PUBLIC EXPENDITURE

HC Deb 14 December 1977 vol 941 cc843-67

8.26 a.m.

Mr. Edward du Cann (Taunton)

I begin by saying how grateful I am to my hon. Friend the Member for Blaby (Mr. Lawson) and to the Minister of State, Treasury for their presence here this morning, after a long debate, to comment as they see fit upon the matters which I propose to raise. The relationship between cash limits and the Estimates is a matter of first importance. It is not yet recognised to be so, but inevitably it will be, and I take the presence of my hon. Friend and the Minister here this morning as an immediate acknowledgment of that fact. Because I believe it to be of such significance, I have been willing to wait 17 hours for a chance to discuss it.

All of us who are privileged to be Members of Parliament conceive over the years much affection for this place, and you, Mr. Speaker, set us a fine example in that regard, but our affection and respect for its traditions should never, I believe, be uncritical. It is a commonplace to say that we live in an era of change. The truth is that we live in an era of change which is the most rapid that the world has ever known or experienced. Little would I have thought when I first became a parliamentary candidate, and little would I have thought 22 years ago when I first became a Member of Parliament, that State expenditure would grow at the prodigious rate it has, now occupying, as it does, the dominant proportion of the gross national product.

Institutions must adapt to modem circumstances. In debating cash limits this morning and their relevance to the Estimates one is bound also to debate Parliament's attitude to control of public expenditure.

The cash limits system was introduced in the fiscal year 1976–77. It now covers approximately 65 per cent. of Government Supply expenditure—say, some £25,000 million out of the total Supply expenditure of about £40,000 million—a not inconsiderable sum, one may think, and also a not inconsiderable proportion of Government expenditure. But it is not only the absolute figures in themselves which are significant, though they are significant enough. It is the implications of the cash limits system which are even more impressive. Some are far reaching indeed.

I shall quote now from the Third Report last Session of the Public Accounts Committee, of which I have the honour to be Chairman. That report has been before the House since last March, and in it we read: The Government's incomes policy, by enabling accurate estimates to be made for increases during the year in public service pay, had undoubtedly contributed to the successful introduction of the cash limits system; public service pay represented just under half the total expenditure covered by cash limits. The Treasury acknowledged that what happens in the future in settling pay will be important for the operation of the system; if for any reason changes in public service pay in the course of a year cannot be forecast with reasonable accuracy it will be more difficult to determine the cash limits which can be made to stick. The Committee did not examine in any depth the relationship between cash limits and the settlement of Civil Service pay. However, certain matters were entirely clear. The Times brought out certain aspects of this fear extremely clearly in a leading article of 14th April entitled "A Success is to be Exploited." In that article, commenting on the successes of the cash limits system so far, it said that the system should be applied in future so as to limit the total amount that the Government were prepared to spend on pay, the clear implication being that if pay settlements were higher than the Government thought right, action should in some way be taken on numbers. That leading article drew a predictable response from the General Secretary of NALGO in The Times correspondence columns a day or two later. If I quote from the leading article the point will become abundantly clear: Cash limits ought to be imposed not merely in expectation of the likely level of wage settlements but as a definite statement of what the Government are prepared to accept. Only then will negotiators see clearly that cash limits are not just a mechanical conversion into real money of long-term expenditure plans but a positive tool for control of policy. The Prime Minister, speaking in the House on 20th July in the economic debate just before the Summer Recess, in effect confirmed that that was so. That was a most important declaration of policy. So we have a wholly new situation in which cash limits are and will be applied to control the number of civil servants.

So far the matter has been almost wholly overlooked by the commentators. That may, perhaps, be surprising, but it should not be surprising that it has been overlooked in the House. The bearing that cash limits have on the matter that the House is now considering is fundamental. Some weeks ago I put a business question, while you, Mr. Speaker, were in the Chair, to the Leader of the House and pointed out that the House had not yet debated cash limits.

I hate to appear critical in any way of the Leader of the House, for although I differ from him fundamentally, I have—like almost all of us—much respect for him. I want the House to think it a matter of wonder—to put it no more strongly—that there should not have been a debate in the House on cash limits as a new system of monitoring and controling expenditure. There has not been such a debate in the two-years existence of this Government. Does not the House consider it remarkable that, given the appropriateness of an individual limit on defence, health and other parts of the Civil Service and that some 125 cash limits were specified in the 1977–78 White Paper, they have never once been discussed in the House? The Leader of the House told me, in effect, that cash limits could be debated whenever, under the rules of the order, one could raise the matter. So I have taken this first opportunity thereafter and I am most grateful to you, Mr. Speaker, for that chance.

I am bound to complain that this is not the way for Parliament to manage its and the nation's affairs. It is not and should not be acceptable for a new system of control of expenditure to be introduced without any form of parliamentary sanction; it is not and should not be acceptable for the total cash limits to be decided by Ministers in private or by the Treasury, with no consultation with Parliament. It is intolerable that the Public Accounts Committee, one of our senior Select Committees, has reported on the system—as has the Expenditure Committee through the agency of its General Sub-Committee—and that there should not yet have been time during two not especially busy Sessions to debate the reports.

We have had this Consolidated Fund Bill debate throughout the night and into the early morning. We have not been talking about Estimates or Supplementary Estimates both of which involve vast sums of money. The occasion has been used for a series of Adjournment debates on favourite subjects—all very important, valuable and meritorious in their way, but hardly an exhibition of effective financial supervision or control on the part of this Mother of Parliaments.

In Gladstone's day—and I mention his name, advisedly because he was the founder of the PAC—we led the world in techniques of control, supervision and the like. Today, we give to outsiders the clear impression that we are amateurs and inexpert and, indeed, muddled in what we are trying to do.

If democracy is to function effectively in a nation without a written constitution, parliamentarians have a duty to display special vigilance and control over the Executive. The easiest route is through control of the purse strings—but that is precisely what we do not do. I have said many times in the House, in broadcasts, writings, speeches in the country and in every way open to me that in recent years Government expenditure has increasingly slipped outside parliamentary control. We no more control it from the Back Benches than Canute controlled the tide. We are increasingly failing to control the Executive. We permit the expenditure of hundreds of millions of pounds on the nod. The total Supply Estimates to date are about £40,000 million, of which this document comprises the great part. The supplementaries which we are supposed to be discussing and examining come alone to £2 billion. We discussed it in the way that I have described in the middle of the night in an almost empty House of Commons.

If I looked for authority or longed for it at any time, it would be simply to change that situation, because I believe that it is impossible to overestimate now the importance of the development of cash limits, on which, as I say, the PAC produced a separate report last March.

By general consent, I think, cash limits have greatly helped to keep central Government expenditure within the limits originally agreed. Through their application to the rate support grant, about which we shall be talking later today, they have also contributed to the welcome restraint on local authority expenditure. This imposition of short-term budgetary cash control of large areas of public expenditure is a most welcome development. As the Minister of State will recall, in that report in March the PAC warmly welcomed it. We believed—and the Treasury and other departmental witnesses confirmed this—that the need to work within firm cash budgets had had a marked and advantageous impact on the way that Departments handled their own business at all levels, and we gave full credit for that.

However, we also drew clear attention to the necessity for improving Parliament's own control. However effective they may be, cash limits, as I may already have indicated, are a purely administrative system introduced by the Government and not subject to any formal parliamentary procedure. They must be so subject. We therefore recommended that the cash limits and the system of parliamentary Estimates and accounts should be brought together into one integrated and fully effective system. We recognised that, although that objective can be stated quite simply, it involves major reform of a system which has been long hallowed by tradition but which, frankly, is now of little more than historical interest, as I am sure my hon. Friend the Member for Blaby and the Minister of State will confirm.

We were glad to see that the Treasury accepted that view in principle—that such an integrated system, if we were to have it—and have it we must, sooner or later; preferably sooner—would mean, among other things, that Parliament could once again concentrate effectively on the much smaller number of Supplementary Estimates that would then come before us, instead of being faced with inexorable demands, as it has seemed over the years, for very large sums of money to meet pay and price increases, as at present.

The PAC had its first deliberative meeting of this Session just a few days ago. The Financial Secretary was present. I had the pleasure, in the Chair, of welcoming him most warmly, because his presence, traditionally, at the first meeting of the PAC is a symbol of the co-operation and good will that exist between that Committee and the Treasury I am sure that the Minister of State would warmly confirm that the PAC and the Treasury are indeed strong allies.

We told the Financial Secretary that it was the intention of the Committee to examine further, and as promptly as possible, the operation of the system of cash limits. He was good enough to note that, and, as one would expect—and we were grateful for it—he offered us every co-operation on the part of the Treasury. Knowing how busy Treasury officials traditionally are at this season of the year, that offer of immediate and prompt co-operation was particularly appreciated by the Committee.

In the meantime, before the examination is made and before a report in usual form is made to the House, there are a number of points that can be made and upon which it would be agreeable and useful from the point of view of the House as a whole to hear the comments, if they will be good enough to make them, of my hon. Friend the Member for Blaby and the Minister of State, Treasury.

At the moment of publication of the Estimates and Supplementary Estimates—the four House of Commons papers that we are studying—there was issued a three-page memorandum from the Treasury. I do not know how many of my colleagues have seen it. I do not know whether you have seen it, Mr. Speaker. It was a useful document that sought to indicate the changes that have been made this year in the presentation of the Estimates and Supplementary Estimates. The changes have been made because of the incidence of cash limits. I congratulate the Chancellor and the Treasury team of Ministers on having updated, as it were, the Estimates and Supplementary Estimates in that way. It would be most useful if we could hear from the Minister of State something of the thinking behind the amendments that were made.

I shall quote again from the Third Report from the Select Committee on Public Accounts that was published in March 1976. I refer especially to paragraph 20 at the end of the paper, the part headed "Conclusions and Recommendations". It reads: As regards further development of the system"— that is the system of cash limits— we recommend that the Treasury should (a) consider dividing the larger cash limit blocks to increase the precision and effectiveness of the control. I remarked earlier that in the White Paper for the current year 1977–78 there are no fewer than 125 different cash blocks listed covering various aspects of Government expenditure. I think that you will be staggered, Mr. Speaker, to hear that the size of the limits varies widely. For instance, the whole of the defence budget is on one block of over £5,000 million, while at the other end of the scale we find a cash limit of as little as £5 million. Obviously, it must be for the better and more effective working of the system for the divisions to be more even than they appear to be at present. I ask the Minister of State to tell us how the Treasury is getting on with the division of the cash limits and their equalisation.

I turn to the next recommendation in the paragraph, which reads: (b) seek to reduce the number of different revaluation factors which are used to convert expenditure figures at constant prices into out-turn prices for the year. When Select Committees publish their recommendations it is usual for comments to be made available. In the case of the recommendations made by the PAC in its reports it is customary for a Treasury Minute to be published. Promptly after the publication of the report in March of this year in the previous Session the Treasury published its minute in June. Besides saying that it would pay attention to the size of the blocks in future, it commented at some length on the recommendation. It would be valuable to hear from the Minister of State whether there has been further thinking in the Treasury on the matter.

The third recommendation states: (c) Be ready, by the use of appropriate adjustments to maintain the effectiveness of cash limits if movements in wages and salaries at any time in the future should become less closely predictable than they were during the first year of operation. I think that we are all gratified by the success of the Government's voluntary incomes policy—that is to say, those of us who support incomes policy of that kind. While it continues, prediction is plainly much easier. But it would be valuable to hear the Minister's comments upon that recommendation in the light of experience. Remembering what I have already said about the huge dominance of pay and salaries in the total of Government expenditure, Mr. Speaker, you will readily appreciate the importance of cash limits from the point of view of the size of the Estimates and Supplementary Estimates in general.

I have already remarked on the closeness of the liaison between the Treasury and the Public Accounts Committee and have paid my tribute to the Treasury for that. Another example came in a letter addressed to the Clerk of the Committee by one of the senior officials, Mr. McKean, who is an old friend of the Committee. In that letter of 9th December he commented in particular on the consideration that the Treasury is giving to the scope for assimilating cash limits with parliamentary estimates and accounts. He added that the Treasury was pressing on with its study as fast as it could and would certainly want to consult the Public Accounts Committee. How long does the Minister think it will take before there is a full assimilation?

In the meantime, as the letter made plain, and as the whole House should be aware, there are some interim arrangements. One is that the Treasury has informed all Departments that in future, whenever a cash limit is increased, a Supplementary Estimate should be presented.… As the counterpart of this, the Treasury will also take account of the cash limits in dealing with requests for virement between subheads. As was made clear in the correspondence, these new arrangements are no more than a first step, but they go some way towards harmonising the operation of Estimates and cash limits. It is important for the House to have from the Minister an estimate of the rate of future progress.

Finally, I would ask the hon. Gentleman how he sees the scope for further development of the cash limit system. The Treasury Minute of 10th June said that the matter was under examination. How is that examination going? What progress is being made? What progress does the hon. Gentleman hope will be made?

In sum, Government expenditure has grown hugely over the years, and while it has grown we have allowed supervision and control in this House largely to lapse. Matters cannot remain as they are. In any case the introduction of the cash limit system transforms the position. Parliament must reassert its historic function and provide itself with adequate tools to do the job.

Do not assume, Mr. Speaker, that I am in any way an opponent of public expenditure. I thought that the Prime Minister made an admirable point in a speech soon after he became Prime Minister when he gave examples of the way in which expenditure by the State could be of the utmost benefit to our fellow citizens. I agree with him about that, but in the aggregate it is the greatest inflationary force that there is. What is more, we cannot be certain, if the House is not doing a proper job of supervision, that we are getting value for money, which the electorate particularly looks to us to provide. It should not look in vain.

I hope that in reply the Minister of State will be able to indicate to us and to the nation that progress is indeed being made and that he is anxious to see it accelerated, if possible.

8.55 a.m.

Mr. Nigel Lawson (Blaby)

I shall intervene only very briefly. I do so first in order to pay tribute to my right hon. Friend the Member for Taunton (Mr. du Cann), not merely for raising this very important issue of cash limits and parliamentary scrutiny and control of public expenditure—which he has done at this early hour of the morning after sitting right through the night—but because this is yet another instalment in the long campaign that he is waging, with the authority of his distinguished chairmanship of the Public Accounts Committee. He has been campaigning for some time in and out of Parliament—by speech and by way of the excellent pamphlet that he wrote, which was published earlier this year—to make people alive to the importance of the subject and the need to get back for this House of Commons the proper scrutiny and—if the word is not too ambitious—control of public expenditure, which has got completely out of hand.

My right hon. Friend was right to focus attention on cash limits, not as the be-all and end-all but as one of the most important tools that we now have before us to achieve this task. As he rightly says, at the moment it is helping Government to achieve that task, but not very considerably—because of the way in which we conduct our affairs in this House—is it helping Parliament to assist in that task, one of the first importance to Parliament. We have only to think of the debate that we had not long ago on the Crown Agents to know how important it is that we should have a much tighter scrutiny of the money being spent, in the taxpayers' name, by the various agencies, Government Departments and bodies of one kind and another who have the responsibility for spending this money. It is one of the great historic tasks of Parliament to control Supply. If we break down in doing that we fail to discharge our overriding duty.

As I said, I shall intervene only briefly. My right hon. Friend put a number of pertinent questions to the Minister of State. On behalf of the Opposition I wish to associate myself entirely with all the points that he made and the questions that he put. We shall need to hear what the Minister of State has to say by way of answer. I hope that he has had time to bone up on his cash limits. Earlier this week we had a debate, late at night, on the Local Loans (Increase of Limit) Order, a debate in which I put a number of questions on cash limits—questions accepted by the Chair as being in order and which echoed the sense of importance that I, like my right hon. Friend, attach to this subject. The Minister was unable to give me any answers. I hope that in the intervening period he has had time to brief himself thoroughly.

One other thing that my right hon. Friend stressed was the desirability of bringing the Estimates on to a cash limit basis. We now have three bases on which public expenditure figures may be presented. We have the old-fashioned historic Estimates basis; we have the funny-money PESC figures in the public expenditure White Paper; and we have the cash limits.

It is clear that the PESC system offers no means of financial control of public expenditure; indeed, it was never intended as a means of such financial control. It is a method of what is known as planning real resources. I believe that it is an imperfect method even for that, but it is certainly not a system of financial control of public expenditure.

In recent years we have learned how desperately dangerous it is to lose financial control. Therefore, cash limits offer us the possibility of a way back. That way back could be greatly improved if—as the Public Accounts Committee, under the distinguished chairmanship of my right hon. Friend and, indeed, the General Sub-Committee of the Expenditure Committee earlier, of which at that time I had the honour to be a member, urged—the Estimates were brought forward to Parliament in cash limits terms. That is what we want now. Indeed, when the Estimates procedure was started in the dim and distant past, it was intended to be a cash limits system, because it was based on the assumption of a stable value of money. Therefore, the figures were put forward in a way that reflected prices at that time under the confident assumption that those prices would continue to prevail. Now they do not.

We are not trying to overturn the Estimates system but to bring it back to what was its original raison d'être. If that could be done, the whole business of Supplementary Estimates could be given the importance which it used to have long ago, but which it no longer has. A Supplementary Estimate, when originally introduced, was an important and significant matter which the House of Commons had to consider, because it was for expenditure on a particular head that had turned out to be more than the Government had intended and planned and they sought Parliamentary approval to spend more money.

Now, under the Estimates procedure in an era of inflation, that is no longer the case. The figures are put in originally in a form which does not mean very much, and everybody knows that there will be Supplementary Estimates and probably further Supplementary Estimates later.

A cash limits system might get us back to a situation where, the cash limits having been promulgated, if there is an increase subsequently for any reason, it has to be justified, first, by the Department to the Cabinet and, if the Cabinet is agreed, to the House of Commons.

I should like to make one further comment on this important point of the bringing together of the Estimates and the cash limits systems. Of course, although it would be helpful to do just that, it will not help us all that much—I do not know whether my right hon. Friend will agree with me—unless we can at the same time—I think that my right hon. Friend was saying this—bring back the procedures whereby we can debate these matters.

Mr. du Cann

That is absolutely right.

Mr. Lawson

The trouble is that the Estimates figures go through on the nod and the Supply Day system is now used for totally different purposes. If we are to have cash limits figures and they are to go through on the nod, it will not be a tremendous advance. Therefore, we want not merely to bring the two things together but to get back to some method by which the House, having got figures which mean something, can debate, first, the original promulgation of cash limits and, secondly, supplementary cash limits if they should be required. From time to time changes in cash limits will be required.

My right hon. Friend asked the Minister of State a number of specific questions, which I am sure the hon. Gentleman will do his very best to answer. I should like to comment briefly on these points seriatim.

The first point concerned the documents published with the other Consolidated Fund documents on, I think, 2nd December. Another document was published at the same time, but in a very funny way. It was a deposited paper which found its way to the Library but was never available in the Vote Office. The Vote Office knew nothing about it. Indeed, the Library, when I first asked about it, knew nothing about the document. Several phone calls were made to the Chief Secretary's office, but no one there knew anything about it. Of course, somebody in the office must have known something about it, but the first three people whom the Library kindly telephoned on my behalf knew nothing about it. Eventually it was tracked down. That deposited paper, in a typewritten duplicated form, is the crucial document which shows the profile of cash limits over the first half of the year and the outturn and how that compares with what was originally projected. That really is a very important document. It should be given far more prominence, published in the proper way and laid before Parliament in the proper way. It should not be presented in this rather hole-in-the-corner way.

I know that it is of some embarrassment to the Treasury that one of the few blocks that was overspent was the Treasury's own block. I have no doubt that the Minister will explain why that is. The document is one of importance and we are grateful to the Treasury for producing it.

My right hon. Friend referred to the need to divide the big cash limit blocks into smaller blocks. He is absolutely right. I am not sure, in the case of the Ministry of Defence, to what extent security reasons would limit the extent to which it could be divided. I have no doubt that the Minister will enlighten us on that. But I am sure that it is not necessary to have one block.

The defence block is not the biggest block. The biggest is the rate support grant block. It is very unsatisfactory indeed. I hope that the Minister will be able to say something about the Government's thinking on the possibility of dividing up the rate support grant block, either in terms of different authorities or in terms of different local government services.

The present system is wholly inadequate as a method of financial discipline—which is what cash limits are meant to embody both in the Government field and the local authority capital field.

My right hon. Friend's third point concerned the need to reduce the number of various different revaluation factors. I am at one with him on this. The revaluation factors have often been a surreptitious way of allowing public expenditure to get out of control. The more of these factors that there are, the more likely that is. Going back to the PESC system, it is clear that the relative price effect has been a major way in which the Government have lost control of public expenditure.

One of the things that would help the Treasury considerably would be to change the whole PESC system so that instead of figures being produced in funny money terms, they would be considered in cost terms. The relative price effect would be included and that could not be used as an excuse to cover up surreptitious over-spending or increases in quantative terms.

The fourth important area mentioned by my right hon. Friend concerned the whole question of the control of public sector pay. My right hon. Friend also mentioned this in his earlier comments. We all know that this is a very difficult problem indeed. It is quite right that it should be approached as my right hon. Friend approached it, not from the point of view of an incomes policy of which the public sector is a part, but from the point of view of the control of public expenditure, of which public sector pay is a large part. I am sure that that is the right approach.

The manner in which the Government appear to be conducting themselves over the dispute over firemen's pay appears to us to be the height of irresponsibility, because it seems that they are saying that provided the firemen stick within the limits for this year, it does not matter if we relax next year and the year after. If we are to have proper control of public expenditure, that is one thing we cannot do. Perhaps it does not matter in one particular case, but if this is to be a precedent of how the Government are to approach public sector pay settlements, it is very serious indeed. If high expenditure is being pushed off to future years simply to keep things under control this year, the Government are then storing up a tremendous amount of trouble for the future.

Perhaps 10 minutes past nine in the morning is not the time to be cynical, but I cannot help feeling that the Government may be aware that the future to which they are deferring these problems lies on the other side of a General Election when a different Government would inherit them. But the idea that somehow a problem has been solved by pushing it forward with interest to a future year is an idea which I cannot accept and which I find highly irresponsible.

My right hon. Friend the Member for Taunton was right to say that the existence, particularly during stages 1 and 2 of the Government's incomes policy, of these fixed increases—first the £6, then the 2½ per cent. and the 41½ per cent.—has made the setting of cash limits much simpler. He asked the very pertinent question of what happens to cash limits when we are moving in the orderly way that the Government want to free collective bargaining. This is a subject in which I have been interested for some time. When I was a member of the General Sub-Committee of the Expenditure Committee, I put this very point to Mr. Leo Pliatzky, now Sir Leo Pliatzky, a very distinguished civil servant who was at that time the head of the Treasury's public expenditure side. He said—I should be grateful for the Minister of State's endorsement of this—that in that event the cash limits would become the incomes policy. I think that that is a fair statement of what would happen. It would be helpful for the Minister of State to elaborate on that and tell us about the planning and implementation of this approach.

Certainly this is the way in which we have to move and I think that this is the way that the Chancellor of the Exchequer had in mind when he said: For 1978–79 the assumptions used for cash limits will reflect the Government's policy on pay. Spending authorities will not be able to rely on supplementary provision beyond the cash limits."—[Official Report, 15th July 1977; Vol. 935 c. 993.] I assume that he is saying that the Government will decide on public sector pay within the overall framework of what the public purse can afford and what the taxpayers are prepared to pay—and they are paying far too much at present—and then, within that, the need for recruitment to particular sectors. Then the cash limits would be the discipline within which the unions and the public sector would have to operate, just as the unions in the private sector have to operate within the discipline of market forces.

The fifth question was one I have already dealt with. My right hon. Friend asked how long it would be before there was full assimilation of the cash limits and Estimates. That is something that we should all like to know. It would be helpful if we could be assured that the next full-year Estimates to be presented to us will be on a cash-limits basis.

Finally, my right hon. Friend asked about the further development of the cash limits system. This links up with a Question I asked the Minister of State earlier this week which he was unable to answer. There has been one further development this year. It is quite an important one. This year, unlike last year, house building by local authorities has been cash limited. In the first year the Government thought that they could not do it. It was not the sort of thing that they thought could be subjected to cash limits. This year they have, and it is far and away the most important block of local authority expenditure.

It would be of some help if the Minister would tell us how this experiment in cash limit house building by local authorities is working out. I think that he is saying to me that it is working out very well. I am glad to hear it. We who have long urged it are very glad that our ideas have been borne out.

There has been in the past a considerable reluctance on the part of the Treasury to adopt the technique of cash limits. I have never had the great honour and privilege of serving under my right hon. Friend on the Public Accounts Committee, but I did serve for some time on the General Sub-Committee of the Expenditure Committee. We argued there all the time for cash limits and we had evidence from the Treasury that it could not be done, that it was impossible, and that there were tremendous problems involved. The Treasury asked what would happen if the money ran out after 10 months and there was nothing left for the remaining two months. But the Treasury, having told us solemnly in evidence that it was quite impossible to do this, is now doing it, and we welcome that.

One does not want to assume that it will always work as well as it has been working, but, as far as I have been able to discern, it has been a very salutary discipline at national and local government level. I hope that much further progress will be made. Certainly the next Conservative Government will take cash limits a great deal further along the lines that my right hon. Friend has been suggesting.

I close by again welcoming the fact that in this long and sometimes inconsequential debate on the Consolidated Fund Bill my right hon. Friend has struck at the very root of Parliament's task in bringing before the House a subject of the first importance.

9.18 a.m.

Mr. Frank Allaun (Salford, East)

I shall not take five minutes, Mr. Speaker, but I think this is the most important subject facing the Government today, and I make no apologies for speaking on it. It is the key issue, far more important than the other subjects on which we are wasting day after day and night after night in the House.

I can tell you, Mr. Speaker, that my constituents do not care two hoots about devolution or about elections to the European Assembly, but they care very much about their essential services being taken away from them by the public expenditure cuts.

All the pundits are telling us that we must cut public expenditure. The Conservative Opposition are clamouring for it daily. The International Monetary Fund and the Confederation of British Industry, practically all the newspapers, the other media, and top Treasury officials themselves are at it. Incidentally, I think that the top Treasury officials should keep their mouths shut if they have any sense of shame. As they have made the little mistake recently of £2.5 billion in their estimate of public expenditure, they should remain silent. If you, Mr. Speaker, or any other right hon. Members here this morning, made an accounting mistake of £2.5 billion, they would be joining some other hon. Members in goal where they should be.

Mr. Lawson

The hon. Gentleman has mentioned rather scathingly the matter of top Treasury officials and the IMF calling for public expenditure cuts. Are his constituents so different from mine? Do not his constituents say that they would like to see taxes cut? How does he propose to cut taxes unless there are economies in public expenditure?

Mr. Allaun

There is a little thing called North Sea oil, and I am coming to that. There will be considerable revenues, as we all know, from North Sea oil. Since the hon. Gentleman has asked me how I would deal with taxation, I say that I am in favour of tax relief at the present time because it would help reflation, which is what this country needs. But I would not do it in the way in which the hon. Gentleman and his party would do it, by reducing the rate of taxation, because that would help the rich more than the poor. I would do it in the direction on which we have already started, by increasing personal allowances and thereby removing hundreds of thousands, if not millions, of people from paying tax at all.

I see that one of my hon. Friends is looking at me in a vexed manner. If I cannot spend five minutes on this vital question of opposing cuts in public expenditure, I am in the wrong place. I intend to take my five minutes without apology.

When North Sea revenue becomes available, estimated at £3½ billion a year, I maintain that half of it at least should go to reversing the cuts in public expenditure. That will do two things. First, it will relieve the mass of human misery resulting from the shortage of housing, hospital beds, home helps and nursery schools. That is the first thing that any self-respecting Member of this House should do.

But at the same time, by reversing the cuts in those directions, we would reduce this intolerable figure of 1½ million unemployed. That is the official policy of the party which I try to represent and of the TUC. Indeed, the policies of both organisations are not merely about reversing the cuts but, in housing, are about a massive programme of house building and house improvement. House improvement is of great importance because it can be started quickly, without waiting the two years that is sometimes involved in starting to build a new house. In addition, the improvement of older houses by installing baths, hot water and inside lavatories—which are basic essentials—is highly labour intensive and would put many of the 260,000 unemployed building workers into employment.

A visitor arriving here from Mars would think that we were absolutely bonkers to see, on the one hand, 9 million men, women and children going to bed tonight in houses without a bath, hot water and inside lavatory, or houses unfit for human habitation or needing major repairs to the extent of more than £2,300, and 260,000 unemployed building workers, on the other hand. He would think that we were crazy, and he would be quite right.

Finally, I want to refer to the attitude of the newspapers to this subject. The newspapers will not deal with it. They will deal at length with ridiculous stories like the one we have this morning in all the popular newspapers suggesting that respected trade union leaders are Fifth Columnists or spies from behind the Iron Curtain. Every self-respecting journalist—I have been a member of the NUJ for 32 years—must know that that story is absolute balderdash. It is a fair bet that perhaps only one in 10 of the most credulous of the population will believe that Jack Jones, Hugh Scanlon or the rest are paid agents of Moscow. For the newspapers to talk about that and to give no publicity at all to the subject now under discussion reveals an absolutely distorted sense of values.

I will give an instance. Last week the Labour Party published its 36-page comment on the Housing Green Paper. Most of it was devoted to the question of restoring the cuts. As chairman of that committee I said publicly that these four volumes of the Green Paper on housing were not worth the paper on which they were printed until the cuts were reversed.

But on what did the Press concentrate attention? It concentrated on cuts in tax relief on mortgages, where we said that those getting relief above the standard rate, the very rich people, were virtually buying their houses for nothing, whereas poor people got relief at most at the standard rate of tax and that the ceiling of £20,000 mortgage on which tax relief is granted should be brought down nearer to the average. The subject of mortgages was all that interested the Press. With one exception, there was not a word about reversing the cuts.

The damaging cuts in public expenditure, which the Opposition support, have been brushed under the carpet, and it shows the false sense of values of our newspapers and of Members of Parliament if they persist with them. This is the most important issue facing the British public today from the point of view both of relieving unemployment and of relieving the misery caused by these cuts. I make no apology, therefore, for having intervened on this vital issue.

9.25 p.m.

The Minister of State, Treasury (Mr. Denzil Davies)

First, let me add my congratulations to the right hon. Member for Taunton (Mr. du Cann) on raising this very important issue. As my hon. Friend the Member for Salford, East (Mr. Allaun) said, this is an important matter. The right hon. Gentleman, as chairman of the Public Accounts Committee, has pursued the Treasury on it, and I have no doubt that he will continue to do so, quite rightly.

Unlike the hon. Member for Blaby (Mr. Lawson), I have the advantage of having served an apprenticeship under the right hon. Member for Taunton. Perhaps the hon. Gentleman would be benefited from a period of service on the PAC, as I have. The hon. Gentleman made a characteristically brief intervention, for which we are always grateful, and put more or less the same arguments as his right hon. Friend.

Perhaps I may try to deal with some of the matters raised. This debate goes to the heart of the control of public expenditure. I do not believe that it is a debate about the level of public expenditure in terms of the cuts in public expenditure. The levels of public expenditure are determined by the Government according to priorities. But with cash limits, we are concerned mostly with the control of public expenditure in an era where inflation rates tend to be higher than perhaps they were in Mr. Gladstone's time when the present system of Estimates was devised.

I recognise the complexity of the situation where Estimates are introduced more or less in money values at the time of their introduction or at the time that the Estimates are drawn up, whereas we have inflation sometimes increasing money values to higher levels. I recognise, too, the difficult for hon. Members and for Treasury Ministers as well in scrutinising Estimates, then having Supplementary Estimates, then having cash limits, and then having the public expenditure survey, often at different prices.

The right hon. Member for Taunton implied that one reason why he wished to align the cash limits to the Estimates or to insert the cash limits into the Estimates was that he believed that this might again give Parliament its old rôle—if there was such a role, which presumably there was at one time—of a greater control over public expenditure. He will know, of course, that the Supplementary Estimate now provides that control, at least in theory—[Interruption.] The hon. Member for Blaby seems to be amused. In theory it provides that control. However, in practice, because of parliamentary procedures, that control has become a very theoretical one.

Perhaps I may digress for a moment. Because we are living in a different world, it might be possible for Parliament to reassert a rôle which it had when the Executive did not sit in Parliament. If one goes back a long time to when the Crown did not sit in Parliament, one finds all these splendid constitutional cases set out in Dicey. Parliament did control money for the Executive. We have a different situation now in which the Executive is here as part of Parliament. We tend to forget that we do not have separation of powers, with the Executive sitting somewhere else. This creates problems that are not easy to solve, save by changing our constitution.

Mr. Lawson

I would be grateful if the Minister would clarify this. Is he saying that there is no need, desirability or possibility of improving parliamentary control over public expenditure?

Mr. Davies

I know that it is very early and the hon. Member for Blaby has probably been up all night, but he should not try to tie me down to a detailed answer when I was making a valid point about the difficulties, where the Executive sits in Parliament, of talking about control of public expenditure in the same way as in cases where the Executive does not sit in the legislature, as in the United States. At one time the Executive did not sit in Parliament, and Parliament's function was to deny money to the Executive. Now it seems that the modem development has been for Parliament to vote money to enable the Executive to carry out its obligations to the electorate. But the hon. Member is not in the mood to pursue this point now.

I return to the cash limits system. The hon. Member for Blaby made play of the profiles and said that the Treasury cash limits were being exceeded. If he read the report of the Public Accounts Committee—

Mr. Lawson

I have.

Mr. Davies

Then he should know that there is a distinction between profiles and cash limits. That is why the figure for the Treasury cash limit is different. These are profile figures, not cash limits.

The right hon. Member for Taunton referred to paragraph 20 and addressed his questions to its conclusions. Paragraph 20 (a) asks that consideration be given to dividing the large cash limit blocks in order to increase the precision and effectiveness of the control. The Treasury is now engaged in work to see whether it is possible to do this, but it is not an easy matter. It goes to the root of how Departments themselves deal with money provided for them. The Ministry of Defence case is particularly difficult. We are doing some work to see whether it is possible to move towards this recommendation.

Paragraph 20 (b) seeks to reduce the number of different revaluation factors. The point is taken, but there is a difficulty when one is seeking to apply inflation valuation—we are going back to the problem of the Sandilands Committee in applying inflation accounting, and the figures that one should apply.

Because Government expenditure is so diverse, it is inevitable that there will be more than one inflation factor. This matter is exercising us now. The hon. Member for Blaby talks about the general index and glosses over the difficulties in the characterisic way of the Opposition Front Bench generally.

Third, subparagraph (c) deals with what is perhaps the central issue, or one of the main issues, in the cash limit problem—namely, incomes policy and how we apply cash limits to the income or wages part of the cash limited public expenditure. As the Third Report makes clear, almost half, or perhaps over half now, is wages. This goes to the heart of the problem, and the hon. Member for Blaby ducked it. His right hon. Friend did not. He said that he favoured an incomes policy, and that is consistent with his view and wish to align the cash limits with the Estimates, because without any form of incomes policy in the public, sector, and without the kind of stability of foresasting—to put it no higher—which an incomes policy gives, it would be difficult to bring forward the cash limit figure with the Estimates in the way that the right hon. Gentleman seeks.

We are dealing here with the crucial issue, because, if that be the case, the House of Commons is then asked to vote, if I may put it in a general way, some kind of incomes policy for the public sector. If the Estimates include the cash limit figure, bearing in mind that the cash limit amounts include at least half in respect of wages and salaries, the House of Commons is being asked to vote, in effect, some kind of incomes policy for the public sector.

That may be a good thing or a bad, and I understand that some of the public sector unions would support the right hon. Gentleman in wanting to see the Estimates presented within an amalgamation of the Estimates and the cash limits. I am not saying that it is a good thing or a bad, but I am pointing out the situation. The House of Commons is then saying "Yes, there is some kind of incomes policy in the public sector for public employees because we have voted the money for it."

Mr. Michael English (Nottingham, West)

My hon. Friend speaks of "some" unions in the public sector. He will realise that it could be a little stronger than that and he could say that the President of the TUC, for example, and his union, among others, advocate an incomes policy in the public sector.

Mr. Davies

I think that Ministers are by nature cautious and they prefer not to make strong statements if they can make weaker statements. I shall not follow my hon. Friend along that road. I understand that some unions in the public sector would wish to see the kind of parliamentary control which the right hon. Gentleman advocates.

Mr. Lawson

rose—

Mr. Davies

I shall deal with this point and then give way. The Opposition Front Bench is in a dilemma and it has not been able to get out of it. The hon. Gentleman is a monetarist. He does not believe in an incomes policy, yet he believes in cash limits. I suggest that if he is suporting, as apparently he is from the Front Bench, the right hon. Gentleman's recommendation for an alignment of the two, he must support some kind of incomes policy in the sense that the incomes figure has to go into the cash limits figure with the Estimates. Otherwise, I do not see how he can get stability of forecasting at least into the cash limit figure. So on this, as on other matters, the Opposition Front Bench does not know which way it is going.

Mr. Lawson

The hon. Gentleman is getting a little mixed up. I quoted the answer or summarised the answer, of Sir Leo Pliatzky in which he referred to the cash limits on pay blocks, which, incidentally are not composed simply of rates of pay, as the hon. Gentleman misleadingly supposed. As my right hon. Friend pointed out, they are a combination of pay and numbers, which is an important point which adds flexibility and gives something which trade unions can negotiate about. It is said that that could take the place of an incomes policy in the public sector. The hon. Gentleman must know that there have been periods without formal incomes policies in which there has still been, and there must be, a proper control over public expenditure. So these two things should not be taken as inseparable. But if the hon. Gentleman is asking for explanations of policy, perhaps he owes it to the House to explain what the Chancellor is cooking up for phase 4.

Mr. Davies

I am sorry that I gave way to the hon. Gentleman, because he does not recognise the dilemma, or he pretends that he does not recognise it. There is a real dilemma here, because on the cash limits we are concerned with figures or percentages for incomes in the public sector.

Perhaps I can now return to my speech, which has been written very well for me by the Treasury, to see whether there is anything in it that I should say in relation to this matter. I hope it will at least satisfy the right hon Member for Taunton if I say that I take extremely seriously the point that he has made. Treasury officials are working on the recommendations that were made by the PAC. The Financial Secretary to the Treasury told the PAC this week that we hope that in the New Year Treasury officials will be able to go back to the PAC and discuss these matters further in the light of the work that they have been carrying out, because it is not merely a question of principle whether we should align the Estimates and cash limits and how that would affect the objects of Departments and the way that they control their budgets. We believe that this is an important and serious issue and Treasury officials will come back to the PAC early in the New Year.

Finally, it may be that at the end of the day, if the cash limits are aligned to the Estimates, this will to some extent improve parliamentary control. But I think that we should still look at our own procedures here. This is not a matter that can be delegated or in which responsibility can be shunted off to either Treasury Ministers or civil servants. It is up to us. Possibly the Procedure Committee could look at it to see whether our inadequate debates in this regard can be made more adequate, because we could very well, if there were a new system, get back to some of the Supplementary Estimates going through without much debate and there could be increases in the limits. What should we do then? We are considering things that could have tremendous consequences.

This is a serious and important matter and I hope that Treasury officials will discuss it again with the Committee soon in the New Year and that we can eventually come to a satisfactory conclusion.