on 21st October. There is, I think, a great danger that if we multiply Committees we may detract from the authority of the Floor of the House.
There is, secondly, the question of availability. There are 630 Members, but if one deducts the Government, their "shadow", the Chair, and so on, probably fewer than 500 are available for this and all the other vast number of tasks. The great difficulty is that those 500 are not equal in the service that they give to the House. Far too much the work of this House is operated on the willing horse principle, and there are a lot of willing horses, on both sides, present today. Indeed, it is largely their interest in this matter that brings them here.
I think that the Select Committee's proposal will put a considerable strain upon those Members. [Interruption.] If I heard the interjection aright, I do not think that it is simply a question of whole-time or part-time Members. There are many of us, and I would like to include myself, who do a lot of things outside the House and yet manage to play a full part inside. That can certainly be done. It is much more a willingness of the spirit rather than any artificial distinction between whole-time and part-time Members.
§ Mr. James Dickens (Lewisham, West)
This is highly debatable and I should like to return to it later. May I put this point to the right hon. Gentleman? Is it not becoming increasingly obvious in the House that what we require now is a change from an amateur democratic Parliament to a professional full-time Parliament?
§ Mr. Macleod
No, I do not think so, and partly for the reasons which I have given. It is possible to combine a whole range of interests outside this House, and I believe it to be desirable to do so. That does not overcome the fact that one should comment on the difficulty of the proposals of the Select Committee on Procedure and the effect that 549 they will have on the availability of the people who, we know very well, will carry the burden of this work.
§ Mr. David Marquand (Ashfield) rose—
§ Mr. Macleod
I do not mind having a conversation about this. I am coming to the conclusion that we should adopt the Select Committee's proposals. I said that al the beginning.
§ Mr. Marquand
I merely wish to question the right hon. Gentleman's assumption that the Select Committee's proposal would add to the burdens. I agree with the general tenor of his argument, but I think that if he looks carefully at the report he will find that what it proposes is a redistribution of the existing burden arid not the addition of a new burden.
§ Mr. Macleod
I understand that, but a number of those already carrying out Select Committee and other duties may not wish to be redistributed. I cannot believe that the net effect of a proposal of eight Committees, each of nine, can be other than to add to the general burden upon, as I have described them, the wiling horses.
The next point is very well summarised in the final question put by the hon. Member for Birmingham, Northfield (Mr. Chapman) to Sir Douglas Allen, the Permanent Secretary to the Treasury. It is art extremely important point for us to consider. The Chairman of the Select Committee put this question:I wonder if you are in fact saying to us —I am not saying I object to it—that in the context of some of the questions we have been putting to you today the Treasury does not have a corporate view that it wants to express to anyone other than Ministers on matters of tax change and tax reform. Is this really what you are saying?Sir Douglas replied:I think that is a way of putting it with which I would agree, yes.The Chairman said:Thank you very much indeed.and that was the end of the evidence as taken.
550 Sir Douglas is absolutely right. I have no criticism of that, but I think that we should consider where it leads us, because inevitably it will mean a particular burden upon Ministers, and especially upon Treasury Ministers. I approach any proposal to reform the House of Commons from the point of view not of my temporary occupation of a position in opposition, but of whether it will or will not suit me when and if I become a Minister again.
I am deliberately putting, as devil's advocate, all the difficulties, and the next point is that I believe the analogy often drawn with the United States is false largely because, over there, the Cabinet are not members of the House of Representatives and cannot be brought to the Dispatch Box for the ordinary process of questioning and debate. I think, then, that the Select Committee overstates its case which is, on balance, a good one, when it says:Moreover, Ministers have to take their decisions without the benefit of an informed public debate on the issues.I do not think that that is really true.
Let us consider some of the great issues we have had over the last few years. Let us take the whole question whether to have industrial legislation or not. Let us assume that the Conservatives win the next election and introduce a Bill based upon their proposals in "Fair Deal at Work". The one thing that cannot be said is that there has not been public debate on that issue, and we should not confuse the more detailed examination of a Select Committee with the wider forms of public debate which, on all great issues, goes on all the time and of which Ministers are fully informed.
Finally, would such a series of committees really make a change in the relationship between the Executive and the House of Commons? Those who have been Ministers know the reality of how policy decisions are arrived at at present. They depend on many things—on the undertakings a party may have given, on the appeal which it wishes to make at any given time, on the strength of feeling amongst its own back benchers, on the strength of the position of the Department and in many cases of the Minister himself. This is, as it were, the reality of policy power decisions as I have 551 known it as a Minister. Will it alter that position to have something like the Select Committee procedure, or will the Select Committees be debating the form rather than the substance of policy?
These seem to me to be formidable arguments why we should look carefully at this proposal for these Select Committees. Many people, I know, from the debate of 21st October, which will be reflected in the next two days, find these or similar arguments convincing against the case of the Select Committee. I believe, not necessarily in precisely the same form that is indicated in the Select Committee's Report, that we should go forward for three main reasons. They are in ascending order of importance.
First, I am impressed by the body that has given us this advice. It has amongst it young, keen, knowledgeable hon. Members who may be expected to be enthusiastic for reform, but it also includes, for example, the Father of the House of Commons, my right hon. Friend the Member for Thirsk and Malton (Mr. Turton), my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), who has, I think, held more senior offices than any other Member of the House, and others like the hon. Member for Northfield, my hon. Friend the Member for Tynemouth (Dame Irene Ward), the right hon. Member for East Stirlingshire (Mr. Woodburn) and the hon. Member for Edmonton (Mr. Albu), with vast experience going back over many years. I find it an impressive report and difficult to say that we should reject it without trial.
The second reason is that, with modern input-output and flow methods of accounting in business and increasingly in government, we simply cannot go on in the House of Commons discussing expenditure on an annual cash basis. It is very well put in the report and I find it a deeply compelling argument.
Thirdly, and most important, I think that the Executive, no doubt all Governments, have in recent years become more remote from the House of Commons and more independent of it. I think that there is a feeling in the country that this is so, and that the proposals that are before us, after the wisdom of the House 552 has been brought to bear on them, will do something to redress that position.
So if, when the time comes for decision, I have anything to do with it, my vote will go with those who wish to reform along something like the lines proposed by the Select Committee on Procedure. I hope that the Government will be able to tell us when the Leader of the House will bring forward his proposals. I hope that it will be soon, because otherwise, as I have said, this debate will lead nowhere, whereas the idea of the Select Committee was that it should lead to an informed series of Select Committee discussions. If the consensus emerges, perhaps along the lines on which I have spoken or perhaps in some other way, from this debate, then the debate will be extremely significant in the history of the relationship between the Executive and the House of Commons. I believe that most people are ready to move forward now along these lines.
§ 5.26 p.m.
§ Mr. Reg Prentice (East Ham, North)
The speech of the right hon. Member for Enfield, West (Mr. Iain Macleod) was curious in one respect. After all we have heard about the policy of the Conservative Party to increase expenditure on a whole range of particular items but to reduce it in general, one would have thought that the shadow Chancellor would have taken the opportunity today to try to reconcile these rather conflicting concepts. The fact that he has not done so is bound to lead us and the country into some rather uncharitable conclusions about the nature of Conservative propaganda.
But I agree on the whole with the last part of the speech and I join him in congratulating the members of the Select Committee on Procedure on the work they have done and the Government on their reaction to it. In particular, I want to join my right hon. Friend the Chancellor of the Exchequer in congratulating my right hon. Friend the Chief Secretary to the Treasury. I crossed swords with the Chief Secretary from time to time when I was a spending Minister and I shall say things that he is bound to disagree with, but I congratulate him on the work he has done in this matter. It has been a conscientious and brilliant 553 piece of work of very great service to the House.
Anyone who has been in Government and taken part in the long, difficult and sometimes agonising business of arriving at public expenditure figures, arguing about priorities and deciding sometimes where cuts must fall, is conscious of the fact that all these are amongst the most important decisions that Ministers have to make and that these decisions create a framework within which every spending Department has to work and set limits on the ways in which spending Departments can grow.
Hitherto, that has been a process carried on within the Government without very much dialogue with Parliament or public opinion and with the facts emerging sporadically and partially at intervals afterwards. I hope that this is going to become part of a continuing, rolling debate not only within Parliament but in public as well, so that the many bodies representing legitimate vested interests in the country—the economic development councils, the T.U.C., the C B.I., the local authority associations arid many others—will be able to make their demands on the Government and their case for what they believe to be right within a better informed framework. In one sense they will have to make mere responsible demands in that they will be aware of the total framework of public expenditure within which they will have to ask the Government to do more. Also they can make better informed, and possibly more powerful, demands commanding greater attention from those in office.
I shall make two criticisms of the White Paper on Public Expenditure, one specific and one general. The House will not be surprised if I say that the specific one deals with the figure of overseas aid. I was fascinated by the fact that the Chancellor of the Exchequer identified overseas aid figures as among those that stand out because they are rising faster than others. I am sure that he will acknowledge something which is not widely enough understood in this House or outside. The way in which overseas aid figures are presented in a document of this kind inevitably makes them look a lot better than they are. Firstly, the figures are cash figures and are not adjusted in the way other Departments' 554 figures are adjusted in terms of constant prices. Therefore, there is a built-in cut which has amounted to approximately £6 or £7 million a year in real terms in the last few years which should be applied to these figures if they are to be compared with the figures in the White Paper.
Secondly, the overseas figures are given in gross terms, taking no account of the fact that the repayment of old loans is going on and will be growing to some extent during the five-year period covered by the survey. Thirdly, the aid figures which are given are ceiling figures, and in practice there is always some degree of underspending when the actual aid is disbursed. Fourthly, these figures bear no realtion to the rise in gross national product. It is in terms of comparison of G.N.P. that we have international obligations. In fact our official aid programme is now probably running at about 0.4 of 1 per cent. of G.N.P., and by 1974 at the end of this period, even if we assume that we spend the whole of the figure given for that year, it will probably still be less than 0.5 of 1 per cent of G.N.P. and will be a lower percentage of G.N.P. than in 1964.
I do not want to deal with this matter at length because in recent months I have taken part in two debates on this subject. I simply submit to the Government that the figures they present to the House on overseas aid should at least be consistent with the target of the international commission under the chairmanship of Mr. Lester Pearson. This was a target in which we and the developed world in general were called upon to reach a total flow of resources, including both aid and private investment, in net terms of at least 1 per cent. of gross national product by 1975.
In order to do that, the actual increases in the figures before us would now be very modest indeed. It would involve approximately an extra £20 million in the year 1971–72 and an extra £40 million in the year 1973–74. Out of a total public expenditure of the order of £20,000 million these figures would be very modest indeed. Indeed, I believe them to be too modest. I am more inclined to agree with my right hon. Friend the Prime Minister who, in writing on this subject a few years ago, said that the correct flow should be something like 3 per cent. of our national income. 555 But the Pearson Commission deliberately set a modest objective which it thought would be politically practicable for the developed countries. It deliberately set an objective which would represent an improvement in the flow of resources, but at such a rate that it would not impose any substantial extra sacrifice on the taxpayers of countries in the developed world.
The stock Treasury reply to that argument is that spending Departments always have good arguments to put forward for modest increases in expenditure that on their own would not mean very much. The Treasury would argue that if it were to concede all cases of that nature it would be conceding a great deal in total. But I suggest that this matter deserves a greater priority than it gets. The one thing basically wrong with the approach of the Government to overseas aid is that, while everybody is for it, in the rather vague way in which the proverbial parson was against sin, no Government yet, Conservative or Labour, have been prepared to treat it as a priority matter in terms of public policy.
To fail to reach the Lester Pearson target is in a real sense to fail to keep our word. At the second United Nations Conference on Trade and Development held in New Delhi in the early part of 1968 we subscribed, as did other countries, to a resolution in which we promised "to use our best endeavours" to reach a flow of 1 per cent. Surely if those words have any meaning at all they mean that we ought to reach it by 1975 at the latest, seven years after we made the pledge. If the words had no meaning, they should not have been used. If they did have that meaning, they should be implemented.
I go on to make a point with which my right hon. Friend the Chief Secretary is very familiar indeed. In addition to the overwhelming moral case for doing this as a minimum, there are clear reasons of self-interest why we should do it. One thing that has made me profoundly angry over the years is the shortsightedness and lack of sophistication in the Treasury when approaching the matter of overseas aid in relation to our own economic self-interest. This is an investment in our own markets. If we keep an international 556 flow of aid from the developed world generally in response to the Pearson target, then Britain as a nation will benefit from the extra business created by it. To fail to take advantage of this was stupid and shortsighted in terms of our commercial self-interest. It was also a failure not to take a diplomatic initiative that would have been very good for Britain in the current world situation. I sometimes think that the Government are so obsessed with going into Europe that they forget that there is a world outside Europe. For the world outside Europe the flow of aid is one of the most important aspects of the relationship between those countries and the countries of Europe and North America.
Because this is a rolling exercise on public expenditure, the Government will shortly have a chance to put the matter right. I suspect from my experience that officials are already beginning to work on the next round of public expenditure figures for the White Paper which presumably will appear later this year. The Government should recognise that if they continue to fall short of the Pearson target, they are working in opposition to a practically unanimous view expressed in this House in many debates, the last occasion being 28th November last in which every hon. Member from both sides, with one exception, supported the Pearson concept. They would be working against the unanimous view of the Labour Party conference and working against the view of an increasing number of sincere and dedicated people throughout the country who rightly regard this as one of the great challenges of our time. The petition organised by the Churches in December and which many hon. Members will have received is the latest example.
I make a more general point about the strategy in the White Paper. My comment is that the total growth of 3 per cent. allowed for by 1971–72 and anticipated for the two following years is almost certainly too small and ought to be increased. Particularly, it should be increased in relation to the social services and the environmental services which ought to receive larger allocations than in fact they do.
I found the Chancellor's speech disappointing in that he did not seem to spell out the reasons for fixing 3 per cent. as the right objective. He spoke 557 about a balance between private and public spending, but did not say why that balance was correctly defined at 3 per cent. In my view, in the next General Election candidates from our party will be, entitled to take credit for the fact that in terms of housing, health, education and other basic services this country has been doing better under the Labour Government than it ever did under the Conservatives. We would be entitled to take credit for the fact that the pensioners and widows and others in need are doing better than they did under the Conservatives, certainly better than they would have done had the Conservatives been in power during the present period.
The reason is that public expenditure has gone up more than the G.N.P. This has been right. Of course people object and grumble about higher taxes, higher rates and increased National Insurance contribations, but any M.P. or candidate worth his salt should be prepared to say to people who grumble in this way that those who are fit and able to work and who receive reasonable wages and salaries should contribute their share to a better society, particularly in meeting the needs of the less fortunate members of the community.
In judging whether 3 per cent. is an adequate measure of what we need to do to continue that progress, there are a number of factors in public expenditure that we need clearly to recognise. The Chancellor dealt with one of them in talking about the relative productivity of those employed in the public sector and those employed, for example, in manufacturing industry. This underlines the fact that public expenditure needs to grow rather larger than other forms of expenditure to keep pace with it over a period of years. But also we know that in all of the main social services there is a tremendous extra demand because of changes in population and other changes in our society.
The White Paper reminds us that between 1968–69 and 1971–72 there will have been a rise of 6 per cent. in the number of primary school children, a rise of 9 per cent. in the number of secondary school children and a rise of between 14 and 20 per cent. in the number of full-time students. In the matter of health we are reminded that the num- 558 ber of in-patients is going up by 3 per cent. a year and that is likely to continue. In the matter of social security we are reminded that by the end of 1972 there will he an extra 500,000 pensioners and an extra 400,000 children eligible for family allowances. Therefore, a great part of this proposed 3 per cent. per annum increase is bound to be taken up in providing for larger numbers. It is true that the figures also provide for what is an improvement factor but clearly it is a very slow improvement factor.
What we must ask ourselves is whether our objectives in reaching a more just society and fighting the remaining pockets of poverty in our society can be fulfilled by figures of this kind. I do not believe they can. I add the particular anxieties of the local authorities which accounted for a very great deal of expenditure in these social areas. The rate support grant was negotiated for 1969–70 and 1970–71 on the assumption of a 5 per cent. rise in the real value of local authority services. They are now being told that it will be 4 per cent. for the year 1971–72. The Association of Municipal Corporations and other local authority associations have expressed a great deal of anxiety about this matter, and are wondering how they can possibly maintain it.
To introduce a constituency point, the Borough of Newham, with an ageing population, with ageing physical assets, and with social conditions which at the moment are putting an increasing burden on the rates, rightly submits that within the range of 4 per cent. it will impose very great burdens in terms of extra rates if the local authority is to fulfil its normal obligation. In other words, I think that this approach to public expenditure is too cautious and too conservative. It is a lot better than we would get from right hon. and hon. Gentlemen opposite, but it is not good enough to satisfy the aspirations of hon. Members on this side of the House.
If I am then asked how I would change this and provide the extra resources, I will make four points. I make them briefly, because three of them go much wider than this debate.
The first is clearly that we have to think in terms of a much higher rate of growth. For that, there are many reasons, one being that it cannot long be tolerable 559 to a Labour Government to contemplate a level of unemployment as high as it is now and has been in recent years. A higher rate of growth would meet partially the need for higher social expenditure along the lines that I have suggested.
§ Mr. Dalyell
Would my right hon. Friend tell us where this unemployment is? Some of us who represent development areas see industries closing down, even new ones, for want of available workers.
§ Mr. Prentice
In many areas, even in parts of the London area, there is a tightness in the availability of jobs. Certainly that applies to East London, where my own constituency is situated, to a greater extent than was the case a few years ago. One has only to look at Cornwall, Ulster, South Wales and the North-East to see problems of this kind.
The second point is that I am convinced that there is scope for further cuts in defence. I say that as one who is not a pacifist. I believe in the maintenance of defence forces, and I do not exaggerate what is available under this heading. Perhaps I shall be able to develop that point in some future debate. Since the correct decisions made on these matters in 1968, though they were overdue, there has not been a sufficiently rigorous attempt to reduce defence expenditure.
Thirdly, there is scope for a new structure of taxation and for the introduction of a wealth tax and a gift tax, both of which have often been discussed on this side of the House. We have been told that there are considerable reasons of administrative difficulty for not introducing them. However, one cannot accept that administrative difficulties go on year after year, holding up the important changes which we ought to see in this respect.
All these points provide only a partial answer, and my fourth point is bound to be this. In my view, we should provide for a rather larger share of the gross national product to go to public expenditure and face the necessity for rates of taxation to continue at least at their 560 present levels on people with average incomes and at somewhat higher levels on people with higher incomes. This is a matter of great psychological difficulty. The man in the street does not like it. He imagines himself to be grossly overtaxed. He has done so for many generations. He will always imagine himself over-taxed.
In my working life since the end of the war, I have gone through a wide range of incomes, from very low to fairly high as a Minister of the Crown. When I was low-paid, I paid no tax. When I was average-paid, I paid average tax. That seemed reasonable. When I was a Minister, I paid heavy tax, but still I had a lot left. At no time did the process seem unreasonable. However, when people get their pay packets and see their pay slips, they look at the gross figure and then at the take-home pay. Of course, they grumble. If taxes were half what they are, people would grumble just as much.
It is the task of leadership to explain the reasons for taxation and what happens to the tax. That is especially difficult in an election year when, as always, the Conservative Party will be making a selfish appeal to the public which runs counter to any concept of social—
§ Mr. George Younger (Ayr)
Has the right hon. Gentleman forgotten that his right hon. Friend the Prime Minister fought the last election on the fact that no general increase in taxation would be needed?
§ Mr. Prentice
That is a distortion of what was said, and it is entirely wrong. We have always maintained—in a sense, I have repeated it today—that we want to see a fast rate of economic growth and want to finance extra services out of the proceeds of that growth. Whatever the rate of growth is, decisions have to be made about the balance between public and private expenditure. That cannot be dodged and never has been dodged on this side of the House, although it is dodged constantly by right hon. and hon. Gentlemen opposite.
We have to explain to people what the real issues are. The fact is that for many years, under both Governments, the index of personal consumption has gone up in respect of home ownership, car ownership, television, washing machines, telephones, holidays abroad, 561 and the rest. I hope that it will continue and that more and more of my constituents will enjoy them. At the same time, we have to put it to people that the building of a new primary school in their district may mean a fundamental improvement in the standard of living of a family which is more important than having a new motor car in the garage. It has to be considered as having an effect on the living standards of the family. People have to be presented with the costs of it and the reasons why they must be taxed to provide it. In terms of human dignity, the speed at which we clear our slums and replace out-of-date mental hospitals is more important than the speed at which we change to colour television.
It is a test of leadership for all parties to put these issues clearly to the people and to have the courage to explain the choices and the reasons for making choices in favour of the public sector and public expenditure to a greater extent than is proposed in the White Paper.
§ 5.44 p.m.
§ Mr. Nigel Birch (Flint, West)
The right hon. Member for East Ham, North (Mr. Prentice) started his speech with a few words about procedure. I do not want to speak about that today at any length, but there are one or two comments that I would like to make about it.
My right hon. Friend the Member for Enfield, West (Mr. kin Macleod) announced his conclusion first and argued with equal brilliance both sides of the case about whether we should have more Select Committees and give more weight to their reports. I agree very much with him and with the hon. Member for Ebbw Vale (Mr. Michael Foot) that they tend to suck the life out of this Chamber and make it a boring place. I am not standing for election again, so that I can bear that with Roman fortitude. But it will happen.
My right hon. Friend's second point is that few hon. Members read these reports and fewer still are willing to speak on them. When the House was debating the report of what is probably the greatest of all Select Committees, the Public Accounts Committee, I looked in and saw my hon. and very keen Friend the Member for Ormskirk (Sir D. Glover). The Committee had reported 562 on such important matters as the £400 or £500 million under-estimation of the Concorde costs. About five hon. Members were present, and hardly anyone who had not served on the Committee said a word. If hon. Members had read that report, they would have taken part in the debate. The hon. Members who work on these Committees may be wasting their fragrance on the desert air.
The last point touched upon by my right hon. Friend is really the most important. There is the greatest difficulty in having Select Committees probing deep into policy. My right hon. Friend quoted the words of Sir Douglas Allen, the Permanent Under-Secretary to the Treasury. He was asked by the Chairman of the Select Committee, "If we ask you a question, would you give us your full mind and say exactly what you thought?" In effect, he said that he would not. Of course, they will not. One can never get a civil servant to speak outside his Minister's instructions. It is not possible for that to happen.
This was very much borne in on me the other day. Hon. Members may remember the case about the disclosure of evidence given at Porton. That was considered by the Committee on Privileges, on which I serve. I know something about Porton, having visited it when I was in the defence world. One interesting feature about it is that it is the only magnificent building put up by the 1945 Labour Government. It is a superb example of Post Office Georgian. In fact, I suggested that it should be turned into a home for old Socialist school-masters.
The point is that the Select Committee which visited Porton thought that it was being told secrets, whereas it was told absolutely nothing. It is almost impossible to tell a mixed Committee real secrets. However, if it is not told real secrets, how can it make a balanced judgment? That is the real difficulty. Back-bench hon. Members are not administering the country. They are sustaining or criticising a Government. We cannot have 630 people running the Government.
I hope that we shall be very careful on these matters. One is very liable to get judgments expressed by Committees which are not based on real evidence.
§ Mr. Dalyell
It was my understanding, and still is, that there were no possible secrets involved in the evidence taken at Porton. That was part of my point.
§ Mr. Birch
Certain parts of the evidence were sidelined and excluded on those grounds.
Turning to my main theme on the White Paper, it is interesting and valuable, to a certain extent. It is a much more elaborate variation on what was suggested a good many years ago and used to be called the split Vote on Account. The idea was to have a White Paper in the autumn setting out what Government expenditure would cost if policy remained as it was and, therefore, hon. Members would have a chance of estimating what sort of taxation would be involved and whether people would stand for it.
The Chancellor quoted the Plowden Report. That Committee was the first to suggest a five-year forward look. Plowden said that he did not think that it would happen, and the reason why he said that was that officials of the Treasury at that time were against publishing a five-year forward look. They feared that if they set out the suggested expenditure for five years, there would be no chance of getting it down—and, indeed, it would almost certainly go up—whereas, on the other side, the growth might very well not occur. That is precisely what has happened, and that is why we have been in such difficulty.
I suppose that it is a certain victory for the Chancellor and the Treasury, and I do not think that there could be a White Paper set out in this form unless the Department of Economic Affairs had surrendered unconditionally. I have always thought that that Department was the silliest of all the very silly ideas of the Prime Minister. The idea of creative tension is like saying that the Foreign Office is too much in favour of Europe and that we need an anti-Foreign Office against Europe. It was as silly as that.
It was always certain that the Treasury would win. But it would take time, and 564 that was one reason why our economic policy was confused for so many years. Fortunately, however, the Department has surrendered, and no massacres or starvation will result. The last Minister has a holiday on full pay in the Cabinet, and no doubt the civil servants involved are carrying on their laborious mischief in other Departments, certainly with equal pay and probably with equal status.
Another matter that I suppose the Chancellor may take some bows for is an overall balance in the Budget. The difficulty is that taxation is now so high that it is inflationary on its own account. It is having the effect of cutting down savings with an acceleration in wage claims and wage awards. Therefore, it is ultimately self-defeating.
On the other hand, the Government have put up taxes, cut back on a great many things, and instituted a savage monetary policy which out-Chicagoes Chicago, because any deficit on the balance of payments has to be counted against domestic credit expansion.
It would be easier for the Government to pride themselves on this if it had come about as a result of purposive action on their part. But we have had measure after measure. I once counted up and found that deflationary measures had been introduced on 30 different days. I then lost patience. All these measures have been thrust upon us by our creditors. They have not said, "You will not spend money on this; you will put up taxes by so much." They have said, "Unless you pull yourselves together you will not get any more money". In one instance they set down something definite. In the Letter of Intent, a definite figure for domestic credit expansion was laid down. Our creditors have had a tremendous amount to do with what happened.
In the canticles of praise that the Prime Minister and the Chancellor sing to themselves, they should end, "Non nobis domine—not unto us the praise but unto Pierre-Paul Schweitzer".
The severe credit squeeze is producing some ghastly results. So many old people have had their savings damaged and destroyed. It will be a long time before any confidence returns in the market for Government securities.
The Prime Minister likes to dwell on the palmy days of 1964, but 1966 is 565 his real year. That was when he promised that there would be a steady 3.8 per cent. growth and no great increase in taxation, no health charges, and other matters.
Hon. Gentlemen opposite have constantly been marched up and down the hill saying that trade union legislation is essential for wage restraint, and so on. The Grand Old Duke of York marched his men up and down the hill, and the poor old "Duke of Scilly" is doing the same thing. He does not seem to mind the occasional yelp from below the Gangway.
I turn now to one of the main reasons why we have got into such difficulties and why it took us five years to get over an acute balance of payments crisis, whereas five months have been about the maximum before.
One reason is the size of the nationalised industries. This has destroyed the gilt-edged market and the market in Government securities. How can the Government raise capital for the nationalised industries? Basically, there are four ways. First, they can put aside money out of profits. Many of the nationalised industries do not make any profits. The ones that do are ordered by the Treasury to put aside a certain percentage on their assets, but that is much less than an ordinary private company would put aside. Therefore, there is already a drain.
The next way is by selling Government securities to genuine savers outside the banking sector. The original idea of nationalisation was that that would cause no difficulty because the Government would be able to sell all the bonds that they wanted. But people will not buy them. Until recently there were no net sales of Government securities. There are some sales now, but not many.
If the companies do not save and the Government cannot sell bonds, there are two other resources. The first is inflation. That is what has happened in past years. There has been an enormous increase in the quantity of money, because the bonds were not sold. The second way is to put up taxation enormously and cover the capital requirements of the nationalised industries out of taxation. That is what the Government are now doing. That is one reason why we are so heavily taxed.
566 What can we do about this? One thing that we can do is not to nationalise. Nationalising the docks seems to me to be an act of supreme folly. The Government have gone out of their way to conceal the amount of extra Government securities which will have to be created to do this. Steel was nationalised and is making a loss. The Government's holding is called a public dividend stock, but they get no dividend. So they have to put up all the capital expenditure. On the other side of the balance sheet the Government issued nearly £1,000 million of 6½ per cent. bonds which mature next year and will have to be refinanced at a higher rate of interest. All this comes straight on the Budget.
I have always looked on the gas industry as one of the more efficient of our nationalised industries. I note that it took two months to turn off somebody's stove—but that might happen to anybody. How can it conceivably make up a 14 per cent. wage increase in a year? The First Secretary of State said that it must not put up its prices, but must fulfil the Treasury's target. It cannot do it. So, in effect, this deficit comes on taxation again.
When it is inevitable that the prices charged by some nationalised industries must go up, it is no good waiting six months or a year while poor Mr. Jones makes up his mind. He is not running the show. The Government are supposed to be running it. They ought to know whether the Gas Council is justified in increasing prices. If not, they should sack the Council and get somebody else to run the industry. The effect of constantly delaying these matters piles up the money supply and the charges on taxation.
The Steel Board is applying for its third increase in one year. This is absolutely hopeless. I believe that better control of nationalised industries is essential. My right hon. Friend the Member for Enfield, West spoke about investment grants. A very large sum is at stake there.
Economists have estimated that, on the basis of the White Paper, there is no real justification for a decrease in taxation in the next Budget. In view of the wage flood that is even more certain, but it does not mean that we may not get it. I believe that with taxation at this 567 level, in the long run, inflation will continue to accelerate.
§ 6.10 p.m.
§ Mr. James Boyden (Bishop Auckland)
The right hon. Member for Flint, West (Mr. Birch) has managed to pass lightly over the importance of this White Paper and its consequence for the House. It does what members of the Conservative Party have pressed for for many years, and that is to give backbenchers a greater control over the supply of money, and with new methods and techniques to give greater knowledge of how to apply pressure. This White Paper is in the best traditions of the House, and I congratulate the Select Committee and my right hon. Friend, and indeed the Government, on accepting these improved methods of public accountability and providing the extra information and the extra methods.
I want to concentrate on two points, one of which I hope will awake an echo in my right hon. Friend's mind because I think that it is a way in which the Government can save money. If one looks at the table on page 69 under the heading "Public Expenditure by Economic Category", one sees a large figure for gross domestic fixed capital formation, running from £3,804 million to £4,175 million in 1971–72. The largest part of that is in building and construction, and the point which I wish to develop is that there ought to be in an appendix to this White Paper a similar plan for looking ahead in the building industry.
I have been through the White Paper very carefully, and I have found few references to the significance of the building industry as an element of capital formation and very little indication of the Government's control over and influence on it. In fact the section on housing looks at housing as though the builders did not come into it, and the section on hospitals and the Ministry of Health, on page 52, makes only a slight reference to building by saying:Work on the introduction of industrialised building techniques and the use of standard designs is being developed.My right hon. Friend in his speech just glanced at the building industry and uttered one sentence about it. I therefore 568 suggest to him that what the Treasury—and he himself—has done in looking at public expenditure is to take an accountant's view of it and forget in a very important sector, that is the building sector, how the capital formation can be made.
Paragraph 35 says:As the programmes are rolled forward in this way each year, and as calls are made on the contingency reserve, changes are to be expected in the individual totals.I want to refer to the necessity for having a building programme drawn up nationally by the Ministry of Public Building and Works, and then breaking that down into regional programmes. In his evidence to the Phelps Brown Committee the former Permanent Secretary to the Ministry of Public Building and Works said that it was highly desirable that the building programmes for the nation should be dealt with in this way. For the first year ahead, starts should be settled firmly. For the second year ahead, 75 per cent. of the starts should be firmly fixed, leaving only 25 per cent. open, and for the third year there should be a provisional set of building starts for the whole economy. These building pogrammes should be worked on by the Ministry of Public Building and Works nationally, and then dealt with regionally so that the load on the building industry can be tackled properly regionally.
Perhaps I can illustrate that by reference to one set of circumstances. If an electricity power station, a chemical works, and a great road scheme all start at the same time in a region, there is great difficulty in finding the labour and the building capacity to do those jobs. One function of what I am suggesting is that the building process would be dealt with in a much more orderly way for the whole of the economy. Where the opportunity for saving money comes in is that one of the essentials of an efficient building industry is stability of load, and one of the troubles in the past has been the use of the building industry as a regulator of the economy. The techniques which I am suggesting would provide greater stability for the industry. It would mean greater stability for the firms concerned, and also greater efficiency. That would be one way of doing something to reduce the costs of the public expenditure programme right across the field.
569 I merely sketch those things out. It is more complicated than I have been describing, but it is described in the Phelps Brown Report which made two recommendations on this particular subject. It was dealing with the problem of labour only, but it made these important recommendations in passing, and I hope that in looking ahead arrangements will be made for there to be in a document of this sort—at least an appendix which gives an outline of what I have been suggesting. The Ministry of Public Building and Works should be commissioned to get on with this task for the nation as a whole.
I do not think that it should be overlooked—and here I take issue with my right hon. Friend the Member for East Ham, North (Mr. Prentice)—that a substantial contribution to social improvements in this report and in this look ahead comes from the Ministry of Defence. There is a drop of 2 per cent. steadily over the years. Very little credit is given to the Ministry of Defence. Hon. Gentlemen opposite pick on every possible point in the rundown to make the maxims m trouble, and have very little regard to the contribution which the Ministry of Defence has made overall to social policies.
The Ministry of Defence has been very conscious of the need for better techniques in controlling expenditure, apart from policy changes. Many of the technical devices which have been used by other Departments have emanated from the Ministry of Defence in getting the maximum value for money from Service expenditure. I know that the Service man is conditioned by his tank, by his aircraft, or by his submarine, to produce the maximum operational efficiency, and that this enters into the cost of such apparatus, but where operational efficiency is less important, such as in catering, barracks, or with more general equipment, the Ministry of Defence has made remarkable cost-effective progress during the last few years. I pay tribute to my right hon. Friend the Secretary of State for Defence who has been the greatest success as a Minister for years in pursuing these effective economies.
Perhaps I might give one relatively minor example of that. When I was at the Ministry of Defence I did not hear 570 any criticism in this House of the quality of the soldier's food. This was due partly to the changed attitude of the House to the soldier, but it was due also to the efficiency of the Army Catering Corps and the use of methods which run through this document and which were very much in line with the future of making things more effective with less expenditure of money.
I take issue with the Chancellor of the Exchequer when he says that it is impossible to judge the productivity of public servants. From my experience in three Ministries I know that it is possible to do that, and that an effort needs to be made to do it for the morale of civil servants who are often used by the Conservative Party as a political shuttlecock.
The Conservatives say that the numbers must be reduced irrespective of the function that they have to perform. They make out that civil servants are bureaucrats and that the Civil Service system cannot compare with private enterprise. Of course, that is rubbish. We on this side should take every opportunity not only to improve the productivity of civil servants and those in the public service, but to defend the ways in which they operate when they operate well, as most of them do, and to make an effort to judge their productivity and bring it to the fore.
My second major point is that I hope that the Chief Secretary will not take a defeatist attitude on the problem of Civil Service productivity and will, whenever good productivity bargains and improvements are made, bring them to the public mind and emphasise them.
§ 6.20 p.m.
§ Mr. R. H. Turton (Thirsk and Malton)
Although the Chief Secretary is the proud father of the White Paper, the Select Committee on Procedure, of which I am a member, was the author of the suggestion of a two-day debate, and I should be failing if I did not start by thanking the Government for initiating this two-day debate, although I regret that it did not take place when we asked for it, namely, at the beginning of December.
The object of our suggestion was to enable the Chancellor of the Exchequer to have plenty of time, before making his Budget, to listen to and consider the recommendations of the House. I hope 571 that the Lord President of the Council's successor, who will probably come from this side of the House, will pay attention to our recommendation and will arrange a two-day debate in December this year.
We made many recommendations which have been accepted, but the Government have not accepted two of them. I ask them to reconsider them to see whether they can be accepted by them or their successors. We said that there should be a table showing the Government's overseas expenditure, with its effect on the balance of payments. It would be of great advantage if the White Paper contained that information because everybody is interested in the effect of Government overseas expenditure on the balance of payments. It is not easy to disentangle Government expenditure on defence, on the overseas account or at home.
Our other suggestion was, curiously enough, very much in line with the request which the hon. Member for Bishop Auckland (Mr. Boyden) made for some presentation of the building programme. We asked that there should be a table showing the capital expenditure by function. That would enable us to know exactly the amount of the Government's five-year rolling programme.
I am tempted to follow the lines of the procedure debate which I thought my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) was at one time following, but I must resist that temptation and get down to the important object of this debate, which is to review public expenditure. Between 1963 and 1968, public expenditure increased from about £11,600 million to £19,200 million—an increase of £7,500 million. In the rolling programme foreshadowed in the White Paper, it increases from £19,200 million to £21,000 million. This means that there will have been an increase of 83 per cent. in public expenditure at a time when the growth of the economy has varied between 1 and 3 per cent.
The right hon. Member for East Ham, North (Mr. Prentice) said that we must have growth and more public expenditure. This is what is wrong. Public expenditure has increased so fast and so 572 far under the Government that growth has been retarded. We cannot have both. We cannot have deficit financing and real growth in the economy.
I am not trying to make a party political speech, but the general aim of the nation should be to increase the growth of the economy, bearing in mind that every 1 per cent. increase in the gross national product means £360 million more in output. The way to achieve that growth is to reduce public taxation with the effect of encouraging the private sector to invest its liquid savings, not in consumer demand, but in industrial investment, or, as my right hon. Friend the Member for Flint, West (Mr. Birch) said, in Government or local government stock.
The difficulty is that the White Paper envisages a growth of public expenditure rising from 2.4 per cent. this year to 3 per cent. in later years, exactly in line with the Government's estimate of the growth of the domestic product. The White Paper does not allow for any reduction in public taxation unless the Government have made a lower forecast of the growth of the economy than it turns out to be, or revert to deficit financing, which was the major cause of the troubles in the early years of the preceding Chancellor of the Exchequer.
How can public expenditure be reduced? This is always a painful operation, but some ways are less painful than others. As politicians, we are susceptible to this form of pain. Whenever right hon. and hon. Members opposite talk about reducing public expenditure, they are always happy to envisage ways of making the country defenceless. They do not consider any other way of reducing taxation.
I referred a few moments ago to the rise of £7,500 million in public expenditure from 1963 to 1968. That £7,500 million can be divided into two parts. There was a rise in current expenditure of £5,000 million and a rise in capital expenditure of £2,500 million. Equally, in the rolling programme, the £2,000 million rise can be divided between £1,500 million on current and £500 million on capital. This gives the clue to how we can attack the problem. The clue is to be found in the speech of the right hon. 573 Member for Cardiff, South-East (Mr. Callaghan) when he introduced his Budget in 1967. He said then:Is it necessarily the best arrangement that so much of the borrowing requirement of local authorities and public corporations is financed in the first instance by the Exchequer? The present arrangements have grown up as a series of ad hoc responses to particular situations over a long period of years. I think that the time has come to take stock of the suitability of the present arrangements in the contemporary world, and I have therefore put a review in hand."—[OFFICIAL REPORT, 11th April, 1967; Vol. 744, c. 998–9.]When the review came to be published the right hon. Gentleman had left for another office. I remember the Chief Secretary presenting the review. He did not talk about any new arrangement. He said that was just an actuarial exercise, followed by the National Loans Bill. A great opportunity was missed. If we compare 1963 with 1968 it will be found that in 1963 public corporations financed two-thirds of their requirements from their own resources and only one-third came from Exchequer borrowing. In 1968 the proportion had switched right round and only one-third came from internal resources, and two-thirds from the Exchequer. That involved additional public expenditure of £750 million.
Some of the difficulties of financing public corporations and the lack of confidence about the way that they are run have already been mentioned. The other side of this is the local authority capital expenditure, where the same pattern can be seen. It is of much more importance in relation to the possibility of reduction of public expenditure. Between 1963 and 1968 the capital expenditure of local authorities practically doubled. In 1963, two-thirds of the expenditure was being borrowed from the market with one-third coming from Exchequer loans. In 1968, the situation was reversed with one-third being borrowed from the market, sometimes even from abroad, and two-thirds from the Exchequer. That involved extra expenditure of £1,200 million. The problem is to reduce public expenditure by abcut £2,000 million.
What is stopping us? There is a lack of confidence in the £, in public corporations and local authorities, chiefly because we have been going through a period of inflation. Some of the Government's actions have not led to confidence 574 in the gilt edged market. The national industries have not been paying their way; they have been making losses, and rising prices have been deferred. They are not good subjects for investment.
Is there liquidity which could be invested in capital projects and which is not being so invested? Taking the three years to the end of September, 1967, there were increases of £5,855 million worth of liquid savings on deposit. That was not going into helping to pay Government debt, but was available and could have been attracted into lending to public corporations and local authorities. It is remarkable that at a time when the Government's debt went up by £3,176 million this non-bank private sector made no investment to help the Government and during that period disinvested itself of £288 million in savings. How can we attract this amount of liquidity into local authority and corporation markets?
I want to draw the Chancellor's attention to the practice in America where, under Federal law, bonds raised by municipalities, local authorities, or states are exempted from income tax, which means that investment is attracted to local authority areas. I suggest that the Chancellor should make interest on loans by local authorities to ratepayers free of income tax up to a limit of a loan of £3,000 and provided also that the interest rate is no higher than 6 per cent. In that way we could reduce this load on public expenditure in a fairly painless way for local authorities. It would ease the burden on local authority finance because the pressure on the interest rate would be a good deal less than it is now, when some local authorities are having to borrow at about 10 per cent. It would chiefly attract new savings which we are trying to get into investment.
There is also a psychological advantage. At present, there is a feeling of remoteness between the ratepayer and the local authority. It would be a great advantage if the man could feel that he had a stake in an old people's home, local authority housing, or even a sewerage scheme. The Chancellor did something on the same lines in his last Budget when he allowed relief of capital gains tax on gilt edged to encourage confidence in that market. In the next Budget he should find some way of putting more confidence in local authority finance.
575 This policy of increasing public expenditure in a climate of freeze of personal incomes will be disastrous. That is why some way must be found of reducing public expenditure, because we want more growth. Hon. Members could not be happy when they looked at the recently published O.E.C.D. league tables of growth and saw Britain at the very bottom with 2 per cent., a country like Sweden with 4.5 per cent., and France even higher. I remind the House of the recent warning given by Mr. Catherwood, Director-General of the N.E.D.C. He said:There are tremendous forces for improvement at work in the economies of all our industrial rivals, amounting to a second industrial revolution, and if their growth allows them to participate in this and our stagnation holds us back, then it will not be very long before we are no longer in a position to keep on terms with them.That is why I believe that in the interests of the country it is vital that we should end the stagnation and find steps to promote more growth. In my view, our first step should be very drastically to reduce public expenditure.
§ Several Hon. Members rose—
§ Mr. Speaker
Order. I remind the House that although this is a two-day debate, very many hon. Members wish to speak. Mr. Albu.
§ 6.41 p.m.
§ Mr. Austen Albu (Edmonton)
The right hon. Gentleman the Member for Thirsk and Malton (Mr. Turton) seemed not so much concerned with the reduction of the public use of resources as with the methods of increasing savings in a time of inflation. That is a very important subject, but I do not think that it is one that we expected to discuss today. The right hon. Gentleman was a distinguished member of the Select Committee, but it is extremely important that we should set a pattern for these debates, this being the first of what is likely to be many.
I was rather disappointed that the right hon. Gentleman, and his right hon. Friend the Member for Flint, West (Mr. Birch) did not seem concerned with the present subject, although I must add that I thought that the right hon. Gentleman the Member for Enfield, West (Mr. Iain Macleod) made a most admirable speech.
576 The Government are to be congratulated on making this major advance in the way in which the House is presented with estimates of public expenditure and, in particular, with the policies which the Government intend to pursue in the years ahead to which the money is inevitably committed. There is excuse no longer for any hon. Member or for any of those outside the House who take some account of our proceedings to avoid the issues of choice which are inevitably the basis of our political discussions and debates.
I might add that I am disappointed, as I expect we all are, at the attendance in the Chamber. It is one of those occasions when there is no vote, and when, there are no Whips on, that this happens, but I hope that debates of this kind will be considered in future to be equally as important as Budget debates. Following on what the right hon. Gentleman the Member for Enfield, West said, I hope that in future the Opposition will always table Motions of censure, or Amendments to the Government's White Paper, and that we may have Divisions. That is what the whole thing is all about. The whole purpose of publishing the White Paper is to make issues of public policy as controversial and debatable, and as fully debated, as possible.
I am glad that my right hon. Friend the Chancellor of the Exchequer referred to the only marginal gains to be made from improvement in the efficiency of Government Departments and agencies, and especially the more scientific methods of taking decisions. On some of the latter, we have had some evidence in the Committee, and my hon. Friend the Member for Bishop Auckland (Mr. Boyden) has referred to his experience at the Ministry of Defence.
I agree with the need for the development of improved methods of taking decisions—cost-benefit analysis, and so on, and improved management structure in the Civil Service—but the final decisions are, and must remain, political decisions and any savings made by improved efficiency can be only marginal. But it seemed to the Procedure Committee that the methods by which the Government take decisions, the use they make of modern management methods, and the like, are the very matters which the proposed Expenditure Committee, 577 with suitable sub-committees, could well examine.
I fully understand, and have some sympathy with the view which the right hon. Gentleman the Member for Enfield, West advanced as a "devil's advocate", that it might not be easy to get civil servants or Ministers freely and frankly to give the alternative views which might have been expressed before a decision was arrived at—I think that that is highly unlikely—but the extent to which appropriate methods have been used in arriving at the decisions, and the methods by which the policy is to be carried out, might well be the subject of examination by Committees. We must remember, however, that, inevitably, the number of Committees which would probably be sitting in any one Session would limit the amount of inquiry into these vast amounts of public expenditure and the large number of programmes involved.
As the right hon. Gentleman the Member for Thirsk and Malton has said, the Government have accepted many of our recommendations, first of all, the recommendation to publish the White Paper, but I still have some grumbles left. Table 1.5 describes the separate spending authorities for the various programmes, but it would have been helpful if, in addition, the table could have been broken down or expanded to cover details of the groups of programmes in the same way as is done in Table 1.3. I would also like to see a greater breakdown of such items as technological services, and education, health and welfare in Scotland. It may be that the proper place for this breakdown to be shown would be in a presentation of the separate estimates by functional groupings. That would involve some incorporation of Votes of other Departments in the Estimates of the major Departments responsible for particular functions. It might be better to do it in that way rather than to enlarge this form of White Paper until it becomes a vast book.
I welcome, and would encourage, the improved methods of decision taking within Departments, but what I am not so certain about is whether the machinery at Cabinet level has been greatly improved—the decision taking, that is to say, between Departments themselves and in relation to major objectives of policy. I suspect that this is still based on 578 methods of bargaining between Departments and Ministers, though I hope that more sophisticated procedures are being used.
I was not particularly reassured by the answers I got from the Chief Secretary in the Committee. I was slightly more assured by what the Chancellor of the Exchequer said today, which was that not all forms of public expenditure have the same effect on the national economy. I do not know how far these very complicated matters are considered in Cabinet or in Cabinet Committee when public expenditure is being discussed.
We are discussing the White Paper within the context of the latest Government economic forecast "The Task Ahead". That publication is now almost a year old, and it would be better if we could have something more up to date. I know that there are difficulties about that, because the main economic forecast by the Government is given, presumably, at the time of the Budget, which is based on it. I am not sure that we could have an economic forecast at the same time as or shortly before the White Paper on public expenditure is produced.
§ Mr. Patrick Jenkin (Wanstead and Woodford)
The hon. Member may be able to clear a doubt which arose in my mind, and which was not clarified by the Committee's Report, as to when the Committee envisaged that the economic assessment would be published in relation to the timetable.
§ Mr. Albu
I am not sure that we were very clear on that point ourselves. There are considerable difficulties, in view of the inevitable date of the Budget. I shall not seek to defend the Committee in this matter. There are some difficulties which we were not able entirely to resolve.
The Select Committee also asked for a forecast of the growth in the fourth and fifth years. It seemed slightly unrealistic to publish statistics of expenditure for those years without a forecast of growth. I understand the difficulties and to some extent accept the argument put against that by Treasury witnesses, but we shall have private sources which are just as reliable as those of the Treasury for four or five years ahead.
The projections themselves are based on an increase in output, which we hope is a conservative figure of 579 3 per cent. I was rather sorry that my right hon. Friend the Member for East Ham, North (Mr. Prentice) took what I think is the easy course in this matter, of saying that one did not so much have to make a choice about public expenditure in future because one could have a higher rate of growth. Of course, whatever the rate of growth, 4, 5, or 6 per cent., we still have to make a choice about what to do with the increased resources available and that choice is between private and public consumption and, in public consumption, what programmes we should support.
§ Mr. Prentice
To put the record straight, I mentioned four steps which I think should be taken, one of which is increased growth and I said that there should be a higher share of the national product.
§ Mr. Albu
This is an extremely important matter. It has been referred to by hon. Members opposite, including the right hon. Member for Thirsk and Malton.
Of course, we all want higher growth, but so far we do not know how to get it. There is absolutely no proof that a change in the level of taxation will raise or lower the rate of economic growth. We are not getting at present, nor have we got for many years, that increase in productivity which, now that our working population is static, will alone give us an increase in national output.
This may be disappointing, but we have to bear in mind that the present level of increase in productivity, taking one year with another, is actually historically as good as we have ever had. There are structural defects in the British economy or the way we go about our affairs which are not new. They have been going on since the days of Joseph Chamberlain or even the Great Exhibition of 1851. It is no good arguing that we should have a 4, 5, or 6 per cent. growth; we could have it for one or two years as we have had it in the past and then get into a balance of payments crisis and have to stop it again. It is not a question, as some hon. Members appear to think, of just increasing demand. The capacity for increased growth is not there.
§ Mr. Dickens
Would my hon. Friend not agree that while all the structural 580 defects he has mentioned are important, they have all been greatly aggravated in the recent past by the deliberate creation of spare capacity in the economy because of the Government's decision—wrongly in my view—to concentrate on achieving an excessively high surplus on balance of payments rather than a rate of economic growth equal to our O.E.C.D. competitors?
§ Mr. Albu
No, I do not agree with a single word of what my hon. Friend has said. There are at the moment bottlenecks in capacity, particularly in the engineering industry. If we are to have higher output we must have more investment and the type of exports most likely to expand in the future will be capital goods. The Chancellor has been trying to balance these two things, to see that investment does not go so fast that exports are lost but at the same time, not to inhibit investment in industry from which any future increase in productivity will come. I am convinced that the idea that we can have a higher rate of growth at present, disappointing though this may be, is simply "not on".
If my hon. Friends do not agree they will have to prove that this country is capable of a higher rate of growth than 3 per cent. We have never had it. It may be that in the next two or three years we can have it and if so that will be very good. I do not believe that at present it is possible to increase the proportion that is taken of the gross national product for public expenditure. I do not believe it is possible to increase taxation. My right hon. Friend the Member for East Ham, North made an extraordinary mistake in referring to taxes on wealth and on capital. They may be highly desirable for all sorts of reasons, but have nothing to do with the current use of resources and they would not help us in any way.
I am in favour of a high level of public consumption. If we get a higher rate of growth I should want to see a higher proportion going in public consumption than at present, but we need a considerably higher increase in growth before that is acceptable. We can do many things when we have growth which we cannot do when we have not got growth. That is why I am in favour of growth, but we cannot have growth beyond the 581 capacity of industry or the economy to produce it. Right hon. Gentlemen opposite failed to achieve it, it was never achieved in the last century, and we are not achieving it now.
Turning to some particular programmes in the White Paper, I have not fully understood the figures in the general total for social security. Unlike other programmes which are a presentation of Government policy in the future, this represents a continuation of the present level of benefits not higher or lower, I understand, until the new earnings related social security scheme is introduced in 1972. Is the increase of 5 per cent. a year simply because of the increase in the number of people benefiting, so that there is no increase in the value of present benefits unless they come out of the total increase of 3 per cent.? I do not understand this.
I welcome the policy changes which have at last reduced the share which defence has taken of our national output. As the gross national product grows, as I hope it will, the share for defence may slightly decline, but I doubt whether any further reductions will be possible in the future other than those to be gained from increasing the gross national product. I doubt whether it will be desirable or possible to reduce defence expenditure if we are to maintain our share of the defence of Europe and participate in other tasks which we owe to the community of nations. Incidentally, I support my right hon. Friend the Member for East Ham, North in his view that one of the tasks we owe to the cornm-mity of nations is to increase the proportion which we spend on overseas development.
I now turn to what the right hon. Member for Enfield, West spent so much time on, assistance given to industry, and I include the technological services which are given in Table 2.5. This is where an Expenditure Committee could be of help. It might make some examination of costs and benefits and see whether they have been properly judged. As one who is well known as an interventionist, a strurtural change man and micro-economist, I am disappointed at the results so far in the efforts that have been made to effect the structural change, in British industry from which increased productivity will arise. These 582 started with hon. Members opposite in their educational programmes, the expansion of university and technical education, investment allowances, and so forth, and have been carried on by us. It may be too early to judge this, but so far the results have been very disappointing if judged in terms of the slow changes now seen to be taking place in both productivity and innovation.
The right hon. Gentleman referred to investment grants. I expressed myself on that question in the speech I made when I left the Government. I myself have considerable doubts as to whether investment grants, investment allowances, and so on, have the slightest effect on investment, except in regard to regional policy where I agree with the right hon. Gentleman. I do not believe that otherwise they have much effect on either the level or the direction of investment.
One of the difficulties about abolishing the investment grants and, as suggested by the right hon. Gentleman, to some extent tax allowances, is that this would be considered an increase in taxation on industry. I gather that the right hon. Gentleman would wish to balance this by a corresponding reduction across the board. This is another matter which a sub-committee could examine. Nobody knows what the effects would be. I do not think that this is the time to increase taxation on industry, certainly not if the welcome growth which is now taking place in industrial investment is to be maintained. However, these are matters which a sub-committee of an Expenditure Committee could well examine.
I should also like to see such a Committee examine the justification for some of the still very expensive technological programmes. I will mention only three —not all technological, but similar: first, Concorde; secondly, the support for Upper Clyde Shipbuilders; thirdly, an old sacred cow—the Hovercraft. I leave it at that, but there are many others, and they need to be subjected to serious cost-benefit analysis.
I turn to one other group of expenditure programmes—that is the educational forecasts and the assumptions behind them, especially higher and further education. Paragraph 4, on page 51—I am somewhat in agreement with the right hon. Gentleman's doubts about the total figures given here—shows that the rise 583 in the numbers of students in further and higher education between 1968–69 and 1971–72 will be 10 per cent. This is a very low figure. Incidentally, I would like to know what the figures are for 1973–74, when the rise in total educational expenditure is to be only 5 per cent. over those two years.
There has been much discussion in the Press recently to the effect that over the next five or six years the number of students at universities will double. The number of applications is certainly very great. How is this to be paid for? We are all dodging the issue, except perhaps my right hon. Friend the Secretary of State for Education and Science, who has sent out some perhaps rather crude suggestions to the universities. I am absolutely ashamed of the attitude adopted by university teachers in their reply. All that they could say to my right hon. Friend's presentation of these very serious and difficult facts was, "Give us more money". They are as bad as the students. This will not do, because it is a problem that the country must face over the next five to 10 years.
The question is how we are to do this. We cannot continue with the present system of absolute grants to every student who wants to go to university. Nor am I not sure that the motivation of students is very good at the present time. It would not be a bad thing if some of our students learned from some of the American students that it is not so very harmful to have to work your way through college.
§ Mr. Albu
I ask my hon. Friend to speak to his constituents. It is no good his dodging the issue. How are we to pay for twice the number of students? I hope that my hon. Friend will tell me that.
The White Paper refers to the great advantages to be gained from the increase in highly-qualified manpower. This may be a factor of declining importance, especially if the reports of the reverse brain drain are true. Higher education may be considered as either a consumption good or a capital good. It may be something which is valuable for the indi- 584 vidual, or it may be, as has been argued recently, valuable for the country as a whole. Our attitude towards its priority may well be affected by which of these we believe to be the case.
Turning from the question of higher education to consider the social problems with which we will be faced within the next few years, and to consider the social justice which I believe that we on this side stand for, I would wish to examine the justification for a rise in expenditure on further and higher education in 1972 of 14 per cent., to deal with a rise in numbers of 10 per cent., which I believe to be a gross underestimate, and a rise in expenditure on primary education of 10 per cent. to deal with a rise in numbers of 6 per cent. I want these figures to be examined in terms of our social philosophy. We cannot have everything. Choices must be made. It may be that our choices in educational priorities must be changed.
I have no final answer to these problems. I do not know how to deal with them. I do not know how finally to make up my mind as between one item of expenditure and another. That is why I want a Select Committee. I believe that this would give us more information to enable us better to make up our minds on these difficult issues. This debate, which may so far be considered to be fair or medium, will no doubt be improved upon with experience over the years. The House must make it so if it is to get down to serious discussion of policies and priorities. I regret that it will not do so if the Government continue to resist the second half of the Report of the Select Committee on Procedure, that which demands the setting-up of a Select Committee on Expenditure with appropriate sub-committees.
§ Mr. Speaker
Order. I again remind the House that many hon. Members wish to speak. Reasonably brief speeches help.
§ 7.7 p.m.
§ Mr. David Howell (Guildford)
The hon. Member for Edmonton (Mr. Albu) has said much with which we on this side agree. Not only has he raised many questions which need to be raised but which have been raised rather late in the life of this Government, but he has also raised precisely the kind of questions which cry out for analysis and 585 which would be fed into public information and debate by the development of functional sub-committees which would reinforce and enliven debate in the Chamber. Therefore, a Select Committee on Expenditure, far from having the effect of fur,her weakening the Chamber of the House of Commons, would vastly strengthen and enliven debate in the Chamber.
The White Paper is presented by the Government on the basis of two hopes. The first is that it will lead to more efficient administration and better methods of reaching decisions about public expenditure inside the Government. The Chancellor made this point at the beginning of his speech and it has been made by other members of the Government. The second hope is that it will lead to wider public discussion and participation by Parliament in decision making, or whatever one cares to call it.
My contention is that so far nothing has been done adequately to support these hopes. This is not meant to be churlish or partisan, except that it is partisan in the sense that I am on the side of the Parliament party rather than the Executive party.
But, however much people may say that they may come. The fact is that the committees asked for by the Select Committee on Procedure have not yet been set up. Nor do the aggregate figures in the White Paper meet the minimum requirements either of improved efficiency in the control of public expenditure that is needed in modern government or, in relation to the Government's second claim, of affording adequate rights to Parliament to recover its position in influencing the unfolding of public programmes. Those are the two assertions which the Government have made and I cannot go along with them.
I take, first, the one about efficiency in administration. The view has been expressed by hon. Members on both sides that the White Paper represents a great triumph for the Chancellor and for the Treasury, that somehow they have succeeded in imposing upon their colleagues, not merely for the coming year but for years ahead, firm ceilings on public programmes, and that that is a great victory for the Treasury.
I have no such illusion. I do not believe, when one comes to look at the 586 figures, that any real ceiling has been imposed at all. One hears talk that the Chancellor has succeeded in placing a firm framework of discipline upon public spending. I believe it would be just about as relevant to talk about imposing a firm framework of discipline upon a bubble bath. When one comes to look at the details of the estimates practically every one is uncertain for the future.
My first point then on this is the general point which was touched on by my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod). Looking at the figures in the White Paper we find that the Government have finally abandoned the pretence of keeping the growth of public expenditure in line with the growth of the gross national product. That used to be the cry, often challenged by hon. Members on this side, and finally we have seen what a nonsense it is.
Public expenditure from 1964 through to 1971–72 will be racing along well ahead of the rate of growth of the gross national product over that period. That is the first point which straight away undermines the claim that this is a fine achievement for the Treasury.
The second factor which undermines that claim emerges when one looks at some of the individual estimates put forward. What is obvious—the point has been made by several hon. Members, including the hon. Member for Edmonton —is that many of the estimates are just too low. They simply do not represent truly the amount of public funds which will be required to support the relevant programmes of the future.
We have heard today, and also in the evidence given to the Estimates Committee which looked at the winter Supplementary Estimates, that investment grants are in almost all senses of the word out of control. The civil servants who appeared before the Estimates Committee, of which I was a member, made perfectly clear that they were not yet complete masters of the methods of imposing some degree of control on the public expenditure resulting from the investment grant system. It was pointed out to us that we are entering 1970 with £150 million worth of grant somehow unclaimed or unchecked and, therefore, presumably, not yet appearing in the figures of public expenditure. That is 587 just one programme where the figure is highly suspect.
Other hon. Gentlemen spoke of the technological services and education. Are we really to believe that these expenditures will decline? The White Paper itself makes the reservation more than once, shooting to pieces the whole validity of the original figure, that other technological programmes and projects may come along, making nonsense of those figures.
Then there is the question of debt interest. Are we to believe that there will be no new borrowing? The figures in the White Paper do not support that, and, looking at the likely pattern of debt interest, I greatly doubt it will remain at the low level stated in the White Paper.
The Government claim that they will achieve a decrease in defence expenditure. That surprises me, and I shall not believe it until I see it. Can we believe that there will be no change in respect of the research councils? For the local authorities, can we believe that the 4 per cent. level can be kept?
My point is that these figures are far from being reliable figures showing the future profile of public spending. They are highly variable estimates and give the lie to the belief that this is a triumph for systematic control of public expenditure way into the future. They do not add up to that.
There is a third reason why the claim that this is a triumph for efficient administration should at least have a question mark placed over it. Of what do these figures consist? Are they programme figures or the global aggregates the outcome of proper analytical procedures, of proper questioning of the objectives, in welfare, aid to industry, education or any of the other programmes set out?
One turns away from the naivety of comparing corporate business with the way the Government go about their accounts, but the fact remains that in them there are two separate controlling functions. There is a treasurer's function; he is the man who deals with paying out the money, on the financial side; and there is the programming or strategic function. The treasurer function 588 is that of, on the one hand, paying out, querying irregularities and checking the small beer of value for money, and, on the other, forming a view on the overall financial situation. The programming or strategic function deals with and queries programmes, sub-programmes and sub-sub-programmes, querying their implication and the consequences which may flow in two, three or four years hence. Above all it asks what the objectives are, whether they are the right objectives, whether they are being achieved, whether they could be achieved in any other way, and whether they should, perhaps, be achieved in the public sector at all.
The first function, taking the view of the overall economic situation, the longterm aggregate resource planning, is a function which the Treasury performs increasingly admirably and has done since the first Plowden Report. If the claim is that the White Paper shows that the Treasury has now very advanced methods for dealing with aggregate figures, putting together the figures and comparing the global answers with total economic resources for the future, I concede that it does function well.
But then one comes back to the second and, in my opinion, more important question of what are those figures? On what are they based? It is all very well putting together aggregate figures in fine style and comparing them with resources, using some of the best macro-economic brains to come up with the answers. But, if the figures themselves are based on items that have not been systematically questioned, and if the items composing the aggregate are unquestioned lumps of public spending, is the game really worth the candle?
It is the claim of the Administration that both these functions are performed, that the overall resources planning is done—I concede that it is—and that there is adequate and continuous questioning of the sub-programmes and the items which make up the aggregate objectives.
But I do not believe it. I believe that there is a weakness here. The hon. Gentleman the Member for Edmonton referred to it when he spoke of a weakness in the staff and analytical command at the centre, at No. 10, as he called it. We all know how Treasury control works. 589 A dialogue is set up between a man in the Treasury and a man in the Department initiating the expenditure. The Treasury is involved early on, often on an informal basis, and later on a formal basis.
All along, the questioning is based on two things. It is based on the general prevailing mood, on the line going out about whether the cry should be, "Cut, boys" or not, on the ease of discipline in the Treasury about overall public spending. And it is based on thorough questioning of activities, not of objectives, not of why something should be done or what its purpose is, but of the activity—the wage bill, the number of paper-clips, whether there should be 900 instead of 1,000, whether there should be two clocks in the computer room or only one—that sort of thing. I exaggerate, of course. I am putting the extreme case, but the basic philosophy of this Treasury questioning is the questioning of activities in order to achieve candle-end economies, not an analysis of ongoing programmes to assess their worth and their policy importance.
§ Mr. Hooley
I have a good deal of sympathy with this part of the hon. Gentleman's argument, but is he not putting a powerful case for having a Department such as the D.E.A.?
§ Mr. Howell
If I have conveyed that impression to the hon. Gentleman, I have failed. I am trying to point out that what is needed is the very opposite of the D.E.A., a capacity of a different kind aiming in entirely different directions.
'This is not, and should not be, a matter of complaint against the Treasury. The Treasury is entirely right in its traditional view that it is not in business to make policy, that it is improper for it to do so, and that, therefore, it should not ask questions which become policy questions. When I say that, I have in mind the sort of question which the hon. Gentleman the Member for Edmonton rained about how one finances education if one simply cannot squeeze any more out of the public sector; does one look at the possibility of student loans, and so on? These are hot policy issues. The Treasury expenditure control divisions would not dream of thinking that it was their rôle to ask questions of that kind.
590 This is why, again and again, when one looks art the situation and analyses it, one comes back to the realisation that an analytical capability at the centre of the Whitehall and budgetary complex is needed, with a capacity of a kind which does not exist today to question and question again many of the programmes. If one had that questioning, one would begin to have confidence in some of the aggregate figures in the White Paper, confidence that they were based on efficient and disciplined questioning, on efficient and disciplined programmes, not just on the philosophy, "Well, last year's figures plus a bit more, old boy, should make everyone happy "—depending on the Treasury mood.
The pity is that this view has not been developed. There was the Prime Minister's observation about making No. 10 a power-house, but we never heard any more about that. I believe that he did appoint one or two economists to No. 10, but a fat lot of good they were. That is really where the story ends up to this date. Nothing has been done to give me any confidence that these aggregate figures are based on proper systematic analysis, and I see no sign of it at present.
That is the case against the claim that the White Paper represents a great advance in efficient administration. I come now to the second point—that, so far, it does not make all that much contribution to better and more informed public discussion.
First, as I said, when one looks at the figures one finds that there is an inadequate presentation of the cost of objectives, the cost of programmes, the cost of precise Government policy. What, for instance, is the good of telling us that expenditure on rural buses and ferries will go up to £2.3 million in 1971–72? What is the point of that expenditure? I do not know. No doubt, the rural bus and ferry operators think that the point is to ensure that they are kept out of the red, or, if they are in the red, that they can stay there without too much worry.
Then again, I do not criticise, but I assert the right to question the spending of £45 million two years ahead on forestry. It may be a marvellous forestry or social programme, but I do not know, and the White Paper says nothing about 591 it. Where is the Concorde, that whopping great programme? It does not even appear in the White Paper. Is this supposed to be an opportunity to question programmes? Besides such matters as that, there are the more obvious things, for example, that the B.B.C., I.T.A. and Covent Garden, apparently, for some obscure reason, are all lumped together in one category of capital expenditure. There may be a link which hon. Members can see, but it is not clear to me.
That is why I say that the figures are not all that useful for public discussion, even if we had the machinery and opportunity to carry on that discussion. The question which has arisen again and again, and which my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) raised again today, is whether we should have the machinery for carrying on that discussion. Should we in the House of Commons, in some way or other, have the forum or forums—whatever the plural is—in which we can, if we have the information—which we have not got anyway—discuss these things systematically and have answers from people who are empowered and ready to give the answers?
Many right hon. and hon. Members on both sides, of great seniority and experience, have said that the Commons is not the place—they have been saying it for many years—and that, therefore, nothing really can be done systematically to question these programmes in detail. For all I know, those who are against this development may be right. Perhaps nothing can be done. But, in that case, I ask them to realise that, in saying that, they are condoning the present situation. When I refer to the present situation, I refer not merely to badly attended debates. Today's debate is crowded by the standard of many debates at about this hour of 7.30. One is not merely condoning badly attended debates and a general feeling among the public that Parliament has lost its grip on what is happening in Government. More than that, one is condoning—I ask my hon. Friends particularly to be interested here—a situation in which the bureaucracy and the pattern of activities, the vast range of public programmes and sub-programmes and detailed activities, continues to expand unscrutinised, un- 592 surveyed and unquestionedx204;and, from our point of view on this side, at least, uneliminated. I ask my hon. Friends to bear that point carefully in mind.
I believe that the House of Commons, with the Committee system developed as the Select Committee on Procedure asked, could work. I believe that it could work if the information were offered. It is not offered in the White Paper, although there is, I suppose, a beginning. It could work if the Committee were set up. It could work if the civil servants, as many are ready to do, began to realise that the rather purist attitude, if I may say so, taken by Sir Douglas Allen and mentioned in the evidence was not necessarily the ideal one when one came to the question of public discussion about programmes, and was not necessarily the best from the point of view of the administrator himself who wanted to carry forward his ideas of the way in which a particular programme should be successfully operated.
§ Mr. Peter Emery (Honiton)
But will not the decision of civil servants depend on the Minister? If the Minister wants to allow the House to have the information and to be able to co-operate in analysis, the civil servant will do everything to co-operate in that examination. If, on the other hand, the Minister wishes to be restrictive, one will get nowhere.
§ Mr. Howell
I go rather further than my hon. Friend. I believe that in the future pattern of Departments it will be necessary for Ministers to delegate authority; unless they delegate authority, they will find themselves carried forward on a chaotic and ever-expanding pattern of activities which will benefit no one and will certainly not provide the opportunity, which we on this side will be interested in, of cutting the activities of Government and questioning unnecessary public activities.
The Select Committee recommended that there should be these functional sub-committees. I hope that that is not forgotten. We understand that discussions are going on. For my part, I serve notice that we shall wish soon to hear that these ideas are to be carried forward, and we shall press hard if they are not.
I am glad that, after putting the arguments both ways, my right hon. Friend 593 the Member for Enfield, West came down on the side of this development. I believe it to be inherently right. It is part of the process of recovering for Parliament and the public the influence over big Government which they have lost, and recovering it not necessarily from Ministers and politicians, who in many cases have;tot got it themselves, but from the fragmented mosaic of the bureaucracy where much of the power lies and is allowed to produce ever-expanding Government.
That is why I have doubts about, although I hope that I am not too churlish about, the White Paper. It makes clear what is wrong with our Government and their decision-making procedures. It paints a devastating picture of the antique incom,Detence of the way in which decisions are made in Government, by the Cabinet and by the Prime Minister. But it goes, no way towards putting any of this right. That is my complaint against the White Paper and its sponsors.
§ 7.30 p.m.
§ Mr. Robert Sheldon (Ashton-under-Lyne)
The hon. Member for Guildford (Mr. David Howell) said that Ministers should delegate more. One of the main reasons for this debate is that Ministers have delegated without making the decision to delegate. The complete responsibility of a Minister for his Department is a modern myth. We all know that no Minister can possibly be responsible for all the workings of his Department, which means, in effect, that the Civil Service—because someone has to decide these issues—has taken over many of the Minister's functions. What we really need today is some informed debate so that democratic control is reasserted.
I understand the Chief Secretary's admirable attempt to give us so much information and I too offer him my congratulations. Since he has been the only one to bear the burden of the unpopularity of his office by saying "No" to so many splendid schemes, one of his intentions may be to share some of the burden. This is quite right. Nye Bevan said that the language of priorities is the religion of Socialism. We have had today the first instalment of the dictionary of this language. We are able to make the kind of choice which has hitherto been made only by a select number.
594 Therefore, the days are over when we could liberally ask for more of this and more of that and more of the other, without at the same time being forced into the discipline of saying that, no matter what growth rate we have, it will not provide for all the enormous demands which we all have. These demands will take care of the highest growth rate which any of us have ever thought of for years ahead, so it forces back on us the responsibility of deciding where we cut, if we are determined to spend more in certain directions.
The Chancellor of the Exchequer compared this debate in importance to that on the Budget. When we consider that the Budget and the Finance Bill and the related discussions take up to 18 or 20 days of the time of the House, we see that a couple of days is by no means as much as we should spend in discussing how we dispose of £20 billion. The odd thing is that, whereas in our private lives, we all know that far more people are interested in spending money, the House, exceptionally, prefers to discuss how to raise it. But, in time, interest in the spending of money might rival the interest in raising it.
Some have called the subject of this debate the watchdog of public expenditure. But it has to do much more than a check on public expenditure. The Government spend so much money that not only are they making choices but the economy itself is affected by the very spending of such sums. This should be considered as well. Although the economy is controlled by the Government in its macro-economic aspects, the effect of public expenditure adds a further measure of control of the economy. This of course is not peculiar to this country: it happens all over the world. Even in the United States, one of the most capitalist countries in the world, capital expenditure as a proportion of public expenditure is around 35 per cent. and is growing at a higher rate than in most other countries.
Way back in the 1930's and shortly after, we discovered how to get rid of extreme poverty and hunger. We found that, in all countries, we could give people some of the basic necessities of life, so further expenditure began to form at the luxury end. Once people start spending money on luxuries, they 595 begin to think it wrong when they find squalor in the public services. I remember coming out of Morgan Guarantee Trust in New York and stepping from acres of lush carpeting and then descending into the and grimy subway. That might have been an exaggerated contrast, and it is that kind of contrast which may be tolerated for a short time. However, as levels of personal consumption rise, people increasingly question this discrepancy.
Thus, all over the world, people are prepared to spend rather more on public services. But, of course, my right hon. Friend the Chief Secretary is on a slippery slope. He has given us the first instalment and it has whetted our appetite. That appetite will grow in succeeding years. We are seeking for the first time what element of choice can be exercised and what it is that we have missed out on in discussing some of the important ways in which this country is run.
Thus, we are seeing for the first time, through being able to contrast one kind of expenditure with the other and how they are formed, why there is some natural principle of justice in education having a certain proportion of our expenditure and other social services another proportion. This has not been debated properly before. Among the most important issues of our time is how we spend in these various areas. This has just grown up without the kind of discussion which I hope we will see as a result of the new procedure.
My hon. Friend the Member for Edmonton (Mr. Albu) said that he would have liked the Opposition to divide. Although I can understand the reasons why they have not put down an Amendment—this is the first time and they will want to feel their way—this is a wholly admirable suggestion. I hope very much that, on these crucial matters, they will give them the importance they deserve over the next few years by putting down Motions on a number of these specific commitments.
§ Mr. Sheldon
I am fully expecting the right hon. Member for Enfield, West (Mr. Iain Macleod), in customary urbane style, to point out the reasons why we have 596 our priorities a little wrong. I feel that the Committee system is in integral part. The more that I have thought about this over the last few months the more I have come to realise its key position.
Although we now have a breakdown, this does not give us sufficient of the arguments to enable us to see with certainty that we have the proportions wrong. What we now face is making this decision. We know that, when one has to decide oneself, this concentrates the mind wonderfully. When I concentrated my mind, as I tried to do on education, I found that I wanted to ask far more questions that I ever had before. For the first time, I could see what was wrong with the estimates ahead. Why should the rate of spending on education suddenly go down to 2 per cent. after having risen so high? What were the underlying assumptions? To have a winding-up speech tomorrow is not enough. One must probe and get answers and then put fresh questions based on those previous answers until one gets a total understanding which can only be obtained in this way.
There is no other parliamentary device open to us that can answer the kind of questions in the way we want them answered. None of us is able to say at the end of the debate that the estimates for education are clearly wrong and that the figure of 2 per cent. is a nonsense. There may be all sorts of assumptions that the Government have in mind. Somebody might be thinking of student loans, cut-backs in various areas or of improvements in efficiency. Until we get the people responsible for those decisions within the old familiar horseshoe, where we are able to come back again and again with questions until we find out the real reasons why those decisions were taken, we shall not get the control of public expenditure that this House eventually will get.
Nothing can now set back the clock. This House has started on the road to obtain proper power and control over expenditure. Fortunately, we have been pushing against open doors. We have had enormous co-operation from the Government. Even if, by some misfortune, we were to get a Government who were not so friendly disposed towards backbenchers trying to find out these 597 things for themselves, the time is now too late to halt the trend. We have, as backbenchers, shed far too much of our power. We are beginning to see what the real power is all about, and it is here. Therefore, we shall find ourselves faced with increasing demands from backbenchers to know more and more, and there is only one way to satisfy that kind of demand.
We know that as a result of this, there is bound to be conflict between Members of Parliament and the Executive. That is inescapable. We cannot avoid that kind of conflict coming to us. This, after all, is what the House of Commons is all about traditionally, and we must adapt ourselves to a new kind of conflict between Ministers and backbenchers—from both sides.
This is a very serious matter. Unless we gel the kind of discussions that we want, however, we shall have to accept that conflict. Nobody can say how it will be resolved. These are far too early days, but that we will have to find a way of resolving this is one of the problems that lie ahead. We cannot run away from it: this is something we will have to face and accept.
We know—the figure has been given to us—that roughly 2½ per cent. of the Government programme can be changed within any one year. One of the ways in which we hope to obtain greater flexibility is the initiation of the contingency reserve., which will rise over the years up to a level of £500 million in 1973–74. To those who have given it thought, it is astonishing that we have had to wait so long to have some sort of contingency reserve, a buffer for the unexpected, because one thing that we all know is that am Government always have a large number of unexpected happenings in any one year and that we have to rearrange programmes to cater for the unexpected. The one thing that is certain in any year is that the unexpected will happen. We must, therefore, be able to provide for it. It is wrong that this has not been done before, but we must welcome it now that it is done.
I notice the sophistication of the relative price effect and other adjustments. This is a useful figure but it tends to distort some of the arithmetical calculations that we might make of increases in any one year. That was the point 598 I made with the right hon. Member for Enfield, West. We need to watch this with care, because it can distort some of the figuring.
Throughout all the lack of flexibility that we have had in the past has come the need to understand where we can change programmes in the years ahead. One of the things that is obvious is that decisions involving large physical effects are increasing in number. One has only to think of the road programme or the university or the hospital building programme. These are long-term programmes frequently covering up to seven years or more. They are increasing, and they will do so in length of time as well as in number.
The problem that we have to decide as legislators is how we cater for those seven-year decisions within the context of a five-year Parliament. I have always felt it to be one of the main problems of our time that so many of the things that the Government are able to do are pre-empted by previous decisions. When a Government come into office, we know that it is only in the fourth year that we can even make a start at changing the pattern of public expenditure. Bearing in mind the time it takes for a Government to settle down, we are faced essentially with five- to seven-year decisions which will come to fruition long after the Government have gone to the electorate again. This is the great problem of democracy. How are we to cope with seven-year decisions in a fourand-a-half year Parliament?
The only solution to this is to hope that people can understand some of the things that one is doing. Clearly, the Opposition exist to confuse and muddy the issue on all occasions. The only thing that we can try for is to get a greater understanding of the problem. At least, it is made easier by the kind of debate that we are having today.
We are debating not only particular expenditure, but total expenditure as a whole. This is very much influenced by the rate of growth predicted by the Government. It is natural that, on this occasion, we have to ask ourselves whether we have been too optimistic or too gloomy about the levels of growth that are expected. My view is that we are shedding some of the shackles of empire and the distortion of trade which 599 empire brought upon us. Because of this and of the other measures that the Government have taken, I would expect a rising rate of growth.
The problem, however, is that there is a rising expectation. I find no mystery in this rising expectation of the people, because with their holidays abroad and their regular understanding of what is going on elsewhere, the point has fundamentally got across to people that the whole Western industrial world is improving its standard of living to a very high level. It is a mark of contemporary man that far from being satisfied with modest improvements, he is beginning to reach out to all the new range of goods and services that are being offered to him. Therefore, we shall not find the people satisfied with anything less than the rate of growth that is being accepted as normal in other countries. Consumer spending has been kept in check for too long. It will soon have to be allowed to rise to more reasonable levels.
In that connection, I feel that there must be a way of getting across to people the kind of expenditure which does not appear in their take-home pay. It is up to us to discourage some of the wage demands that are bandied around with figures of take-home pay. It is up to us as Socialists more than anyone else never to use figures of take-home pay except in exceptional circumstances, because take-home pay will obviously be a declining part of gross earnings as time goes on. The hospital service, education —[Laughter.] Of course it will. Will not people be educated longer? Will they not want better hospital services than they have at present? Are they not going to ask for better roads, better cleansing, transportation and all those things? Will they be satisfied with the present services and say, "We have now come to the ultimate, and there we shall stay"? Of course not. Some way must be found of trying to bring into their thinking the kind of advantages which they get from the expenditures of their local authorities and the Government.
Like the right hon. Member for Enfield, West, I am particularly unhappy about the question of education. Bearing in mind the vast potential of students whom it is necessary to educate and train, together with the increase in the 600 school leaving age which is coming soon, surely there is no question but that this should be an almost ever-ascending curve. The annual percentage increases go something like 3, 3, 5, 2, 2, and I find it inconceivable how this calculation can have been made. This is perhaps another argument for a kind of Committee stage at which there could be no evasion and where we could investigate again and again what happens. Have the Government decided that they cannot go on spending on education this kind of proportion of the gross national product? Have they made some other assessment? These are matters we should know about. It is not enough to say that we can have a reply at the end of the debate because that will not be enough in view of the details that we require.
I accept that there has been a decline in defence expenditure and also that, if we had pulled out east of Suez earlier, we might have been realising some of these savings earlier. I appreciate the great difficulties there always are in reducing expenditure on matters like defence. But in fixing the present level, how did the Government decide that it was the right amount and that we could go no lower? The level is still higher than in a number of continental countries, including a number within the N.A.T.O. alliance. Do we have to pay more for defence because we have no conscription? If that is so, can the Minister quantify it? We need to go into the matter more fully because the large spending incorporated under the heading of defence could pay for many other things.
But it is no use thinking that other than a small amount could come from defence. It is no use thinking that the money saved could pay for all the other things that we want. This is because of the vastness of the expenditure needed in other areas. My right hon. Friend the Member for East Ham, North (Mr. Prentice) pointed to the need for a cut-down of defence in order to spend more on overseas aid. He is right because only a small amount of reduction in defence expenditure would provide a considerable increase in overseas aid. But it would not be much in terms of education or social services or health expenditure. We must understand this. Although we can ask 601 for some reduction in defence expenditure, only a limited amount can come from that source compared with the amounts we require elsewhere, which are so large. It is forced upon us to make these choices.
We are all in favour of growth. My hon. Friend the Member for Edmonton rightly referred to this. We know that there is no theory of economic growth on which we can rely and that the Government cannot hang around until someone comes along with a theory of economic growth and then say, "Thank you. We will now apply it. "Neither do I take the view that there is something basically inferior about us as a country so that we cannot proceed at a higher rate than 3 per cent. while other countries have a growth rate of 5 or 6 per cent. I cannot take this pessimistic view of the ability of our people. There is something wrong with that view.
I can understand that it is easier to suggest a lower rate of spending and that if we do better we can spend more easily than we can cut back. But we must at the same time be fully convinced that we should in no circumstances be prepared for long to accept a rate of growth that implies a basic inferiority as a country.
§ Mr. Sheldon
I do not agree. I do not see why a country with a very high rate of economic growth should not do the things we should like to do. I see no distinction between the two. It is merely the old idea of being poor but honest. I see no reason why the rich cannot be honest as well. I see no reason why our people as a whole should not be prosperous as well as being reasonably looked after.
I want to say how much pleasure I have in that this is a two-day debate. It makes it much more of a parliamentary occasion than if it were just a one-day debate. We have a chance now of seeing Ministers being brought into the open to discuss their spending and the reasons for it. I hope that we can get the Committee system started in some 602 way or other—and I am not convinced about the exact method proposed by the Select Committee. Such an investigation is necessary, however it may be arranged. I have no doubt that the responsibility of a Minister must be to defend the way in which he is taking his share of the expenditure and we should be fully convinced that it is right before we approve it. Some control of expenditure is necessary. If it is not going to be by us, it may well be by no one.
§ 7.56 p.m.
§ Mr. Richard Wainwright (Colne Valley)
I had it in mind to begin by offering some specific and limited congratulations to the Chief Secretary of the Treasury on the form, but not the content, of the White Paper, but until I heard the hon. Member for Ashton-under-Lyne (Mr. Sheldon) it had not occurred to me to congratulate the right hon. Gentleman on producing a dictionary of Socialism.
I do not think that those in my constituency who voted to elect Victor Grayson to this House would regard as a dictionary of Socialism a White Paper which allocates about one-twelfth of public expenditure to hand-outs to certain privileged units of private industry, commerce and agriculture. Indeed, I felt at the opening of the debate that we were hearing a somewhat Gladstonian argument from the Government being answered by Disraelian Socialism from the Conservative Front Bench.
But on the form if not the content of the White Paper I congratulate the Chief Secretary in succeeding, despite the exigencies of government, in getting the headings altered. With luck, we can hope that, in succeeding years, the content can be improved, also.
It must sadden all our hearts that this new product has so far fallen so flat with the public outside. Like other hon. Members, I spent the Recess in my constituency looking at some of the most contentious sectors of public expenditure. Not once was I confronted by anything at all concerning this White Paper. In considering whether we are to have a high level of debate during these two days, I am somewhat despondent, because this House never reaches the heights unless driven there by a good deal of steam from our constituents. This may be an edifying debate, but it is a private 603 one. Public imagination has not been caught by the form of the forecasts, mainly because the Press and other media have little confidence at the moment that a really useful dialogue on the White Paper will ensue over the coming months.
There is widespread doubt outside this House about the possibility of a type of the Select Committee on Procedure because of the extraordinary delay that seems to be occurring in any announcement. I do not understand why there should be any question of waiting for today's and tomorrow's debates before the Leader of the House can come forward with a plan. After all, last April we knew from an excellent Green Paper what was to be the form of the White Paper which we are debating today. On 21st October an excellent debate in this House gave a clear idea—almost a unanimous idea—to the Leader of the House as to what those who took part wanted. It seems to be somewhat disturbing that there is still delay in announcing how this White Paper is to be tackled.
§ Mr. John Mendelson
The hon. Gentleman talks about unanimity. Only a limited number of hon. Members were called in that debate. There were also the silent Members who were not in the House. I say this since the hon. Gentleman has no right to talk about unanimity.
§ Mr. Wainwright
I recognise that the hon. Member for Penistone (Mr. John Mendelson) had a strong dissenting voice in that debate. Apart from him there was a strong feeling that this White Paper ought to be discussed by Select Committees of one sort or another.
My own view is that there is room for the proposed committees on expenditure and also for some of the Specialist Committees which I earnestly hope will survive any new experiment.
I believe that the Chief Secretary will agree that expenditure can and ought to be looked at from many different angles. That is how it should happen in this House. Fears were expressed earlier in the debate that there are not enough of us keen enough to serve on such committees. It is quite wrong to make any deductions based on the past as to the number of members who are interested in serving on new committees. 604 The attitude of many hon. Members towards serving on committees which will investigate future expenditure will be entirely different from the attitude they have adopted to sitting on mere audit committees limited to looking at what has already flowed under the bridge.
In addition, there are some very important headings of expenditure in the White Paper which must have regional investigation. I only regret that at present in the regions there is not much machinery available to begin this task straight away Let us take, for instance, the very large sum of money which is rightly allocated in the forecast to hospitals. The Secretary of State for Social Services made it very clear in the House a few weeks ago that the hospital building programme during the Conservative Administration and the present Administration has greatly favoured the Metropolitan area and certain parts of Southern England. He frankly confessed that there are other parts of the country which so far have come rather badly out of the allocation of hospital building expenditure.
There are also enormous regional factors varying from one part of these islands to another. These include the state of public health, the number and quality of general practitioners, the accessibility of hospitals, the climate, and so forth. These make the hospital problem essentially a regional matter. No discussion of the future trend of expenditure on hospitals can be effectively conducted without some strong regional inspection as well as examination by a committee of this House.
§ Mr. Dalyell
When the hon. Gentleman talks about inspection, what exactly does he mean? Inspection by whom?
§ Mr. Wainwright
If the hon. Gentleman wants a discourse on Liberal policy for government in the regions.
§ Mr. Wainwright
There is no machinery available at the moment, which fact I regretted only two minutes ago. I simply say that the structure of democratic participation in future spending plans cannot be regarded as complete until there is a system for regional examination. In this debate we should be particularly sensitive about those areas of public expenditure in which government of 605 either party, indeed any party, has a virtual monopoly of supply. All forms of public expenditure are important, but there are many sectors in which the ordinary citizen of average means, if he is disgusted with the public provision, has an opportunity of recourse to other means of satisfying his needs. But, except for people who are very well off, this is not true of the hospital sector. People have to be taken to whatever place the public provides when they meet with an accident; and this is also true of education, except for a very small minority. These are areas which should be carefully examined.
One important token of the intense public dissatisfaction with both these sectors is the extreme generosity of the public in contributing quite voluntarily funds to augment the service provided both by the hospitals and by the schools. The amount of money contributed by parents and friends of schools in my constituency over the last five years speaks highly and loudly, first, for their community spirit, but, secondly, for their sense of dissatisfaction with what is provided from the public purse.
The sad thing about this great volume of private generosity is that it can be spent only on peripheral items. What parents are really saying when they sacrifice to provide the school with a film projector or some item of physical training equipment is that they would like to be able to stump up for an additional teacher, or for some further accommodation.
It is in the light of this ample evidence of dissatisfaction with a great part of the primary and secondary education provision that I and my hon. Friends look very much askance at the relatively small share of the forecast expenditure which education has to receive, particularly in the years 1972–73 and 1973–74. In our opinion this is demonstrably too small and we very much hope that we shall have an opportunity in some form of committee, or committees, to probe why education seems to have come out so badly from the forecast programme.
Finally, however many Select Committees are set up and succeed in attracting the keen interest of Members, there will be a need for the whole matter to come back to this House. It is the par- 606 ticular duty of the whole House to look into the delicate matter of the interrelation of one form of expenditure, under one of the Chief Secretary's excellent headings, to another form of expenditure. I give only three examples. When we talk about investment for industry and commerce, education is in large part, though I hope never wholly, an investment for industry and commerce and the professions. Although I do not for a moment suggest that educational expenditure should be shown under the investment heading there must be an opportunity provided for discussion in this House of the relative importance to industry of public money spent by way of investment in education in contrast to public money devoted to investment in machinery.
There is, secondly, the question under many headings, but particularly the medical heading since hospitals are so expensive to build and equip, involving the extent to which money spent on communications could cut down the need to extend and duplicate facilities under other headings. Representing a constituency which has the new trans-Pennine Motorway passing through it, I know that when the Yorkshire/Lancashire Motorway is opened many of the more expensive services and public provisions which are used by only a small part of the population can be unified either in Lancashire or in Yorkshire.
The traditional view that everything that is built on one side of the Pennines must be duplicated on the other, will go. I believe that improvement in communications and a little more attention to railway lines which on the face of them seem to be unprofitable could save very large sums of capital and revenue expenditure in some of our public services.
I end with a modest but significant example of the need to co-ordinate in the fashionable field of anti-pollution. A great deal of capital, split into very small sums, has been invested by the nation in helping households to acquire smokeless fuel burning apparatus. In total, a very large sum has already been expended. Unfortunately, because of lack of co-ordination with the smokeless fuel producing industry, the greater part of which is nationalised, a large part of that capital is now lying idle. All over the 607 industrial North of England smoke control orders have been suspended because there is simply no sufficient supply of smokeless fuel.
§ Mr. Wainwright
As my hon. Friend says, the same thing is happening in the industrial Midlands.
I was assured by a director of the Coal Board before Christmas that there is no hope of the situation being materially eased for at least another winter. This is an example of the importance of not leaving expenditure to be examined simply under the heading in which it is originally placed, but that we should eventually debate in the House these matters when the Select Committees have finished their probing so that we may examine the whole question of interrelation and integration.
I and my hon. Friends hope very much that there will be no further delay in the Leader of the House coming forward with proposals for the White Paper to be considered in detail and that eventually it will have the attention of an extremely well-informed House.
§ 8.12 p.m.
§ Mr. Tam Dalyell (West Lothian)
The hon. Member for Colne Valley (Mr. Richard Wainwright) will forgive me if I do not pursue him into the matter of the Health Service. I can hardly restrain myself, after what he said, but since I am Parliamentary Private Secretary to the Secretary of State involved I cannot speak on the subject relating to my boss's Department.
I do not know whether it is a combination of dinner, lack of Whip, or even the "phoney" and continued television boxing match between Cassius Clay and Rocky Marciano that has kept hon. Members out of the Chamber, but I should like to thank the right hon. Gentleman the Member for Enfield, West (Mr. Iain Macleod) for remaining for the first part of a very short speech. He raised the issue of unemployment figures. I take no exception to this, other than to say that for a very long time I have thought, in a rather crude way, that these unemployment figures are totally bogus as produced by both parties.
608 I represent a mining area and well know that one element is the hard core unemployed, those who suffer from acute pneumoconiosis or from pit accidents. It is extremely misleading to include this hard core in the unemployment figures, as a former Minister of Labour will recognise.
The other matter he mentioned in his speech in producing the unemployment figures tended to create a misleading impression; this was that he left out of his calculation the issue of the students and those staying on at school. Although it is true that the actual number of jobs may well have fallen, one wonders whether the developments both he and I would welcome—and we on this side of the House very much welcome the dramatic increase over three years in the number of those staying on at school and indeed in the number of those of higher education in universities and colleges—do not account for some of the figures which he produced. But I would ask the Chief Secretary if it is not about time that, in the breakdown which we are now getting, some different approach was made to the unemployment figures. It has been long overdue. I am not raising any novel point. Besides, unemployment figures are swollen by the fact that people are taking longer between jobs.
§ Mr. Hooley
On the hard core problem, it would be statistically dishonest to take those out now, because they have always been included for the past 25 years. My hon. Friend would have a worse situation at the end than exists at present.
§ Mr. Dalyell
I suggest that we leave that one until after the next election. I am very much against statistical playing around and dishonesty of that kind. After the next election, whichever party wins it, a different approach should be made to the presentation of unemployment figures, and the policy deductions made from them.
Before the right hon. Gentleman leaves to have a well-deserved dinner, perhaps I might raise one other point about his speech. He talked in graphic terms of the Ministerial struggle. As a reader of books on the subject, I wonder whether a Ministerial struggle in which decisions depend on people, their positions of power and their positions in the party is not endemic in our system. Is it any 609 good saying that Ministerial decisions can be rationally made clinically and in cold blood? Politics is about people and about representing points of view. I will give way to the right hon. Gentleman if he cares to comment on what he said about it.
§ Mr. Iain Macleod
One of the difficulties which I see is that, invariably, it is the conflicting forces within a Government in one way or another that shape policies. To give an illustration from the speech of the right hon. Member for East Ham, North (Mr. Prentice), in an ideal world no doubt overseas aid would go only to the places which needed it most, whoever decided that. In practice, it goes in many cases for strategic reasons, prestige reasons, or for reasons which are different from the fundamental clinical analysis. One of my doubts about the Select Committee procedure is whether we shall overcome what might be called the "old Adam" in the policy-making apparatus. But I still think that it is worth trying.
§ Mr. Dalyell
That is an interesting comment from a senior Minister with long experience of Government. Perhaps I might ask him one other question. How does one stop the benefits and advantages going to those who are in a position to shout the loudest? That is a very difficult question.
§ Mr. Macleod
I am not sure that one can. I am not sure necessarily that it is wholly desirable. To take my overseas aid point again, in many cases the fact that we desire for strategic reasons to help country A rather than country B is a fact of life in the world today which any Government have to take into account. My only point is that that detracts from the pure clinical analysis of problems, and inevitably we are still left with something of a power struggle in the determination of policy. I do not think that that is undesirable. On the whole, it is inevitable. However, I think that the introduction of the Select Committee procedures will illumine the dark corners in which policy decisions are now taken.
§ Mr. Dalyell
I will not attempt to have the last word. At that point, I think that I should release the right hon. Gentleman.
I want to raise one other matter on the Select Committees. It is painful for 610 me to do so because, in one sense, l made a very bad mistake. The right hon. Member for Flint, West (Mr. Birch) referred to a privilege case in which I was involved. I raise it simply because the right hon. Gentleman put it in terms of secrecy. Without trying to justify myself or resurrect a difficult and complex situation, I would say that it never dawned on me and some of my colleagues that secrets were involved. That being so, I would have thought that the Select Committee procedure would better be seen not in terms of one unfortunate incident but in terms of the experience of the Public Accounts Committee. Certainly in my three years' experience of the P.A.C. and during its hundred years' existence, no one has ever thought to leak the Exchange Equalisation Account. That could be a very damaging leak. Therefore, I would have thought that Select Committees could be trusted on the condition that it is made clear and specific that they are dealing with confidential documents, that minutes, sidelined or otherwise, are not sent out for correction, and that such documents with which they may be concerned are, like the Exchange Equalisation Account, kept under lock and key by their Clerks. I would have thought that the Exchange Equalisation Account is a more relevant example than the one given by the right hon. Member for Flint, West.
I come now to a number of slightly isolated points. One is that there is a very grave problem of time lag in the way that decisions have to be made in government and often that Governments are prescribing remedies which may be two, three or four years late. I offer the example of certain aspects of development area policy, and I do not know whether the hon. Member for Ayr (Mr. Younger) will agree with me. In the late 1960s, we were adopting some solutions expensively which were dealing with the problems of the earlier 1960s.
I endorse what my right hon. Friend the Chancellor said about decisions being taken and time being necessary to work through those decisions. The problem is clearly stated in the White Paper, but I do not see any answers to it. I do not know how Governments can keep up with the problems currently afflicting us rather than those of two or three years earlier without breaking their word to certain sections of the community. Once 611 a Government become commited to a regional employment premium or to some other commitment to industry, they cannot then say that the situation has changed and that they must change the whole methodology of helping those who have benefited hitherto. It upsets their plans. Whereas I would like to see grants and help to the area which I represent tapered off because the situation has greatly changed in the last ten years, one recognises that they have to be tapered off over a period of years with plenty of notice, rather than by making any change in the tax laws or the grant system.
Again, I echo a good deal of what has been said about the standards of public services. I wish that public services were included in the concept of the standard of living and that the standard of living was not connected simply with wages and salaries. Better schools are part of the standard of living. Better measures against pollution are part of the standard of living. Imprinted on my mind is what my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) said about his exit from the Morgan Grenfell Bank down a squalid subway in New York. I understand that that was an experience which was shared by my hon. Friend the Member for Heywood and Royton (Mr. Barnett).
I welcome very much the emphasis in the White Paper on measures to prevent pollution. It has become fashionable, but it is some evidence of the Government's intent to take action on this pressing problem.
The next issue which I wish to raise with my right hon. Friend the Chief Secretary is his own business of the Inland Revenue and its problems in terms of services and staff. Here I would give a concrete example. There is no more skilled sector of the Inland Revenue than the Estate Duty Office. Over the past 10 years, the Estate Duty office in Edinburgh has trained 32 graduates, 13 of whom have gone over to private law and insurance firms, 7 to banking, four leaving to get married and 4 leaving the service for other reasons. Only four are left. That is a story which can be repeated all over the country. What do my right hon. and hon. Friends at the Treasury mend to do to keep in the public service 612 those highly skilled tax inspectors in the Inland Revenue without whom they cannot bring about the tax reforms which some of us would like to see? I put that in question form, and perhaps my right hon. Friend will reflect upon it between now and tomorrow.
A good deal has been said about the public service, and I want to ask another question which touches on defence. This is not the proper occasion to have a defence debate, but it seems to some of us to be something of a marvel that here we have the contraction in forces for which a number of my hon. Friends and I have been pressing, but, as far as we can see, there is no comparable contraction in the civilian section of the Ministry of Defence. At a time when withdrawals have taken place and there is some contraction in defence, how is it that the Civil Service sector of the Ministry of Defence has grown? I should like to see some kind of Treasury probe into this. The methodism of shrinkage is difficult. People have pension rights. We have obligations to civil servants. However, it seems strange that the number of people controlling the forces has grown when those forces have shrunk.
Again, a good deal has been said by my right hon. Friend the Member for East Ham (Mr. Prentice) about overseas development. Whereas it may be unrealistic to suppose that we can fulfil all the recommendations of the Pearson Committee, even in a decade, I suggest that thought should be given to the part which could be played by our forces. To take one example, in Nigeria at the moment there is not only the problem of Biafra, on which I have nothing new to say. There is also the problem of resettling tens of thousands of troops at present serving in the Federal Army. I am no great militarist, but it is probably true to say that the best people to train and work with other peoples' soldiers are our own soldiers. As an example of overseas aid, could not some offer be made to provide British Service men to train Federal Army troops in technical skills in which the Services have done a good job? Part of our aid programme could be to help in the training of members of the Federal Army before they return to those areas of Nigeria from which they come as part of resettlement courses. This could be done not only in Nigeria but 613 in many other parts of the world, not least in a country such as Indonesia. That is the kind of assistance about which we should be thinking, dovetailing our needs to those of the developing world. This is an example of the dangers of compartmentalisation of departmental thought.
I wish to express some minor unhappiness about the rigidity which we are now seemirg to inflict on the investment programmes of the nationalised industries. I am not clear why the Government are doing it. Is it because it creates a good impression that we are toughly containing public expenditure, or is it for some other reason? It seems to me that the nationalised industries are as vital, if not more so, than great sectors of private industry.
In the electricity supply industry there are many vastly booming areas, such as the one in which I live and represent, where we need more capital investment, not I am unhappy about this particular straitjacket.
I should like to offer one reflection to the Treasury. It has been the opinion of some hon. Members over a considerable time that a great deal of Government money and resources could be saved in a new look at Government research establishments. I am not suggesting the dismantling of the Radar Research Establishment at Malvern or Farnborough overnight. Far from it. But there are many establishments where the work would be better done either in universities or intra-murally by industry. I accept much of the proposition that work done inside industry is three, four or five times more productive than similar work done in Government establishments.
I hope that this debate will fairly soon be followed by another, killing two birds with one stone, one of these birds being the Report of the Select Committee on the Defence Research Establishments, on which a number of hon. Members on both sides have done a great deal of work, the other being the excellent Green Paper which came out last week from the Ministry of Technology suggesting a British Research Development Corporation. These two subjects could be taken together as a natural sequence to this debate.
§ 8.30 p.m.
§ Mr. George Younger (Ayr)
I do not want to follow the hon. Member for West Lothian (Mr. Dalyell) in all the interesting points he made, but I agree with him most strongly on one point. I hope that no one will under-estimate the time scale required in making any alterations in economic policy or spending of this kind.
In the White Paper we are looking ahead to estimates for 1971–72. If, tonight, we were able to make all kinds of changes of decision affecting those estimates, it still would not be possible to change detailed programmes or anything physical within that time scale.
This was brought home to me recently when a firm in my constituency approached me in great concern wishing to know in precise terms what tax allowances and industrial incentives, etc., would be four to 10 years hence. When I was asked this question I thought that it was going a bit far. But the firm explained that it was absolutely necessary to make fixed price tendering for contracts, etc., for that time scale ahead. Therefore, the hon. Member for West Lothian is right in saying that we have to think in terms of very long time scales. The more that we can get this through, not only to Members of this House but to the public, the more understanding there will be of the problems of Government spending.
A debate like this is most valuable. It has always seemed to me to be a huge gap in Parliament's control of the Executive that these important decisions, which are and have to be made by Ministers, have so little parliamentary control over them. We have not the means to do it.
I do not accept, in this connection, what has been said by several hon. Gentlemen opposite. It would not be of help if we were encouraged to put down Motions to have these debates. If that were to happen, I feel that they would become rather like Supply Days, when the Opposition of the day picks a subject or subjects which they think it would be to their advantage to debate. We would get a narrowed down debate on a particular item of disagreement between the two sides of the House. We have plenty of opportunity to have that kind of debate 615 now. What I welcome about the debate today is that we have the opportunity to take a really good look at public expenditure as a whole and to give our views on the priorities within it and the way that it is made up.
I will confine my remarks about the White Paper and the figures within it to three main headings. This debate is being held against the background of the figures in the White Paper which show the conduct of expenditure in the last year or two. The great worry is that in the past few years not only has expenditure been rising at a rate which many have described as out of control, but that it has been doing so against the background of a poor performance in the expansion of the national economy generally.
It is bad enough to have public expenditure rocketting upwards at any time. It is far worse when the national economy is not expanding, or not expanding fast enough, during that period. As a result, we can see from these figures that whereas in the five years from 1960 the proportion of the gross domestic product taken by public expenditure increased by more than 2 per cent., in the next five-year period that figure went up to more than 6 per cent. It means that the expenditure programme has been increasing out of money which we should not have allocated to it because we had not earned it in the first place. This is why, in spite of increases in expenditure, the actual growth in expenditure on particular services has not increased as rapidly in the last few years as it did previously.
In the five years prior to 1964 all public expenditure had been increased in relation to gross domestic product by about 26.7 per cent. In the last five-year period it has increased by 27.7 per cent., a very small change indeed. If we look at the figure for education, we see that in the five-year period up to 1964 expenditure on education, in real terms, increased by 45.1 per cent., whereas in the last five years it has increased by only 27.4 per cent. A similar picture can be seen in health and welfare, in housing, and in many other forms of public expenditure. We must therefore now look at the methods of assessing our public expenditure and the amount spent 616 to see what lessons we can learn from the unhappy experience of the past.
The first thing at which we must look is what I call the problem of bad housekeeping within the machine for producing public expenditure figures and for deciding public expenditure programmes. It is extremely disturbing to see what must be a grave deficiency in our methods of making estimates and having any chance of sticking to them when the outturn is measured. I could cite many examples of that. The Public Accounts Committee commented adversely on the estimates for Ninewells Hospital, Dundee. The original estimate was £10 million. During the construction period of five years, that figure increased to £15 million. I accept that some proportion of that may have been due to new equipment, new techniques, changes in design, and so on, but surely it is not conceivable that there can be a 50 per cent. increase on the original cost due entirely to those factors. No one who sees that figure can be anything but disturbed at the methods by which these estimates must be made if the eventual outturn is so far removed from the original.
That is perhaps an outstanding example, and I shall therefore consider one or two smaller ones. The building of the new Income Tax Centre, Centre 1, at East Kilbride was estimated in 1968, fairly recently, to cost £1 million. Now we find that the estimate has risen to £2,073,000—double the original figure. There may have been an extension of what the centre does but a variation in an estimate of that order in only two years is not acceptable.
Then there are the new offices which the Scottish Office has been building and equipping known as Argyll House in Castle Terrace in Edinburgh. In 1968, the etimate was £200,000, whereas in 1969–70, it has suddenly become £523,000. How can we possibly calculate our expenditure properly with that sort of error? There are dozens of other examples, but these few make the point.
Then there is the still growing increase in the number employed in Government departments. Surely, when public expenditure must be under scrutiny in view of the provision for the future of education bearing in mind policies like 617 raising the school-leaving age, we cannot be happy with the continual and remorseless increase in these numbers. The recent figures comparing 1968–69 with 1969–70 show an increase in the Scottish Office of 144 persons, costing almost £250,000 a year. Why are these increases allowed to continue when everything must be under the closest scrutiny?
Then there is the question of whether we get value for this extra money squeezed out of extra taxation. One example is the cost of providing school places. The cost per place taking all types of schools was £343 in 1964 and had risen to £422 in 1968—a far greater increase than in the cost of living. Taking secondary schools alone, which is particularly relevant with the raising of the school-leaving age, the cost per place, was £381 in 1964 and had risen to £473 in 1968.
These are surely all symptoms of public expenditure on the ground having got out of control. It has been said that a great question mark must hang over the value which we get now for investment grant policy. We are all anxious that measures to induce industry to go to development areas should be successful, but in Scotland we should face the fact that they have been conspicuously unsuccessful and that we have registered a loss of over 60,000 jobs in the last five years compared with an increase in the years before that. Not only have they been unsuccessful, but they are costing an immense extra sum.
When spending so much more, we should expect at least as good a performance, and, indeed, a better. There must be a question mark on whether we are getting real value for the increased money.
§ Mr. John Mendelson
The more I listen to hon. Members opposite speaking in support of this great parliamentary reform, the more I must warn my right hon. Fiend that I get the impression of a bunch of reactionary Tory Members masquerading as parliamentary reformers and that he should not enter into any underhand dealings with them before he accepts these plans. Some hon. Members have said that if one wants to undermine these plans, one should join the reforming movement.
§ Mr. Younger
I do not know whether the Chief Secretary understood that any 618 more than I did. This does not alter my conviction that the more money we save by spending to better effect, the more there is to spend on things which are starved of money, including raising the school-leaving age.
Following these five years of question marks over public expenditure let us look at the programmes. Have we got the programmes for which we originally put forward the money? It appears that we have not, although naturally the Government do their best to conceal every point where a programme falls short. There is the hospital building programme. About a year ago there was an announcement in a Parliamentary Answer that five major postponements of hospital building projects would take place in Scotland. At the time there was considerable concern expressed and statements made by the various hospital boards. There was a statement made in one of the papers by an official saying that the reason was not only the upward trend of costs, but the effects of devaluation, the Budget and the uncertainties of the market in the building industry. Here again we have clear proof that the programmes for which money has been put forward have had to be cut back.
Then there is the roads programme in Scotland. We are continually being told that this programme is going forward uninterrupted and that nothing has been cut back. Yet only yesterday we heard that one of the final sections of the M8 has mysteriously become the A8. There is great local concern because people who thought it would be a motorway find that they have a trunk road instead. I notice that one of the Scottish Office spokesmen admitted, according to the Press, that the decision to make the last three and a half miles of this motorway into a trunk road could mean that in 10 years' time that particular bit of road might be seriously overloaded.
§ Mr. Donald Dewar (Aberdeen, South)
Are we to deduce from this that the Scottish Conservative Party is criticising the White Paper because the projections in Scotland are too low for the next three years? I am rather tired of listening to this catalogue of complaints. I would rather hear the hon. Member's judgment on what we are supposed to be discussing.
§ Mr. Younger
I am glad that the hon. Member has asked me that, because it gives me a chance to say yet again that what I am criticising is the fact that we are not getting value for the vast amount of money that we are spending. May I add this, for the hon. Gentleman's benefit. No one could criticise this Government for not having spent enough money. The reverse is true. The Secretary of State for Scotland sits up in St. Andrew's House like a great mogul with money pouring through his fingers—other people's money, money that the country has not earned. What I am asking is whether we are getting value for this money.
Let us look at another road project. What about completion of the M9 between Stirling and Edinburgh, scheduled to be finished by 1972? Of course the road programme has not been cut, but suddenly we discover that this road has no chance of being finished by 1972. This again is the result of cutting back.
Then there is education and the great programme to raise the school-leaving age in two years' time. Yet at this critical moment, when investment programmes should be stepped up, we find a drastic drop in the school-building starts. Over the last three years the average has been £30 million a year. In 1970–71 this will have gone down to £17 million and in 1971–72 according to this White Paper it is only £19 million. In the county of Lanarkshire the estimates for school buildings have been cut by £2 million, West Lothian £1,500,000, Renfrewshire by £1 million and Glasgow has only been allocated £2,500,000 when it really needs £9 million.
Here again is a whole series of cuts, forced on the Government because public expenditure has not been covered by the gross growth in the national product in the past five years. That is why the Government are forced to cut back programmes, not because they do not want them, but because the economy has been run so inefficiently that they cannot have them.
§ Mr. Dewar
The hon. Member seems to be saying that the Secretary of State for Scotland is dispensing too much money. At the same time he is complaining that there have been cuts in innumer- 620 able programmes which he has managed to gabble in the few minutes he has occupied. Could he tell us his formula whereby the Conservative Party would spend less and by some economic miracle produce more? I should like to know the details.
§ Mr. Younger
I do not need to give details, because the hon. Gentleman will find from the record that during the term of office of the last Conservative Government it was possible not only to reduce taxation but to increase the level of public spending on all these services at a greater rate than that achieved by the present Government. All the figures are there to prove it. It can be done, it was done and, of course, it ought to he done again.
I hope that the Chief Secretary will take what I now have to say as being intended to be helpful comment. The effort expended in producing this present document was well worth while, but I question whether the basis of information at the real grass roots is sufficient to make one believe the figures that have come up. In particular, I draw the right hon. Gentleman's attention to how the future estimated position looks from the grass roots. The present system is that we work from year to year to a rigid dateline to the end of March. At that point the expenditure of public bodies has a line drawn against it, with no further consideration given to any money that might have been saved in the preceding year. I believe that this probably wastes millions of pounds of public money each year. I do not criticise the present Government: this system has run for many years.
I will give two examples of how that system works. I remember on one occasion many years ago, when I was in the Territorial Army, arriving at the drill hall to which I was attached and being told that people were moving in to lay a new floor the following day. When I asked the reason, because I had not heard anything about this, I was told: "We were got in touch with. There is some money available that has to be spent by the end of March, and this is the only thing they could think of that would cost the right amount and could be done quickly enough." We all know that this sort of thing happens in many different places.
621 Again, my attention was drawn to this system not long ago in connection with hospital work. It is known that every year some hospitals get a request sometime in January, perhaps from the regional board, "Can you spend £1,000 by the end of March?" The reply probably is: "Yes, we can put a little tarmac on the car park" or whatever the work may be.
I urge the Chief Secretary in his consideration of changed methods of planning ahead to look closely at what happens at the grass roots, because I am sure that such instances as I have given would not have his support. We must try so to change the system as to give the people at the grass roots of public expenditure an incentive to save public money from which they, too, will get some benefit. I am sure that with modern acounting methods it would be possible to do something of this kind.
My general comment is that we cannot look with pleasure on the results of this White Paper, but we can ask the Government to take seriously the new rôle which I hope Parliament will now play as an effective watchdog on all expenditure; and that they will take their courage in both hands and accept fully the recommendations of the Select Committee so that we can build on today's very successful debate, and try to get mere efficient and detailed consideration of these matters in future years.
§ 8.54 p m.
§ Mr. A. H. Macdonald (Chislehurst)
The hon. Member for Ayr (Mr. Younger) has made a very interesting speech, but my belief, when this White Paper was presented and the debate was anounced, was that the debate was meant to provide an opportunity to take a rather broader view of taxation and expenditure than he did. He concerned himself to some extent with details, which he was fully entitled to do, and running through this discourse was the theme question whether we get value for money.
I wondered whether this was the precise opportunity to raise questions of that nature. I wondered that the more particularly because I recall that just before we broke up for the Christmas Recess we debated the Report of the Public Accounts Committee, a Committee of this House specifically charged with 622 examining Government expenditure and seeing precisely that it is spent in due way and we get proper value for money.
I had the privilege of taking part in that debate. On that occasion, which I should have thought was the occasion to discuss the details, apart from the official spokesman from the Opposition Front Bench and members of the Public Accounts Committee, no hon. Member opposite took part in that debate. If the hon. Member for Ayr is so zealous about examining the details and giving them meticulous and minute inspection, how comes it that his zeal did not lead him to take part in that debate? There was plenty of time. The debate terminated rather earlier than our debates normally do, yet he did not use that opportunity rather than this one which, I understand, was intended for a review of a wider nature.
I add my congratulations to the Government on their action in introducing this White Paper and offering us this opportunity to debate it. It appears to be a White Paper for accountants rather than for economists. That is meant as a tribute, not a criticism. The White Paper is presented in what I call a flat, neutral manner, which surprised me a little at first. I had expected to see rather more argument deployed therein. On reflection, I think that perhaps this is no bad thing because the White Paper gives us an impartial basis for our arguments. I could have wished that the Government had made more pomp and ceremony about the introduction of the White Paper because it is an occasion of great importance, giving us the opportunity to discuss forward projections of expenditure and taxation. I hope that this precedent will be followed and that when we discuss future taxation we shall have the opportunity to do so together with projections of expenditure.
There is vast scope for comment in this document, but perhaps it is a salutary fact that my time is limited. I infer from the figures set out in the document that in the foreseeable future there is unlikely to be any significant extension of public ownership. I assume that we are not to proceed with further public ownership by expropriation. I trust that we have learned our lesson, not to extend by financing bogus and non-existent savings but there does not seem scope in the 623 document for expansion of public ownership. How comes it that the Treasury has imposed this bar on expansion of public ownership? I thought that that was one of the things we were here to do. I am a little disappointed that the figures do not appear to provide facility for this.
I have never understood how it is possible for this Government, of all Governments, to advance a policy of insisting on the creation of large monopoly enterprises if the end product does not mean an enlargement of public control. Otherwise, I deeply fear that the Government will be at the mercy of large enterprises. If there is only one customer or one supplier, as the case may be, there will be the disadvantages of no competition without the corresponding advantages of public control. I rather regret that, as I read the figures, though I shall be happy to be proved wrong if anybody can do so, there does not appear to be any opportunity for the extension of public ownership.
The borrowing requirement for the years ahead is very nicely balanced. I had hoped that there would be more argumentation about this in the document than there is. The document assumes, though to be fair it says that it is not making a forecast, that interest rates will continue at their existing level. This was one of the assumptions made in the projection of figures.
Am I to assume that it is for that reason that the nationalised industries are expected to live off revenue without any further borrowing requirement? Is that the reason why the B.B.C., for example, although it is not exactly a nationalised industry, is financing colour television out of revenue rather than out of borrowing? I wish that there had been more argument on this point. If it be true, can we assume that, if interest rates were to fall, the nationalised industries would be allowed to take advantage of further borrowing?
I wonder whether we are seeing the most efficient use of capital employed in the nationalised industries if we are to insist in the years covered by the projections in these documents that there is to be no borrowing and that they are to live entirely out of revenue raised from their own resources.
624 The final significant point is that the document assumes as a basis for calculation a 3 per cent. growth rate in the economy and in the expansion of public expenditure. Nowhere in the document is there any justification for this assumption. It may be that the proportion of public expenditure in relation to gross national income is at this moment exactly right. If this be so, I should have liked to have heard some arguments in support.
I wonder whether we can so confidently assume, without any supporting argument, that a growth rate of 3 per cent. in public expenditure is exactly right. Why should it not be 4 per cent.? There are hon. Members who argue that it should be less—perhaps 2 per cent. Either way, there is scope for argument and discussion. On this point, also, I am sorry that there is no further argumentation in the document.
It occurs to a cynical mind like mine that in preparing the document the Government started from the assumption that they dared not increase taxes or cut public expenditure and, therefore, decided to stay put. There is constant demand from some people for a cut in taxes. There is constant demand for increased expenditure on services. Admittedly, it is impossible to satisfy both demands, but I should have thought that this document satisfies neither and is, therefore, peculiarly unfortunate from that point of view.
In the table setting out the percentage increase, which it is very interesting to see and which I would wish had been enlarged upon, it is noticeable that the average ends up at 3 per cent. I find it difficult to resist the conclusion that the Government in preparing the document started with the 3 per cent. at the bottom and then juggled with the figures in the column above to ensure that the average of 3 per cent. came out. If this be so, I regret it.
I should have liked there to have been an explanation in the document, but, failing that, perhaps we shall have it in the reply to the debate, as to why it must be assumed that the growth rate of public expenditure from now on is precisely the same as the growth rate of the economy generally. Why can it not be greater, as I personally would like it to be? Alternatively, why can it not be less? These things should not be taken for granted. They should have 625 been explained and enlarged upon in the document. I am sorry that they have not been.
Although I have made some carping criticisms, which I suppose the Government must have expected when they introduced the document, I repeat my appreciation of the Government's initiative in providing us with these figures and with this opportunity to consider these matters and to advance arguments for their consideration.
§ 9.5 p.m.
§ Sir John Eden (Bournemouth, West)
It was inevitable and not altogether unexpected by any hon. Member that this debate should have been fairly wide-ranging. We have covered quite a few subjects, from overseas aid, the building industry, Porton Down, to a hospital in Dundee. In so far as this tended to happen, it happened more by way of illustrating the main point than by any intention of fragmenting the debate.
There have been two sides to the debate as I see it. First, there was what my right hon. Friend the Member for Enfield West (Mr. Iain Macleod) called the most important aspect of it, namely, the relationship between the Executive and this House. Secondly, there were the general trends and the specific categories of public expenditure.
In the past, I have had the privilege of serving on the Estimates Committee. I was a member of the sub-committee which examines all the Supplementary Estimates and in that capacity I had the opportunity to cover a wider canvas than some of the specific sub-committees of the Estimates Committee are able to do. It was a valuable and rewarding experience but we were then—as the committee still is—much more concerned with past performance than with the future prospects of expenditure.
I think that we all tended to feel that our reports did not quite make the impact on the House which they merited and deserved. But that happens quite often to all of us.
The Report of the Select Committee on Procedure is a fascinating document. I have read it several times and find it extremely interesting. I am sure that all hon. Members, whether they served on the Committee or not will agree that it is to the lasting credit of the members 626 of that Committee that they have encouraged changes in our practice of which the publication of the Government White Paper and this debate on it are a most welcome first step. There has long been a need for a debate of this nature and never more so than when the total weight of public expenditure bears so heavily on the people.
I am sure that as we develop the procedures and improve on the practice both the interest in and the significance of this annual event will grow, perhaps especially if, as was suggested in the Committee's report and emphasised by my hon. Friend the Member for Guildford (Mr. David Howell) that the debate could come somewhat earlier in the year, by which I mean in December rather than at this time.
Although I have served on the Select Committee on Estimates I have never served on either the Select Committee on Nationalised Industries or the Select Committee on Science and Technology. I wish that I had. But now that I have some responsibilities in the field of nationalised industries I have been studying their reports with greater care than ever I did in days gone by and they are enormously valuable documents. For the most part they are a mine of information and usually have led to a thorough and effective examination of a particular industry and its problems.
In one notable case, the report on North Sea gas, the survey covered the whole range of all the interests principally affected by the introduction of that new fuel. Undoubtedly, we shall see further developments of that kind in the future handling of inquiries by those Select Committees, and they will be a great help in keeping the House informed in depth.
I should like to see that trend carried into the Government's own classification procedure for a White Paper on Public Expenditure of this kind. As regards the nationalised industries, rather than proceed solely on an industry-by-industry basis, it would be extremely valuable, for example, to see the cost of the provision of energy as a whole and, also—if this be at all possible—see weighed in terms of capital expenditure the alternatives which have been considered and, for one reason or another, rejected.
I realise that, as the Chancellor himself suggested, that could be asking for more 627 information than it is possible to give in a single document. There may well have to be some limitation there, but we ought none the less to look at the categories or classification of some of the items of expenditure—I think primarily of the nationalised fuel industries here—for in that way we might have a clearer picture, more readily seen, of the total cost involved in trying to achieve as cheap a fuel with as great a degree of security of supply as can be managed.
In other words, I agree very much that we should endeavour to be clear about the objectives of expenditure and that these, too, should be set out as much as possible at the time when we consider the total cost of achieving them.
It is important that we have as much information about these industries as we can in order to assess not only their capital requirements, but also the impact on their efficiency and upon the services which they provide—this point was raised by several hon. Members—if they are denied what they claim they need in terms of capital. The example of steel prices referred to by my right hon. Friend the Member for Flint, West (Mr. Birch) illustrates the point well. The history of steel since renationalisation has not been happy. It is a story now of shortages and long delay in deliveries. A number of trade associations have complained about that, and I am sure that every effort is being made to overcome it. It is a story, also, of frustration for the management of this great industry, not only as a result of the great upheaval in organisation which, seemingly interminably, has been going on within, but also as a result of direct Government intervention and action.
For example, the total finance for 1969–70 originally required by the industry was cut by £25 million in August, 1969. I am sure that that was a political decision, and it undoubtedly had a material effect on the industry's development plans. As my right hon. Friend the Member for Flint, West said, we now face the third major price increase in the industry in a year.
I am wondering what has happened to the cost reduction programme which was called for in the first Report of the National Board for Prices and Incomes. At that time, our attention was drawn 628 to the fact that costs in the United Kingdom steel industry were probably about 15 to 20 per cent. higher than in Japan, and that is why the need for cost reductions rather than straight price increases was stressed at that time, and the industry was called upon to submit a programme to the Minister.
As the right hon. Gentleman the Chief Secretary to the Treasury will recall, the Government had some considerable sympathy with that view and went a long way towards refusing to accept the call for the total span of price increases from the Steel Corporation. He agreed with much of what the Prices and Incomes Board had said then.
So we wish to know a little more about what has happened since those days. Had it had that price increase, the corporation made it clear that it then hoped to make a profit of about £30 million. My information is that that profit has gone out of the window and that, far from there being a profit, it is likely to be a fairly substantial loss this year. I know that there are all sorts of extenuating circumstances, and there always are. There are labour troubles and other problems, but that is not the whole story, for the world boom in steel has been with us since 1967. I cannot but emphasise over and over again that, if the industry had not been renationalised, those companies which would have been left would have been in a much stronger position to take advantage of this situation.
This industry has been victimised by the Labour Government. There was, first, the threat of renationalisation which kept investment down, and since then there has been a series of plans and counter plans. It is not surprising, therefore, that the reference to steel on page 60 of the White Paper says:The British Steel Corporation's plans for the long term are still tentative and the estimates shown…are preliminary figures.It is fantastic that this should be so. I wonder what has gone on over all these years.
We get the same sort of story, only from a totally different point of view, in another industry. I choose this industry simply to illustrate my theme. This is the electricity industry, which has been affected by Government decision about the rate at which the economy would grow 629 in the years to come. The industry naturally felt itself bound by the Government's forecast of the growth rate and planned all its capital development programme and power station and generating plant provision on that basis.
But we have seen now a most dramatic change even within the last few months from the picture which had emerged a short time ago. There was a substantial margin of spare capacity and Ministers were quick to assure the House that the day of power cuts was a thing of the past. But then, the first cold snap brought a whole series of voltage reductions. Again, there are explanations, and so far as they go they are absolutely valid. They are plant failures, or unusual conditions coinciding, and the implication is that it is rather the fault of the people who built the plant.
But it is not as straightforward as that. With one dominant customer in the field, competing suppliers—there are now only two major suppliers—are bound to have to build to the customer's orders. The difficulties in power station commissioning and in the new designs were foreseen to some extent and commented on in the Wilson Report when it called for a slowing-down of the rate at which we followed on from an initial prototype with further orders. This is very much the case with power stations of the 500 megawatt generating unit size. These are enormous power stations and the capital expenditure involved is enormous.
As they cost about £100 million apiece, this is relevant to the consideration of capital expenditure. There is no doubt that it would have been wiser to go more slowly in that direction and have a more flexible mix of stations. I could make a number of other points on the electricity industry.
When talking about public expenditure, the Chancellor said how difficult he found it to evaluate the efficiency of the services and the contribution made by the service industries. People undoubtedly relate public expenditure not so much to the sum involved as to the price of the product they buy and the standard of service they get. Every hon. Member must have had in his postbag during recent months letter after letter complaining about one form of public service or another.
630 There are any number of examples of customer frustration. Perhaps the worst in showing a declining standard is the Post Office, which has been fastest growing in its demands on public capital. It has a lamentably poor rate of self-financing and constitutes a considerable burden on the taxpayer without yielding, at present at least, much evidence of improving standards of service for the customer.
We are all, I suppose, becoming conditioned to delays in letters, to local calls going wrong, to subscriber trunk dialling errors and to delay in overseas cables. Campaigns have been run in newspapers and elsewhere. It is extremely serious when, after all the enormous investment, as much as 10 per cent. of all mail is admited by the Post Office to be subject to delay. [Interruption.] The same sort of comments could apply to the telephone service and telegrams. [Interruption.]
§ Sir J. Eden
—is that this is a service which lost £3.4 million. If the Minister is thinking of cuting it back—[Interruption.]
§ Sir J. Eden
If the Minister is thinking of cutting back the telegram service, perhaps he should first consider handing it over to somebody else who would make a success of it.
§ Sir J. Eden
I am sorry that hon. Members opposite are upset by my reference to the Post Office and postal services. The White Paper contains frequent references to the Post Office and a substantial underlining of the fact that the growth of demand for public expenditure by the Post Office will increase beyond anything else. An enormous sum of money will be taken in terms of capital expenditure.
Surely, hon. Members opposite are not simply interested in seeing how much 631 money they can spend. Surely they are interested in getting value for the service on which it is spent. This applies to some extent also to the position with coal, which has recently been the subject of an inquiry by the Select Committee on Nationalised Industries. There again, extremely valuable information has been brought forward, particularly on the impact of colliery closures and the special assistance which is being paid to the coal industry. This will be most useful information, especially when the foreshadowed legislation comes before the House.
Here again, however, after a great deal of investment and capital expenditure, we are confronted with much the same sort of situation that seems now to be affecting the steel industry. As the hon. Member for Colne Valley (Mr. Richard Wainwright) said, there are acute shortages of smokeless fuel in Birmingham, London, Yorkshire and other places and, regrettably, there have been shortages in other fuels as well. Take coking coal. We produce the finest coking coal in the world. There is enormous demand for it which, somehow. is not being met.
Dealing with coal, the White Paper—[Interruption.] Perhaps hon. Members opposite will listen for a moment.
§ Sir J. Eden
The White Paper states:Investment by the fuel industries is expected to decline until 1972–73. Within this pattern the National Coal Board's investment is likely to remain at about present levels (subject to the development of its participation in oil and gas exploration).It should not be participating at all in that development. Nor should the gas industry be engaged in exploration for oil and attempting to turn itself into an oil company.
These are the sort of decisions, largely Government decisions, which affect the course of public expenditure for many years ahead. The Government may well be able to contrive a dip for a few years or to hold the level of nationalised industry spending steady, as they have done, but that, as my hon. Friend the Member for Guildford said, is a foam ceiling on a bubble bath. That is all that the Government have achieved, as the White Paper shows.
632 Unless there are policy changes, the expenditure must go forward in course of time and, looking only at the capital expenditure of the nationalised industries, this is what the future would seem to indicate, for the projection to 1972–74 shows an increase of 8.6 per cent. over the figures for 1968– is a rather gloomy outlook when we are only promised a growth rate of 3 per cent.
The Chancellor rightly said that sudden reductions in major capital expenditure programmes were most damaging. I emphasise that as well. Ill-considered, piecemeal cut-backs in spending programmes for two or three years without any fundamental alteration in policy must lead not only to enormous frustration for the managements of these great industries, but will also be followed by substantially increased costs to the taxpayer and the consumer. That is what has happened over these last few years and it is a poor way both to manage the economy and to stimulate the nation's investment in new technology.
The Chancellor was right that control over public expenditure and major policy decisions go together. Judging by the figures which are forecast for the years beyond 1971–72, major policy changes are needed. We need to look at the major policies not only to try to get better value for money, but also to try to reduce altogether the weight of the public sector on the taxpayer.
§ 9.29 p.m.
§ Mr. Joel Barnett (Heywood and Royton)
I am delighted to have the opportunity and honour of winding up this debate tonight from this side of the House, but I should make it clear now, although no doubt it will have become obvious by the end of my speech, that I am not speaking on behalf of the Government.
Perhaps I was expecting a little too much from the contributions of hon. Members opposite. I suppose that people reading the debate tomorrow will be expecting at least to have certain answers to fundamental questions. For example, was the assumption about the level of growth right? Was the total proportion of public expenditure as a percentage of resources right? How was it decided? Should it be divided in the way suggested, or in some other way? I listened carefully to all the speeches 633 and found not a single answer to any of these under any of these fundamental questions.
The Government deserve congratulation for having published this White Paper. I hope they will not consider it churlish if I now go on to criticise a great deal of it. I take first of all the level of growth and the assumption about growth. My hon. Friend the Member for Edmonton (Mr. Albu) told the House that, whatever the level of growth we choose, whatever assumption we make, we still have to make a choice about the performance of public expenditure. He is quite right, but I found his view as to the level of growth we could expect somewhat pessimistic.
I cannot help thinking that if the original intention when the D.E.A. was set up was to have a form of creative tension between the D.E.A. and the Treasury, then somebody must have also thought of having some creative tension inside the D.E.A., otherwise I cannot imagine why the D.E.A. took a more optimistic view of growth than my hon. Friend. However, perhaps I am doing him an injustice.
I cannot accept the assumption in the White Paper about the level of growth. It is fundamental to the whole question of how much we should have available in total public resources and how much will be available. I refer to paragraph 11 of the White Paper, in page 9, which says:It seems that the underlying rate of increase in productivity is now about 3 per cent. a year or a little less.I would question this. It is based on arguments in the Green Paper "The Task Ahead". It is based, firstly, on the amount of productive potential and, secondly. on the perennial question of balance of payments.
I find the arguments something of an insult because of the implied inability of this country to produce at the same sort of level as our industrial competitors. It may be that some of that insult is deserved when placed on the shoulders of British management. Certainly some sections of British management deserve that sort of criticism. But the British worker cannot be criticised in this way, and there is plenty of evidence to show this. I refer to the Brookings Institute Report which came out a little time ago 634 from Washington. This showed that British workers under American subsidiary companies with American management were producing comparably more than workers under different types of management. This does not support the argument that we hear all the time that there is something fundamentally wrong with the British worker in that he cannot produce as fast as others throughout the world.
Again I question the assumption in "The Task Ahead", because it is on this that the whole White Paper assumptions on growth are based. I refer to paragraph 24 of the Green Paper in page 16 of which we see:During the period 1960–66, productive potential was probably growing at about 3.3 per cent. a year; but as the working population was growing by 0.7 per cent. a year the underlying growth of output per head was about 2.6 per cent. a year.It is on this that the whole assumptions are made. In other words, we were basing our assumptions about productive potential and planning the next five years on the basis of a miserable period of stop-go.
I will turn in a moment to the self-imposed limitation of credit through the balance of payments. Were the Government not expecting any improvement from the considerable growth in the field of management education, from the work of the Industrial Organisation Corporation, and the rationalisation of industry which seemed very worth while? The House will remember the British Leyland and G.E.C. amalgamations likely to produce a considerable increase in productive potential. In regard to the work of rationalisation, the productivity bargains of the N.B.P.I. and the D.E.P. and the work of the Ministry of Technology, are the Government assuming that none of this will produce any increase in productive potential?
To turn to manufacturing investment, are the Government expecting any increase at all, or are they not expecting any increased productive potential or increased manufacturing investment? The only argument my right hon. Friend the Chancellor of the Exchequer gave the House today for this assumption of growth was that it was important to play safe. We might exceed it. We might, as "The Task Ahead" says, achieve a 4 per cent. level of growth. But we must 635 be on the safe side, th Chancellor said, and aim at an assumption of 3 per cent., otherwise we should be planning to spend something which we are not likely to receive.
The argument can also be put another way. It could be said that this is a dangerously pessimistic way to approach the problem. It may well be that if we set targets starting from an assumption of a level of 3 per cent.—I accept that this was not set as a target—then probably that is the sort of miserable level we will achieve. We must look again at this percentage of growth which we assume is only to be available to us during the whole of the next five years.
There is another reason that I believe we should aim at a very much higher rate of growth. This brings me to the reason given in both the "The Task Ahead" and the White Paper, the need for a substantial surplus of balance of payments which limits the rate of growth we can achieve. Paragraph 12 of the White Paper says:Despite the marked recent improvement in the country's overseas earnings, there remains the overriding need to make available a sufficient share of these growing resources for maintaining an adequate surplus on the balance of payments…".Then in paragraph 26 of the Green Paper one sees:The starting point of this discussion was that, in view of the likely balance on capital and invisible accounts, a visible trade surplus of some £300 million in current prices might be required to achieve the desired payments surplus of £500 million.Incidentally, I should be interested to hear from the Chancellor if a £300 million visible surplus is still his target. I should have thought it unlikely as a target, but I should be interested to hear if it is so. It seems more likely that the target to achieve is a £500 million surplus overall on balance of payments.
I accept that the Chancellor had to go for a substantial surplus on the balance of payments initially. Now, there is an alternative to persisting with what I consider to be an excessive balance of payments surplus, especially when it is being sought at the expense, inevitably, of economic growth. The alternative is to go for a higher level of growth and a lower balance of payments surplus. I have said this before, and I will not 636 repeat myself. However, for too long we have had an almost Victorian outlook on debt, as if being in debt is wicked and that it is bad for the country to borrow.
Of course it is bad for a country, for companies and for individuals to borrow when they do so beyond their resources and their capacity to repay. But that does not apply to this country, which has very substantial assets both at home and abroad. It is time that we stopped pretending that, somehow, we are something other than a comparatively wealthy country. It would be tragic if this irrational fear of debt forced us, once again, to go for a level of growth which will not enable us to get the levels of public expenditure which most of us on this side of the House would like to see.
I turn now to the main part of the White Paper, dealing with public expenditure. One reason for congratulating the Government on producing the White Paper is that it puts in perspective what politics is about. It is a shame that this House could be crammed to capacity to ask about issues over which we have no control, such as Vietnam, when here is an issue covering every aspect of political and public life resulting in a relatively thin attendance. However, as it happened, today's debate has been rather better attended than most of our Budget debates—
§ Mr. Heffer
The same hon. Members are present to debate this issue as attend our debates on Vietnam.
§ Mr. Barnett
My hon. Friend is right. But really the crucial issue in political life is how we spend the resources available to us as a nation. Incidentally, it has the side effect of exposing some of the nonsense that we hear daily from right hon. and hon. Gentlemen opposite and have heard again today.
As my hon. Friend the Member for Chislehurst (Mr. Macdonald) said, no one can argue that the levels of public expenditure are precisely right in economic or social terms. It is impossible to argue that because they are arbitrary figures. They are not figures which someone worked out many years ago and said, "We will arrive at 1970 at such-and-such a level of public expenditure." I think that it was my hon. Friend who referred to where it was balanced. He 637 wondered whether the Government had decided on 3 per cent. and balanced it in that way.
Many people tell me that they cannot understand why it is that the right and left hand sides of a balance sheet always have the same figures. The reason is simple. There is a balancing figure. I will not do the Government the injustice of suggesting that they did just that, but I do not think that they would argue that the figures in the White Paper are arrived at in anything other than an arbitrary way, in my view inadequately.
Inevitably, they are a political compromise. Governments decide what they consider that the public will tolerate as a level of overall taxation and what they want as a level of public expenditure. It stems from a political fear of the consequences of too high a level of taxation. In this sense, the Government have been rather more honest than the Opposition, who want massive cuts in public expenditure which they imply are painless and, at the same time, cuts in taxation. It is difficult to see how it can be done.
The problem has been looked at in the wrong way. We are in danger of distorting the picture by starting with this compromise and the assumption that the country will not tolerate any levels of taxation of the sort that we have today. It should be the other way round. We should be deciding what standards of public expenditure the country will tolerate and whether, in education, the country will tolerate classes of 20, 30, 40, 50, or even 60. I believe that we should present to the country precisely what certain levels of public expenditure would mean. In education, should children start school at two, three, four, five, six, or seven, and if so, what would be the relative costs of each? Taking university places, how many should we provide, and what precisely will it mean to our middle classes? That is what we should be presenting to the country, rather than this argument about the over-all level of public expenditure in the general sense and the general level of taxation.
In terms of health, how many lives would be saved if we spent more on equipment and on paying our nurses and doctors reasonable salaries? Putting it another way, how many lives would be lost by limiting the level of expenditure 638 on health to that in the White Paper? How many more kidney machines could we have? How much better a society would we have if we spent considerably more on environmental problems, pollution and the like?
Those are the sorts of issues that we should be presenting to the public. It the people were given these alternatives, we could have a genuine debate. Instead, unfortunately, one tends to get a rather bogus debate about the general question of public expenditure as opposed to taxation. It is a bogus debate, because for a man on, say, £25 a week who might, if he has a couple of children and a mortgage, get 2s. per week off his income tax, it will not be a great deal of use to him if he has to pay £1 a week more for school meals, for milk, for staying in hospital, for contributions to university expenditure and for an increased rate bill. A cut in taxation for that kind of man—the average working man on that kind of average wage—is not meaningful in terms of real income. It is real income which is crucial. That is why I say that it is a bogus argument to present it to the country as a simple issue of cutting public expenditure and taxation.
The real issue before us is the proportion of resources that we, as a nation, should be spending in the social sphere. We can then decide how it should be financed. This is what I was hoping we should hear from the Opposition today, but we got nothing.
I accept that there is a need for political compromise in this area. We must be realistic. Of course there is a need for political compromise, but we should not drift into an arbitrary figure and then, having drifted into that arbitrary figure, convince ourselves that the percentage is right. This is done all the time in political life. People decide on a particular line of argument and then go on, day after day, week after week, convincing themselves that that line of argument is right. This is what tends to happen—[Interruption.] Hon. Gentlemen opposite do neither. They sit there and, as we have had demonstrated today, tell us nothing about their views on this issue.
Socially and economically it would not be difficult to prove that the levels of public expenditure that we have today 639 and that are proposed for the next five years are wrong as a proportion of total resources. Socially it is impossible to argue that the proportion is right whilst, for example, in education our classes are too large and the proportion of university places is too low compared with the United States. Why should we assume that our young people are less able to benefit from a university education than those in the United States? How can we argue that the percentage is right socially when we consider the situation in health and the many thousands still living in slums? We cannot therefore argue that it is socially right as a proportion. So the only argument can be that this is all that we can afford.
Is this really so? Is it all that we can afford? Even accepting the Government's assumption of a 3 per cent. level of growth—which I hope I have made clear I do not accept—should private consumption continue to grow at the same level as has been forecast in the White Paper? Until we have a much better level of public expenditure, I would argue—and I think there is an overwhelming social case for this; I will come to the economic case later—for stepping up the proportion. I go further. Even conceding the Government's case that public expenditure should grow only in line with economic growth and resources, must it grow equally at an approximate average of 3 per cent. over the next five years? There is a strong argument that it should be much higher in the early years.
Socially, in this way—nobody has disputed the social argument; I should be delighted if somebody would—we would have people living better and longer, but we would have more schools and school places and more hospitals. I therefore ask my right hon. Friends to reconsider, even inside their own figures, the way that it is being spent.
The strongest case of all is the economic one, because money not spent, for example, in 1970–71 is not just socially unfair; it is economic years lost to a better educated labour force. For example, expenditure not made in the industrial sphere, as we have learned the hard way in recent years, would be very costly indeed in terms of industrial investment.
640 On the question of industrial investment, the White Paper shows substantial and rapidly increasing levels of assistance to industry. For 1970–71 we see a figure of £105 million for the R.E.P. I have always made clear my opposition to the R.E.P. It is money for which we do not get an adequate return. My experience —and the figures confirm this—is that it is not justified, and from speaking to directors, and advisers to directors, on how they present the case to boards of companies, and on the way in which the investment decision is made, I find that this is very much a marginal issue, and that in most cases very little note is taken of it.
The biggest figure of all relates to investment grants. As has been said, this has risen to £590 million a year. This would be cheap socially and economically, if it did the job; if, for example, it produced more employment in the regions, and more investment both in the regions and elsewhere. But there is very little evidence that it is doing that.
I listened with great care to the right hon. Member for Enfield, West (Mr. Iain Macleod). He was not quite arguing the C.B.I. case. It seems that the right hon. Gentleman is to switch from investment grants back to investment allowances. I welcomed investment grants when they were first brought in because I thought —and I still think—that in most cases they were more readily and easily understood by managements. The right hon. Gentleman was arguing that he would switch back to investment allowances, but would not necessarily reduce the amount of public expenditure.
The right hon. Gentleman then suggested that perhaps the C.B.I. was right. He did not mention the C.B.I., but its case is that we should remove investment grants, or allowances, and substitute a reduction in corporation tax. The right hon. Gentleman did not argue that that is what he would do, but he argued that there was some case for it.
It is possible that there is something to be said for that, but the case is not proven. Recently, I read in an article that in Sweden it had been found that a reduction in that way had brought about increased investment, but it would be difficult to relate that to the situation here, and, certainly, the right hon. Gentleman did not make the position clear. 641 I think that it is a matter of degree, and I am worried about the extent of the return on the money being provided by the Government.
However one juggles past, present and future figures of investment—and I shall not bandy figures now, whether it is 10 per cent., or slightly more, or slightly less—most investment decisions are made on a broad profit-making basis. The allowance has only a marginal effect when it comes to making a decision about investment. Nevertheless, that marginal decision can be important, and this is what I hope the report from the Ministry of Technology will show, because, apart from the direct incentive effect, there is a direct effect because of the cash flow which can be of considerable importance.
We need to be very much more discrirninatory in the way in which we hand out grants. My hon. Friend the Member for Middlesbrough, West (Dr. Bray) put the matter very well, and I do not want to go into it again now. We are giving millions of pounds to companies which would have decided to replace plant anyway. This means, to me at any rate, that we shall have to examine very much mare closely, and in a discriminatory way, the method by which we give out investment grants.
I propose to revert now to the general question of the level of public expenditure. In view of the serious economic and social cost of the expenditure which has been incurred over a period of five years, and the reduction in expenditure on education to as little as 2 per cent. in the later years, it is important to examine the Opposition's case, the case which they did not put today, but which they have put elsewhere. The case is of reducing public expenditure in certain fields; for example, in the case of farm subsidies, they would remove them. This, they will presumably concede—the right hon. Gentleman certainly would—is simply exchanging a price increase for a tax reduction and in real terms affecting adversely only people at the lower end of the scale.
Let us assume that one could cut £500 million off the total education bill. The extent that one reduces taxation by that £500 million and gives it to those people without children, those with children who are not paying much tax or are paying 642 none, are bound to be affected adversely. In terms of real income, one is bound to affect many sections of the community.
§ Mr. Iain Macleod
With respect, the hon. Member is making precisely the same mistake as that made about 18 years ago. When by noble Friend Lord Butler removed the food subsidies, there was a howl of protest from the Labour Party exactly on the lines mentioned now. In fact, the money was used both for reductions in taxation and for help through the social services for those who would otherwise not benefit. One of the results was a period of steady prices instead of the inflation which preceded it.
§ Mr. Barnett
In the last few minutes of the debate the right hon. Gentleman has taken me into a very wide field, but he cannot prove that case. I quoted certain facts about what will inevitably happen which he has not disputed—[Interruption.] He did not dispute what I said: all he did was quote something else. That is a normal parliamentary tactic of the right hon. Gentleman.
To return to the question of the White Paper, the choices, unfortunately, are not too clear, despite the admirable intention behind publishing the White Paper. In education, the proportion of increases as between, say, primary schools and higher education is not set out clearly to show on what assumptions it is based. This is the important thing—the assumptions on which the whole level of public expenditure is based and on which the Government arrive at certain levels, not only as between one item of public expenditure and another, but inside particular items. This is the strongest case for having Select Committees—to get at these assumptions. We can get them in Select Committees, and, I hope, in future White Papers, where some at least of these assumptions are set out.
Taking the total, I recognise the limitations of what one can do, whatever the level of growth we have. Therefore, I would go some way with what my hon. Friend the Member for Edmonton said. Of course, if it is a question of getting an adequate level of public expenditure or of having selectivity, I will have selectivity. But we must understand the limitations, because we already have a considerable degree of selectivity 643 in income tax and surtax and the claw-back arrangement in family allowances, which I welcome.
But we cannot pretend that we can get it all by some selectivity. What we need is a higher proportion of public expenditure in all the fields I mentioned. Also, all that one can do by the form of selectivity which the Opposition suggest is to raise modest sums unless one sets the line so low that one causes real suffering to very many people. This is what is likely to happen under the Conservative pro- 644 posals. I hope that my right hon. Friends will go much further and ensure that help will be provided for those who would otherwise be left behind in what is becoming certainly by the way the Opposition are handling the matter a mad race for an ever-increasing share in personal affluence.
§ Debate adjourned.—[Mr. Harper.]
§ Debate to be resumed Tomorrow.