HC Deb 06 March 1973 vol 852 cc249-50

There has recently been much discussion about the trend of public expenditure. There are two aspects to be considered—the medium term and the short term.

First, the medium term. In the recent White Paper, we estimated that the average rate of growth in demand terms of the programmes as a whole up to 1976–77 would be 3 per cent. to 3½ per cent. a year. On any reasonable assumption about the future growth of the economy this rate of increase should be acceptable.

Next, the short term. In order to help to bring spare resources into use and to bring unemployment down, public expenditure has been deliberately increased during the period 1971–72 to 1973–74. Part of this increase has taken the form of specific additions to programmes concentrated on the regions, and those additions run down rapidly after the coming financial year 1973–74.

But much of the other additions to expenditure which will continue beyond 1973–74 is also helping to deal with the particular problem of regional unemployment. And a significant part of the continuing increase in expenditure, as compared with the previous year's White Paper, has been due to substantially higher pensions, which I have yet to hear criticised in any quarter. Looking ahead to the total picture after this coming financial year, 1973–74, the White Paper shows the planned rate of growth of public expenditure coming down to only 1.5 per cent. to 2 per cent. a year.

In my judgment, the situation does not demand precipitate cuts in public expenditure. Nevertheless, as we move closer to full employment, it becomes increasingly important for us to get the right balance between the different claims on the national output. The House should know three things.

First, the main Supply estimates for the coming financial year, 1973–74, are now more than £130 million below the corresponding total in the White Paper. In addition to this—also in respect of 1973–74—there is likely to be a substantial reduction on the White Paper provision for the capital expenditure of the nationalised industries, bringing the total reduction in the two items to over £200 million.

Secondly, the Select Committee, in a report last July, said that the use of public expenditure to correct short-term deficiency of demand is an essential element of policy". I accept that without reservation, but it is equally the case that, if circumstances warrant it, public expenditure should be cut back. Effective action requires proper preparation, with continual need for contingency work. And so, when last year the Government completed their review of the programmes, this contingency work was at that time put in hand. But lest anyone should jump to conclusions, I should say that this is not a hint of things to come. It is only common prudence.

Thirdly, my colleagues and I are in any event determined that, having now achieved the faster rate of growth of the economy, as we set out to do, there will be the strictest control of expenditure, both on existing policies and for any new proposals.