HC Deb 07 August 1975 vol 897 cc705-9
4. Mr. Hurd

asked the Chancellor of the Exchequer what will be the estimated effect on the public borrowing requirement in the current year and next year of the imposition of cash limits in the public sector as proposed in Command Paper No. 6151 "The Attack on Inflation".

Mr. Dell

The measures proposed in Cmnd. 6151 are unlikely to have a significant net effect on the public sector borrowing requirement in the current year. As regards next year, the application of cash limits should help to reduce some of the uncertainty in forecasting the borrowing requirement.

Mr. Hurd

That is very disappointing. Is the right hon. Gentleman not supposed to be in control of this operation? Before he started all this talk about cash limits, he must have had some idea of what he meant their effect to be, next year, on the borrowing requirement. Has there not been a degree of backsliding since the brave days when he said that he would need convincing that a particular case did not require the imposition of cash limits?

Mr. Dell

The hon. Gentleman should observe the difference between the level of public expenditure, about which my right hon. Friend the Chancellor of the Exchequer has made a number of statements, and cash limits, which are a system for the better control of public expenditure. Once we have determined the appropriate level, cash limits will help to control and to ensure that we achieve that level.

Mr. David Howell

The Prime Minister spoke on Tuesday about "a new lot" of public expenditure cuts. Will the right hon. Gentleman say when this new lot is likely to come along? Will it be in October, in September, or this month? On the issue of public expenditure cuts, does the right hon. Gentleman agree that there is, to quote Sir Monty Finniston in another context, no possibility of running away indefinitely from this issue?

Mr. Dell

The hon. Gentleman knows that it is customary to publish a public expenditure White Paper later in the year. At the moment, the Government are going through the normal processes of considering the level of public expenditure. The Chancellor of the Exchequer has made a number of statements in the House about what he expects to achieve in respect of the level of public expenditure. I cannot add to them at the moment.

Mr. Frank Allaun

Is my right hon. Friend aware that the cuts in public expenditure clamoured for by the Opposition will be resisted by many Government supporters? Will not the so-called cure of cutting back production and consumption only worsen the disease of unemployment?

Mr. Dell

My right hon. Friend has made it clear that he wishes these cuts in the increase in public expenditure to coincide with the upturn in world trade, so that there can be a movement of people into export-oriented industries to improve the balance of the British economy. We understand the anxieties about public expenditure. But my hon. Friend, in turn, must understand the great increase in the proportion of British resources devoted to public expenditure in the past two years.

Mr. MacGregor

Will the right hon. Gentleman confirm that it is the intention of the Chancellor of the Exchequer to publish the initial cash limit figures and the eventual outturn related directly to those initial figures, so that Parliament can monitor the way in which the policy is operating?

Mr. Dell

We are considering publication. I cannot give any assurance about it at the moment. The matter will be considered in due course.

Mr. Horam

In respect of the public sector generally, does my right hon. Friend agree that it is most important that the programmes are as cost effective as possible, and are seen to be? Will he consider the proposals of the Expenditure Committee to publish as much as possible of the detailed programmes, so that they may be analysed not only by Parliament but by other interested bodies?

Mr. Dell

We always consider seriously the proposals of the Expenditure Committee, especially on public expenditure.

Mr. Ridley

On a point of order, Mr. Speaker. In view of the unsatisfactory nature of those replies, I beg to give notice that I shall seek leave to raise the matter on the Adjournment at the earliest possible opportunity.

14. Mr. Gow

asked the Chancellor of the Exchequer if he will now make it his practice to give estimates of the public sector borrowing requirements, other than at Budget time.

Mr. Dell

No, Sir.

Mr. Gow

Will the Paymaster-General reconsider that answer? Does he recall that in November of last year the Chancellor gave a figure of £6,300 million as his estimate of the public sector borrowing requirement, but that five months later the requirement proved to be £7,600 million? Does he expect that the Chancellor's forecast for the current year will be more accurate than the appalling estimate he made as recently as November 1974?

Mr. Dell

No, I do not think it is right at present to reconsider this answer. A satisfactory revision of the estimate of the public sector borrowing requirement can be made and its implications fully understood only in the context of a revised forecast for the economy as a whole.

Mr. Heffer

When my right hon. Friends are considering this question, and when we get the series of cuts which are likely to take place in public expenditure, will my right hon. Friend give us an assurance that if any local authorities in assisted areas wish to bring in schemes to help the unemployed in those areas, this will not be counted against them and, in fact, the schemes will be exempted precisely because of the very high level of unemployment in areas such as the West of Scotland, Merseyside, and South Wales?

Mr. Dell

I cannot give my hon. Friend that assurance. As he knows, this Government have devoted considerable attention to assisting development areas, but the expenditure situation in respect of local authorities is serious. My right hon. Friend the Secretary of State for the Environment made a statement about it recently. I cannot add to that.

Mr. Norman Lamont

Is the Paymaster-General aware that in the United States, for example, the authorities publish forecasts not just for the borrowing requirement but for the growth of the money supply, which the Treasury refuses to do here? Is he further aware that in the United States and Japan the Budget judgment is discussed openly by the Government for many months, whereas here it is delivered by the Chancellor like a white rabbit conjured out of a hat on Budget day? Why cannot the Treasury be a little less secretive?

Mr. Dell

The hon. Gentleman will also realise that a number of these forecasts, even in the very different economic situation of the United States, are very inaccurate. Forecasts which we might make—for example, in respect of the money supply—would be subject to many influences, including external influences, which we cannot control. It could be self-defeating. It could be a destabilising factor. Therefore, at this point we have come to the conclusion that the balance of advantage is against publication.

Mr. Dykes

Does not the Paymaster-General think that it was a little foolish—indeed, somewhat amazing—that several weeks ago when the Chancellor was under pressure yet again he castigated the Opposition for being too obsessed with the size of the borrowing requirement and its relationship to the prevailing rate of inflation, and said proudly: "After all, look at Germany. It has the same size borrowing requirement as ours, at £9 billion."

Is that not amazing, bearing in mind that the German economy is twice the size of ours, that Germany's rate of inflation is considerably lower than ours, and that Germany has a different standard of financial structure?

Mr. Dell

That question might lead the hon. Gentleman to think a little more deeply about the relationship of the public sector borrowing requirement to the rate of inflation.

Mr. David Howell

The Chancellor said that forecasts are very inaccurate in the United States, but the Government's own forecasts have not been too hot, either. Is he not damaging his own case by being such a blushing bride on the question of the public sector borrowing requirement? Is it not the position that if the £6 limit is to work effectively in the public sector and in local authorities as from 1st August, this will greatly reduce the total outturn of pay increases in the public sector, and this, presumably, should change some of the arithmetic for the public sector borrowing requirement? Would it not help the Government at least to reduce the present appalling lack of confidence if they were more forthcoming on the lines that my hon. Friend the Member for Kingston upon Thames (Mr. Lamont) suggested?

Mr. Dell

I do not think that it would help in the respect that the hon. Gentleman has suggested. The reason for not publishing certain forecasts is not that they are inaccurate. We all know that all forecasts are likely to be inaccurate. It has been judged by successive Governments that these forecasts are likely to have a certain value. The point is that they are not merely inaccurate but in certain circumstances could have a destabilising effect and could give rise to certain expectations about Government policy. It is obviously a balance of considerations. All that I am saying is that in present circumstances we are of the view that these should not be published.