HC Deb 14 October 1976 vol 917 cc602-4
1. Mr. Gow

asked the Chancellor of the Exchequer whether he intends to announce any further cuts in public expenditure; and if he will make a statement about the level of public expenditure.

4. Mr. Younger

asked the Chancellor of the Exchequer whether he has any plans for further reductions in public expenditure in the year 1977–78.

The Chancellor of the Exchequer (Mr. Denis Healey)

I have nothing to add to my statement of 22nd July.—[Vol. 915, c. 2010–20.]

Mr. Gow

Does not the Chancellor yet understand that until he cuts public spending the decline in sterling and the present astronomical interest rates will go on? Would it not be better to announce public spending cuts now rather than do so in much more humiliating circumstances later?

Mr. Healey

The hon. Gentleman will recall that in my statement on 22nd July I announced cuts in public spending of £1,000 million—substantially larger than have been made in previous circumstances—leading to a fall in expenditure in real terms next year compared with this year. The hon. Gentleman's views would be taken more seriously if he could persuade the Leader of the Opposition not to pretend, as she did in a series of interviews last week, that cuts of £5½ billion to £6 billion, as proposed by the Vice-Chairman of the Conservative Party, can be made without very high unemployment and intense distress to many millions of people.

Mr. Ron Thomas

Will my right hon. Friend tell the House what proportion of the public sector borrowing requirement is made up of the nonsensical inclusion of public sector capital investment, the results of an indefensible system which puts 1½ million people on the dole, and continuous public handouts to private industry, including stock appreciation relief?

Mr. Healey

I have already told the House that we are making proposals which will be put to the Select Committee for dealing with the capital expenditure of the nationalised industries in the same way as it is dealt with in all other countries. On the element in the public sector borrowing requirement which is caused by excess unemployment, I have already told the House that it is between one-third and one-quarter of the total.

On the last question, I think that the overwhelming majority of Labour Members and still some Conservative Members would regard assistance by the Government to private industry as an important element in the regeneration of our economy.

Mr. Younger

If the Chancellor finds that his planned level of public expenditure next year is too heavy for this overtaxed country to bear, what action will he take then?

Mr. Healey

If I find that the public sector borrowing requirement is too heavy, I shall cut it.

Mr. Frank Allaun

Apart from the damage that they do to the community, are not these cuts bound to increase the numbers of unemployed? [HON. MEMBERS: "No."] Yes, they are. Does the Chancellor seriously believe that, with 1½ million unemployed and vast unused industrial capacity, it is possible to absorb that number and more in export and other industries?

Mr. Healey

I am not quite clear whether my hon. Friend is referring to the cuts already made by the Government. They will increase unemployment, as I told the House in my statement on 22nd July.

As for the cuts proposed by the Opposition, which would be six times as high, they would lead to six times as much unemployment. [HON. MEMBERS: "No."] The right hon. and learned Member for Surrey, East (Sir G. Howe), in an unaccustomed flash of honesty, told the electors of Surbiton not so long ago that public expenditure cuts would in fact lead to an increase in unemployment.

Sir G. Howe

Will the Chancellor stop misrepresenting the policy of the Conservative Party and recognise that our programme for the reduction of public expenditure is spread over some years ahead? Will he further recognise that the longer he puts off starting on that task, the worse the problems will become? Will he also recognise that it is no use now referring to the statement he made on 22nd July when the figures published the day after he spoke in the House on Monday show that the assumptions about output that he then made are now without foundation?

Does the right hon. Gentleman recognise that his difficulty in covering his present borrowing requirement shows that a reduction in the public sector borrowing requirement is now essential as soon as possible, that we shall not welcome increases in taxes and that he must move towards reductions in public expenditure?

Mr. Healey

On the question of the output figures published on Monday, the right hon. and learned Gentleman will be aware that the CBI issued a statement yesterday saying that all its information from its constituent members suggested that the desired output would be achieved. On the question of the unemployment that would be caused by the Opposition's policies, if the right hon. and learned Gentleman endorses, as I suppose he does, a cut of £5½ billion to £6 billion in public expenditure, he must know that that will lead to massive unemployment—

Sir G. Howe indicated dissent.

Mr. Healey

—and that the Leader of the Conservative Party, in telling Mr. Havilland on 4th October that a very small increase would be incurred, was falling far short of the standards of honesty which are expected of political leaders in this country.

Mr. Gow

On a point of order, Mr. Speaker. In view of the terrifyingly complacent nature of the Chancellor's remarks, I beg to give notice that I shall seek an early opportunity of raising the matter on the Adjournment.