PUBLIC EXPENDITURE

HC Deb 16 March 1978 vol 946 cc646-784

Mr. Speaker

I have selected the amendment in the name of the right hon. Lady the Leader of the Opposition.

3.54 p.m.

The Chief Secretary to the Treasury (Mr. Joel Barnett)

I beg to move, That this House takes note of "The Government's Expenditure Plans, 1978–79 to 1981–82" (Command Paper No. 7049); and approves the plans to increase public expenditure in view of the need to reduce unemployment and improve public services. Perhaps I may start with a reasonably non-controversial statement, namely, that none of us knows by what percentage the eventual 1978–79 level of public expenditure will exceed the eventual 1977–78 outturn of public expenditure. We can all agree that anyone who pretends to know is either a fool or a knave—or both. I am not sure quite where that leaves the right hon. and learned Member for Surrey, East (Sir G. Howe), but in a typical piece of instant statement-mongering, within minutes of the White Paper being issued, he was ready to pronounce that we were planning a real increase of 8.2 per cent.

Of course, if we compare the estimated outturn for 1977–78—that is, the planned expenditure after shortfall—with the planned figure for 1978–79 without shortfall, we get that figure. We can also get a whole range of different percentage increases, as many commentators did, between 2 per cent. and 8 per cent.

The only point that all these estimates have in common is that they are all estimates or best guesses. If we compare plans with plans, the increase is 2.2 per cent. That is not purporting to show what will be the eventual outturn. As I have said, none of us can know what that will be, but within a range of reasonable estimates of shortfall, the increase could be about 4 per cent.

The shortfall confuses the picture, but I doubt whether the picture would be any clearer if the White Paper had used 4 per cent. or some other figure from the many which have been suggested. We tried to deal with this difficult problem at the point in the White Paper, paragraph 10, where we refer to the 2.2 per cent. increase in 1978–79 on a like-with-like basis. There we draw specific attention by footnote to what the eventual outturn might be. Perhaps it is worth quoting what is said there: The increase compared with the latest estimates for 1977–78 is much greater. That is obviously true, of course. I do not pretend that it is an ideal solution, but, frankly, there is no ideal way of presenting such a complex set of figures.

I turn to the central question, that of shortfall, which is at the heart of the problem. I am concerned about the amount of shortfall both last year and this year, but some forms of shortfall are more serious than others.

Not all shortfall has to do with underspending. Much of it is not underspending at all. Some arises from deliberate policy decisions taken during the year—in the current year, for example, the agreement under which the banks undertook to re-finance a greater proportion of export credit. Some arises from extra receipts or better trading performance, and thus lower net lending to the nationalised industries. Some arises from factors which are not directly within the control of the spending authorities concerned, such as changes in economic conditions or interest rates or sometimes even the weather.

Where shortfall is in the nature of underspending, there are, again, many causes. In some cases it is due to more economical administration, and that is to be applauded. In others, it may reflect a tendency to overestimate requirements. The new monitoring procedures should help here. When programmes are expanded or new projects launched, progress may be slower than hoped when the funds were allocated, and procurement delays can be greater than expected, especially where complex equipment is involved.

Finally, a degree of shortfall is only to be expected when planning figures are used as a basis for setting control limits. The Government expect some underspending to occur for this reason and allow for it in their plans for managing the economy. The new procedures for controlling public expenditure, and especially cash limits, may have made managers more inclined to play safe. The role of cash limits should not, however, be exaggerated. About half of the estimated shortfall shown in the recent White Paper for the current year is expenditure not even covered by cash limits.

Nevertheless, where shortfall represents a failure to achieve a planned level of service, it is a lost opportunity. Shortfall of this kind must be reduced as far as possible. The remedy is not to jack up existing programmes but to improve management and estimating procedures. It is vital that we do, especially now that there is room for a controlled increase in public expenditure.

Mr. Eric S. Heffer (Liverpool, Walton)

Will my right hon. Friend indicate to the House how much shortfall there has been in relation to housing programmes by local authorities, many of which have been controlled by the Conservatives? What exactly is happening in that area, and what have the Government done to correct this position?

Mr. Barnett

We do not have the latest figures for 1977–78. It is clear that there has been some underspending on new starts for houses, particularly in the kind of local authorities to which my hon. Friend referred. As he will know, there is the problem of local autonomy and central government autonomy, and how far central government should go in interfering in the rights of local authorities is a very difficult question.

Mr. Timothy Raison (Aylesbury)

I am grateful to the right hon. Gentleman. His last sentence has slightly restored my faith in him. Should he not say firmly to his hon. Friend the Member for Liverpool, Walton (Mr. Heffer) that it is up to local government to decide those things within the purview of local government and that it is no good taking a sort of corporate-State attitude and constantly bullying them?

Mr. Barnett

That is an entirely different matter. I agree with my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) that we should deplore circumstances in which some local authorities are not building new council houses which are desperately needed in many parts of the country. I entirely agree with my hon. Friend and, knowing him, I am sure that he is not seeking the kind of State that the hon. Gentleman has described.

As I was saying, it is vital that we do have a firm control over expenditure—whether we are increasing it or reducing it—for expansion, no less than retrenchment, must be effectively controlled. We cannot afford a return to the uncontrolled surges of expenditure of previous years which led inexorably to damaging cutbacks. The ability to keep expenditure within the stated totals is vital to the maintenance of confidence, the fight against inflation and the promotion of internal efficiency.

Mr. Alexander W. Lyon (York)

If the last scheme was so bad because it led to overspending and cut-backs, why—when we introduce cash limits which are a greater restraint on the freedom of the spender—cannot we deal with the question of carry-over so that it can be spent in the following year?

Mr. Barnett

There is a case in some circumstances for having carry-overs. We do allow carry-overs in some areas. But we entirely lose parliamentary control if we allow total carry-overs. Indeed, not only do we lose parliamentary control but we have a serious problem with regard to control and efficiency of particular programmes. While I agree that in some programmes there is a case for some element of carry-over, I would not accept that it would be the right or proper thing to do in general. However, I would say this to my hon. Friend about cash limits generally: if we do not have adequate control over expenditure—knowing how my hon. Friend wants to see increases in public expenditure—the net result would be that the likely priorities within any given total might well not be the kind of priorities that he and I want to see.

The use of cash limits and the use of proper control of expenditure is every bit as vital to Labour Members who want to see improvements in public services as it is to those who want to use cash limits, and other methods of control, for no other reason than for massively cutting public expenditure.

Before leaving the subject of shortfall, I should like to refer to the argument that shortfall in public expenditure is a significant factor in the present levels of unemployment. It is very difficult to quantify the effect of shortfall on demand and unemployment. Many estimates of the consequences assume that the Government take their decisions on the basis that expenditure plans will be exactly fulfilled without any shortfall. That is just not so. Budget decisions are based on economic forecasts which make allowance for some overall shortfall. The table of expenditure and revenue projections in the White Paper reflects this.

It is also necessary to take account of the different economic effects of different kinds of underspending. A considerable amount of the shortfall shown in the White Paper is on expenditure which has much smaller effects on demand than public expenditure generally. I referred to a number of such items—including the refinancing of export credit—a few minutes ago.

It is misleading simply to take a total figure for shortfall and to try to translate it into an equivalent number of jobs. There are wider effects, too. If expenditure is higher, the public sector borrowing requirement is also somewhat higher and that tends to push up interest rates and depress employment. It is difficult to put any precise figure on these offsets, but it must at least be clear that estimates of the effect of shortfall on unemployment are not a simple calculation and cannot be made with any confidence—although I am sure that will not stop estimates being made.

Shortfall apart, criticism of our expenditure plans themselves—

Mr. Nigel Lawson (Blaby)

The right hon. Gentleman said a moment ago that if there had been a shortfall the borrowing requirement would have been greater and that would have pushed up unemployment. Will he confirm that if the borrowing requirement next year is greater than this year, that will increase unemployment?

Mr. Barnett

The hon. Gentleman should not try to be over-clever. I was talking about one aspect of the problem. As he knows, there are many other aspects. It is no use seeking to make silly little debating points, if he will pardon my saying so.

Mr. J. Enoch Powell (Down, South)

I am obliged to the right hon. Gentleman. I do not want to make a silly debating point. Is it not the case that any shortfall of whatever kind must be counterbalanced by reduced demand by the Government upon the public?

Mr. Barnett

It depends on what else is done, as the right hon. Gentleman knows very well. I appreciate that he is not seeking to make a debating point. Unlike the hon. Member for Blaby (Mr. Lawson), he does not need to. The fact is that this will depend on what other action the Government take. But, as I pointed out with regard to shortfall in expenditure, we make assumptions of shortfall in our Budget judgment in deciding what other action it is necessary to take. That is why there is great difficulty about making an assumption about the effect of any particular shortfall on employment generally. I should have thought that the right hon. Gentleman would agree with that.

But shortfall apart, criticism of our expenditure plans themselves falls into two diametrically opposed camps. On the one hand, many of my hon. Friends think that growth is too slow and, on the other hand, the Opposition think that growth is too fast. All my sympathies are with my hon. Friends' desires to see bigger increases in public expenditure. I shall return to the reasons why we have not felt able to do more at this stage. I shall also return to the criticism of the Opposition that the planned growth is too fast. I assume that is what the Opposition mean in their amendment when they refer to the White Paper leaving inadequate scope for the reductions in taxation". But first I should mention one fact on which I hope we can all agree. The whole economic environment, both domestic and international, has become a good deal more uncertain and unstable. The increase in oil prices at the end of 1973 both brought about an enormous structural shift in international balances of payments and added to the already worrying levels of inflation in the consumer countries. In consequence, most Governments have been extremely cautious about stimulating demand in their economies. In this situation it is impossible to predict with any degree of confidence the prospects for the world economy—or our own economy—beyond a fairly short time period. One can, and in my view should, seek to achieve the highest possible rates of growth. One can make assumptions about it. One can have hopes about it. But we should not delude ourselves that we can forecast it other than on inevitably uncertain assumptions.

One particular uncertainty confronting all recent forecasting exercises is the relationship between output and employment. This has behaved very oddly in recent years, particularly in the past year, when employment rose slightly even though output was flat. This makes projections of the future course of unemployment extremely hazardous. The past relationships on which such projections are normally based have not proved a very reliable guide. I mention this because some of those submitting evidence to the Expenditure Committee have laid great stress on the need for the economy to grow at a certain rate in order to reduce unemployment to a given level by a given year.

The prescription in one of the papers submitted was that the Government should make a firm commitment to an annual rate of growth of real GDP of 41 per cent. I wholly accept the motives that lie behind this prescription, but the achievement of a particular growth rate is not something that is within the gift of the Government alone. It requires cooperation, both internationally in stimulating world trade and with labour and management at home in containing inflation and improving productivity. The Government can create the monetary demand for an expansion, but unless they can be sure that this demand will not be dissipated in higher money earnings and prices and that domestic industry is able to match the extra demand with extra production, the result will simply be another inflationary, import-led boom that will kill our hopes for the sort of sustained expansion that, alone, can bring down unemployment.

Mr. Ron Thomas (Bristol, North-West)

Can my right hon. Friend give an indication of what is the propensity to import finished and semi-finished manufactured goods of each £1 billion injected into the economy? I should have thought that the major constraint was high penetration of finished and semifinished imports.

Mr. Barnett

It is not possible to take a given £1 billion without knowing the content of it. One "£1 billion" injected into the economy would have a different effect on imports from another. I am aware of my hon. Friend's solution to all these problems—wholesale, non-selective import controls.

Mr. Thomas

No.

Mr. Barnett

Well, perhaps my hon. Friend does not say that, but there are some who suggest substantial import controls. In the light of our strong financial position, if my hon. Friend believes that we could maintain such import controls for long enough for them to have meaningful consequences for our economy generally or for our level of employment, we shall have to agree, in the friendliest possible way, to differ.

The White Paper discusses the major factors that are likely to determine the course of demand and output over the years ahead. The Expenditure Committee's report urges the Government to publish more on the medium-term projections, including publication of the Treasury's work on assessing the medium term. I shall naturally consider the Committee's views carefully when decisions are made about the shape and content of the next White Paper.

I shall also consider the suggestions made about Table 8 of the White Paper which gives projections of general Government revenues and borrowing requirements. The inclusion of such a table has been widely welcomed. Requests have mainly been for widening its scope, both by giving projections on alternative assumptions about earnings and by extending it to include the public sector borrowing requirement. I do not find all the arguments entirely persuasive, but I hope that we can submit a reply shortly.

Meanwhile, given the great uncertainty to which I have referred, we have decided to keep our plans within what might reasonably be expected for the growth of national income. We have all seen the pain caused by having to cut overambitious plans. That is why a vital element in our improved financial position has been the demonstration of our readiness to keep a firm control on public spending. I believe that control is essential not only if we are to maintain a stable financial position but, equally, if we are to be able to increase our public spending.

Within past and present spending plans, concern has been expressed, notably by the Expenditure Committee, about the balance between capital and current expenditure. I appreciate that the criticism from the Committee is generally put in an objective and non-party political spirit, although I hope that I may be forgiven for, at times, finding that what may be true of the Committee in general is not true in every particular.

For example, the mind boggles at describing the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) as viewing these matters in a non-party political way. Even more difficult to take is the blatant dishonesty of the Opposition amendment which seeks to jump on this bandwagon when the right hon. and learned Member for Surrey, East had squeezed out of him by a question in last year's debate that he would have cut both capital and current expenditure. That is his way of, as he says in the amendment, restoring a "proper balance". I am being positively moderate in my references to the Opposition and their amendment.

However, I understand the more sincere concern of those who have expressed the view that past cuts have fallen too heavily on capital programmes. But cutting expenditure involves difficult decisions on priorities and, after four years, I am under no illusion that such decisions are likely to please many.

Choices between capital and current expenditure are more complicated than is often realised. Major influences on the balance include the high priority that the Government attach to the protection of the least well off, for example, old-age pensioners, and to the improvement of education and social services. These and other key services entail a large amount of current expenditure. They also provide employment for dedicated people undertaking vital tasks in society—nurses, doctors, teachers, transport workers, civil servants at all levels and many others. The scope for manoeuvre is much more limited than some choose to recognise.

The need for capital expenditure is greatly affected by demographic changes and the changing requirements of individual spending programmes. For example, in the education programme the fall in the number of pupils in schools implies a reduced requirement for additional school buildings. In the housing programme, the proportion of households living in physically unsatisfactory conditions has fallen dramatically over the years. It is still very bad in some areas, but, as was pointed out in the recent Green Paper, the era of absolute housing shortage is over.

In the Health Service, the present policy is to substitute non-institutional care for hospital care as far as possible and to reduce the number of hospital beds, along with the length of stay. In the transport programme, the recent White Paper showed that the expenditure needed for roads is less than previously.

In addition to these demographic and programme considerations, we have to pay regard to the consequences that capital expenditure has for current expenditure. All this has to be taken into account when making a judgment on what balance between capital and current expenditure best serves the objectives and efficiency of particular services.

We are aware of the problems faced by the construction industry, but cuts in previously announced plans have been unavoidable. They were painful, and we recognise that the construction industry was heavily affected. However, in the light of the improved financial situation, we announced last year increases in planned expenditure on construction over the period 1977–78 to 1979–80 totalling more than £800 million, and the White Paper plans show a steady level of expenditure on construction—about £6,250 million a year in the public sector.

I know that my hon. Friends who complain about cuts in capital expenditure do so honestly without suggesting that increases be offset by cuts in current expenditure, hut that is not the position of the Opposition.

Mr. Michael English (Nottingham, West)

My right hon. Friend is correct in saying that there were divisions within the Committee on this issue and there is a sentence in our report of which the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) did not approve. His proposed amendment was negatived. There was no Division for the simple reason that the overwhelming majority of the other Members on the Committee, Labour and Conservative, agreed with the sentence that said that we failed to see how current expenditure could benefit from the fact that 60 per cent. of office buildings were being leased rather than owned by the Government.

Mr. Barnett

That is an entirely different point. My hon. Friend should listen to me. I was stating the reasons for the importance of getting a balance between capital and current expenditure. I know that my hon. Friend will show me the same courtesy that I show him. I always listen to him and I answer questions to the best of my ability when I appear before his Committee. I read its reports with great consideration because I nave enormous regard for my hon. Friend and his Committee.

Before my hon. Friend intervened, I was about to deal with the Opposition. They want cuts in capital expenditure. but in order to "restore a proper balance", they want even bigger cuts in current expenditure. They have never told us where they would make their cuts in public expenditure.

If we look at almost any programme we shall find that the Opposition are demanding increased expenditure, and there can be little doubt that more is needed in many programmes. For example, a substantial part of the expenditure on hospital care, community health and personal social services goes to help the over-75 age group. Numbers are increasing. Simply to keep pace with this, and to provide the same standards of service to old people and children in care, hospital and community health services need to grow at 1 per cent. a year, and the personal social services at 2 per cent. a year. Would the Opposition cut the growth of this expenditure?

Then we come to the social security programme. I make no apology for the increased retirement pensions to keep pace with the earnings increases when these are ahead of prices. In this way pensioners are assured of a share in increased living standards, and indeed they have done better than that. Extra expenditure is also inevitable in view of the increasing numbers of retirement pensioners. I hope that the Opposition would not seek to cut this programme.

In education, the numbers of children in primary schools are falling, but those in the more expensive secondary education are rising. After that, part of the peak will be moving on to the even more expensive further and higher education Would the Opposition cut this?

It is against the background of demographic influences such as these that calls for cuts in the public expenditure plans set out in the White Paper must be assessed. To counteract the demographic influences that I have mentioned, plus demands for increases in other programmes, even a nil growth means that some programmes would have to be cut. and cut savagely.

Where would those cuts fall? The Opposition are obliged to tell us. It is no use the hon. Member for Blaby nodding his head. He is not yet the Shadow Chancellor. Where are the Opposition intending to make these offsetting cuts for the increases that are inevitable?

Will it be on defence expenditure? Naturally, I take it that the right hon. and learned Member for Surrey, East listens to the defence spokesmen of the Opposition. Therefore, he will know that what they have in mind is a very substantial increase in this expenditure.

Will it be on law and order? I take it that the right hon. and learned Member also listens to his Front Bench spokesman on this matter. If so, he will know that the Opposition also have in mind a very substantial increase in that area. We also know from a junior spokesman that the Opposition want to spend more on the inner cities. Therefore, exactly where would they cut expenditure?

Would it be on transfer payments? I read the article written by the right hon. Member for Leeds, North-East (Sir K. Joseph) recently on the question of transfer payments—industrial and employment transfer payments. I am sure that it appears to workers, particularly in Lancashire, that the Opposition have it in mind to cut temporary employment subsidy to textile workers in Lancashire. We very much want to know whether that is what the Opposition have in mind. Is it the cutting and phasing out of these industrial subsidies? If the right hon. and learned Member does not tell us tonight, I hope that my hon. Friends will remind the House what the Opposition have told us in the past.

If they are not cutting out subsidies to industries and individuals, where will they make the cuts? There is not much left to cut—agriculture, fisheries and food is the only other area. Do the Opposition propose to cut out agriculture payments? There is a most apalling deathly silence from the Opposition Front Bench. They have never told us what they intend, and I have no doubt that they will not tell us where the cuts will fall.

Mr. Spencer Le Marchant (High Peak)

Wait and see.

Mr. Barnett

The Whip should not intervene. We have waited, but they have never told us and I do not expect they ever will.

Unless I hear to the contrary, I must assume that what the Opposition have in mind is not planned cuts in actual goods and services, which even they must recognise need more, rather than less expenditure. They will not admit to plans to cut transfer payments. So until I am contradicted, and if their amendment has any meaning, I can only assume that they are planning very large charges for a visit to a doctor, a hospital, new charges on education and massive increases in council house rents and school meal charges. If that is not what they have in mind, perhaps they will tell us, because their whole public expenditure position is totally lacking in credibility.

Mr. Hefferrose—

Mr. Barnett

I shall give way in a minute. Actually, the Opposition have no credibility either way, as even large charges of the kind I have described, given the essential exemptions that would be necessary, would make only a modest contribution to reducing total public expenditure, especially allowing for the increases in other fields of public expenditure that they are demanding.

Mr. Heffer

My right hon. Friend keeps using the term "transfer payments". Would he explain to working people precisely what transfer payments are? That term does not mean a thing to the average person. Does it mean cuts in pensions, sickness benefits, redundancy benefits and unemployment payments? If so, would he say so, so that working people will know what that crowd opposite have in mind?

Mr. Barnett

I am grateful to my hon. Friend. He has done the job for me. I know that he understands, the Opposition understand and the House understands. We on this side of the House will make sure that there is no doubt among the electorate later this year or perhaps next year. We shall tell them just what is intended by the Opposition.

On the other hand, my hon. Friends have an entirely different motive for pressing increases in public expenditure. I do not complain. In fact, I welcome the pressure.

Mr. Ivor Clemitson (Luton, East)

You could have fooled us.

Mr. Barnett

The point is that against the background of the present international economic climate and our experience over many years, it is essential that we do not plan to spend more than we can afford.

Nevertheless, we can point to significant achievements in public expenditure. Expenditure on housing in each year of this Government has been significantly higher than during the final two years of the last Conservative Administration. We have sustained a steady growth in health and personal social services and we have substantially increased pensions and social security benefits.

We have steadily increased expenditure on law and order as well. We are now spending more in real terms on law and order and protective services than the last Conservative Government, and our record on overseas aid demonstrates our concern for the plight of the Third world.

These improvements have been achieved at a time when real living standards have declined. However, things are now improving and real take-home pay is starting to rise again. There is a lot of ground still to be made up. That is why our plans for the growth of public expenditure need to be within the likely growth of GDP over the White Paper period.

But we have planned for additional growth in public expenditure. I hope that it will be possible to do more still in the years ahead. We do not have to apologise for wanting to see improvements in our public services. Real living standards and the creation of a decent civilised society are dependent on something more than the need to cut taxes, important as that is after a decline in real take-home pay.

In our first three years we had to concentrate on cutting public expenditure, or rather cutting public expenditure plans. That is an important distinction. Even allowing for a £1½ billion estimated shortfall next year, adjusted public expenditure will have grown in real terms between 1973–74 and 1978–79 by around £2½ billion, or 5 per cent. From now on we can look forward to a steady planned growth of expenditure.

I know that many of my hon. Friends would like us to do more and faster. I hope that it will be possible, but we must first earn it. Meanwhile, we must not jeopardise those prospects by giving this cynical Opposition an opportunity to preside over the destruction of the public services, as we now know them, especially as they do not even have the honesty to spell out their secret plans. I ask my right hon. and hon. Friends to dismiss the Opposition amendment and to support the Government's motion.

4.32 p.m.

Sir Geoffrey Howe (Surrey, East)

I beg to move, to leave out from 'House' to the end of the Question and to add instead thereof: 'declines to approve a White Paper which fails to restore a proper balance between capital and current expenditure, and which leaves inadequate scope for the reduction in taxation needed to create a healthy and thriving economy'. I wish to begin by reminding the House of the remarkable style, even for him, in which the Chief Secretary opened his speech to the House this afternoon in one prolonged paragraph which added up to the words "I do not know".

I wonder whether the Chief Secretary has any recollection of the object of the White Paper on Government expenditure. Does he remember that when the idea was first adopted by the previous unlamented Labour Government it was commended on the basis that—and I quote from the White Paper in April 1969— This new annual White Paper which will look three and five years forward at the resource implications of public expenditure would prove of great help to public discussion. That was the then Labour Government recommending the implications of the original Plowden Report, which suggested that the White Paper would be designed to facilitate the creation of informed public opinion about these matters. It recommended that the various official published documents should expound the fact of public expenditure as lucidly as possible. The Chief Secretary has some experience of moving away from the standards of lucidity and clarity there envisaged. This White Paper, which will be the last he will ever present, shows that the longer he goes on, the worse he gets.

I am sure that the whole House will agree with one observation made by the Select Committee—and the House is grateful to the hon. Member for Nottingham, West (Mr. English) and his colleagues for the work they have carried out. Paragraph 4 of the Select Committee's report said that the White Paper was capable of being read only by professionals who are prepared to study it intently, read all the footnotes and perform extensive calculations". That is astonishingly moderate language when we consider that that document was composed by the hon. Member for Nottingham, West, my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) and the hon. Member for Luton, West (Mr. Sedgemore).

The Select Committee referred simply to the "obscurity" of the White Paper. The Committee must be astonished at its own moderation in using that word. Rather more to the point was the observation we had from the former chief economic adviser to the Government, Sir Alec Cairncross, who, after having wrapped his head in wet towels, referred to the "incomprehensibility" of the White Paper. That is correct—and it is not a literary criticism of the Chief Secretary's style but a description of the thinking, if that is not too charitable a word, that lies behind the document.

The document contains no analysis of the Government's planned demand on resources. That has disappeared. It contains no monetary analysis or reference to money supply. It is not surprising when this afternoon's figures show money supply roaring ahead by 14¾ per cent. [HON. MEMBERS: "Oh".] The Chief Secretary may be amused at that, but the Chancellor of the Exchequer has been priding himself on setting targets of the growth in money supply of 9 to 13 per cent. It is now way beyond that. But the White Paper has nothing to say on that score. It contains no estimate of the outlook for the economy but contains instead a coy and far from sensible assumption for the growth rate of the economy in the year ahead.

Treasury witnesses before the Committee were asked to speak on this topic. They were far from forthcoming. They said that the growth rate figure of 3½ per cent. was not a target, a policy or a forecast but a sort of projection. When asked what this "sort of projection" was, they said that it was founded on a number of assumptions. One of those assumptions was that earnings in the year in question would increase by 10 per cent. That looks likely to be too low. Secondly, it assumed that the exchange rate would be 62¼ per cent. of the Smithsonian value, which is certain to be too low. Thirdly, it assumed that there would be a continuing growth in world trade, but all current comments suggest that that will not happen.

The White Paper contains no meaningful commentary or analysis of the likely course of the economy in the next year. Perhaps I am expecting too much of this document, which is only 180 pages long and costs only £3.05p. The title of the document makes plain that it relates only to the Government's expenditure plans. Perhaps it is unfair to expect the document to deal with more than the Government's expenditure plans.

Therefore, we look for details about that matter with some excitement in the hundreds of tables, but even the answer to that is not to be found there. It is no wonder that the Chief Secretary began his remarks by trying to deal with this matter in his inimitable fashion by explaining that he did not know what the Government expected to spend next year compared with what they are now spending. It may be hard for the House to believe that, but it is the case.

So, since the White Paper appeared, dozens of brains have been whirring up and down the country in a kind of national economic lottery to decide what the Chief Secretary may have meant. If one looks at the answers as to what the Government may have in mind as between what the Select Committee's various economic advisers said, one finds that one said that expenditure might fall rather than rise, while at the top end is a growth forecast of 8.2 per cent., which is the figure I used in my comment. That was used by two other people who presented papers to the Select Committee.

It is no wonder the Chancellor has not appeared to speak in defence of the White Paper. He has not even dared to sit alongside the Chief Secretary in this debate. He made a flying visit a little earlier and then disappeared, no doubt astonished and dismayed. In other words, he has left the matter to his accountant—in the same way as a recalcitrant taxpayer leaves things to his accountant—to try to justify the position.

When we examine the performance of the Chief Secretary before the Select Committee, we appreciate that its members must have waited with bated breath for the right hon. Gentleman's comments on what he expected next year's Government expenditure to be. The right hon. Gentleman gave the Committee the classic reply that it could be anything ranging from 2 per cent. to 8 per cent". That is the band that he puts forward for the year that is shortly to begin. It puts in perspective the figure that appears in the White Paper for the last year in the series if the forecast even for the forthcoming year is between 2 per cent. and 8 per cent. That is what we have from the right hon. Gentleman after his long professional career, in which he has given his clients and others a true and fair view about the state of their accounts. That is a career that we are longing to see him resume as soon as possible.

We must assume that a growth of between 2 per cent. and 8 per cent. is the right hon. Gentleman's true and fair view of what is likely to happen to public spending. My hon. Friend the Member for Cirencester and Tewkesbury has said that the economy is as idle as a painted ship upon a painted sea. One might add that it is now a painted ship whose radar, sextant, compass and every navigational instrument have broken down. That is the picture that the right hon. Gentleman would have us believe.

I do not believe that the Chief Secretary is quite such a simple man. I do not believe that he has presented his figures in this way merely on the basis of ignorance or because of an inability to match what his predecessors have done. There is a curiously revealing bit of skill in the right hon. Gentleman's construction of the White Paper, to which he referred today. He made the great point that one of the important qualifications about the likely growth of public spending is contained in a footnote. Let the House mark that. He put his qualification in a footnote. When asked about that when he appeared before the Select Committee, he said that he did not want to have it tucked away in some paragraph". Is that his idea of tucking things away?

The reason for that approach is that the White Paper was prepared not for one audience, not for two audiences, but for at least three. That is why we have this band of contradictions. The White Paper was prepared for the benefit of international financiers and bankers who care about the danger of overspending. It has to demonstrate to them that public spending is being tightly and ruthlessly controlled by this fierce fellow at the Treasury. The figure that appears in large print for the financiers and bankers, and which is publicised widely, is a growth rate of 2.2 per cent.

The White Paper also has to satisfy Labour Members below the Gangway who are increasingly concerned about shortfall. It has to persuade them that the economy, under the right hon. Gentleman's beneficient guidance, is about to resume its happy explosion of public expenditure. That is why 8 per cent. appears at the top end of the bracket.

Thirdly, the White Paper has to satisfy the Prime Minister, who is now developing an increasing concern, for electoral purposes only, to begin cutting taxes.

Somehow the right hon. Gentleman has to show simultaneously that he is not increasing spending very much, to show that he is increasing spending massively and to show that he still has enough room left to fulfil the Prime Minister's tax cut pledges. The Select Committee was quite right to draw attention to that state of affairs and to point to what is described as the absence of any argued strategy in the White Paper.

There is no such strategy in the document. This great strategic Government who took office four years ago with plans for putting the country back on the rails are now without a strategy. Even the Chief Secretary cannot think of a way of squaring the circle. We may as well discard him from the argument and take our only cue from the evidence of the Treasury witnesses.

What did they say? They stated that the likely increase next year was 4 per cent. up on this year's outturn.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

Is it not true that the Chief Secretary said that anyone who made a guess as to what it would be was either a fool or a knave? Is it not rather unfortunate that the right hon. Gentleman should call his own civil servants either fools or knaves?

Sir G. Howe

It is curious, but when men are driven into a desperate corner under cross-examination, as the right hon. Gentleman was, they are likely to say desperate things.

Mr. Joel Barnett

Will the right hon. and learned Gentleman point out in the document where any of my officials forecast exactly a 4 per cent. growth for next year?

Sir G. Howe

That is the figure that they repeated several times.

Mr. Joel Barnett

Will the right hon. and learned Gentleman quote the relevant passage? Let him tell the House what they said.

Sir G. Howe

In previous White Papers, Governments have condescended to make forecasts of this sort. In the relevant passage this year, a Treasury witness told the Select Committee: if you want me to give a forecast, then the best forecast that I can offer is that it may be of the order of £1½ billion and that would give an increase of about 4 per cent. However, I would again stress that that is a single figure in the middle of a wide range. The House is entitled to know roughly where the Government think they are going. How can the Government say, as the right hon. Gentleman said earlier, that they are confident that matters will take such and such a course over the entire period of the White Paper? Yet that was what the right hon. Gentleman said not long back. He said that his planned growth of public spending over four years would be lower than the likely growth of gross domestic product. How can he say that that will be so over four years when he is unable to say with any confidence what the GDP growth rate will be for the next 12 months and when he is disclaiming any knowledge even of what the growth of public spending will be during the same period?

Mr. Joel Barnettrose—

Sir G. Howe

I shall give way later.

It is clear that if there is a 4 per cent. growth in public spending over this year's outturn it will exceed any conceivable forecast of the likely growth of the economy during the forthcoming year.

Mr. Heffer

I revert to the right hon. and learned Gentleman's point about forecasting and the role of civil servants being that of either a fool or a knave. Is he aware that his hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) wrote a pamphlet, which was published by Aims of Industry, which indicated clearly that in his view civil servants were all fools or knaves?

Sir G. Howe

I gave way to the hon. Gentleman because I normally find his interventions are to the point and that it is worth while responding to them. However, if he wishes to make that point, he may make it to my hon. Friend the Member for Cirencester and Tewkesbury—that is, if he thinks that it is worth making at all.

Mr. Englishrose—

Sir G. Howe

No, I cannot give way to allow the intervention of the hon. Member for Liverpool, Walton (Mr. Heffer) to be followed by an intervention of the same sort.

A growth rate of 4 per cent. in public spending with a GDP growth rate of less than that will be taking us down the wrong road. The right hon. Gentleman must know that. He must know that if taxes are cut in the forthcoming Budget, as we are all told they will be, the inevitable consequence of a 4 per cent. growth in spending over the next year and the nation's GDP growing at a lesser rate is that a Labour Chancellor in office in 12 months' time—that will not be the position—would find himself obliged next year to increase taxes again.

Mr. Hefferrose—

Sir G. Howe

No, I shall not give way again.

Mr. Heffer

Why not?

Sir G. Howe

I shall give way later.

The Chief Secretary spoke about the agony of cutting over-ambitious plans. It seems that his plans for spending are that it will increase between 2 per cent. and 8 per cent. and that his best guess is 4 per cent. That is well beyond the most optimistic assumption for the rate of growth of total national wealth. The people should not be misled. They should be told that that is what will happen. A Labour Government with these spending plans are not merely restricting their chances of reducing taxes but are making tax increases in the year ahead inevitable.

Mr. English

If the right hon. and learned Gentleman looks at page II of the Select Committee's report, he will see that the figure of 4 per cent. that we took from the Treasury is really 3 per cent. if we exclude the sales of BP shares as an exceptional factor, unless he thinks that we shall sell another chunk of BP this year. Surely the right hon. and learned Gentleman must exclude the sale of BP shares as exceptional. It should not be assumed that we shall sell a bit more of the Government's holding in BP.

Sir G. Howe

I know that my hon. Friends are looking forward to further sales of BP shares as soon as possible.

Even if one were to accept that the figure is 3 per cent., that figure is likely to exceed the likely rate of growth of the economy. The reality will remain—

Mr. Joel Barnett

The right hon. and learned Gentleman has made an important statement. Is he saying that if by any mischance he ever became Chancellor, one of his first tasks would be to sell the rest of the Government's BP shares?

Sir G. Howe

I was not describing my first task. There are many more important things to be done to put the economy right when we come back to office.

Mr. Joel Barnettrose—

Sir G. Howe

The Chief Secretary was making a bogus point. He knows that we were exhilarated when we saw that the Government had the good sense to sell a large tranche of BP shares. It is one of the few sensible things that the Government have done.

Mr. Joel Barnettrose—

Mr. Englishrose—

Mr. Deputy Speaker (Mr. Oscar Murton)

Order. There appear to be three separate debates taking place. We must come to order. Sir Geoffrey Howe.

Mr. Joel Barnettrose—

Sir G. Howe

I am dealing with the subject of the debate. I am not in the least surprised that the Chief Secretary should seize on any opportunity to get away from the subject of the debate. I shall come back to it now.

I shall describe the conclusions that we draw from this document and the way in which the House should react to it. There is no prospect of the economy recovering its prosperity through some automatic expansion of exports by some form of export-led growth. The movement of trade figures in the last three or six months certainly underlines the wording used by the Bank of England in today's Bulletin that the outlook for export-led growth is "sombre."

Nor—here I agree with the Chief Secretary—is there any hope of a solution along the lines advocated by some Labour Members below the Gangway for increasing public expenditure. The Chief Secretary was right to point out that that would be a prescription for inflation. If things are not to turn out that way, we ask: where is the money for increased public expenditure to come from? It will come from the pockets of the people represented by Labour Members below the Gangway—the very people whose votes the Prime Minister is seeking when he talks now about the need for tax cuts.

Two years ago the Chief Secretary told us that if we were to take away every penny over £5,000 from people's incomes that would increase the yield of taxation by about 6 per cent. That is rather less than, or just the same as, to be fair to the right hon. Gentleman, the Chief Secretary's forecasting bracket for the likely outturn of public expenditure next year.

Mr. Russell Kerr (Feltham and Heston)

A wealth tax.

Sir G. Howe

The people whom Labour Members below the Gangway claim to represent are asking the question that the Prime Minister is beginning to learn: where are we to get public expenditure from, except at the cost of a higher price in the form of higher taxes on us? A wealth tax will not help them. The yield from a wealth tax—whatever form has so far been proposed—would be less than sufficient to keep the British Steel Corporation afloat for more than six months. The sooner the Government drop their proposals for a wealth tax, the greater would be the contribution to the health of the economy. If only they had sense to follow the example of the Irish Government and to scrap it before it is introduced, it would be of enormous advantage. There is no hope there of increased public spending.

Mr. Alexander W. Lyon

Will the right hon and learned Gentleman give way?

Sir G. Howe

No. I must get on.

If we were to raise money for more public spending, how would it be spent? How would Labour Members below the Gangway hope to spend it to increase prosperity and to raise our economic performance?

The National Enterprise Board is reported to be scouring the country and failing to find any places in which to put its money. To argue that temporary employment subsidy or subsidies to steel are any long-term answer to our problems is equally to deceive ourselves. We understand why in this country and in other countries Governments are looking for ways of maintaining employment, one would hope, on a temporary basis. But the Government as well as anybody else that the temporary employment subsidy and subsidies to the steel industry will not in the long run either create wealth or save jobs. The East Moors steelworks and others are closing at a time when unemployment is worse than it was one year or two years ago and when up to £1 billion of taxpayers' money has been spent on sustaining the steel industry. We have moved further down the road.

Therefore, the money that is being spent in this way will in the end destroy jobs, because it will have come from taxes paid by other working people and by other companies from which jobs should come.

Mr. Dafydd Wigley (Caernarvon)rose—

Mr. Joel Barnettrose—

Sir G. Howe

I give way to the hon. Member for Caernarvon (Mr. Wigley).

Mr. Wigley

Will the right hon. and learned Gentleman tell us whether it is his intention, if a Conservative Government come in after the next election, not to have the type of temporary employment subsidy about which we have been talking, particularly in the context of the steel industry?

Sir G. Howe

The answer is clear. It is a temporary employment subsidy. Therefore, it will eventually have to be tapered out. It cannot go on indefinitely. It is no solution to the problem. The longer we go on imposing taxes on other businesses and workers to maintain it, the more difficult it becomes to maintain employment and to expand production in other places.

There is no need to go on down this desperate road. Labour Members do not seem to understand that there is another way of running the economy. For example, the United States of America, with a 5 per cent. wealth tax and a top rate of income tax of 50 per cent. on incomes higher than in this country, has over the last three years created—[An HON. MEMBER: "Unemployment."] I am coming to unemployment. In the last three years the United States Government have created 8 million new jobs. Unemployment there has been coming down since 1975. Unemployment in the United States in the last quarter of last year was 6.8 per cent.

The achievements of this Government have resulted in unemployment rising over the same period. In the last quarter of last year our unemployment rate was 7.2 per cent. Unemployment has gone up in this country, whereas in the United States it has come down. For example, California, with a population about half the size of our own, has seen its steelworks and bomber factories closed down in the light of the ending of the Vietnam war. And, indeed, that State faces Japanese competition more closely than we do. Yet, over the last two years, it has created 400,000 new jobs because it is a prosperous, thriving, free enterprise society. That shows what can be done if we go down that road instead of the road about which the Chief Secretary was talking.

Mr. John Pardoe (Cornwall, North)

I do not know whether the right hon. and learned Gentleman minds misleading the House, but I must save him from misleading himself. There are two other countries, Switzerland and Germany, which have the kind of economies of which he was speaking. Switzerland has lost 10 per cent. of its jobs since 1973–300,000 out of a work force of 3 million. Germany has lost 1.8 million jobs since 1973, which is 7 per cent. of its work force. It does not always work.

Sir G. Howe

Germany has an unemployment rate rather less than half that prevailing in this country, and it is coming down.

Mr. Pardoe

Will the right hon. and learned Gentleman give way?

Sir G. Howe

I cannot give way continually.

There are reasons why economies of that kind are more prosperous than our own. The United States, Germany and most other Western economies of the same scale as our own are prospering better than we are because they have tax systems which, unlike the one created by this Government, make it worth while for people to work, to move house, to change occupations, to acquire new skills and to start new businesses. In those countries it is still possible for people in a wide range of occupations to get rich and to prosper out of their post-tax incomes without provoking the hostility of the Tribune Group. That is what we suffer from here.

It is not just a matter of high income earners or high taxpayers. Labour Members below the Gangway may laugh. But what sense does it make to have the level of benefits payable to a family man with three children at £55 a week free of tax while alongside it we have a tax system which requires that same family man with three children to pay tax of 40p in the pound on an income of £45 a week? It is absolute lunacy to ask people to pay tax on incomes which are £10 below the poverty line. Tax concerns not only high income earners but ordinary working people. Members of the Tribune Group would do well to remember that more often than they do.

In addition, a great deal of public expenditure in this country is now devoted to the administration of bureaucracy, and that is a positive deterrent to enterprise. Members will have seen yesterday, for example, a story in the Daily Mail about one of Britain's leading housebuilding companies pulling out of housebuilding because, to quote from its chairman: It is simply not worth our while to continue. Many of our managers are having to spend most of their time dealing with central and local government regulations. One of our directors spends 70 per cent. of his time dealing with planning appeals. This kind of work is simply not cost-effective. Virtually every site we want to develop is the subject of planning appeals. The bureaucracy of the administration, for which we are paying, for which the taxpayer is paying, is standing in the way of enterprise and growth. Those are the reasons why public spending has to be reined back to take a smaller share of national wealth each year. That is what the Chancellor described as his intention when he wrote to the Director of the IMF in 1976. In December 1976 the Chancellor said: An essential element of the Government's strategy will be a continuing and substantial reduction over the next few years in the share of resources required for the public sector. Whatever happened to those good intentions? They are still entirely valid.

When the Chancellor spoke to the House at the time of the White Paper in March 1976 he said that it was then his intention to hold public spending steady for several years and to ensure that there was no real growth in it. That is still right. There should be no further expansion in real public spending for some years to come beyond the level of outturn in the current year.

I do not need a lecture from the Chief Secretary to remind me of the importance that we attach to defence and the police. The increases which we all regard as necessary on defence expenditure and on the police and law and order should be found from within that total. Within that total, room should also be found to redress the balance between capital and revenue expenditure. For many years the balance between capital and revenue has run at between 18 per cent. and 20 per cent. Now it has fallen to about 9 per cent. A switch will have to be made within that total of resources.

Labour Members have asked about and have been told often enough where the savings should be found. In the first place, when the Government have announced plans, as they have, for example, to raise the charges for school meals, those plans should be implemented and carried ahead. In the second place, there should be much tighter management of existing programmes. The Public Accounts Committee's reports abound with examples of ill-controlled, extravagant and wasteful Government expenditure. The Devonport dockyard, for example, ended up by costing more than four times its original estimate of £20 million. The Liverpool hospital cost four times its original estimate of £11 million. The Professional and Executive Register places only one applicant per day in each of its offices up and down the country.

Labour Members say that it is not possible to make savings by applying proper discipline to public spending. It is the answer of Labour Members to say "A few £10 million, £20 million, £30 million, £40 million-what does it all add up to?" They should face the reality that Conservative councils which have come into office over the last year throughout the country have been able, with proper control of public spending, to cut back expenditure by 10 per cent. and 20 per cent. simply by prudence and frugality.

Mr. Joel Barnett

The right hon. and learned Gentleman has mentioned school meals and the PAC. Is his suggestion that the PAC never found any overspending during the Conservative Administration?

Sir G. Howe

Not in the least. There are many examples of overspending found by PAC reports. All I am saying is that a tighter administration of the whole range of Government spending programmes would save substantial sums of money, which has happened in local authorities under Conservative control. The Chief Secretary should not be laughing at that prospect. If he were able, by tighter administration, to save 2 per cent. on the total burden of public spend- ing, he would be saving more than £1 thousand million a year.

Beyond that, the total expenditure on trade, industry and employment planned over the next 12 months is £3,000 million. That is the total spending on those three programmes over the next 12 months, without taking any account of the continuing losses of the British Steel Corporation. Mysteriously, those losses do not appear under that Vote. The spending on trade, industry and employment is almost one and a half times as much as the annual corporation tax paid by British industry.

The Public Accounts Committee has reported a number of projects in development areas costing £100 million, which would have gone there anyway and for which regional development grants were, in fact, unnecessary. It has been drawing attention to the fact that the present pattern of regional development grants is wasteful of money in the way in which it is not related to the number of jobs created.

Mr. Pardoe

It is the right hon. and learned Gentleman's Act that is doing it.

Sir G. Howe

It is also wasteful in the way in which it is being administered. Within the total of £3,000 million there is a substantial saving that can be made and the CBI is right to say so.

The budget on housing runs all told to £4,000 million. Almost half of it is on subsidies—up from a much lower figure, as the Chief Secretary was boasting, four years ago. Almost £2 billion out of £4 billion is going on subsidies. They have doubled in real terms between 1973 and 1974. There is room for substantial savings to be made there.

At the time of last year's White Paper it was the Chief Secretary's target to raise the percentage that goes forwards thereon on housing being paid in rent from the figure of 42 per cent. to a much higher figure. A much larger saving could be made if the Government were willing to encourage the sale of council houses.

Finally, savings could be made if the Government were to abandon those elements of Socialism which they have already placed on the statute book which threaten to cause a good deal of Labour Members not to be content with what has happened. The Community Land Act, for example, is being doubly futile. [HON. MEMBERS: "No money."] That is exactly the point. We have got the entire legislative apparatus of the Community Land Act multiplying and increasing the process of administration in local authorities up and down the country. Ask local councillors the extent to which they are having to take account of these legislative provisions, although they are not fertilised with money. The bureaucracy is there but the purpose for which it was intended is not. So it should be repealed forthwith.

The reality is that public spending for some purposes is essential and good, but for many other purposes it is a comforting way of describing the process whereby the Government misspend money which they have taken from the people. All too often the process of public spending is uncontrolled and reduces choice, lowers living standards, causes inflation and destroys jobs. The White Paper offers no prospect of an end to increasing public expenditure as a part of the total national income. If it is allowed to continue, if public expenditure is allowed to grow on the scale forecast by the White Paper, there will be no prospect of significant tax reductions and no prospect of a restoration of the property of our economy.

For those reasons, I invite my right hon. and hon. Friends to support our amendment in the Lobby tonight.

5.9 p.m.

Mr. Michael English (Nottingham, West)

The idea that the Prime Minister and the Chief Secretary are Socialists, red in tooth and claw, which I think was the picture that the right hon. and learned Member for Surrey, East (Sir G. Howe) was trying to paint, is not generally appreciated on this side of the House. The Chancellor of the Exchequer could perhaps be described as a more orthodox Chancellor in monetary terms than his predecessor under a different Government. That may be rightly so.

I want to thank a lot of people who helped the Expenditure Committee. The right hon. and learned Gentleman mentioned briefly the number of economists who wrote papers for the Committee. One of them was his colleague on his Front Bench, the hon. Member for Blaby (Mr. Lawson). We are grateful to all those people who wrote papers. It says something for the prestige of the House that they did so so readily. Of the people whom we asked to write papers for us, only one person, who was out of the country at the time, found himself unable to do so. Instead, his colleagues wrote a paper for us. People do that only when they regard the House of Commons as being of some importance. When it requests assistance, they give it readily. I thank all those people who so assisted us, and I hope that the Financial Secretary, unlike the Chief Secretary, will thank them as well on behalf of the Government.

I turn to the question of obscurity. In times past, like many other right hon. and hon. Members, I was once chairman of the finance committee of a local authority. It was the Rochdale authority, and I had on that committee the hon. Member for Rochdale (Mr. Smith). His presence made it extremely interesting.

Each year, a local authority estimates its expenditure and usually manages to come within about 3 per cent., plus or minus, of the figure that it anticipates spending in the forthcoming year. Figures for local authorities as a whole were produced by Dr. Marshall for the Lay-field Committee in which he showed that local authorities were capable of estimating their expenditures with a fair degree of accuracy. No human being in this unforecastable world can be precisely accurate, but it is possible to get within close and reasonable limits, and, in my view, the limit is plus or minus about 3 per cent. in the case of local authorities.

I quote local authorities because, in round figures, they represent one-third of public expenditure, so that the people responsible for that third have over a period of years shown a precise ability to estimate what they will spend. Over a period of years, it seems to me that the Government have not had the same ability to forecast the other two-thirds of expenditure.

I hope that it is realised that when the Committee criticises shortfall, it does not criticise it in the abstract. We anticipate that every other year on average there will be a shortfall, and we anticipate that on plans of this type, which are not cash limits but forecasts of proposed expenditure in real terms in the alternate Years—approximately every other year, though not so precisely—there will be an overspend on those planned figures.

That is not expected in the case of cash limits, because a cash limit is what its name implies. It is a limit. It is like the lines on the Floor of this House. It is the point beyond which one may not go. That does not apply when one is merely forecasting the real level of expenditure—the programme or the plan of expenditure. That is what the title of the document is. The Government gave themselves their own title, and their title is "The Government's Expenditure Plans". I think that there was a year when they actually spent the money that they proposed to spend, but in all other years they underspent it. When that happens, it means that what is being planned is not happening. What that means in terms of jobs, we do not know precisely, but it means something. It means that some people are unemployed whom the Government did not plan to leave unemployed. It means that some people are not in jobs who should be in jobs. It means that some schools, houses and hospitals, or whatever it may be, are not being built.

When hon. Members had very deep and passionate arguments about the Government's expenditure cuts, we were talking about a myth. We are not talking about the important issue, because the total of the Government's planned expenditure cuts is less than the accident of shortfall. So we were having the argument on the wrong subject. It was of great importance. We were discussing £2 billion in two successive sets of cuts. But in fact the unplanned shortfall was greater than the planned cuts.

Whatever the views of right hon. and hon. Members may be on expenditure cuts, that cannot be said to be an adequate way of running the country. It applies to successive Governments. I do not make a party point. It cannot be said to be the proper way in which this House should be considering this issue. We should be here discussing the Government's plans for the future. We are discussing them. That is the very title of the White Paper that we are discussing. But, after the experience of years past, one can almost forecast now that in practice the figures that we are discussing will never happen. Something less will happen. Because it is something less that will happen—but we do not know what—we are in the difficult position of discussing what we do not know. That cannot be.

What is worse, we cannot tell how far the reality is known within the Government. My right hon. Friend the Chief Secretary will be the first to tell me if I fail to point out that the Treasury, responsible for volume I of the White Paper, anticipates a shortfall and has put a figure of £1 billion for it into the total in these figures. So that whenever we discuss, say, the total of the health programme, the education programme, the road programme or any other programme in which any individual hon. Member may be interested, we must always remember that that figure in volume II, when all those programmes are added up, does not equal the total in volume I. The total in volume II is £1 billion more than the total in volume I.

But it is not so simple as just saying that we can knock, say, 4 per cent. off every programme. We know that shortfall occurs in large lumps in some programmes and in small lumps in others. So in each programme we do not know what the figures in volume II mean. Therefore, to a certain extent, we do not know how far Departments are aware of this when they are arguing their case with the Treasury or in the Cabinet.

This White Paper is about priorities. The Opposition will probably say that they wanted more spent on defence. Government supporters may say that they wanted more spent on social security or education. But that is what the argument is about. That is what the political argument in the whole country is about.

We are arguing on a basis that we do not know. We do not know whether the figures which the Departments put in will be spent, and we do not know whether the Departments themselves realise that. We know that the Treasury does, but we do not know whether the Departments do. So if the Department of Health says "This is what we want to spend on the National Health Service", we do not know whether it is anticipating the inevitable shortfall. We do not know the basis of the argument between the Department and the Treasury or in the Cabinet.

Mr. Powell

As the hon. Member was speaking, my hand happened to fall on a page in Crossman Volume III. There are two sentences there which run as follows: We considered Roy's proposal to reckon in our £17 million in exchange for a six-month delay on new hospital starts and we all agreed to turn it down. This was partly because we know we have £45 million of hidden reserves, which Dick Bourton hadn't told the Treasury about.

Mr. English

I am grateful to the right hon. Member for his assistance. He has illustrated the point to perfection.

That, therefore, is what we mean by putting a title to a section of our Committee's report, "The significance of shortfall". It is significant in two respects. It is very big. It is much bigger than anything that the Chancellor of the Exchequer or the Chief Secretary ever intended in the expenditure cuts. It is larger than the total of the two sets of expenditure cuts. Also, it is just not right. It would not be tolerated in local government. It would not be tolerated in industry.

Forecasts cannot be accurate. Human beings are not omnipotent. Certainly they are not omniscient. We all tolerate inaccuracy in forecasts. We know that plans can be made which do not necessarily happen. But what cannot be tolerated is if they never happen and if always the error is in one direction—not in two directions, but always in one. What that means is that all this is a myth. It means that this debate is about a fiction. I do not think that the House will always be prepared to tolerate that situation.

The other major argument is about current and capital expenditure. I have been somewhat critical of the Treasury and the Chief Secretary, but he and I illustrated a few moments ago that we are capable of co-operating readily. The right hon. and learned Member for Surrey, East must have forgotten what we said in paragraph 10 of the Fourth Report from the Expenditure Committee last year. On page ix the Committee said: The Government is thus itself acting like those industrialists it criticises for failing to invest. Indeed, even worse, it appears to be cutting capital expenditure and selling off productive capital assets (eg BP shares). Contrary to the general tenor of the remarks by the right hon. and learned Member for Surrey, East, that portion of our report was unanimous. There are many right hon. and hon. Members opposite—and I am not afraid of it, but grateful for it—who have a strong business sense and a strong sense of the reality of their positions as taxpayers. They do not want to see the Government selling off productive capital assets. They know that in the country, as in a company, that is not necessarily the best way to success.

The same was true this year, although one hon. Member objected. The Second Report from the Expenditure Committee stated: We fail to understand, for example, how the taxpayer gains in the long run from the fact that nearly 60 per cent, of Government offices are leased rather than owned. One Opposition Member took exception to that sentence, but the rest of the Committee did not. That is why there was no Division.

Many Conservative Members as well as Labour Members are capable of seeing that taxpayers' current expenditure must be increased by such a practice as allowing two-thirds of Government offices to be leased rather than owned. A proportion should be leased because there should be some slack in office space that can be disposed of if Government Departments are reduced, if there is a change in the machinery of government or, however unlikely, a decline in the number of civil servants. But the average business man would not agree to 60 per cent, of his office space being leased.

The Chief Secretary used the example of schools. I shall be parochial for a moment and take the example of central Nottingham, which is next to my constituency. We had a slum there called The Meadows. It was built in the 19th century and comprised typical terraced houses on an old water meadow. I see that the hon. Member for Croydon, South (Mr. Clark) remembers because he represented part of Nottingham in his past career. That slum has been torn down and the houses replaced. All that remains are 140-year-old schools. The people have been rehoused in brand new homes, but they are forced to send their children to schools that were built at the same time as the houses that have been torn down. I do not say that one cannot educate children in older schools. Many dedicated members of the teaching profession do that every day. But it is not the best way. The best teachers are not attracted to such schools if somewhere else further out of the city has good, efficient and modern schools.

The basic needs element that the Treasury allows the Department of Education and Science to spend is barely sufficient to build schools in the suburbs to keep up with the natural expansion of owner-occupied and corporation-owned houses that are built on green field sites. Not enough money is available to build new schools. This was pointed out by the Sub-Committee that I chair. I have no reason to believe that this has changed. Indeed, it has got worse. This is the reality of what we mean when we talk about cutting capital expenditure.

I am sure that my hon. Friend the Member for Liverpool, Walton (Mr. Heifer) will agree that there is another injustice. If one cuts public expenditure to some extent one reduces the number of jobs in the community. Perhaps that would be a good thing. Perhaps it is sometimes necessary to allow for an increase in jobs in the private sector. However, in the present circumstances, that does not apply because there are over 1 million people unemployed. That situation is likely to continue well into the 1980s according to the evidence given to the Committee.

Where does one cut the jobs? The capital expenditure cuts were of the order of 23 per cent. —much deeper than the current expenditure cuts. The bulk of current expenditure, other than transfer payments, is on jobs in the Civil Service and local government. I do not want to see civil servants unemployed, but if there is a measure of unemployment, and if for economic reasons we feel that we should cut public expenditure, the burden should be borne fairly. The man in the Whitehall office, however reluctant we might be to sack him, should be as vulnerable as the man in the building industry.

Capital cuts are made because they are convenient, there is less row about them and so the man in the Whitehall office stays and the man on the building site becomes unemployed. The construction industry has the least effective lobby. It needs someone, such as the farmers have, to act on its behalf. Perhaps someone from the Opposition Benches could take on that job.

Construction industry workers also have never been regarded as the most powerful. Some workers in that industry may be eminent, but collectively the unions involved in the industry have never been regarded as being as powerful as some others. They cannot stop mining coal or pull electrical switches. They cannot exercise the same power as some other unions.

The line of least resistance is taken and we cut capital expenditure. It is grossly unfair that the rate of employment in one industry is higher than it is in others. All members of the Committee found that objectionable.

That is why I agree with the first part of the Opposition's amendment. But I shall not vote for it because I do not agree with the second part. I agree that there is a need to restore a proper balance.

Mr. Frank Tomney (Hammersmith, North)

Is my hon. Friend making a plea for equal misery all round?

Mr. English

I am making a plea for the prosperity—or perhaps the misery—to be shared. That is a very good Socialist principle. I should have thought that it was highly undesirable for people who possess power to export misery solely to those in the community who do not have that same power. That is what I object to.

These are the principal points that we made as a Committee. We also elicited the possibility of growth in public expenditure in the next year of, in non-exceptional terms, 3 per cent. The figure is 4 per cent. if the BP shares are taken into account. The figure of 3 per cent. is slightly less than one hopes the economy will grow in that year. One would like to see it grow by 3½ per cent., as the Government have forecast, for several years. None of us has much belief in the possibility of it growing at 3½ per cent. for five years in succession, but it could happen for one year and we must hope that it does, even if the state of the world economy causes us to have doubts about that.

I was amazed that the right hon. and learned Member for Surrey, East did not notice that the unexceptional figure was 3 per cent., not 4 per cent. I congratulate him on his skill at escaping from his own figure of over 8 per cent., but he has perhaps illustrated that for some incomprehensible reason he does not always check his figures before coming to these debates.

What is most needed is the consideration promised by the Chief Secretary of the presentation of the medium-term assessment in some form. The Government resisted that many years ago. As a compromise, they put in the resources table. We do not mind them dropping that resources table because it was always somewhat artificial, but we cannot debate the future of the economy and public expenditure without a reasonable projection of the Treasury's best guess of what will happen to the economy in future years—the medium-term assessment, as it is called. I am grateful to my right hon. Friend the Chief Secretary for saying that he will consider that. I hope that he does and I hope that the next debate we have on public expenditure will in that sense be better informed. By that time one trusts that the figures in the White Paper may also be more reliable than they seem to be at the moment.

5.33 p.m.

Mr. J. Enoch Powell (Down, South)

I consider this to be a very remarkable White Paper, possibly to be an epoch-making White Paper. If that seems to the House a rather startling statement—it seems to have taken the Chief Secretary rather by surprise—I am reminded of the proverb that the truths which shake the world come upon the feet of doves. I find many doves' footmarks over this White Paper, and wish to draw the attention of the House to some of them and draw one or two conclusions.

The first footmark I find is right at the beginning and is closely related to the amendment to the motion that is technically now before the House. It is in paragraph 4 and it states: it is necessary that the planned growth rate for total public expenditure should be within the prospective growth rate of national income. That is a blameless aspiration or assertion, one that is based upon the desire expressed in the surrounding text to avoid programmes being subjected to the disruption of sudden cuts and to leave room for manoeuvre on taxation —a very delicate expression that has been put more flat-footedly in other contexts.

Before proceeding to consider the prospective growth rate of national income", against which the public expenditure plans in this White Paper are to be considered, I should like to go to the end of the White Paper to draw attention to a very sad sentence in paragraph 65. It reminds readers that there have been "four years of no growth". I admit that the context there is about consumption; but the statement is very little different from that in paragraph 44 which reminds us that In the first half of this decade … national disposable income grew very little". Let us ask whether, at the beginning of these four years—that is putting ourselves back from 1978 to 1974—the forecast of the rate growth of national income was nil, nil, nil, nil. The answer is that it was not, and for a very simple reason. No Chief Secretary of the Treasury, no Financial Secretary—I do not know what it feels like to be a Chief Secretary because that post had not been invented in my time, but at least I was Financial Secretary and I know what that feels like—would possibly have been allowed to produce four years ago a document which proceeded to set out that which we know has actually happened, namely, that the growth rate would be nil, nil, nil, nil over four of the five years which the annual expenditure statement covers.

To that extent, all the expenditure plans over the last four or five years have been based upon what we now know to have been a complete breach of the proposition with which this latest White Paper begins, that the planned growth rate for total public expenditure should be within the prospective growth rate of national income. Of course, there is that saving word "prospective". Prospective growth, when read in this kind of literature, does not mean that growth which the eye of the Almighty already perceives is destined over the next four years. It means the sort of figures which we reckon we dare insert in this kind of paper, especially with the possibility of a General Election in the coming year or the year after.

Much attention has already been drawn to the fact that, greatly daring, in Table 8 the Government have actually displayed part of the planned growth of public expenditure against what is coyly called resources. But there are very important and interesting qualifying paragraphs which I hope other hon. Members have read with the same repeated relish as I find that I have done, and they do not stale with rereading. The ratios which are represented in that table, we are told in paragraph 47, are based on present expenditure plans and the illustrative assumptions on GDP growth made in paragraph 58". So, what are these "illustrative assumptions" on domestic product growth which are made in paragraph 58? They are that in the next two years GDP will continue to grow at 3½ per cent. and that private sector expenditure will be sufficient to produce a level of demand consistent with that growth rate. So this is not a nil projection of growth rate. This is not based on form. We are not betting on form. Form for the last four years is zero. Instead, for various reasons which are set out in preceding paragraphs—I shall mention them in a moment—we are working for the next two years on 3½ per cent. per annum growth in GDP. But—and here comes the sentence which I fear will not be so frequently quoted, which will not be inscribed on tablets of stone, which will certainly not be inscribed on any election literature during the period— The figures for 1979–80 are thus not forecasts, but illustrations of what might be consistent with one assumption concerning the growth of GDP. So we have a table set out in this White Paper virtuously purporting to compare the planned growth rate for total public expenditure with the prospective growth rate of national income and to draw this vital comparison at any rate for the next two years—something very modest—and yet the growth rate of national income for these two years, at any rate for the second year, is not even a forecast. It is just an illustration of how the figures would work out, and what the mathematics would be, if one took one particular assumption. So it is just illustrative arithmetic. Say the authors of this paper. "You can take any other figure you like and you can work that out, too, as an illustration; but we are not giving you a forecast—at any rate, we are not printing it as a Command Paper—of growth rate in the year beyond the immediate one a year ahead."

For the immediate year ahead, the Treasury, in this paper, has rather more confidence. It says: it would be imprudent to count on a faster growth of productive potential than 3 per cent. a year. It does not say that it will be 3 per cent.: it says that it would be "imprudent to count on" more than 3 per cent. On top of that, of course, there would be the utilisation of the excess capacity, on which I shall now quote from paragraph 56. I apologise for so much quotation, but even this document is intended to be read. In paragraph 56, the Treasury says: on present prospects a marked improvement in industrial performance would be necessary to sustain a growth rate above 3½ per cent. So the Treasury is regarding 3½ per cent., even in the next year, as the maximum that one would be prudent to contemplate; and the 3½ per cent. in the year after that is just an assumption so as to give an illustration of how one works out the mathematics, but is not a forecast in any way.

It may have struck you, Mr. Deputy Speaker, that I have been talking about only the next two financial years. Yet this is a five-year expenditure plan. This is the brood of Plowden, who, in 1961, recommended that for the proper control of public expenditure and for the due education of the public so that they should be brought more into understanding what was being done in their name—a five-year prospect of expenditure should be laid out from year to year. The technical term for that is rolling—rolling, perhaps, in more senses than one.

Here, then, is a five-year projection or plan, as the hon. Member for Nottingham, West (Mr. English) pointed out that it is called, for public expenditure over the next five years. But only for two years are we vouchsafed to know in one case a forecast, in the other case a specimen illustration, of the all important correlative, the growth rate of the national income. So we have one year projection, reasonably argued—that is putting it high —of the growth rate of the national income, side by side with a five-year plan of the course and growth of public expenditure.

In an interruption, which was entirely unrehearsed, in the speech of the hon. Member for Nottingham, West, I have already quoted from that remarkable book from which posterity will continue to learn year after year about how people really behave and really think when they are under the stresses of government. I want to venture just one more quotation from Crossman Volume III, because this is about what happens if one has a five-year—indeed, a much less than five-year —future projection of public expenditure.

Once again, it is Crossman and the right hon. Member for Blackburn (Mrs. Castle) on the one side, against the person whom it is now allowable in this Chamber to refer to as Roy—[HON. MEMBERS: "Woy."]—the then Chancellor of the Exchequer, on the other. The book says: The discussion was on the whole friendly and good-tempered. At the end Roy said severely, 'It's no good. It's not true that the social services Ministers cannot get economies if they really want to. The fact is that they don't really want economies. Psychologically they are spending Ministers.' He had to be reminded that we had already loyally carried out the economies he had asked for. We had been given a four-year programme and told that in 1969–70 there would be 3 per cent. growth, so we had planned for that. It wasn't fair to say that we are not economical. We had kept within the margins that were given us. They had, in fact, exploited the well-known benefits of five-year programmes of public expenditure: they kept within them, and here, in July 1969, was the Chancellor of the Exchequer accusing them of being spendthrift and coming back for further cuts.

I only mention, to conclude the quotation, the end of the paragraph: Barbara and I secured one major success. We persuaded Roy not to circulate his paper but to discuss this orally on the basis of the medium-term prospects and the various economic documents' but without his specific project of a 2½–3 per cent. cut, which we did not want to see in the newspapers. So all this agony of cuts in public expenditure derives from following the notion that one can set out a five-year programme for public expenditure, coupled, as it ought to be, with a five-year reliable indication of what resources are going to come forward to match that programme. So far from producing certainty, this method has produced chaos. So far from producing confidence in the management of expenditure programmes so that they shall not be subjected to the disruption of sudden cuts —paragraph 3 of the White Paper—it has caused precisely that. Moreover, it has poisoned the relations between Government and Government supporters, and, worse still, between Government and public, since the public have constantly been given the impression that something which they had already and had earned was being taken away from them almost malevolently.

The whole literature of the subject has been radically misleading, for the figures which were being cut never had any reality. What was really happening was that the Chancellor of the Exchequer was, in preparing his Budget for the coming year, doing what it was his duty to do in the current circumstances as he understood them.

At the spectacle of these fantastic tricks, the angels might be forgiven if they laughed. But we are told that in these circumstances angels weep. Yet I do not want to leave the House without some consolation.

So I shall make a brief reference, more for the benefit of Labour Members, to the relationship of all this with the phenomenon of unemployment, over which they and everyone else are rightly and necessarily concerned. This business of the projection of spending programmes in the light of unknown and unknowable, but necessarily overestimated, future resources not only does nothing to maintain employment: it is a positive hindrance to the maintenance of employment and produces the effects on the building industry, for example, which have already been referred to in this debate.

Public expenditure in itself, addition to public expenditure in itself, cannot reduce unemployment, for it can be secured only by two means: by taking purchasing power away from areas in which it is already being employed or—and we should know this by now—by adding an impetus to the cycle of inflation, which as it is later unwound, inevitably has the result of bringing rising unemployment in its train.

I am entitled to say, especially to those on the Labour Benches who are anxious about unemployment, that for years as inflation has risen I have said in the House and outside that this portends rising unemployment, because, sure enough, as the rising curve of inflation must descend, so the inevitable concomitant of a reduced rate of inflation—rising unemployment—will emerge, as emerged it has. Unless we can keep the rate of inflation down, unless we can prevent that curve from bouncing up again, we shall be entailing the curse of renewed unemployment upon people in years to come.

As to the five-year programmes—and this is why I hailed this White Paper with such perhaps extravagant hopes as portending a real change—those who wrote this White Paper have at last come face to face with the fact that the whole Plowden notion was misconceived. They have come face to face with the damaging consequences for every section—Government, public, Parliament and the rest —of the foredoomed attempt to create five-year plans, published plans, of public expenditure, matched in this case with two-year projections, more or less speculative, of the growth of resources. We must some time give up this nonsense and go back to proper budgeting which is the function of government and which can be done only in the circumstances of each year as it emerges.

Of course, the Departments, the great services, must have their aspirations for the future. They must know, broadly speaking—although they will modify their notions—where they want to go to. But we must not entail upon ourselves and others the evils which follow from publishing year by year a five-year projection of what no human being can project.

5.55 p.m.

Mr. John Garrett (Norwich, South)

The right hon. Member for Down, South (Mr. Powell) took a fair time to tell us that we were wasting our time. I believe in the Plowden concept of producing priorities and programmes for five years ahead, but, as I shall try to show, I think that that idea has never been properly followed through.

I wish briefly to comment on both the form and the content of the public expenditure White Paper and to express the disquiet I feel about both aspects of what is a very important public document.

The form of the White Paper, including the presentational conventions it embodies, is rarely discussed in this annual debate. It is a subject which can be technical and even boring to hon. Members in a general debate and should properly be discussed in a Committee. Indeed, it is a subject discussed in the General Sub-Committee of the Expenditure Committee, and from time to time the Treasury has responded with some improvements in presentation. But it seems to me right to raise some general principles in this debate to illustrate how poorly served we are with information on which to assess the purposes and the results of Government decisions on public expenditure.

There is a controversy at present about excessive secrecy in government, concerning the Government's proposed information Bill and the counter-demand by many hon. Members for a freedom-of-information or right-to-know Act on American or Swedish lines. I am not directly concerned with that issue here, but I am concerned with the narrower issue of the quality, quantity and scope of the regular reporting on spending by the Government to the House—what in other organisations would be called management information or control information, the kind of information we need in order to assess what the Government are trying to do.

There is a demand at present, most recently expressed in the Expenditure Committee's report on the Civil Service last July, for a new system of powerful investigatory committees of the House, with each committee related to a Department or group of Departments. The Procedure Committee of 1964–65 said much the same thing.

In my view that is an essential reform, but if such a committee system were to be set up it would achieve nothing if there were no parallel reform in the information published by Departments. It seems to me highly significant that the present Expenditure Committee cannot comply with its terms of reference because of the Treasury's failure to provide the information which would enable it to do so.

The Expenditure Committee was intended to carry out a scrutiny of the results and value for money obtained by departments and to assess the efficiency with which departments set and realised their objectives". The Committee cannot carry out those tasks, because nowhere in our system of one-year Estimates or in the five-year public expenditure survey is there any attempt to display results or set objectives.

What we are shown in the White Paper are enormous aggregated spending programmes, with very little analysis of what they are expected to achieve, and usually only the sketchiest details of what past programmes have produced. In other words, we are told what we are spending but never what we are buying. For example, £6,000 million of health expenditure is accompanied by three pages of discussion and three tables of analysis of service provision in the past.

In contrast, I have been much impressed by the published analyses accompanying the United States federal budget on health spending in the 1978 budget. There are 27 pages of highly detailed information about where the money is going and why, although admittedly for only two years ahead. Those analyses include international comparisons, disease and mortality rates, comparable research expenditures by disease categories, and service provision by region and by category of the population. That is the kind of information needed by legislators if they are properly to examine the priorities and purposes, in this case of health spending, and call Ministers and officials to account.

When my right hon. Friend the Financial Secretary is pursued on this issue and asked for the kind of information I have mentioned, he usually replies that it would be unfair to burden hon. Members with so much detail. I cannot see how hon. Members who are deeply concerned with the rationale behind spending programmes can carry out this important function unless they are given better information. I should like my right hon. Friend to reply to this point, if only to tell us once again that to ask for more information is an impertinence.

Turning to the content of the White Paper, we are immediately faced with an expenditure shortfall in 1977–78 of £2.4 billion-more than the cuts announced for the year in July and December 1976. Leaving aside the wider implications for Treasury competence of such an under-spend, the Government now appear to be indicating that it shall be a source of tax reliefs in the next Budget, and so an unplanned underspend becomes a policy for redistribution from the public to the private sector.

We shall no doubt discuss these reliefs in the debate on the Budget, but I am convinced that, both in social justice and, for that matter, in popular appeal, it would be better to spend, say, £300 million on the National Health Service or on child benefit than to relinquish an equivalent sum in tax reliefs.

The White Paper is as close as we ever get to a national plan, or, at least, some kind of statement of priorities by the Government. I believe that this White Paper gets some important priorities very wrong indeed, and I shall give a few examples and ask a few simple questions.

The cuts in capital expenditure continue. Capital expenditure for 1978–79 is planned to be 25 per cent. below the level of 1975–76. The consequent damage to the construction industry is incalculable. By next year, capital expenditure will be between 15 and 16 per cent. of public expenditure as against 23 per cent. in 1972–73. Construction work will fall as a proportion of public expenditure throughout this period. One industry particularly important in areas outside the great industrial centres has been singled out for attack without any statement that this was public policy.

Treasury officials, when giving evidence to the General Sub-Committee of the Expenditure Committee, said that school building was being cut because of the falling school roll. When I pointed out, for instance, that there are 264 schools in the county of Norfolk which were built before 1903, they did not think that this had relevance for restoring cuts to the school building programme.

The target GNP growth rate of 3½ per cent., if that is what it is, for the year ahead, if that is what it is, would still leave, even if that were followed right through the whole period, well over 1 million unemployed by 1981. Where is the justification for that?

The volume increase in defence spending is put at 6.5 per cent. The volume increase for health and personal social services is put at 5.2 per cent. The increase for education, science and the arts is to be 2.4 per cent. How on earth can those figures he relevant to Labour Party priorities? For social policy programmes, nearly all the small planned increase in expenditure will be needed simply to keep pace with the number of the elderly. There is no additional spending on mental health services, and no funds are being set aside to improve community care for the elderly.

We spend less on health care in this country than any other developed Western country. In fact, 5.2 per cent. of our GNP goes on it compared with 7.4 per cent. in the United States and 6.9 per cent. in France, for example. The National Health Service is the most outstanding creation of the Labour movement, and the movement is proud of it, yet we end up by starving it of funds On what basis can it be such low priority? It is clear that the funds allocated to the Health Service programme are far too low, and unless they are increased a real deterioration in standards will follow.

So, obscure in form and misguided in content, the White Paper should be forgotten as soon as possible. The Expenditure Committee says that the Treasury has this year produced a document which reaches new heights of obscurity. Next year, I hope that it will produce one that seeks to inform and at least promote informed discussion. But I doubt whether it will. Yesterday's reply by the Government to the Expenditure Committee's report on the Civil Service on this very question dodged and twisted to avoid any such commitment about giving more information in future.

In the short term, I want the Government to rethink their priorities. We have to increase public expenditure to create jobs both in manufacturing industry, where private investment fails to respond to the inducements we give it, and also on the public services. We have massively to increase the crucially important child benefit. We have to revive the construction industry through public spending and to rebuild the National Health Service.

I listened to the right hon. and learned Member for Surrey, East (Sir G. Howe) on this great issue, and I understood him to say for the Conservative Opposition "We will build more battleships out of better housekeeping in the Civil Service". Public spending is not some kind of national burden or overhead, as the dominant tendency in the Conservative Party seems to believe. Public spending is the way we create jobs and a civilised society for ordinary people.

6.6 p.m.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

I hope that I shall be very brief, but it is impossible for me to estimate whether my speech will be anywhere between 2.2 and 8.1 minutes long. I hope, however, that I shall keep within the magical eight minutes which Mr. Speaker announced the other day.

I start with a quotation from page 60 of the evidence to the General Sub-Committee by the Chief Secretary to the Treasury. When I asked him on what forecasts of earnings the White Paper was based, he said that officials are given instructions to do this on the basis of Government policy, namely, a 10 per cent. rise in earnings. But we all know that it will be not 10 per cent. but more. When I asked the right hon. Gentleman why that figure, which is known to be incorrect, should be included in the forecast for next year, he replied: it is a Ministerial paper and the figures are prepared on the basis of the Government policy of restraining the growth of earnings to 10 per cent. Of course, I would not at all wish to be political about this, because we are always non-political in the Expenditure Committee. We may be fairly nonpolitical in the Committee, but the Treasury is not non-political because it is filling up all the figures, to the extent that I almost wonder whether officials do not send to Treasury Ministers a blank White Paper with boxes along the side saying "Tick these where appropriate"—for example "growth will be 0 per cent., 1½ per cent., 2½ per cent., 3½ per cent." "the earnings rise will be 0 per cent., 10 per cent., 15 per cent., 20 per cent."; "inflation will be what you like."

I have never myself been so shocked as I was as the evidence came out on the extent to which the figures have been massaged by Treasury Ministers. Indeed, the whole Treasury is a sort of massage parlour. It goes on producing documents like these and the chief masseur, who has just left the Chamber, is, I believe, the most culpable of the lot.

This White Paper, at least so far as it concerns 1977–78, should be the officials' best guess as to what expenditure is going to be, what the growth in the economy is going to be, and what the revenues are going to be on the basis of unchanged tax and matters of that sort. If the figures are to be massaged in this way, I believe that the Treasury should be required to come and give evidence at the same time to the Select Committee, so that we can publish our own version of the White Paper, based not on political hopes and gerrymandering but on what is actually thought, so that Members in all parts of the House would have a chance to discuss the figures, because once one gets to the stage of manipulating the figures there is little more to be done.

I entirely accept what the right hon. Member for Down, South (Mr. Powell) said, and, of course, the key figure has been massaged in this way. The Chief Secretary said in his speech today—he also said it in the White Paper—that we must live within the growth of gross domestic product. His last words were that we must earn it first.

If we look at the figures in the White Paper, we find that the intention is that there will be 3.5 per cent. growth and 2.2 per cent. extra expenditure. Under cross-examination, however, those figures become 4 per cent. extra expenditure and somewhere under 3 per cent. growth—even if we believe that last figure. Therefore, even from within the Government's own White Paper, and for one year ahead only, the cardinal principle upon which the whole thing is erected has been thwarted. I am quite certain that it is right not to seek to carry this exercise into future years.

In the table on page 11 of the White Paper we are given some figures showing the growth of public expenditure as a percentage of gross domestic product, and it is quite clear from those figures that, give or take 1 per cent. here or there, there was a rise of about five percentage points which accompanied the entry of the Government into office and which has, broadly speaking, persisted up till the present time and is likely to persist in the year ahead.

There has been, I acknowledge, a much more strict and effective control since 1974–75, and the percentage has been held steady. This, of course, is essential in the sense that the gross national product has not grown for those four years. With hindsight, one cannot help thinking what a pity it was that the control was not imposed at the beginning of the period of office of the Government instead of after that disastrous rise.

But the question that I want to discuss is the permanent shift, it seems, of five percentage points of gross domestic product into public spending. What have we got for it? Labour Members are advocating a bigger shift. What do they think they have got for this 5 per cent. shift which their Government have undoubtedly produced? The numbers and pay of those in the public sector have increased, but I do not think that that is the main point.

There are two big elements. First, there has been a large increase in transfer payments from earners to drawers of benefit, with the result that those who have been on pension have on the whole had their standard of living increased, whereas those who have been earning have, on the whole, had their standard of living reduced. That is a policy which the Labour Government are entitled to pursue. I question whether it is right that, when the standard of living of some people is falling, that of other people should be increased. But if that is the Labour Party's idea of social justice—

Mr. Heffer

It depends on the point at which one starts.

Mr. Ridley

The process of the increase in the standard of living of those drawing a pension has been continuous in the last 20 years, and I do not grudge it. I am not quarrelling with that. What I am quarrelling with is the other major element of the 5 per cent. shift—the massive increase in subsidies. These are disguised in one way or another, or not at all, but they are intended to create jobs. About £2 billion has gone to the Department of Industry for rescues, for industrial investment and for keeping lame ducks and the British Steel Corporation going. In addition, a growing sum of money has gone to the Department of Employment for job creation programmes and similar schemes.

Has it escaped the notice of the Labour Party that, as a result of this, unemployment has more than doubled? Can it be the prescription for the future that the way to increase employment will be to increase this sort of activity? Four years is a good period over which to test these things, and there has been no stinting of resources put into the preservation of jobs, yet let us look at the debilitating effect that this policy has had on British industry. Look at the declining competitiveness of our industry, despite the fact that our currency has never been as low historically over a period of centuries as it has been in this period.

The decline continues, however, and the demoralisation and the de-industrialisation of this country have got worse and worse during those four disastrous years. But the Labour Party will never learn that the prescription for dealing with failure is not to give more and bigger doses of the same medicine as before.

6.16 p.m.

Mr. Giles Radice (Chester-le-Street)

The bark of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) is sometimes worse than his bite, and I pay tribute to the constructive role that he plays in the General Sub-Committee. Certainly his speech was superior to that of the right hon. and learned Member for Surrey, East (Sir G. Howe). I cannot say, however, that either of those speeches persuaded me that the Opposition's amendment is anything other than hypocritical.

The Opposition call for further and major cuts in public expenditure but they do not really seriously say where these cuts are to fall. About the only serious point that was made in the speech of the right hon. and learned Member for Surrey, East was that he would have to think about changing regional incentives. Certainly my constituents in Chester-le-Street will be very interested to hear that he is thinking about changing regional incentives, and I hope that they will draw appropriate conclusions.

Mr. Lawson

I think that the hon. Gentleman may have misheard what my right hon. and learned Friend said. If I recall it aright, what he said was that there was certainly no scope for any increase in public expenditure over the level of the estimated outturn for the present year. He did not say that we were looking for substantial overall cuts below the level reached in this present year.

Mr. Radice

Then where are the Conservatives' tax cuts to come from? The Conservative Party must face up to that question. If there are not to be further cuts in public expenditure, where are the further cuts in taxation, over and above those which will happen as a result of the Budget, to come from?

As the Chief Secretary has pointed out, and as the General Sub-Committee's report shows, the main problem raised in the White Paper is that of shortfall, which, as has been said, is larger than all the Government's public expenditure cuts over the last two years. Certainly this has made the task of the General Sub-Committee very difficult. It has made it very difficult to make a judgment about the spending plans and about whether, as the Chief Secretary says, it is 2 per cent. or 8 per cent. if one is looking at spending plans for 1978–79. It also makes it very difficult to estimate the budgetary stance of the Government. Most important of all, as the Chief Secretary acknowledged, this means a serious cut and a serious loss of services.

The other main criticism of the White Paper has been that it lacks a strategy and that it is not placed in the context of a medium-term assessment. I think that there is a lot in that, but we have to accept that at this time it is very difficult to make a medium-term assessment, particularly when we have regard to the international context. That is a point to which I wish to return later.

I want to say something about the growth of domestic resources. The White Paper, as hon. Members have pointed out, assumes a growth rate of 3.5 per cent. The latest output figures show that the economy is still very stagnant and that there is still very little growth in the economy, although, given the fact that consumer spending is rising and that real incomes are now rising, one certainly ought to expect more growth. There is also plenty of headroom in regard to the public sector borrowing requirement, and we are in surplus in the balance of payments. This means that there is a strong case for a stimulus in the Budget.

However—this is a very important point—it is essential that our expansion rate is one that we can sustain. We have had too many dashes for growth. We saw what happened in 1964 and in 1972–73 when we had a dash for growth. We ran quickly up against supply bottlenecks. We sucked in imports and costs went up, which resulted in an inflationary problem. It is important to remember that even with North Sea oil we must not expand domestic demand beyond the ability and the capacity of our own industry to supply it.

I now want to turn to the world context. As is generally acknowledged, the domestic scene this year is overshadowed by the international context. As the White Paper states in at least three paragraphs—paragraphs 48, 54 and 56—our rate of growth will depend in part on developments in the world economy over which we do not have much control. We must also remember that most of our attempts at sustaining growth in the past —in 1963–64, 1968–70 and 1972–73—have taken place against a background of expanding world trade. Indeed, one of the features of the period which ended in November 1973 was that world trade expanded faster than national output, certainly much faster than United Kingdom output.

But the problem is that the prospects for the world economy are the most gloomy that they have been since the war. According to GATT, world trade increased by only 4 per cent. in volume in 1977, compared with 11 per cent. in 1976. On present trends, the increase is likely to be only 4 per cent. this year—well below the levels in the 1960s.

The level of growth in GDP for the OECD countries was little more than 31 per cent. in 1977. On present trends it is unlikely to be higher in 1978, and that is 10 per cent. below its potential level. It is hardly surprising that there are well over 16½ million people unemployed in the OECD countries and that the numbers are likely to grow. In addition, we have the background of a very unstable monetary system. The monetary flows have become very unstable. Indeed, the movement of money across the exchange rates threatens to disrupt world trade.

We are facing a major international crisis caused mainly, I believe, by a deficiency of demand on a world scale. Because they are unable to absorb all their new wealth internally, the OPEC countries have been amassing surpluses—to a tune of £40 billion a year—and have put them mainly in fairly hot money and property rather than in investments. That has meant that world purchasing power has suffered. The oil-importing countries as a whole inevitably have to be in deficit. What they have done is to try to shift the deficit one from the other. That, in turn, has depressed demand and output.

In those circumstances, everyone is the loser. The indebtedness of the developing countries threatens to overwhelm all their economies. Already they are threatened by the slackening of world demand and the protectionism of industrial countries. The weaker industrial countries—the ones which have been in deficit—have had to follow restrictive policies in order to improve their balance of payments. That has affected world demand. Even countries in surplus, like Germany and Japan, find themselves worse off. The slackening of world demand reduces the expansion of their exports. As they do not feel able to expand their home demand to take up the slack, the consequences are slower growth and more unemployment. The truth is that at present we are trapped in a vicious circle of demand deficiency, reduced output and growing unemployment on a world scale, from which, I believe, only concerted international action will free us.

Here I welcome the efforts of my right hon. Friends the Prime Minister and the Chancellor of the Exchequer. They have consistently stressed the need for a major international initiative. In particular, I congratulate the Prime Minister on the steps that he is now taking to bring this about. My right hon. Friends recognise that the growth of world trade and the increasing interdependence of the national economies means that there can no longer be purely national solutions the problems of our economies.

What is required is a package of measures. Many people would agree that, to be effective, that package of measures has to include the following items: first, a co-ordinated expansion by a number of countries, including the United Kingdom, France, Italy as well as Germany and Japan; secondly, the creation of more special drawing rights by the IMF to help those countries in deficit and to prevent further deflation; thirdly, long-term loans by countries in substantial surplus, particularly to the developing countries. OPEC countries, which are spending about one-seventh of their surpluses in loans to the developing countries, could step them up considerably, as, indeed, could Japan. There is also a strong case for the development of the so-called Ortoli facilities to help to finance European investment.

Fourthly, we need more stable exchange rates. We must move away from the instability of the present system to a more orderly monetary system of a kind envisaged by Bretton Woods.

Fifthly, we need more trading agreements along the lines of the Multi-Fibre Arrangement. If we are to prevent a retreat into a "beggar-my-neighbour" protectionism, we must provide more effective arrangements to ensure that essential industries are safeguarded from both dumping and disruptive trading. In short, what we need is a major change in international behaviour—a change on the scale of Bretton Woods.

What is required is political vision and political will of the kind that led to the Marshall Plan and to the reconstruction of Europe after the war. We are entitled to expect—indeed, to demand—this kind of creative international co-operation, because the failure to act together will inevitably lead to "beggar-my-neighbour" protectionism, further unemployment and declining living standards. Democracy itself could be threatened in many countries. We must act before it is too late.

6.28 p.m.

Mr. David Atkinson (Bournemouth, East)

I am grateful to you, Mr. Deputy Speaker, for calling me to make this my maiden speech in such an important debate. It is a pleasure to follow the hon. Member for Chester-le-Street (Mr. Radice).

First, I want to record the gratitude of the people of Bournmouth, East for the long period of service of my predecessor, John Cordle. During the by-election campaign last November, I was particularly impressed by the many expressions of appreciation that I received on the doorsteps for the generous help and personal advice that he gave to so many of his constituents for which they will always be grateful.

I am extremely privileged to have the opportunity to represent such a pleasant residential seaside constituency with so many attractive and natural amenities. To most people, Bournemouth is a first-class, all-the-year-round holiday centre. Many hon. Members present will themselves have experienced the hospitality of its fine hotels and excellent conference facilities. It is also an equally attractive place to retire to. Perhaps for that reason, Bournemouth is not without its special problems, because it has twice the national average of elderly people. More than 25 per cent. of its population are over the age of 65.

Many of those people have fought to keep this country free. They have sacrificed to bring up and educate their families. They have saved and invested their savings throughout their working lives in order to retire and enjoy their remaining years in prosperity and security. That is a right they have earned and which they have deserved.

However, in the past four years they have seen the value of their savings reduced by half, their dividends restrained and their investment income not only falling short of inflation but surcharged. As a result of the value of their homes, in an area where houses are not cheap, they are threatened with the prospect of a wealth tax. That is not what they anticipated when they retired, and it is not what they deserve.

It may come as a surprise to some hon. Members to learn that, far from being the affluent place that it is supposed to be, Bournemouth, according to figures issued by the Department of the Environment last month, is top of the table for towns with the most claims for rate rebates. A total of 28 per cent. of Bournemouth ratepayers claim rebates—twice the national average. This shows just how hard elderly people in particular have been hit in recent years. Unlike many other people, they have little opportunity to top up their incomes and maintain their living standards.

On their behalf, I urge the Chancellor of the Exchequer to recognise the elderly as today's new poor and to treat them as a very special case in his forthcoming Budget by increasing significantly the age allowance so that they may keep and enjoy more of the income from their savings than they are allowed to keep at present.

Another characteristic of my constituency, which has little manufacturing industry, is the large number of small firms. These are run by dedicated men and women and often whole families. They are intent on supplying a personal service. They must compete in order to survive. They have not heard of the eight-hour day or the five-day week and they do not clock on and clock off. The verb "to strike" is not part of their vocabulary. They cannot take a holiday together, because that would mean closing the shop and letting the customers down.

It is they who, by endeavouring to reap a reward for themselves, enrich our community. It is they who offer a quality and variety of goods and services which no large impersonal chain or nationalised industry could hope to match. They do not seek special favours from the State and they are willing to pay taxes to benefit all—provided that they have the incentive to make a profit in the first place.

Yet it is they who have been let down by successive Governments who have passed legislation which has made it difficult or impossible for them to survive. And, when so many of them give up the struggle and sell out to the large groups, we are told that the trend is inevitable. It is only us in the House who make such a trend inevitable, and I hope that the Lever Committee on small businesses will appreciate this fact.

May I suggest to the Chancellor of the Exchequer one area where he can, I believe, produce a sigh of relief as opposed to howls of anguish from 500,000 small businesses? They would no longer be legally obliged to be registered for VAT if the Chancellor were bold enough to raise the tax threshold to an annual turnover of £20,000 from the present £7,500. According to the reply to my first Written Question in January, the annual loss of revenue would be about £40 million. This loss, of £80 per business, would be made up in no time at all through the extra taxation from the increased income which would result on their being free of the burdensome commitment of administering VAT, apart from the bureaucratic savings resulting from such a move.

Retired and elderly people and small businesses are common to every constituency and the key to their prosperity is the key to the country's prosperity—namely, to reduce taxes. There is only one sound way to cut taxes. It is not by blowing the revenues from the North Sea. It is not by maintaining a high public sector borrowing requirement. It can be achieved only by reducing Government expenditure—the subject of this debate.

It may be an academic argument whether public expenditure is partially or wholly responsible for our present inflation, but none of us can deny that excessive taxation is a cause of inflationary pressure and that taxation and public expenditure have accounted for a growing proportion of our national income since records began. A century ago the proportion was 10 per cent., in 1900 it was 15 per cent. and by 1958 it had risen to 40 per cent. Today, although the Chancellor will argue various interpretaions of national income, the proportion is more than 60 per cent.

The point to which I wish to draw attention is that every Government in the past 20 years have left office spending a greater proportion of our national income than when they arrived in office. Whereas in 1958 a married man on average earnings was paying less than one-tenth of his income in taxes, he now pays three times as much.

In the light of results, I ask whether greater public expenditure has meant greater public efficiency. Spending on education has trebled since 1960, but there is no evidence that standards in our schools have improved by that much, if at all. Spending on housing has increased by nearly 1,000 per cent. since 1960, but not only do we still have a high number of homeless, we have a record number of empty dwellings. Spending on health has increased by 500 per cent. since 1960, yet, despite long waiting lists, the number of hospital beds is being reduced and wards are closing.

We are spending more on social services than ever before, but, as chairman of a county council social services committee, I know that we are nowhere near satisfying needs and that no social service authority in the country is meeting its statutory obligations. I question whether these authorities ever will, even though it is an area in which few would argue that our resources should not be concentrated.

For all the £8,000 million losses, compensations, subsidies and write-offs in our nationalised industries, do we enjoy efficient and profitable State services? Ask the consumer; ask the taxpayer.

I ask whether it is not a fallacy that for services to be good, it is the State which must spend the money. I urge that Parliament—not Government—should consider whether better results would not be achieved by using an altogether different approach—although I realise that to suggest substitutes for public expenditure would be venturing into controversial areas and trespassing on the kindness and indulgence that the House extends to a maiden speaker.

However, I hope hon. Members will agree that I am stressing the obvious when I say that there must be, and will be, a point at which the amount of State spending of our private earnings becomes so high that there can be no turning back because it will have become so much a part of our way of life that no Parliament or Government will be able to reverse it. Then, we in this House shall no longer be servants of the people; we shall be servants of the State. This should be one of the main points at issue in this debate. The plain fact is that Government spending has risen, is rising and should be diminished.

6.40 p.m.

Mr. Eric S. Heffer (Liverpool, Walton)

We have heard an extremely honest, cogent and fluent speech from the hon. Member for Bournemouth, East (Mr. Atkinson). It is not easy to make a maiden speech in the House of Commons. I find it difficult to make a speech even now, and I have been here for a number of years—

Mr. Pardoe

I do not believe it.

Mr. Heffer

I am glad that the hon. Member did not keep strictly to the tradition of making a non-controversial speech. I always feel rather sad when new Members come into the House and are non-controversial. They were not elected to be non-controversial. They were elected on a political programme and for their political ideas. They were elected to fight for what they believe in. It is always welcome when a new Member indicates from the word "go" that he or she has very firm ideas and will fight in his or her corner for certain political concepts.

In that sense it is a very great pleasure to follow the hon. Member—and I mean that sincerely. I hope that we shall hear more from him, but I warn him that he will get only one chance not to be interrupted and not to have a difficult time. Things will change from now on.

I turn to the speeches made by my right hon. Friend the Chief Secretary and the right hon. and learned Member for Surrey, East (Sir G. Howe). I think that my right hon. Friend made a good speech within what I would call his "cash limits". It is quite clear that my right hon. Friend, and all right hon. Members on the Government Front Bench, have to fight on two fronts. On the one hand, they have to fight the Conservatives, aided by one or two others opposite who sometimes put their case more effectively. These Members argue that there should be strict cash limits, strict control of money, no planning, cuts in public expenditure and so on.

On the other hand, my right hon. Friends have to face those of us on this side of the House, behind them and below the Gangway, who ask exactly the opposite. In fact, my right hon. Friends listen to the Opposition far too often. If we have any criticism of the Government, it is that they do not listen to us enough and they listen too much to the Opposition. That is a great pity, because as a result they get into political difficulties and the country gets into economic problems.

As the Government never listen to us and never carry out our policies to the extent that we would wish, no one can prove whether we are right or wrong. Unfortunately, our ideas are not accepted and are not put into operation. We have had Tory ideas for years. They have been implemented by Government after Government after Government. As a result, we are in a crisis and the country faces economic difficulties. This is because we have carried out the Opposition's ideas.

I want to look at the document itself. To some extent I agree with the arguments, though not with the political ideas, of the right hon. Member for Down, South (Mr. Powell). A lot of what he said about the document was of great interest. Item 62 on page 14 says: Forecasts of borrowing requirements are subject to a wide margin of error. One can say that again. I remember going with a deputation from that wicked body, the national executive of the Labour Party, to discuss these matters with the Chancellor of the Exchequer when the earlier White Paper came out. We were told that the public sector borrowing requirement meant that we had to do something or other, and we were given the figures. We asked how the Chancellor knew that these figures were right. He told us that they might not be right but that was what was required. Of course, they were wrong.

Some of us at the time had the temerity to say that we thought the forecast figures were wrong. We are merely simple Back Bench souls in the Labour Party, but even we can see that they were wrong. The Chancellor of the Exchequer had this battery of civil servants at the Treasury, and the funny thing is that they were wrong and we were right. When it comes to forecasting, we can certainly accept the statement that these forecasts are subject to a wide margin of error. That point is 100 per cent. correct.

The last paragraph says that, after four years of no growth, There is now, thanks to North Sea oil and to the adjustments achieved in the past year, an opportunity to move to a higher rate of economic growth than has been achieved for many years. I agree with that, but we must not rely on North Sea oil to save this country from its problems. The hon. Member for Bournemouth, East made that point. He is right to say that it would be quite wrong to rely on North Sea oil. Income from North Sea oil will go up for a period, then it will level out and then it will decline. For this reason, we must not rely on it.

I differ from the hon. Member and other Opposition Members on the use to which North Sea oil revenue should be put. Conservatives see it as a great opportunity for bringing down taxes. They also want to use it for overseas investment. We have heard a whole series of ideas from the Opposition on this matter. I think that we should use this money for investment in this country. The truth is that, if we look at investment per worker in Britain compared with Japan, West Germany and France, we find that we are well below them. That has not happened only since the Labour Party came to power four years ago.

In fact, Sir Fred Catherwood made a speech in which he gave the 1975 figures. Those figures applied to a period when we had been in office for only one year, after being out for four years. On the basis of those figures, we can see the total failure and lack of investment in Britain compared with our major competitors.

A grand opportunity is presented in the White Paper to use oil revenues intelligently to bring about investment in industry. However, investment in manufacturing industry by itself will not solve the problem of unemployment. On the contrary, investment can lead to further unemployment because, the more machinery that is put in, the fewer the number of workers required, and, therefore, more and more workers will be thrown out of a job. Therefore, alongside the question of investment in manufacturing industry we need to see the creation and development of new industries.

We must plan for these things—and this is where we reach a fundamental difference between the two sides. The Opposition would leave all these matters to chance. Their view is "Let us not plan anything. We do not have to look ahead. We have only to leave these things to competition and hope for the best, and everything will come out all right in the end." I have a message for the Conservatives, based on the years I have spent studying what happens in the world. The process does not work in that way.

We know what happens where one has a totally competitive society without any element of planning. The right hon. Member for Sidcup (Mr. Heath), who used to lead the Tory Party, understands these matters well. He and his colleagues recognised that one had to have an element of planning in intervening in the economy, even within the confines of the existing capitalist society. That is where we have such a fundamental difference on these matters.

I wish to deal with the speech made by the right hon. and learned Member for Surrey, East. He is not the most scintillating speaker in the House, but now and again scores a few minor points. One was the point he made that the Chancellor of the Exchequer came into the Chamber for only a few minutes and then disappeared. However, my right hon. Friend the Chancellor was not down to speak in the debate, because that job was left to the Chief Secretary. When the right hon. and learned Member for Surrey, East had delivered himself of his speech, he disappeared. I have not seen him since. Having made his own remarks, he did not stay to listen to even one speech.

We all know the old saw about people living in glasshouses not throwing stones. The right hon. and learned Gentleman should not criticise the Chancellor and then, having made his own speech, walk out of the Chamber and not return. I appreciate the fact that nobody can spend all his time in the Chamber, because Members have to go for a cup of tea or see their constituents, but the right hon. and learned Gentleman, having made a speech of the kind he did, should be here to listen to the debate as a whole, particularly as he occupies the Opposition Front Bench.

Let me refer to some of some of the points in the right hon. and learned Gentleman's speech. I get a little confused when I consider the cuts that are to be made by the Conservatives. Some Conservatives say "Yes, we must cut public expenditure", whereas others take the view "Let us not say too much about these things, and let us not let on what we are going to cut." The question of what they intend to cut is the whole point of the argument.

My right hon. Friend the Chief Secretary referred to transfer payments. In an intervention I tried to spell the matter out. Transfer payments will mean that there will be cuts in unemployment, sickness and disablement benefits, as well as cuts in pensions, redundancy payments and other areas. I hope that the people of this country will understand that when the Conservatives speak of cuts in public expenditure, those are the ways in which the cuts will be made.

The Tories then say that we should get rid of all the subsidies to private industry. I am not enamoured of such subsidies for other reasons. If subsidies are given without public control, they must be regarded as a handout if people use those subsidies for their own benefit and not for society as a whole. But if cuts are made in subsidies to private industry, we cannot escape the fact that that will mean further unemployment.

I must make clear to the hon. Member for Blaby (Mr. Lawson) that if he seeks to deploy his argument on this topic, he will not have much support from industrialists. When I was a Minister in the Department of Industry, industrialists were lining up at the door. They said "We are having a bit of a problem. What can you do to help us? Will you be able to give us more assistance?" One has only to ask any Minister from that Department to know what actually happens. I am referring not to theoretical arguments but to the realities of the situation.

The Tories say they will cut subsidies, and they have also made clear that they intend to impose higher charges for school meals and also higher rents. I hope that all these matters will be borne in mind by the people of this country.

I wish now to turn to the subject of the construction industry. The Second Report of the Expenditure Committee contains a memorandum from the National Federation of Building Trades Employers, from which I should like to quote. Nobody will suggest that I am the pin-up boy of the NFBTE.

Mr. Lawson

The hon. Gentleman is not mine either.

Mr. Heffer

I know I am not the hon. Gentleman's pin-up boy. I am certainly not the pin-up boy of the federation, particularly after the Labour Party issued its document "Building for the Future in Britain". The federation does not favour cuts in public expenditure. It says in paragraph 10 of its memorandum: There is no evidence in the White Paper that any of the shortcomings of the allocation of public expenditure in 1977–78 are to be rectified to any significant extent in the next four years. I know that my Governmental colleagues would object to that. They would say that the Government are to put back into the construction industry in the next two years a total of £800 million. I agree that they are allowing for a figure of £400 million a year. However, I must tell the Government that, although I support any public expenditure for the construction industry, I do not regard it as sufficient. The federation makes a very important point in that context.

The report also contains a memorandum from Shelter, which says: First, there is a desperate need for more capital expenditure on housing, particularly house improvement. The 1977 house building figures are the worst (with the exception of the three day week year of 1974) for 26 years". The memorandum goes on to instance home improvements.

I hope that the Government will consider a 75 per cent. grant for home improvements rather than maintain the present 50 per cent. figure in areas of high unemployment. This matter requires tight control by the local authorities in terms of spending, but I believe that my suggestion could be an immediate way to help to put construction workers back to work. I hope that my hon. Friends will recognise this.

It seems necessary to point out to Conservative Members that the idea of cutting taxes is not new. It is not their proposal. They imagine that they are the only ones in favour of cutting taxes. The package that the national executive committee of the Labour Party has put to the Government contains the argument that the way to boost the economy is that one-half of the boost should be by way of taxation cuts and that the other half should be directed to public expenditure.

The argument for taxation cuts depends on whose taxes we are cutting. I am not in favour of massive taxation cuts at the higher end of the tax scale, or even in the higher and middle tax brackets. I am in favour of taxation cuts at the lower end and the middle of the scale—in other words, the average. It is important that that should be done.

We have suggested ways in which it can be done. We argue most strongly that there should be public expenditure to give extra assistance to the construction industry. Money should be made available from public expenditure to restore the cuts that have taken place in the provision of health services and education. Those are areas that can immediately give employment to workers who have been thrown out of work as a result of cuts or have not been taken on because of the imposition of cuts. That is not because there have been massive cutbacks, although there have been cutbacks, but because projected plans have not gone as far as they should have proceeded.

This is an important and fundamental debate. It has always been so. I am shocked when I attend these debates and find so few Members coming into the Chamber. I am not criticising all those who are not present. I accept that they have many other activities. However, the debate is central to the future of our people and to the whole issue of public expenditure, involving as it does the level of public expenditure and how it is used.

The effectiveness of public expenditure and our methods of using it are central to having a civilised society. That is why I fundamentally disagree with Conservative Members who constantly argue for cuts, cuts and more cuts. Those cuts can only mean worse services, poor services and a lack of development, whereas we believe in a civilised society. That means accepting the principle that public expenditure is essential to that sort of society.

7.3 p.m.

Mr. John Pardoe (Cornwall, North)

First, I wish to say how great a privilege it is to follow the hon. Member for Bournemouth, East (Mr. Atkinson) in a notable maiden speech. The hon. Gentleman told us something about the problems of his constituency, but accomplished what I think was a stupendous feat: he made Bournemouth sound like a depressed area. I thought that that was impossible, but he did it as near as anyone could. I congratulate him. If he can do that, he can argue the case of his constituents in future in the House.

I agree with everything that has been said about small businesses. I, too, welcome the fact that at last there seems to be a consensus growing on all political sides that there has to be positive discrimination in favour of small businesses. I hope that we shall see many more steps in that direction in the near future.

The Select Committee has given the debate valuable help in its comments on the White Paper. I echo the remarks of its Chairman, the hon. Member for Nottingham, West (Mr. English), in thanking those who contributed to its comments. The contributors were not only Members of the House but outside commentators. I have one or two differences with the Select Committee to express, but it has helped the House by making possible a much more open way of conducting the political debate, which is wholly welcome.

The concept that government may be carried on in dark corners is entirely against the spirit of the times, and does not lead to good government. I am delighted that the Select Committee procedure, especially in this area, is beginning to open up the process of government. Would it not be much better if we had a Select Committee on the revenue side of government, so that we could open up the Budget to a greater extent than is now the case? I accept that great strides have been made in that direction in the past 12 months, but there is still far to go.

The matters on which I mainly dissent from the Select Committee's report are contained in paragraphs 10 and 11. Before turning to those matters, I must say that it is my opinion that the Committee's Chairman, the hon. Member for Nottingham, West, stressed the wrong point. He laid stress on underspending. I suppose that it is a theoretical truth that if we underspend rather than overspend we are not getting it right and that for that reason public spending is still out of control. However, there is a substantial difference between the two concepts. There is more than one state of being out of control, some such states being more out of control than others. I do not think that it would be helpful to the control of public spending for the hon. Gentleman's criticism to gain ground.

We are all aware of the sort of thing that happens among local authorities on, for example, 29th March. There is the reaction "For goodness sake, we have some money to spend and we must decide where to spend it. If we do not spend it now, we shall not get it next year. We have underspent and the Select Committee is criticising us for underspending." When that is the reaction, it means almost inevitably that money is badly spent. Therefore, the Select Committee should not be giving credence to the concept that authorities, Departments or nationalised industries should spend their allocated sums willy-nilly to accord with a forecast made 12 months ago. That is not a strong point. I hope that the Committee will drop it.

As I have said, there are matters in paragraphs 10 and 11 from which I dissent. I can find no evidence that children in England and Wales are maleducated by reason of being educated in buildings constructed before 1919. I honestly believe that that argument is a load of codswallop. I represent part of Cornwall, an area that has the oldest school buildings in the country. Cornwall has the largest proportion of pre 1919 primary schools of any country in Britain. It is not true to say that that has any effect on the quality of primary education. Therefore, I consider that the Committee is putting forward a bogus argument.

I do not agree with the argument advanced in paragraph 11 dealing with the Treasury official's view that 'a lot of' capital expenditure tends 'to push up the need for current expenditure' ". The paragraph states: More replacing of old buildings would not be likely to do this and should lead to a reduction in maintenance costs. I have not seen much evidence of that anywhere. The paragraph continues: much capital investment must result in gains in productivity, when all the benefits are properly assessed. It specifically refers to new port facilities and roads. I see no evidence that new port facilities or roads have improved operating efficiency in Britain. This is an argument that we all used in the early 1960s when we called for better road networks and better ports, but I have not seen it proved, I have seen no document in which it is proved. The Committee should try to prove it before it asserts it. I should be delighted if the argument were proved, but I doubt whether it can be.

The right hon. and learned Member for Surrey, East (Sir G. Howe) made a curious speech. He exhibited his blind spot, which is a positive obsession with all things American. Surely he should have learnt his lesson, having gone to America to import to Great Britain American labour legislation. Surely that should have taught him that we cannot successfully go to America for everything that we want to improve the British economy.

The right hon. and learned Gentleman's argument is that America, by being a free economy, by doing all the wonderful things that he wants Britain to do, by having that get-up-and-go and entrepreneurial spirit, has succeeded and created a whole host of new jobs and wealth. When I said to him that Switzerland and Germany are exhibiting the same entrepreneurial flair and that Switzerland has lost 300,000 jobs, or 10 per cent. of its work force, since 1973, and Germany has lost about 1.8 million jobs, which is about 6 per cent. to 7 per cent. of its work force, since 1973, he merely quoted unemployment figures at me and asked "Is it not splendid that Germany has been able to keep down its unemployment?"

Any country can keep down unemployment if it can sack its foreign unemployed and send them over the border back to Yugoslavia, Turkey or wherever it may be. The fact that Germany's labour force has reduced, that it has lost this number of jobs and yet can have lower levels of unemployment than elsewhere must surely mean that what I have said is true. I gave the figure to the right hon. and learned Member for Surrey, East because he did not use it. The ludicrous figure for comparing unemployment levels is the Swiss figure. There are 8,000 people registered unemployed in Switzerland. We all know that is impossible. There must be something wrong with it. It is not in any sense a measurement of the spare capacity in the Swiss economy. The figure is 8,000 only because the Swiss have been able to send so many foreign guest workers over the border.

Mr. Lawson

My right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) was comparing the German economic experience as a whole with our own. Does the hon. Gentleman agree, if he is to be fair, that if we could have the Germans' economic problem and they could have ours in return, we might be better off?

Mr. Pardoe

It depends where we start. If we could go back to 1870 and have the German economic record since then rather than our own, yes, I should prefer that. But if the suggestion is that the policies adumbrated by the right hon. and learned Member for Surrey, East will somehow create jobs in Britain, the examples of Switzerland and Germany do not prove that proposition. Therefore, we should not use that argument. Of course, it seems to have worked in America, but it does not necessarily mean that it will work here.

The right hon. and learned Member for Surrey, East, as always, failed to answer the fundamental question that must be put to anyone who suggests cutting public expenditure. He really must say some time what a Conservative Government will not do that this Government now does. These matters must be spelt out clearly if we are to believe that a Conservative Government have a magic formula for the management of the economy. When taxed, the right hon. and learned Gentleman, unbelievably I thought, started with a latter-day equivalent of milk snatching—in other words, school meals charges. We have been round that course several times in the last 20 years. It is becoming boring. Putting up the price of school meals, necessary as it may be in some senses, will not solve the problem of public spending.

In any case, who in this House really believes that to teach a poor child Latin grammar, or even the three Rs, is more important than giving him a good square meal each day? Which will develop him more as a citizen for the future?

Mr. Raison

Of course a child must have a square meal every day. The question is whether that square meal must necessarily be administered through the education service. The school meal is just as essential as proper education. That is a completely false question.

Mr. Pardoe

If a child has to have a square meal—the hon. Gentleman appeared to suggest that may be the case—where will he get it other than at school? If the hon. Gentleman suggesting a new meals-on-wheels service in the evening for poor kids? Of course not. Therefore, it has to be given at school and it must be administered through the education service. I cannot see any argument against that.

The right hon. and learned Member for Surrey, East then spoke about tighter management of existing programmes. That is splendid. All hon. Members on both sides of the House are in favour of that. It is certainly needed. We need an efficiency audit. But what proof did the right hon. and learned Gentleman give us that any of the measures adopted by the Conservative Government between 1970 and 1973 improved the efficiency of public spending? We have the example of the reorganisation of the Health Service. We know what that has done for the efficiency of public spending. I could go on—water authorities, local government reoragnisation and so on. One only has to name it and they have got it. Inefficiency is the Conservatives' middle name.

We then come to regional development grants. We need this matter to be spelt out. I hope that the hon. Member for Blaby (Mr. Lawson) will say something specific about this matter. What industrial incentives are the Conservatives not going to give in future? The hon. Gentleman and I may agrre that industrialists cannot be bribed to invest, but the evidence shows that, whereas that may be so, they can be encouraged to invest in particular locations. We may not be able to increase the totality of investment in the economy by incentives, but we can certainly encourage the direction of investment geographically.

I represent an impoverished, low income, high unemployment, development area. What regional incentives would a Conservative Government cut off? Do the Opposition agree that the Government were right this week to extend the small firms employment subsidy to the assisted areas? That will be of enormous benefit to the small business sector in Cornwall. Will the Conservatives end that subsidy? Do they agree that the Government were right to extend it? Let us have answers to those questions.

Housing subsidies come next. That subject is a huge bag into which one can dip one's hand and pull out any little goodies one wants to spend. Housing subsidies have grown far too large over the years and have undoubtedly led to inefficient use of housing resources. This nation is over-housed, not under-housed. We are under-utilising our housing resources in terms of occupation. We need to reduce this inefficiency. We can probably do that only by changing the whole basis of subsidy in the rented sector and, indeed, of mortgage relief in the owner-occupied sector because that encourages under-occupation, too.

How fast can we move? Millions of families have built their budgets on established figures of subsidies and mortgage relief. It is absolute madness to pretend that we can end that suddenly—even over two or three years. Therefore, that will not be a major source for reducing public spending quickly in future.

There are two overriding questions behind our consideration of public spending. First, how far do we believe that the Government should now expand demand? Secondly, how far should this be done through increased public spending and tax cuts?

My answer to the first question is that the Government should now expand demand quite rapidly. A 3½ per cent. growth rate—whether that is a forecast or an assumption, it is in the White Paper—is not enough to bring production into line with capacity. The latest Midland Bank Review contains a fascinating study by two Cambridge economists, C. H. Feinstein and Professor Reddaway. On page 16, they say: The crucial question for demand management is, therefore, the pace at which the economy can be brought up towards its potential. On present Government policy the Treasury forecast is that GDP will grow at an annual rate of 4½ per cent. from the second half of 1977 to the first half of 1978, and will then slow down to an annual rate of only 2 per cent. between the first and second halves of 1978.… This would in our view be an unnecessary cautious approach. The primary objective of policy in 1978 should be to maintain in the second half of 1978 (and thereafter) the growth rate of about 5 per cent. per annum established in the first half. I agree with that completely, and it leads me to certain conclusions. It obviously leads me to the conclusion that the Government should expand demand. The Government believe that there are constraints on such expansion. First among those constraints is the balance of payments. That cannot be a primary constraint for any Western Government at the present time. Because of the OPEC surplus, there must be a mirror deficit in the West.

The OPEC surplus in 1974 was $62 billion. In 1971 it was $31 billion, and everybody started to whoop with joy and say "It is all right. It is coming down of its own accord. There is not going to be a problem. If it halves next year it will be splendid. We shall be all right." It has not been halved. In 1976 the surplus increased to $42 billion. The OECD estimates that this level of surplus has continued in 1977 and will continue in 1978. Therefore, no Western country with the resources of North Sea oil on its balance of payments account should be thinking of running a surplus at this stage of the world economy.

The second major constraint which the Government recognise is the fear of wage-led inflation. This is a very real danger without an effective and enforceable incomes policy. The Government have their remedy there. If they fail to use it, there is no doubt that unemployment and a low growth rate will be due to the failure to have an enforceable incomes policy. The hon. Member for Bristol, North-West (Mr. Thomas) shakes his head. It is very easy to separate the arguments of radical economists in this country. I do not know a radical economist who would agree with the hon. Gentleman about the expansion of the economy who does not also enter the caveat "but with an enforceable incomes policy". They all say it. Only the Tribune Group wishes to have its cake and eat it and, consequently, lives in cloud-cuckoo-land.

All this leads me to conclude that Government borrowing should be higher than it now is. There is plenty of room for greater borrowing. The argument about crowding out does not exist. The Government have had to step in and stop the building societies lending money because they have got so much. In industry there is a lack of borrowers. This borrowing should not be ploughed into public spending.

That brings me to the answer to the second overriding question that I mentioned, income tax cuts versus spending increases. I believe—in contrast to the hon. Member for Liverpool, Walton (Mr. Heffer)—that all the emphasis this year, anyway—must be on income tax cuts first of all because we need to create a new psychological climate in the United Kingdom industry, and, secondly, because it will have a substantial effect on wage push. The Government are desperately afraid that increasing the retail price index will have its effect on wage push. Nothing will have a greater moderating effect on wage push than to put more net-of-tax money into the pockets and pay packets of the average employee and trade union member—and that can be done by cutting income tax.

The final matter here is the effect of those cuts on the balance of payments. I am very well aware that there are those who argue that if we cut income taxes and give the increased boost that way, it will all go into Japanese and Italian goods. Therefore, they say, "We must put it into the Health Service, not because it needs it, though it certainly does, but because we do not employ too many Japanese nurses." This is a fallacious argument. If we pay the money to nurses, they will spend the money in the economy and they may just as well spend it on video cassette recorders or Japanese cars or other Japanese goods. In the second stage the money, therefore, works through, wherever it is put—whether it be on education or on another sector of public spending—in exactly the same way as do income tax cuts.

Mr. William Molloy (Ealing, North)

There is an overwhelming case for tax cuts, but they do not take into account the contribution to reducing unemployment. If one has a balance of public spending with tax cuts, one can make a contribution also to reducing unemployment, putting men in work. That must aid the economy.

Mr. Pardoe

I dissent entirely from that view. One can expand demand for employment just as well by putting more purchasing power in the pockets of people to spend as they will as by increasing public spending. It is a question not of which is more effective in creating employment but of which will work the quicker and which is right to do this year.

I believe that the emphasis, therefore, should be on tax cuts. The Government have their priorities approximately right in the White Paper, but I note that the Conservative Party does not agree and has tabled an amendment which refers to the balance between capital and current expenditure. Of course, it would be right and proper to increase capital spending. According to population forecasts, there is another good argument for increasing public capital spending in many areas. The number of pensioners and the young—I define the young as being between the ages of 0 and 15—as a proportion of the working age population will decline from around 71 per cent. in 1976 to 66 per hundred of the working age population in the year 2001. The interesting feature is that the forecasts show that in 1991 they will be around 64 per hundred of the working age population. In other words, the figure will go down through the 1970s and 1980s and will then begin to rise again. Therefore, we ought to spend the money now on providing the capital structure, the infrastructure particularly. We shall have to spend more on current account, looking after the non-working population, when that starts to increase from 1990 onwards. There is, therefore, a good case for increasing capital spending now.

But if we are to increase capital spending we can do so only by cutting current spending—the Opposition have not said where—or by somehow increasing the totality of public spending. These are incredibly difficult choices to make.

The Conservative Party's amendment is far too facile and does not spell out how it would make such a choice. The second part of the amendment refers to the hoary old idea that we are overtaxed and spending too much in the public sector. There is, by comparison with other economies, no evidence for that. In terms of taxation we are about the middle of the industrial nations' league in the proportion of our gross national product that is spent in the public sector. Therefore, that is a nonsensical argument.

In the argument about expenditure and taxation we cannot conclude that public expenditure and public taxation are too high. We can conclude that in the present state of the economy the borrowing requirements ought to be higher and that that ought to be used to expand demand through income tax cuts. There are some priorities in public spending. The Health Service is an obvious one. I should hope that child benefit is another. Apart from those two, I would give increases in public spending over and above that which the Government have provided for in the White Paper a miss this year and go for substantial tax cuts.

7.29 p.m.

Mr. Ivor Clemitson (Luton, East)

I want to try to assess the White Paper in the light of what seems to be arguably the central economic and social issue that we face—unemployment. I say that it is the central issue—or one of the most central issues—for three reasons. One reason is obviously that of the suffering which unemployment causes to those who are on the receiving end. The second reason is the equally obvious one that if we have high or, possibly, rising unemployment, it provides the seed bed from which poisonous weeds of racialism grow and threats develop to our democratic society and freedoms.

Thirdly, it is important because on how we approach the question of unemployment depends what policies we adopt across the whole range of our affairs, such as education, health and overseas aid. Every element of public policy becomes changed if we adopt different attitudes towards the unemployment question.

There are two basic considerations to which we must address ourselves in discussing the problem of unemployment. The first is concerned with the effects of technology and of investment. There is already very considerable evidence, which I do not have the time to detail, that investment in industry does not necessarily result in increased employment. The reverse is more likely to be the case. The prospect is that the pace of technological change will accelerate rather than decelerate, and, given the fact that it is acknowledged in any case that this country has fallen behind others in terms of efficiency, productivity and competitiveness, the chances are that manufacturing industry will in future require fewer rather than more workers. We need investment, higher productivity, greater competitiveness and greater efficiency, but we must acknowledge that in the process we shall probably need fewer industrial workers.

The second consideration concerns the size of the work force itself. Between 1971 and 1977 our work force increased by 1,206,000, and, incidentally, we have a higher proportion of the total population in the work force than has any other Common Market country, with the sole exception of Denmark. Each year, the work force is expanding by about 170,000. Forecasts which appeared in 1976 suggested that by 1991 the work force would have increased by 2 million. As I say, we have a higher proportion than many other countries, despite the fact that our total population in absolute terms is falling.

If I am right about these two basic considerations, we have the prospect, therefore, of fewer jobs in industry and a rapidly increasing number of seekers after jobs. The question is what we do about it. Can we create the number of new jobs needed to fill the gap and reduce unemployment to acceptable levels? I believe that we cannot, and I shall explain why later in my remarks.

I suggest that we have to realise that employment is only one of a number of alternatives to unemployment. There are many other alternatives, and I am glad to see that they are now being canvassed seriously—for example, in the first chapter of the TUC's "Economic Review" for this year.

We could encourage more young people to stay on in full-time education. At the moment, only 30 per cent. of our young people do so, and my guess is that that does not compare very favourably with certain other countries. We could build on the time-off provisions in the Employment Protection Act to enable more adults to have longer periods away from work. Why not have sabbatical leaves for educational or other purposes? We could shorten the working life through earlier retirement. There are many options.

What we must do is formulate a policy of alternatives to unemployment, not merely as short-term palliatives and not merely as ways of shifting people from one column of statistics—unemployment—into another column of statistics but as a positive way of enhancing the quality of people's lives. In my view it is vital to get on with this now, because, if such a programme does not run concurrently with a programme of increased investment, the very purposes of the investment will be frustrated and people will adopt a defensive attitude which will mean that the greater efficiency which we seek will not be achieved.

Given that inevitably very simplified and truncated analysis of the problem, we then have to consider how the White Paper stands up to a critique based upon it. What assumptions does the White Paper make about unemployment? The table on pages 92 and 93 of volume II shows the number of people expected to be in receipt of unemployment benefit. For 1977–78 it shows a figure of 655,000, rising to 710,000 next year and then falling to 510,000 in 1981–82. Of course, we all know that for various reasons not all the unemployed receive unemployment benefit. Some of them have been unemployed so long that they are now out of benefit. Others have not a sufficient contribution record. But presumably, given those figures, the forecast is that there will be a reduction in unemployment, and the expected reduction appears to be between 300,000 and 500,000.

Mr. Ron Thomas

I have been studying this table. Might it not also indicate that, more and more, the hard-core unemployed will go from unemployment benefit to social security benefit and that we could still have 1.5 million or 2 million unemployed, even given those figures?

Mr. Clemitson

I am grateful to my hon. Friend because that is an alternative explanation, and a very pessimistic one.

Mr. Thomas

Perhaps we could be told.

Mr. Clemitson

In a sense, I am trying to give the benefit of the doubt to the Government.

Mr. Thomas

My hon. Friend should never do that.

Mr. Clemitson

I am assuming that the pattern of unemployment in terms of duration will not be noticeably different in 1981–82 from what it is today. It seems to me that the Government are thinking in terms of a reduction in unemployment of between 300,000 and 500,000—in other words, a reduction to about 1.1 million or 1.2 million unemployed.

How does that compare with the now famous job gap of the Manpower Services Commission? In paragraph 219 of its Review and Plan for 1977, the Commission says that, with the increased work force, 1.34 million jobs will be needed by 1981 to reduce unemployment to 800,000. Assuming the more modest target in the White Paper which I have circulated to be between 1 million and 1.2 million unemployed, and assuming that we are not to have any of the alternative measures to unemployment which I mentioned earlier, we are talking about the creation of about 1 million jobs, given the increase in the work force and given a certain reduction in unemployment.

If my argument is right, we cannot look to the manufacturing sector to provide any of those jobs. There may be a continued job loss there, which will increase that figure of 1 million even more. But let us assume that manufacturing industry will provide roughly the same number of jobs in 1981–82 as it does today. I believe that we should be looking to the public service sector to provide more jobs, and by that I mean not bureaucrats but people in face-to-face public service employment. Much of that is, by its nature, labour intensive and likely to remain so.

Between 1972 and 1976, central and local government manpower—that is, public service manpower excluding public corporations—increased by about 660,000. Public expenditure between 1972–73 and 1976–77 increased by 10.2 per cent. Given a fairly constant ratio between public expenditure and jobs, what is the likely increase between 1978–79 and 1981–82? I agree that this is a crude technique, but, flowing from that calculation made from past experience, I come up with the figure of about 250,000 jobs in the public sector in that three-year period.

I am not arguing for greater public expenditure only because it provides more jobs. That is clearly a consideration, but it is not the only justification. Neither am I saying that we could not, if we revised our policies, have a greater job pay-off in public expenditure terms than we have at the moment. We could rearrange public expenditure so that within the same amount we could employ more people if we wished.

There are no particular signs of this type of rearrangement in the White Paper. With 250,000 jobs in the public sector, we are still a long way short of our target. We therefore turn to the private service sector. Between 1971 and 1973, when we last experienced a boom, there was an increase of 373,000 people in the private service sector. In that two-year period, GDP increased by 8.3 per cent. We did rather well.

What does the White Paper say about growth for the future? In paragraph 56, which has been mentioned many times, the figure of 3½ per cent. is referred to as a possibility. It slates: Provided inflation is contained and there is some recovery in world trade, the economy should be able to grow at above its past trend rate. But on present prospects a marked improvement in industrial performance would be necessary to sustain a growth rate above 3½ per cent. over the next few years. The aim must be to achieve such an improvement; but it cannot be assumed in advance as a basis for planning public expenditure. With the current degree of unemployment and the bonus of North Sea oil it would be disappointing if a 3½ per cent. growth rate were the limit. The figure mentioned for growth is 3½ per cent. It is true that the authors hoped for more, but it could be less. We do not know. There are all sorts of variables, not to say downright imponderables, in that paragraph.

Assuming that the increase in public sector employment is about 250,000 and that there is no change in manufacturing employment — which is optimistic — the increase in the private service sector employment would need to be 750,000 to achieve our target of 1 million jobs. Assuming that technological change will have no noticeable effect on the private service sector—and that is not necessarily the right assumption, because change will affect both sectors—and assuming a similar rate of growth as in the early 1970s, we would need to increase GDP by about 16 per cent. in the three-year period.

We are talking of a growth rate of at least 5 per cent. per annum, which is well above the 3½ per cent. figure in the White Paper. The only conclusion that I can draw on the unemployment figures is that the assumptions in the White Paper are, to say the least, on the optimistic side. The only way in which this analysis can be fundamentally wrong is if the White Paper embraces in its other assumptions the alternatives to unemployment that I mentioned earlier. Sadly, my conclusion is that it does not.

I shall take three examples. First, let us examine the idea of sabbaticals and educational opportunities for people throughout life—adult education and so on. Acording to the figures in the White Paper, the increase in the provision for further and higher education between 1978–79 and 1981–82 is only about £126 million. Even then, we shall still be spending less in real terms than we were in 1973–74.

Let us take the idea of encouraging young people to stay in full-time education. I have already mentioned the small increase in further and higher education expenditure. There is little increase in secondary school provision. Clearly there is no provision for educational maintenance payments for the 16- to 19-year-olds, which would, admittedly, involve considerable expenditure, as the Secretary of State said on Tuesday. However, the provision of educational maintenance is a key factor in encouraging more young people to stay in full-time education.

Let us consider the question of early retirement. That is not my preferred option for dealing with this problem but it is a favourite with many people. The figures for pensions on pages 90 and 91 of volume II of the White Paper make no provision for early retirement. Of course, the job release scheme, which, I am glad to learn, is to be extended and which is to be welcomed, runs out in March 1979. There is no provision for continuing, let alone expanding, this programme beyond that date.

I use those three examples to illustrate that behind the White Paper there does not seem to stand an overall policy about alternatives to unemployment which would be the positive response to the problem. I am led to pessimistic conclusions. The White Paper is too optimistic about employment prospects, and it lacks the fundamental philisophy and policy without which not only will our industrial policies fail to prosper but we shall miss the great opportunities for the advance of human welfare which are opening up. Lest I end on too pessimistic a note, I say to the Government that there is still time—although precious little—to do some rethinking about these fundamental issues.

Mr. Deputy Speaker (Sir Myer Galpern)

I hoped that Mr. Speaker's statement yesterday about the length of speeches would produce some results today. The last three speeches have taken 22 minutes, 23 minutes and 26 minutes. Without the aid of a computer, I have calculated that if we have 20-minute speeches in the next hour there will be time for only three more. I leave the matter to hon. Members.

7.50 p.m.

Mr. Reg Prentice (Newham, North-East)

I shall do my best to comply with your advice, Mr. Deputy Speaker.

The Government have brought before the House a White Paper which proposes to increase public spending. There is some argument as to whether the increase over the previous year is of the order of 2 per cent., 4 per cent. or 8 per cent. There is no argument about the fact that it is an increase and that a further increase is proposed in the following year, with another increase taking place in the year after that.

My submission is that that is wrong The current overriding need is for a strategy on public spending of which the centre-piece should be determination by the Government to maintain public expenditure at its existing levels. I repeat the words "existing levels". I am not recommending cuts in those levels, although I recognise the validity of the point made by the Chief Secretary that if we were to keep within existing levels, there might be some marginal cuts of existing services to make room for those services where there is some inevitable continual increase in costs.

We discuss this matter against the background of the fact that since 1964 public spending in Britain has increased by just over two-thirds at a time when our national output has increased by about one-quarter. During that period, Labour Governments have been in office for most of the time. I was a Minister for much of that time. I therefore share responsibility with my former colleagues for that process, and I do not attempt to duck it. I can remember a number of amiable arguments with the Chief Secretary, who was the spending Minister when I tried to get him to agree to higher totals in respect of my Department than he was ready to concede.

I was prepared to argue, as most Social Democrats are, along the lines of Professor Galbraith and the late Anthony Crosland that increases in public spending were one of the essential tools of creating a more just and equitable society. I have not retreated from that basic view. Most modern and humane societies have high levels of public expenditure. I believe that this country should have a high level of public expenditure whichever party is in power.

But what has basically gone wrong in the period since 1964, and perhaps earlier, is that public spending has been increasing faster than national output We have increased the share of the national product being spent publicly at such a rate as to make two things inevitable. One has been that we have had to impose upon our people taxation levels which have been a serious disincentive at all levels of income, with consequent damage to our economic performance. The other consequence has been a public borrowing requirement of such a size that it has been one of the main causes of our excessive rate of inflation in recent years. That lesson should have been learned by December 1976. It should certainly have sunk into the minds of Ministers during the crisis of November and December of that year.

At that time, this country had to go cap in hand to the IMF and to the Governments of countries with stronger economies in order to get substantial credits to keep us afloat. Those creditors quite rightly insisted on a certain measure of self-discipline on our part in relation to the size of our public borrowing and our future spending plans. It is, I think, to the eternal discredit of those of us who were in the Government at that time that we did not impose those disciplines upon ourselves earlier. It was to our discredit that we had to reach the point at which they were imposed upon us from outside.

With this White Paper, I believe that we should focus upon the fact that the lessons of 1976 have still not been learned. Since then there has been some modest improvement in the balance of payments, the public borrowing requirement as estimated by the Treasury in late 1976 has turned out to be lower than that estimate, and the pound has been a bit stronger. Because of all that, the Government feel that: they can get back again on to the old merry-go-round of increasing public expenditure and of putting down on paper plans to spend resources that the country has not yet earned.

It would be a major contribution to the health of our economy if the Government would change course. I do not expect this Government to do so. Nevertheless, they should accept that our public spending in the next three or five years should be frozen at existing levels. That is what the situation demands. It it something which public opinion would accept, and it is something that our creditors overseas are entitled to expect of us. That course of action has been urged upon the Government in the cogent reasoning of the CBI's policy document "Britain Means Business", and it is something that the Chancellor appeared to be promising to the IMF in the letter setting out the agreement of December 1976.

If that basic policy decision had been made, I think that in making its choice of priorities the Cabinet could have retained this kind of discipline without wrecking our social services. I speak with some experience of having sat through the painful business of trying to allocate public expenditure choices. There would have been difficult decisions on the margins, but I believe that that could have been done.

If this discipline had been accompanied over the next five years or so by the kind of economic growth which is indicated in part of the White Paper and by rising revenues from North Sea oil, the percentage of the GNP being spent by the State and local government would have gone down to a very real extent year by year. The CBI's analysis that I have just referred to suggested that it could have gone down from 44 per cent. to 38 per cent.

That would have enabled reductions to be made in the borrowing requirement and in taxation at all levels. But, above all, it would have been simple and clear proof of a change of direction in our affairs. It would have given encouragement to people in business and industry, it would have given encouragement to the world community, and it would have given encouragement to the British people to achieve better results than they have been achieving in recent years.

I should like to go on and talk about the kind of cuts that are necessary at the margin in order to obtain this state of affairs, but I am bearing in mind your advice to be brief, Mr. Deputy Speaker.

Labour Members have challenged the Conservatives to be specific about the cuts we would make. The Opposition are perfectly entitled to keep their options open in this matter. There is nothing sillier than the parrot cry from Government Back Benchers to Opposition Front Benchers of "What would you do?" and "What would you cut?" What is needed is a continuing debate in which we give our personal views, and I should like to see substantial reductions in five main areas.

First, I should like to see cuts in subsidies to industry. I take account of what was said by the hon. Members for Luton, East (Mr. Clemitson) and for Liverpool, Walton (Mr. Heffer) about the employment effects of subsidies to industry. But the Government have met themselves coming back. In making excessive subsidies to industry they have to cut building programmes, and that throws building workers out of work. They have to make cuts in education programmes, which means that newly trained teachers are unable to find employment. That is saving one person's job at the expense of someone else's, and that is no contribution to full employment.

Secondly, I should like to see cuts in subsidies on housing, transport, school meals and many other matters. Thirdly, I should like to see much higher charges in the National Health Service. The prescription charge, fixed at 20p in 1972, would, it translated into the present value of money, be at least 50p per item—and so it should be.

Fourthly, I should like to see an amendment of the legislation on public service pensions so that they are not guaranteed automatically against the effects of inflation. I see no justification for the situation over the last two years in which wage earners and salary earners have had to accept a cut in their living standards whereas many pensioners on a higher living standard have had the level of their pensions guaranteed in this way.

Fifthly, I should like to see the same discipline imposed on short-term national insurance benefits. I do not mean retirement pension or widow's pension; I mean sickness benefit and unemployment benefit. It should be the Government's policy to open up a meaningful gap between what people can earn at work, even in low-paid jobs, and what they can gain in national insurance benefits.

In general, I want to see a shift, to which many hon. Members have referred, from transfer payments towards capital programmes, because—[Interruption.]

Mr. Deputy Speaker

Order. The Chair will not have cross talk across the Benches.

Mr. Prentice

I was on the point of agreeing with at least part of what the hon. Member for Walton said about the construction industry, because I want to see, as he does, better and more consistent capital investment programmes. The greater part of the increase in public spending over the last 14 years or so has been an increase in transfer payments, by which we all pay to each other ever more complex subsidies, means-tested benefits, tax reliefs and the like, which lose all meaning and which people are simply not able any more to understand.

Mr. Heffer

Will the right hon. Gentleman give way?

Mr. Prentice

No, I want to complete my speech quickly.

Meanwhile, what we have seen is a steady decay in the basic pattern of many of our most important public services, the National Health Service, the education service and many others, as the out-of-date buildings stay on and on in service long after they should have been replaced. That is bad in itself, it is bad for the morale of those who work in them and it is very bad for the construction industry.

I return again to the anomalies of Government policy. Some of the cuts in relation to the construction industry have been necessitated by the so-called industrial strategy through which the Government are subsidising other industries but are doing so at the expense of one of our most basic and important industries of all.

I want to make two final comments. I think that the first will not be very controversial and I want to put it on record. I welcome quite unreservedly the proposals on overseas aid, which involve a rise of 6 per cent. a year over the survey period. I wish that it were more. But this rise is a rise in real terms and is one that is overdue.

If there are hon. Members on either side of the House—I think that there are a few on both sides—who have doubts about the aid programme, I would refer them to a Cabinet Office publication of 1976 called "Future Words Trends", written in the sober language of Whitehall but, nevertheless, containing this very important conclusion: Unless there are resource transfers on a scale many times greater than at present, the effective check to world population will be the Malthusian trilogy of war, famine and disease. We should recognise in this House that under successive Governments Britain's share in the development struggle against world poverty has not been adequate and that many of our European partners are doing far more than we are doing. Therefore, I support this increase. I hope that it will be immune from any public expenditure cuts, either from the present Government or from the future Conservative Government.

My final point is more controversial. Last Friday the House debated "Labour's Programme for Britain 1976". It would be more accurate to say that Opposition Members debated it and Labour Members avoided debating it. However, I hope that the Chief Secretary and the Financial Secretary have read that document and that they have added up the cost of those proposals, because, if a Labour Government were elected again on a manifesto based on that programme or on maintaining a substantial part of the proposals in that programme, all the figures in the White Paper before us would be knocked sideways. An incoming Labour Government, if there were such proposals, would be committed to public expenditure vastly in excess of the proposals that have been put before the House this afternoon.

Therefore, Treasury Ministers and, indeed, all Ministers, if they have any sense of their constitutional position, should be stumping the country arguing against the policies to which they are being committed and to which they are allowing themselves to be committed by the absurdity of the block vote at the party conference. Otherwise, it is no use their coming to the House and pretending that it is the policy of this White Paper that will prevail over the next few years. Either it will be an extreme Socialist policy involving enormous increases in expenditure, way above anything in the White Paper before us, or, as I hope and believe, it will be a Conservative alternative.

8.6 p.m.

Mr. Alexander W. Lyon (York)

In an interesting maiden speech today, the hon. Member for Bournemouth, East (Mr. Atkinson) referred to the increasing proportion of the gross national product that is going in public expenditure, and he was concerned about that in case it was coming to a point at which our people would come to depend upon it and the progression upwards would be irreversible. It reminded me of a statement some years ago by a gentleman whom the right hon. Member for Down, South (Mr. Powell) has now blessed with the name of Roy. That was that the percentage of the GNP at 60 per cent. was freedom; the percentage at 61 per cent. was slavery.

Those completely unjustified and, as the Treasury figures turned out, unjustifiable assertions have been carried on today, and in the past, by the right hon. Member for Newham, North-East (Mr. Prentice). In a speech that I deeply regret, and a speech that I hope may be the right hon. Gentleman's last in this place, there was only one echo of the man who used to be a friend of mine for 10 years and who was made into a public figure in this country on the back of the Labour Party that he now so despises. That was the moment when he referred to the transfer of resources across from the rich world to the poor world in order that the poor world would be able to avoid any Malthusian prophecies of war or strife.

The same argument is the argument which we have always held on the Labour side, and which the right hon. Gentleman held in times past, for transferring resources from one part of the nation to the other. It is the very essence of the creed of social democracy which I espouse and upon which I have not reneged, and it is the very hallmark of Anthony Crosland's "Future of Socialism". If my former right hon. Friend would now go back and read Tawney on "Equality", he would read the same precise statements about the future and about the way in which we reach the future which he now spurns in the manifesto that we put out for the next General Election, because it is there written clearly in Tawney's analysis of social democracy.

I can understand those with whom the right hon. Gentleman now sits spurning it. They have the right to spurn it, but he does not have that right. He has no right to turn round now and say that all that we worked for over those years was false. He can now retreat, if he likes, into oblivion, but he should not get up every week in this House in order to spurn the kind of philosophy which made him and to which we adhere.

The fact is that this country depends for its standard of living partly on what comes out of the pay packet of individual workers and partly on what comes out of public expenditure. Increasingly, our workers depend on that part which comes out of public expenditure. Most of our people educate their children free through the education service which is provided by public expenditure.

In sickness, old age, redundancy and unemployment, most people look to a social security service that is provided out of public expenditure. They look to the very social security service that the right hon. Gentleman now wants to undermine by trimming the benefits in order, as he says, that there should be a visible gap between what one can earn and what happens to one at the very moment when one needs most resources, in unemployment or sickness. That is the moment when the right hon. Gentleman would trim. It is the moment when Ramsay MacDonald wanted to trim. The right hon. Gentleman is in a good sedition, but that is hardly something that would find favour with us.

Over the years since 1945, all Governments—Conservative and Labour, but particularly Labour—have extended the range of services which are available to our people and upon which our people wholly depend, to the point where many items—it may be most of the major items that are essential to a good standard of living—are provided out of public expenditure. Apart from food, furniture, clothing and the element of the housing cost—by no means the whole of the housing cost, and in many cases not even the major part of it—that comes out of the private purse, almost every item of real significance in the standard of living of our workers comes out of public expenditure.

When Conservative Members say that they want to cut public expenditure, they are seeking to cut the standard of living of our people in just the same way as if we were to raise taxation by an equivalent amount. What we would cut if we raised taxation is the margin of private expenditure which goes out of the private purse not necessarily into the most important items in the standard of living but sometimes into the less important—I shall not say the luxury items. Some of them are important in giving a fullness to the life of our people but are not as important as education, health, the provision of proper pensions and security in unemployment and sickness, and all the other areas of public expenditure on which our people totally depend.

That is a factor that must be borne in mind when people tell me that we are spending more of the public's money in public expenditure now than we were then. That is true, but it is bad only if we are spending unwisely and wrongly. There are areas of public expenditure that I would like to cut. I do not find it entirely happy that the last Government reorganised local government so that the town clerk of York became the chief executive of York and does less work for more money. That is not an area of public expenditure that I would necessarily want to defend.

But I want to defend the major part of public expenditure. As the White Paper shows, the proportion of public expenditure is 46 per cent., until one takes away the transfer payments. But they are immensely important in guaranteeing good-quality living to people who are dependent on them. Anyone who is on supplementary benefit is totally dependent upon public expenditure. An old-age pensioner is largely dependent on public expenditure. We hear talk across the Floor suggesting that public expenditure is a bad thing or, as the right hon. Gentleman seems to think, something that we can afford only when we are growing.

The right hon. Member for Down, South made merry with forecasts, and there was something in what he said. But the truth is that the forecasts are simply expressions of hope about what might be spent in the future. We all know that they are not worth the paper they are written on. If the borrowing requirement increases, if there is an economic crisis, the Cabinet will be summoned together and these expenditure proposals will be cut. The important thing about having them is that they are an estimate of what we should be doing in the future, and they tend to focus our minds on the right priority for spending, provided that the resources are available.

If the resources are not available, we come to the key question that the right hon. Member for Newham, North-East has always managed to avoid in the tortuous doubts that led him across the Floor of the House. What Crosland was saying in "The Future of Socialism" was that we could manage to have major redistribution and an advent of greater equality as long as we had growth, because we could pay for the redistribution by the greater growth without impinging to any great extent on the standard of living of anyone.

But the question for any Socialist is "What happens if you cannot get the growth, if you have a nil rate of growth over the past four years", as the right hon. Gentleman pointed out we have had, "and if you have a nil rate of growth into the future? What is to happen in order that the people who depend on public exenditure should have a greater share?" Somebody must pay for it. The people who have—who may be the people over the top rate of income tax, but who may also be the ordinary workers—may have to share more in order that all of us benefit, which is the whole ethos of public expenditure. It is so that there should be a greater benefit overall.

I think that it was the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) who said that over the past four years one substantial item of public expenditure that had grown out of all proportion was the transfer payments, which he wanted to reduce. The hon. Gentleman said that pensioners had been enjoying a better standard of living at the same time as other people's standard of living had been falling. But, even now, the average pension for a married couple is £26 a week. Who can live on £26 a week today? Average earnings in industry are £70 a week, and for most of the people in my part of the country they are less. But they are still substantially more than the pensioner has. I do not begrudge the pensioner any increase in his standard of living, and I do not think that the population at large begrudges it.

We always argue public expenditure in overall terms that ordinary people do not understand. If one told them "What the Tories will do when they get back next time—

Mr. Heffer

If.

Mr. Lyon

—"is to put up the cost of school meals and cut unemployment benefit, supplementary benefit and the old-age pension", we should know who would be the most popular.

Of course tax cuts are popular. Of course everybody wants to feel that at the end of the week he will get a bit more in his pay packet than before. The greatest fault is in my right hon. Friends the Prime Minister and the Chancellor of the Exchequer, because they have the greatest call upon publicity. It is they who should be doing this publicity work. Nobody tells our people what public expenditure is for and why they are paying the extra tax that is going into the standard of living that they now enjoy.

People must decide "Is it better to go on a foreign holiday or that my kid should have a decent education? Is it better that we should be able to buy a boat in addition to the car that we have or that we should have a decent health service that can treat the grandmother and the children who need to go into hospital?" Those are the kinds of question that should be asked in a debate about public expenditure, because that is what the whole argument is about.

I have said, and I hold to it, that as a Socialist I would make this choice of priorities even if I were faced with nil growth. It may be that, if our people are to depend upon public expenditure to a greater extent, they must pay for it in increased taxation. I would not go into a greater borrowing requirement, because I would make people face up to the reality of what must be spent and how it must be paid for.

I do not believe that the resource implications for the economy are greater if one spends through public expenditure rather than through giving money back to people to spend themselves. The economic implications, with marginal exceptions, are the same whether we spend through public expenditure or through private consumption.

What has happened in the past, and what we should guard against in the future, is that we tried to spend that public expenditure without telling people that it had to be paid for, and that it had to be paid for by increased taxation, by a borrowing requirement, by inflation, or by any of the other things which have so bedevilled our economic performance in the past.

But if we tell people that out of this year's cake a greater proportion will be spent on public expenditure, which means that they will have less in their pay packets, that at any rate is the right way to approach the matter, although I accept that in political terms it may be unpopular initially until it is explained. But, at least, it would have to be explained. But I also accept that it would be easier, better and on every level more desirable if all these things could be achieved against a background of greater economic growth. In my view, this is the year when we ought to go for greater economic growth.

I am tired of listening to statements such as that which came out of the mouth of my right hon. Friend the Chief Sec- retary about the difficulties of inflating demand at this moment. The truth is that that statement could have been made by Roy Jenkins when he was Chancellor of the Exchequer in 1968. It has been made by every Chancellor since then in order to justify cutting. It is a normal Treasury orthodoxy in order to Justify cutting.

How can one say at this moment that, if we were to release more demand into the economy, there is not the slack in the economy which would allow it to be met? We have 1½ million unemployed; we are running our industry at less than we were running it in the three-day week; we have enormous spare capacity in almost every industry. The steel industry is in its present situation because there is not the demand in the economy for its products, and we could easily produce more steel to meet the demand if it were there.

The way demand comes is the way that Keynes taught us. In these days, when Milton Friedman and his friends reign supreme, it is about time we got back to Keynes. We can create demand as easily as we can knock it down. When people say that 1½ million unemployed is the price of four years of Socialism, all I can reply is that for the first two years of this Government we did not have such unemployment because we were running the manifesto but that when we turned to Treasury orthodoxy and started cutting demand, we started the move beyond the 1 million unemployed mark. We cut demand and we got unemployment. If we reinstitute demand, we shall cut unemployment.

But if we do it we take a risk. I do not think that we take a risk with inflation, because I believe that there is sufficient slack in the economy to allow us to provide the products that would meet the increased demand without necessarily stoking up inflation. It is possible that, because of the poor productivity and the poor investment in British industry over the years, our competitors, who also have slack but are markedly more efficient in using their investment, would be able to provide for that increased demand in our economy.

There are two ways to deal with that. One way is to decide to run a balance of payments deficit for a substantial time in order to give encouragement to our own manufacturers to invest. Nothing encourages investment like sustained growth. Over the last 15 years, the percentage of the gross national product that has gone into industrial investment has remained static at between 4 and 5 per cent. It goes up with growth and comes down with recession. It does not matter about tax give-aways or giving incentives to the boardroom or middle management—that is not what encourages investment. It does not matter about putting actual resources into investment—the employers do not use that. They will invest only when they can see a period of substantial growth ahead in which they think they will get a good rate of return.

We could get growth now, even if it meant a substantial balance of payments deficit, because we could probably carry it for a substantial amount of time because of the relief that our balance of payments would get from North Sea oil. We would have such a deficit for only four or five years, or a few years longer, and this is the moment when we should go for sustained growth even if it means sucking in imports. This is the one moment that we can afford to do it.

The other way is to follow the suggestion made not only by the Tribune Group but by the prestigious Cambridge School, that we should go for selective import controls in order to maintain our own industry for that period. The Cabinet would be doing a great deal more if they discussed that proposal rather than the nostrums of the right hon. Member for Newham, North-East. Such a proposal is not Socialism. No one will be able to persuade me that import controls, first put forward by Chamberlain, are such a Socialist measure that we are in danger of going over to a Marxist society.

The only argument about selective import controls is whether they would work and whether we would be allowed by our competitors to get away with them. I think that for a certain period—not long, but perhaps for two or three years—there is no doubt that we could get away with it.

Either of these two propositions would be a way in which to deal with the sucking in of imports until we got growth. This is the year of all years to go for growth. We do not want simply a £2 billion handout. We need nearer the £4½ billion that the TUC has sought, either in tax cuts or by an increase in public expenditure. My belief is that there should be about equal shares, £2 billion on each. If we got that, we should get the kind of growth which in the end would cut unemployment.

8.27 p.m.

Mr. Ian Stewart (Hitchin)

After that extraordinary speech by the hon. Member for York (Mr. Lyon), a compound of fantasy and economic nonsense, it is time to bring the debate back to reality.

1 was appointed to the General Sub-Committee of the Expenditure Committee only a few months ago, so this is the first White Paper on expenditure that I have been able to examine at close quarters from that position. In the past, in my innocence, I thought that the public expenditure White Paper was designed to provide a basis for debate about the Government's public expenditure plans, but after the experience of the last few months and the Committee sittings that we have had questioning Treasury officials and the Chief Secretary, I have concluded that that is exactly the opposite of the intention of the White Paper and that, on the contrary, it is designed to confuse and obscure more than to instruct or provide the basis for reasonable debate.

I do not think that we should leave the matter there. White Papers of this kind should be a basis for informed discussion. Yet we have had to wait even until today to hear from the Chief Secretary one of the most significant comments on the White Paper. He said that it was necessary, according to the White Paper, to keep the growth of public expenditure within the growth of the economy over the period of the plans. The plans go for four or five years ahead. Paragraph 4 of the White Paper, which was quoted by the right hon. Member for Down, South (Mr. Powell) states that it is necessary that the planned growth rate for total public expenditure should be within the prospective growth rate of national income. The present plans are constituted to this end". That is why the figure for growth of public expenditure this year is shown at 2.2 per cent., and the rate of growth in the economy is suggested to be 3.5 per cent., and obviously 2.2 is less than 3.5. But even Treasury officials admit—at Question 25 on 30th January 1978 in the report of the Expenditure Committee—that the plans for this year do not fall within that framework. This year the projected figure for expenditure is beyond 3.5 per cent., and even if we were to achieve 3.5 per cent. this year, which many hon. Members have doubted—perhaps it is no accident that it is an election year—the Government intend to increase their expenditure beyond the rate of growth in the economy.

The Treasury official who answered that question said that for that particular year the forecast was just outside the rate of growth of the economy. But that is the coming year, which is the whole basis of these public expenditure plans. Everyone knows that, when taking a period of three or four years ahead, experience has shown that the march of public expenditure carries on relentlessly, whether or not growth is achieved.

It is high time that we realised that the cynicism that now greets this sort of presentation of public expenditure plans renders them counter-productive. I no longer think that the Government get benefit from being able to talk with two voices about their expenditure plans—to say, on the one hand, that they are keeping down the growth of expenditure to 2.2 per cent., which is all very responsible, and to refer on the other hand, to the increases in public expenditure programmes, which are being made in order to satisfy the Left.

I think that this is at the heart of many of the Government's economic problems. It goes back in another context to 1976, when the Government really had made effective restraints on public expenditure and initiated cuts. But they spent such a long time in playing down the fact that a further crisis occurred in July that year, and in the end the International Monetary Fund had to come in to sweep up the mess.

If the Government really want to control public expenditure, they should say so. If they are not intend to do so, they ought to admit it. The point we have now reached is that the Government have decided this year, by strange coincidence, that now is the time when public expenditure growth should be allowed to go ahead of growth in the economy. No hon. Member is so naive as not to know the reason for that.

The debate has been very interesting but it has shown how impossible it is to relate public expenditure plans to the Government's economic policy without knowing their taxation programme and in isolation from the Budget. The point has been made many times that it would be much more satisfactory to be able to look at both sides of the account at the same time. In a sense, all discussion of this kind is theoretical. If the Government do not know what is coming in on the one hand, how do they know what should go out on the other? The danger with our public expenditure arrangements is that we plan the public expenditure first and then think afterwards about how to pay for it.

In my early days in the City, I was asked to look at some projections for a company which had a wonderful thing called a five-year plan. There was to be a great increase in investment, and new productive facilities were to be brought on stream. I asked "Could you show me the cash flow out of which this is to be financed?" I was shown a beautiful cash flow which brought about exactly the right amount of money to meet the expenditure which the company had put into the five-year plan. When I was so rash as to ask how the company arrived at the figures for the cash flow for the following five years, I was told "Those are to reconcile with the expenditure plans which I have just shown you."

I am afraid that that is the way in which the British Government conduct a lot of our public expenditure plans. No company, household or individual would get away with it. Any company which did that would go bust, if expenditure was planned first and it then rushed around trying to find the income with which to pay for it. Not only is it irresponsible to do it in this way; it is unreal, and it puts the House in an impossible position to take a realistic view of the Government's economic intentions.

I hope that the Government's intentions are honourable. I hope that everyone in the House would like the Government to behave responsibly on the economic front. None of us wishes to see our country suffering because of the ineptitude or the irresponsibility of Government. But on the present basis we are not able to make any decision about that. We cannot tell whether these public expenditure plans can properly be financed within the framework of income.

There is some evidence that income is going ahead of expectations, and that probably, because wage settlements are going at 14 per cent., rather than the 10 per cent. assumed in the White Paper, and perhaps because stock relief is no longer cutting back the yield on corporation tax, Government revenue may be rather larger than the Government expected it to be. In fact, the evidence of last year suggests that this may well be repeated, because in July the Chancellor of the Exchequer was able to take a more relaxed attitude about his funding through tax than he had at the time of his March Budget, and by November he was saying that the sums were all out again.

That is not very helpful. Because the Government are not prepared to come clean and say exactly how they propose to finance their expenditure plans, people do not give them the benefit of the doubt. It is no good the Prime Minister saying, as he did at the Finance Houses Association meeting the other day, that he wished markets would not look at one month's figures. Of course they will look at one month's figures if they cannot rely on the continuing presentation of a consistent policy by Government. It is the Government's fault for not presenting a clear picture.

The point I want to leave with the House is that I believe that a White Paper on expenditure should be designed to inform and not to confuse. If it confuses, it merely makes it more difficult for those who have to lend the Government money in order to finance these plans—or more difficult for the taxpayers who have to fork into their pockets to pay for them—to judge whether the whole thing is being done on a proper basis.

If this Government or any Government presented their plans in a coherent way, matched their revenue and expenditure and, if possible, had this debate on the economic future for the coming year coupled with the assumptions made in the Budget, so that we could see both sides at the same time. I think that they would have the basis on which to make a clear presentation about what they were trying to do.

In those circumstances, I believe that the reaction from the country would be to accept the Government's plans with more enthusiasm than it does when the policy is piecemeal and contradictory and we are served bits and pieces one after the other.

It is a depressing prospect for taxpayers to look at the figures in this White Paper and to see that even if no changes are made in taxation over the coming three or four years there will be hardly any reduction in the borrowing requirement. There is very little scope for a reduction in taxation based on the expenditure plans contained in the White Paper. Yet the Prime Minister and the Chancellor of the Exchequer are dropping heavy hints all around the place, as often as they can, about the need for tax cuts in the package that will come in the Budget. No wonder that sort of thing rattles markets.

Those who are meant to be persuaded to buy gilt-edged securities in order to finance Government expenditure ask why the Government say one thing with one voice and another with the other.

Mr. Molloy

Will the hon. Gentleman explain why, at Question Times, Tory Member after Tory Member wants more hospitals, better health facilities, better roads and altogether much more money spent in their constituencies, yet when it comes to a debate like this they want public expenditure cut to the bone? That is being two-faced on a level that I have never before experienced in this House.

Mr. Stewart

Any hon. Member worth his salt wants to get for his constituency as much of the available resources as possible. That is the basis on which they make those applications.

Despite the time which has been spent in considering and questioning the Treasury and the Chief Secretary about the White Paper, it does not present a sufficient and reasonable basis for an informed discussion about the public expenditure plans for the coming year. Such indication as it gives is profoundly disturbing for the taxpayers of this country.

8.39 p.m.

Mr. Hamish Watt (Banff)

Although my colleagues and I have no confidence whatever in the ability of a Tory Administration to run the country's economy, we cannot bring ourselves to support the Government. Looked at from a Scottish point of view, there is nothing in the White Paper that warrants our support. Indeed, the SNP is particularly aggrieved to find that virtually all the proposed increased expenditure is being devoted to bolstering up a clapped-out economy.

I should like the House to ponder the position we would be in if we had not found oil off the Scottish coast. By now we would have run down our creditworthiness with the rest of the world and there would be tremendous howls of anguish from all sides as the Government proposed cuts. Fortunately for everyone, this has not happened. We do not begrudge the Government the extra revenue they are getting from the oil, but, in the Scottish context, we object to the unfair way in which it is being spent. It is wholly unreasonable to expect Scotland, particularly those parts that have put up with inconvenience because of oil, not to be recompensed for the discomfiture.

It is ludicrous that the proposed expenditure plans include a reduction in the road programme over the next five years. This will mean that the "oil road" between Perth and Peterhead will not be made into a dual carriageway or a motorway as it should and the communities along that route will get no benefit from the oil revenue. We believe that they should get a disproportionate amount of the revenue because they are the only people who have to put up with the discomfort.

The Government have completely ignored the plight of ratepayers in North-East Scotland and the oil areas who are being burdened with the repayment of loans for the next 60 years to pay for the infrastructure for oil which they neither need nor desire. It is a gross abuse of the rating system and local authorities should dig in their heels and say that there should be no further expenditure borne by ratepayers; it must come from central Government. The Government would then have to get the oil companies to pay for the roads, houses, schools and so on—which they should pay for in any case. Alternatively, the Government could use the Contingency Fund for this purpose; and if the coming of oil is not a contingency, I should like to know what is.

Another area of conflict is the repeated failure of the Government to ensure that a reasonable portion—say 75 per cent.—of oil jobs go to United Kingdom personnel. Government expenditure on the training of young men in Scotland is totally inadequate. It is ludicrous to have so many able young people on the dole and yet to bring in all nationalities to do the work which our young men are keen to do.

I heard recently that one oil firm in Aberdeen advertised in a Glasgow newspaper for a roustabout, which is virtually a general labourer, with some oil experience and received 390 applications. If we adopted a policy of local recruitment and asked the oil companies to implement that policy—and Norway insists upon this—not only would we save on unemployment benefits and social security payments and so improve those figures in the expenditure White Paper but we would have the extra revenue from the tax on the good rates of pay that these young men could be getting from the oil companies.

It is small wonder that people in North-East Scotland are totally fed up with Westminster government and are likely to show their disgust by throwing out Tory and Labour Members at the next General Election—just as the fishing communities did at the last election. They are fair people and all they ask for is fair and reasonable treatment. We do not believe that we get that from a Westminster Government, whatever the complexion.

Is it not ironic that there is not one Scot in the Treasury team when so much of the Government revenue is coming from Scotland? When the Scotland Bill goes through and the Parliament is restored to Scotland, Scots will not for long be content with this unfair treatment. They will demand the right to spend their wages and not just pocket money. I believe that an oil-sharing agreement will be reached between Edinburgh and London and that Scotland will have its legitimate costs met before the money comes to London.

I cannot let this opportunity pass without being critical of the Department of Industry for downgrading the development area status of Aberdeen. The Department has failed to appreciate that many firms and industries in the Aberdeen area have had greater difficulties because of oil developments than they had before. They have had absolutely no compensatory benefits.

I illustrate my point with two examples. The textile industry and the papermaking industry have both lost engineers and maintenance men to higher paid jobs in oil. They are powerless to stop the drain without breaking the Government's pay guidelines, and there is no way in which these industries can put up their prices because they will price themselves out of the market.

If the Government do not want the oil industry to get development grants, they should have the courage of their convictions and tell the oil companies that they are no longer eligible for them. Why not have the guts to say so? Why should they not tell the oil companies that they should not have these development grants? I believe that this is the right way to proceed. If we want to make economies, this is an excellent opportunity. Do hon. Members honestly think that the oil companies would not place orders for oil rigs because they were not getting the 20 per cent. grant? The companies must have the rigs in order to get the oil out, and they must have them whether or not they receive the subsidy.

The Government have a precedent. They have cut out grants to mines and quarries, and that is reasonable. So why not oil? These are not mobile industries. They are tied to an area in which they must develop. If development grants were refused to the oil companies, they would need only an extra couple of months of oil pouring ashore before they started profit-making.

On the more general question, the British economy is left with only two alternatives. I was particularly interested to hear the hon. Member for Chester-le-Street (Mr. Radice) say that the British economy was in a trap. There are ways by which we could get out of this trap. We must go for higher technology industries which require only a small input of raw materials and a high input of highly skilled labour.

On this point I criticise the White Paper, and particularly the Department of Industry, for spending only £1.8 million on processing and project developments and for envisaging increasing this to only £3.6 million by 1980–81. I believe that much more money must be allocated to project and process development instead of bolstering up out-of-date industries which must of necessity be on the way out.

I speak particularly of those industries which have a high import content to output. The country will run up against the same brick wall as it encountered when the oil producers put up their prices four times. The same could happen again if other commodity countries put up the prices of tin, rubber and copper in the same way.

While going for high technology industries, we must seek to change the economic strategy and go also for industries with a high labour input for which the basic raw materials are here in our own country. I wish to instance tourism, fishing and agriculture.

I should like to concentrate primarily on the role that agriculture could play in getting the British economy right and also in providing much needed jobs. For the Government to reduce expenditure on agriculture from £1,133 million in 1976–77 to £899 million this year, and even further to £706 million in 1978–79, is surely the height of folly.

Agriculture is an industry with a sure market. It does not have to depend on volatile foreign markets. Every million pounds value of extra food produced replaces a million or more of imports.

Although I appreciate that there are now few vacancies in agriculture, do the Government realise the vast potential for job creation in agriculture if a proper expansionist programme were undertaken? Can they not see the opportunities in food processing, the leather industry, the agricultural machinery industry and many others? Will the Minister in reply explain to British farmers why industry can get interest relief grants, whereas agriculture cannot? The Danish and Dutch farmers can obtain such grants. Why cannot the British farmer do so?

What is equally important is that these goods do not need any subsidising by export credit guarantee from the Treasury because with agricultural exports it is a matter of money "on the nail". I could go on in similar vein quoting the potential of the fishing industry and of forestry, all of which are of greater relative importance to Scotland than to England.

It is small wonder that Scotland has such a strong desire for a greater degree of economic independence. When we see money being spent as wastefully and unwisely as is indicated in this White Paper, right up till 1982, with no serious attempt being made to correct the dangerous imbalances in the economy, does anyone wonder why Scotland wants away?

Unless there is a change of direction in trade and industry, soon Her Majesty's Government will use up all the oil revenue and be in the same sorry muddle as we were before oil was discovered. We Scots are too canny and too careful to stand by and see our share of the oil revenues dissipated in this way.

There is not even a hint that any of the God-given money will be used to clear up the man-made deprivation of the West of Scotland, yet the surplus labour to do the job is there, the money is now there and goodness knows the deprivation is there for all to see. Should we not do something about the situation while there is an opportunity to do so? Does this House really expect us to support this White Paper tonight and then face the electors of Garscadden on their doorsteps tomorrow? Surely we in the SNP can offer everyone in Glasgow something better.

It is nothing short of scandalous that proposed expenditure on housing is to be cut, at a time when there is so much surplus capacity in the building industry. It may be that certain areas in Britain do not need increased expenditure on housing. If so, may the Scottish people have some of the spare cash to tidy up the West of Scotland?

Do not let anyone in the House accuse the Scottish people of being in any way greedy because we refuse to condone the wastefulness of Westminster Governments past, present and future, if we read the White Paper rightly. It seems that that wastefulness is to continue right up to 1982 if the thinking that is exemplified in the White Paper is a true indicator of what will happen in the next five years.

We in the SNP say to the House "A plague on both your Houses. You are both totally irrelevant to the needs of Scotland."

Mr. Deputy Speaker (Mr. Oscar Murton)

The wind-up speeches are due to start at 9 o'clock.

8.56 p.m.

Mr. Ron Thomas (Bristol, North-West)

I have an important point to make and if I go slightly beyond 9 o'clock I hope that the House will understand.

I refer to what the right hon. and learned Member for Surrey, East (Sir G. Howe) had to say about the Tory amendment. The right hon. and learned Gentleman talked about the need to reduce taxation. He said that he would do that by introducing certain so-called savings. Those savings would be brought about by increasing school meals, cutting rent subsidies and reducing spending in terms of the Community Land Act. As for the last item, there is no longer any money available to cut. The right hon. and learned Gentleman suggests that he would cut away some of the officials who, he insists, are every day looking after that piece of legislation. Anyone who has served on local government will know that that is a nonsense. However, the members of NALGO should be aware of what he intends to do.

At the same time the right hon. and learned Gentleman shed crocodile tears about the level of taxation of low-paid workers. At one moment he was talking about wanting to reduce the tax paid by low-paid workers, but in the next breath he was seeking to increase their rents and the price of school meals. I point out to my right hon. Friend the Financial Secretary that Labour Members are opposed to any increase in the price of school meals. If the House had an opportunity to vote on the school meals issue, I doubt whether my right hon. and hon. Friends on the Government Front Bench would get one vote from the Labour Back Benches in favour of an increase in the price of school meals.

Mr. Dennis Skinner (Bolsover)

My right hon. Friend would get the support of Ministers.

Mr. Thomas

Yes, he would get the payroll vote. I was not including them in the situation that I postulated. I included those who would be free to vote as they thought fit.

In September 1977 the increase in the price of school meals meant that 648,000 fewer children had school meals. About 416,000 children began taking their own so-called food to school, which probably meant a packet of crisps or a packet of biscuits.

The Tory amendment refers to the need to create a "healthy and thriving economy". What happened between 1970 and 1973? That is when the Conservative Government gave the capitalist class in Britain everything for which it asked. However, the level of capital investment in industry decreased. We had investment overseas and speculation in land and property in Britain. We know that the present subsidies to industry are running at about £9 million, £10 million or £11 million a day.

In a recent Answer to a Question that I tabled I was given to understand that up to 31st March 1978 the estimate of the accumulated net reduction in corporation tax resulting from stock relief will be about £4,500 million. If the Tories are serious about reducing taxation for working people, why is it that they did not join some of my hon. Friends and me when we tabled an amendment to the previous Budget? It was our intention to reduce the taxation of low-paid workers. We wanted to stop those in the higher bands getting considerable tax handouts.

Recently, in answer to a Question tabled by my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker), it was stated that the Government's tax changes in 1977 gave £94 to a married couple with two children earning £2,000 a year but gave those, like some Conservative Members or those they represent, earning £63,000 or more £852. When we discuss the next Budget we shall try to make the Government give whatever tax reliefs are available to those who most need them. If the right hon. and learned Member for Surrey, East believes in that policy, I am sure that he will support us in the Lobby.

What alarms me is that the White Paper and the report from the Public Expenditure Committee hardly give the impression that they are written against a background of at least 1½ million people unemployed. They are written against the background of a loss of tax revenue and payments of one kind and another and of goods and services of up to £10 billion a year.

Mention has been made of other countries. Western Germany, with its 1¼ million unemployed, having sent back 1 million or more immigrant workers to their own countries, is sitting on a massive surplus of gold and convertible currency reserves. It also has the lowest level of inflation in the industrialised world. Yet it cannot solve its unemployment problem. That is a clear indication that capitalist measures cannot solve the problem of unemployment. Germany, which has the lowest level of inflation, a healthy balance of payments and massive gold and convertible currency reserves, cannot solve the problem of unemployment. That indicates that capitalism and capitalist measures cannot solve unemployment. There are 7 million unemployed in the EEC countries, another 5 million or 6 million unemployed in the United States, there is unemployment in Japan and so on.

A good deal has been said about the productive potential of this country. That is mentioned in the White Paper. Unfortunately, Britain's productive potential is becoming emasculated every day because of plant closures of one kind or another.

We hear arguments about the economic growth that we can achieve being limited by our so-called productive potential. That productive potential is getting less and less, because manufacturing industry is causing a spiral of contraction and decline.

The economic growth predicted in the White Paper is not enough to begin to deal with the present level of unemployment. It is nowhere near sufficient to create the 1 million new jobs that we need by 1980. Given that we have excess capacity in British industry, and given that increased capital investment will lead to more labour being released, we must face the problem that an increase in expenditure, whether via the public sector or tax cuts, will mean an increase in import penetration of finished and semifinished manufactured goods.

My hon. Friend the Member for York (Mr. Lyon) argued that import controls may or may not be Socialist. There is nothing very Socialist about leaving multinational companies to decide what imports of finished and semi-finished manufactured goods should come into this country. About two-thirds of our import Bill of £31,000 million is represented by finished and semi-finished manufactured goods. That cannot be Socialist in any sense. We call for a planned trade policy.

The White Paper, although it does not mention it, shows that the Government's ideas—that cuts in public expenditure would lead to a transfer of resources from the public sector into export and capital investment—are completely false.

I do not agree with that part of the White Paper that talks about the need for a pay policy to deal with inflation. I cannot go into them now, but there are far more important reasons than pay increases for inflation. The lack of demand in our economy has contributed to inflation. That lack of demand has meant higher unit costs because of a lower level of capacity working and so on.

Looking at the detailed programmes in terms of public expenditure, we see that important items are to be cut relative to two or three years ago. There has been a shift from social policy items. There will be a significant increase in expenditure on defence and a significant proportional decrease in expenditure on housing, education and health.

It is no good my right hon. Friend telling us that our public expenditure is higher than that of the previous Tory Government. Of course it is and it ought to be, because we are supposed to be a party that believes in public expenditure. To take the period just before the Labour Party came to power following the Barber cuts and to say that we have done a little better than the Tory Party is not good enough.

I can remember an occasion when the Prime Minister expressed a sentiment—just one—with which I agreed. He said that the level of public expenditure on education, health, housing and social services was an important contribution not only to the standard of living but to the freedom of the people in this country. It makes the important contribution which enables people to be free from poverty and bad housing and to receive education, social services and so on. Therefore, apart from making a very important contribution to the social wage and the standard of living of working people, public expenditure makes an important contribution to their freedom. If the Conservative Party comes to power, it will unquestionably reduce that social wage and the freedom of ordinary working people.

9.7 p.m.

Mr. Nigel Lawson (Blaby)

We have had a very good debate on an important subject. It has been distinguished by an outstanding maiden speech from my hon. Friend the Member for Bournemouth, East (Mr. Atkinson). It was both outstanding and robust. I hope that we shall hear him a great deal in the future, equally robust.

We had also contributions of great value from a number of my ex-colleagues from the General Sub-Committee of the Expenditure Committee which produced a most useful report for us all—in particular from my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) and also from the hon. Members for Nottingham, West (Mr. English Norwich, South (Mr. Garrett) and Chester-le-Street (Mr. Radice), all of whom made thoughtful contributions. We heard also from a newcomer to the General Sub-Committee, my hon. Friend the Member for Hitchin (Mr. Stewart). The Committee was thoroughly well represented in the debate.

In a few weeks' time, on 11th April, we shall be debating half of the Government's Budget. I say "half" because it is simply the revenue side of it. Today we have been debating the other half, which is an equally important half, the expenditure side. The sooner that the two sides are brought closer together, the better it will be for Parliament, for good government and for economic understanding throughout the country.

The failure to understand the inexorable connection between expenditure and revenue, between expenditure and taxation, was one of the unconscious themes running through a great many of the speeches from Labour Members.

But today at least, unlike last year, we have before us a substantive motion—one that has at least some family resemblence to what ought to be before us. We should, however, be considering a motion to approve the Government's public expenditure White Paper. This time we are not quite being asked to approve it. Such is the Government's lack of confidence in their own supporters—we heard from a number of those supporters today, and we can understand the Government's feelings—that we are not asked to approve it in its entirety. Instead, we have a most curious form of words. The House is being asked to take note of the White Paper as a whole but to approve certain aspects of it.

It is not clear precisely what aspects of it we are being asked to approve. That particular part of the motion refers to the plans to increase public expenditure". Let us see what that means. Hitherto, the convention—as the right hon. Member for Down, South (Mr. Powell) pointed out, a thoroughly bad convention—has been to describe as public expenditure cuts reductions in previously announced spending plans for a particular year.

However, using this convention, which is the one that has been used in the past, there are no increases in public expenditure announced in the current White Paper. Line G, table 14, which is the relevant one in the White Paper, shows an increase of £232 million, chiefly, incidentally, in increased payments to the Common Market under the CAP, in 1978–79, and a reduction of £34 million in 1979–80. Both these figures are less than one-half of 1 per cent. of total public spending and are well within the margin of error—even a normal margin of error, let alone the Chief Secretary's "Guinness Book of Records" margin of error—and they are statistically insignificant.

It seems clear, therefore, that the increase to which the Government are referring is the very substantial increase in public expenditure planned for next year, 1978–79, over this year now ending, 1977–78. This seems to be a very much healthier and more sensible use of language than the old convention was. I hope that in future we can agree to confine the term "spending cut" to a reduction in spending from one year to the next, and similarly with "spending increase". Certainly that is how I intend to use those terms.

In discussing the Government's plans, I suggest that we would do best if we confined ourselves exclusively to what is proposed for the year immediately ahead, 1978–79. As the White Paper points out, The figures for the year immediately ahead, 1978–79, are firm plans —quite how firm, apparently, the Chief Secretary is not sure, but the firmest there are. The White Paper goes on: The figures for the succeeding years are increasingly provisional. The Government can say that again.

Since this general truth of the provisional nature of the figures for future years is of particular relevance now, because the incoming Conservative Government clearly will need to make substantial changes to the plans for succeeding years, that is a further reason why we now should address ourselves solely to 1978–79.

Before looking to the future, however, let me pay tribute where tribute is due, because, as the Chief Secretary knows, I like to be fair. In the public expenditure debate two years ago, in March 1976, my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) declared that public expenditure needed to be cut by £4 billion. This was met with hoots of derision from Treasury Ministers at the time, so much so that the Chief Secretary chose to remind the House of this incident during last year's public expenditure debate. Now we have in the White Paper figures for the estimated outturn for public expenditure in 1977–78. They show that at constant 1976–77 prices there has been a reduction of precisely £4.1 billion in public expenditure over the past two years. Clearly, the Government listened to us and did what we suggested, even though they derided us when we put forward the suggestion.

We disagree, of course, with some of the ways in which this has been achieved. We disagree in particular with the savage cuts in defence spending. But the total sum at least is exactly what we asked for, and it is right.

It was to be expected that Government supporters would ask during the debate where we would have made the cuts to compensate for the cuts which we would not have made in defence and in certain other areas. There are a number of possibilities. The Chief Secretary himself, for example, has pointed out frequently the rocketing cost of indiscriminate housing subsidies, and he has given this as an example of where the present Government have got their priorities wrong. But he has been unable to do anything about it, of course, because he could not get it through a Labour Cabinet.

Then there are all manner of expensive Socialist follies—[Interruption.] I see that the Lib-Lab pact has taken on a new aspect, with the hon. Member for Liverpool, Walton (Mr. Heifer) and the hon. Member for Cornwall, North (Mr. Par-doe) now in conclave.

I was saying that there are all manner of Socialist follies to be extirpated, such as the Community Land Act, which, so far from costing nothing, is scheduled to cost £64 million in the coming year. There is the artificially inflated demand for higher education as a job screening device. There is the excellent example set by the present Government, with the unloading of £500 million-worth of BP shares, of the sale of public assets to the private sector. There is the sale of council houses, which is a most important part of this process of selling public sector assets to the private sector.

Mr. English

Will the hon. Member refresh my memory? Was he not on the Sub-Committee of the Expenditure Committee which I chaired when we criticised the sale of BP?

Mr. Lawson

No. That error was made after I left the Committee.

Then there is the overmanning, the administrative overburden and waste which still permeates much of the public sector. There is the increasingly expensive nonsense which my right hon. Friend the Member for Newham, North-East (Mr. Prentice) mentioned, as did my right hon. and learned Friend the Member for Surrey, East, of the so-called industrial strategy—the State as entrepreneur, of which the hon. Member for Walton wanted more and more and which, in a paper delivered the other day, was so devastatingly exposed by, of all people, the former managing director of the Industrial Reorganisation Corporation Mr. Ronald Grierson himself.

Indeed, I see that even the CBI, in its Budget representations to the Chancellor of the Exchequer, has said that There should be less Government spending on support for industry and employment. If the CBI can say that, perhaps even the hon. Member for Walton can accept it. There is ample scope, in these and other ways for a rearrangement of priorities.

Although I acceded to the request of the Chief Secretary to spell out the areas where we see that there is scope for economies, I am not sure that it is incumbent on us to spell out in any detail what we would cut in one area to make way for necessary increases in another when it is now clear that the Government themselves, with all the information at their disposal and with the books in front of them, are unable to reveal their own cuts in advance of making them. For, as the General Sub-Committee of the Expenditure Committee has pointed out in its report on the White Paper, the unannounced shortfall in spending this year has in fact turned to be larger than all the pre-announced and hotly debated cuts put together. The Government did not know what they were going to do. It just happened. I do not see why it is incumbent on us to spell out the detail when the Government cannot.

But, as far as the total is concerned, the Government, whether by accident or design—or, maybe, a combination of the two—have achieved the necessary cuts of £4 billion. If they were now to hold expenditure at the current year's level—and my right hon. Friend the Member for Newham, North-East and my right hon. and learned Friend the Member for Surrey, East suggested that there is a lot to be said for holding it constant for several years to come—the State's share of the national wealth would continue to decline and there would be scope in the coming Budget for the substantial cuts in income tax that the people want and the nation needs.

Of course, instead of doing that and holding public expenditure steady, the Government are planning a massive increase in expenditure. Quite how massive they rather delicately decline to reveal, and even the General Sub-Commitee had some difficulty in winkling it out. It is absolutely clear that it is greater than the 2 per cent. rise that the Press was led to believe was implicit in the White Paper. The Chief Secretary told the Expenditure Committee that it might be anything from 2 per cent. to 8 per cent. But what did he know? What did he care? Treasury officials told the same Committee that their best guess was 4 per cent. but that this was only a single figure in the middle of a wide range". The Bank of England Bulletin, out today, reckons that it might be close to 7 per cent. but that it is more likely to be closer to 4 per cent. My own guess—it shows, incidentally, the absurdity, as my right hon. and learned Friend has said, of discussing figures for later years when the Treasury cannot even be sure, within a margin of billions of pounds, what next year's public spending is likely to be—is that the increase in 1978–79 will be around 5 per cent. I say that as a confirmed White Paper watcher for many a long year. This is not only 5 per cent. too much; it is also roughly double the likely rate of growth of the economy as a whole over the same period, as my hon. Friend the Member for Hitchin pointed out.

So much for the ringing declaration, which has already been quoted by the right hon. Member for Down, South, in paragraph 4 of the White Paper that in order to leave room for manoeuvre on taxation, it is necessary that the planned growth rate for total public expenditure should be with-in the prospective growth rate of national income. Yet for the only year for which we have any figures that we can believe it is at least double the likely growth of national income. It is clear that, with a General Election in the offing, the Government are now bribing on all cylinders and planning a substantial increase in public expenditure, and substantial tax cuts too.

It is worth contrasting this with what the same Treasury Ministers were saying in last year's public expenditure debate before they had lost all sense of responsibility. For example, the Chief Secretary, in opening the debate, said: the same people who ask for higher public expenditure invariably also want large cuts in direct taxation. They cannot have both. Of course, if there is a General Election coming, maybe they can.

The Financial Secretary wound up on that occasion as he is winding up tonight. He took it upon himself to reply to the hon. Member for Bedwellty (Mr. Kinnock). I am sorry that the hon. Member is not here tonight. I shall not attack him. Last year, he declared that the Government should increase the Budget deficit in order to reduce unemployment. With great patience, the Financial Secretary explained that an increase in the Budget deficit would increase inflation, which in turn would prevent a reduction of unemployment.

Incidentally, that was why I intervened earlier in the Chief Secretary's speech. It was not to make a silly debating point but to refer directly to the contrast with what the Financial Secretary said last year. He then said: If we were to increase the public sector borrowing requirement as a result of increasing public expenditure, we would have to raise interest rates. Once we did that we would make it more difficult to invest. Then we would not get the industrial expansion that is absolutely essential."—[Official Report, 17th March 1977; Vol. 928, c. 637, 760–1.] What do we now see? The Government's motion tonight was obviously drafted by the hon. Member for Bedwellty, because it approves the plans to increase public expenditure specifically in view of the need to reduce unemployment". In other words, since a General Election is now in the offing, the Government have decided, even though they have a busy parliamentary timetable, to repeal the laws of economics. Unfortunately, those laws cannot be repealed. That is the trouble. The inexorable consequences will follow—not lower unemployment, but higher and rising inflation.

I know that the Government will make much of the fact that the public sector borrowing requirement this year is likely to turn out much lower than forecast, probably less than £6 billion, in large part because of unexpectedly high income tax payments. I suspect, incidentally, that there will be a very much smaller shortfall in the public sector financial deficit, which is in many ways a more significant figure. I am glad to see the hon. Member for Nottingham, West, Chairman of the General Sub-Committee, agreeing with me. For the first time ever, we may find that the PSFD is bigger than the PSBR.

But what matters now and for the future course of inflation is not the borrowing requirement for the financial year just ending but the borrowing requirement for the year ahead. It is abundantly clear that any tax cuts in the coming Budget will, on the basis of the plans for public expenditure for the coming year as contained in the White Paper, mean a substantial rise in the borrowing requirement.

This underlines still further the gross irresponsibility of the Chancellor's new pre-election economic strategy. What could be more irresponsible than to plan for a substantial increase in the borrowing requirement at a time when the money supply in terms of sterling M3, as today's figures have confirmed—it was not just January's figures—is increasing at a rate well in excess of the Chancellor's 13 per cent. upper limit? It will not be long before the brakes are off altogether.

This year, as the hon. Member for Cornwall, North remarked, a number of eminent academics were invited for the first time by the Expenditure Committee to comment on the White Paper. It was an interesting and useful innovation. I too contributed my fourpennyworth. Every one of them commented on the complete lack of any coherent economic framework to the Chancellor's proposals—the disturbing intellectual vacuum in which the White Paper is presented.

What, for example, does the Treasury regard as the maximum permissible size of the PSBR? Perhaps the Financial Secretary would care to answer that question now. I hope that he will answer it when he replies to the debate. The White Paper is silent on this, even though it is absolutely crucial. Perhaps the Financial Secretary will tell us. Or perhaps he thinks that it does not matter at all and that there should be whatever degree—this is clearly what the hon. Member for Cornwall, North thinks—of so-called reflation is needed to bring about full employment—the very same crude fallacy that he himself rebuked last year.

But in that case, if there is no limit in terms of the borrowing requirement—I hope that the Minister will say that there is a limit and what it is—what determines the Chancellor's scope for action? It is quite clear what, in practice, the Chancellor regards as limiting the scale of the bribe he is now contemplating for 11th April. As he ponders in his room now, he is asking himself "How much can I do without risking a major balance of payments crisis and a collapse of the pound?" That is the one thing that is causing him concern and the one thing that he feels is a constraint.

Yet the fact that that is the only practical limitation that he sees, the only one remaining now that he has decided, evidently, that monetary restraint is something with which he need no longer bother at all, should surely provide the clue to where the real answer lies. For the reason why, even with North Sea oil, we once again view the prospect for the balance of payments with great trepidation, and why there has been such massive import penetration into this country even while our economy has been stagnant, has nothing whatever to do with demand, whether inadequate or excessive.

The problems lie entirely on the supply side—our appallingly low productivity; the pervasive lack of confidence; the erosion of the incentive to acquire a skill, to work overtime or even, in some cases, to work at all; and, in general, the malfunctioning of both the labour and the capital markets, due in large measure to inflation, to formal incomes policies and to high direct taxation.

It is the correction of these fundamental weaknesses—not the expansion of public expenditure; that has nothing to do with it—that alone will enable the economy to expand and unemployment to come down, as we all hope it will.

The present Government have presided over the worst economic record in the Western world. In four years our currency has lost almost half its value, industrial production is still at the level reached in the three-day working week, productivity has been totally stagnant and unemployment is higher than that of any of our major competitors.

Mr. Clemitson

Nonsense.

Mr. Lawson

It is not nonsense. It is true. Official figures show this to be so on a comparable basis.

Despite that record, the Prime Minister has the impertinence to lecture other countries on how they should conduct their affairs, evidently confusing foreign travel with statesmanship. But other countries will not save us. We must save ourselves.

The measures that we need to take are perfectly clear. Perhaps they are clear to the Chancellor too; I give him that credit. But, if they are clear to him, he has chosen to ignore them, because he is all too well aware that his predecessor—this was mentioned by the hon. Member for York (Mr. Lyon)—Mr. Roy Jenkins, was blamed by the Labour Party for losing the 1970 General Election by not having a give-away Budget. He knows that, and he is clearly determined that at any rate he will not be similarly blamed for the loss of the next General Election.

The spending plans in the White Paper and the Budget that will follow them after Easter are cynically designed as the two barrels of the biggest pre-election bribe the British people have yet been offered. The people will not be fooled. But they will, none the less—this is their hardship; this is the tragedy of it—suffer the inflationary consequences for a considerable time to come.

I invite my right hon. and hon. Friends to register their distaste for this whole shoddy and shabby episode by voting for the amendment tonight.

9.30 p.m.

The Financial Secretary to the Treasury (Mr. Robert Sheldon)

My first happy task is to congratulate the hon. Member for Bournemouth, East (Mr. Atkinson) on his maiden speech. He spoke with confidence and fluency in illustrating the problems of his constituency, and we look forward to his further contributions. He was a little more controversial than has been the custom, but that custom is not quite so strongly observed as it used to be, and I urge the hon. Gentleman not to regret on that score what he said.

The debate has changed considerably from its original format. It is my regret that we do not have those Sub-Committees which form a part of the Expenditure Committee putting forward their assessment of their own programmes. I have always held that that should be an integral part of the debate on expenditure. Those who study the subject could comment upon the choices that the Government make and bring pressures to bear on the basis of the knowledge they have acquired in their own areas. Only when that is done shall we have the exchanges of views and the formation of new and changing priorities that those best equipped can contribute to the debate. I understand that the Sub-Committees are examining the White Paper and I believe that they will make their comments in due course. I hope that they will be able to make their comments in the course of future debates.

There have been a number of comments from the Opposition in this debate about the nature of cuts. The right hon. and learned Member for Surrey, East (Sir G. Howe) went rather further in describing the kind of cuts he would wish to see. There was an absence of an assessment in that direction by the hon. Mem- ber for Blaby (Mr. Lawson). We must assume that the Conservative Party's policy, on economic matters at any rate, is still being made by the right hon. and learned Gentleman. We note his comment that one of the ways in which expenditure might be saved is by the selling of more BP shares. We look forward to learning in a later debate what the Conservatives' intentions are in this respect.

Sir G. Howe

What are the Financial Secretary's intentions?

Mr. Sheldon

We have no plans to sell BP shares. That is quite clear. I wish that the right hon. and learned Gentleman would explain how many BP shares he has it in mind to sell. This is a very important matter. We are dealing with one of the largest world companies. For the right hon. and learned Gentleman to make such a comment upon an international company of BP's size and reputation, without being able to tell us just what he has in mind, is to fail miserably in the position that he holds.

We know that there is a division on many of these matters. I wish to refer to the way in which this has been explained by the right hon. Member for Leeds, North-East (Sir K. Joseph), who wants very strong cuts. The right hon. and learned Gentleman wants reasonable cuts, the hon. Gentleman does not seem to be sure whether he wants cuts at all immediately, but the right hon. Gentleman put his position clearly in an article in The Sun on 3rd August last year, when he made this emotive statement: We will put an end to the spend, spend, spend. If the right hon. Member for Leeds, North-East has changed his mind since, we shall be happy to hear about it. If the right hon. and learned Member for Surrey, East has changed his mind since the opening of the debate, when he explained the number of cuts that he would make, we shall be glad to hear that also. What we are seeing here is the Tory Party demand to cut public expenditure so that it can increase the assistance given to the best-off in our community.

Sir G. Howe indicated dissent.

Mr. Sheldon

The right hon. and learned Gentleman's memory seems extraordinarily short. He said that there should be tax incentives to get rich and to prosper out of post-tax incomes. He said that he wanted these people to get rich so that they could prosper out of post-tax incomes. I do not know his definition of "rich", and I should be glad to hear it. It is a pity that he did not go into it more fully. But let us be clear what the Tory Party has in mind.

Sir G. Howe

Does not the right hon. Gentleman accept and remember that one of the points I made was that a tax system which imposed taxes and national insurance contributions on people with incomes of £45 a week at the level of 40p in the pound was entirely absurd, and that we are interested in creating opportunities for people of all incomes to have lower taxes so that they can improve their own conditions by their own efforts?

Mr. Sheldon

I must repeat what the right hon. and learned Gentleman said. I made a note of it at the time. He said that he wanted tax incentives for people to get rich. The House understands that he wants people to get rich—fair enough. We know where we are. That is what the Tories want to provide. But let us look at the case and see what was actually done by the Tories. Let us compare what they are saying now with their earlier performance in office.

In the years 1970–71 to 1973–74, there was an increase in public expenditure of 13 per cent. If we take the more comparable years 1969–70 to 1973–74, there was a 16 per cent. increase. However, the problem was not an increase in public expenditure but the way it was paid for. It was paid for by an expansionary boom, an expansion in money supply, and an expansion in the public sector borrowing requirement.

On the contrary, in the years 1973–74 to 1978–79, we are having an increase of 5 per cent. in public expenditure after allowing for the £1½ billion shortfall in 1978–79 referred to by my right hon. Friend the Chief Secretary. I think that that is responsible, within the limits of what we have set out in the White Paper, and in the light of these figures it was outrageous of the right hon. Member for Leeds, North-East to say that the Tories would put an end to spend, spend, spend. For it was the Tories who spent money that they did not have and produced the problems that we are living with even today.

What we are seeing now is a modest growth in our gross domestic product, and as our capacity grows, so will our public expenditure be able to grow with it. This compares with what the Tories did when they had their growth in public expenditure paid for by the disgraceful increase in money supply.

By 1974, the money supply had worked its way through, the bubble had burst, and the myth of Tory financial responsibility burst with it. The hon. Member for Blaby talked of lack of confidence. He should understand that, although many people in the City would welcome cuts in taxation which would be heavily biased in favour of the wealthy, when they consider the possibility of a Tory Government they do not forget the profligacy of the Tory past and are justifiably fearful for the City's future.

That is why we have also heard from a former Financial Secretary to the Treasury, one who held the post that I now have the honour to occupy. He said on 17th March 1977: I doubt whether the same degree of control"— that is, control over public expenditure— has been exercised with such determination for so long by any Administration in the last 20 years."—[Official Report, 17th March 1977; Vol. 928, c. 676.] As that statement comes from someone who certainly advocates control in this matter, I think that we have refuted the argument that we are doing nothing more than spend, spend, spend. We are controlling public expenditure in a way that is generally appreciated outside this House and in most parts inside as well.

The right hon. and learned Member for Surrey, East in his list of public expenditure cuts, would cut down on industrial assistance. I am not sure whether all parts of the United Kingdom will react with very great joy and delight to the prospect of the factories not receiving the money that they need for expansion.

The right hon. and learned Gentleman talks about ending or phasing out the temporary employment subsidy. That may go down very well in Surrey, East, but it does not go down at all well in the North of England, or in those areas which desperately need the investment opportunities that we are providing and the assistance in regard to jobs.

Finally, the right hon. and learned Gentleman talked about the Public Accounts Committee as if it were a body which criticised only the spending of Labour Governments. He ought to know that, even at this stage, there are certain matters on which the Committee is still criticising the activities of the Conservative Government.

There are other aspects of public expenditure which the Conservatives would be likely to increase. I shall not go into the matter of defence; we know about that. Let us consider the Conservatives' sometime undertaking to abolish the rates. Are they still intent on doing this, at a net cost of nearly £2 billion?

The Conservatives also had a proposal to introduce tax credits. We do not hear much these days about tax credits. We can read about tax credits in "The Right Approach" as a useful scheme which the Conservatives will implement in due course. They speak of using their period in Opposition in order to improve the scheme and examine the possibilities of broadening it—not narrowing it—within the resources available. But when we look at "The Right Approach to the Economy", we find that this tax credit scheme, which would cost £6 billion, is not there. In other words, the scheme that was set out in "The Right Approach" turns out to be the wrong approach to the economy. It is not, after all, thought right to spend £6 billion, a large part of which would be bound to be public expenditure, on tax credits. The Conservatives know full well that their claim to be cutters of public expenditure would vanish overnight if they were to include their tax credit scheme in "The Right Approach to the Economy".

I know that there are those who say that tax credits ought to be treated as tax forgone. We all know that that is the constant call of Tory spokesmen who always want their expenditure to be treated in that way, but that is an over-simplification. It depends very much on the nature of the scheme. While it is true that certain parts of a tax credit scheme would be tax forgone, a large part of the £6 billion would be bound to be public expenditure, and Conservative Members know it.

Mr. Lawson

The right hon. Gentleman's argument is getting more and more confused. Is he suggesting that the next Conservative Government will spend more than the present Government or Ness?

Mr. Sheldon

The right hon. Member for Wanstead and Woodford (Mr. Jenkin) very much believes that he will get the money to provide about £6 billion in tax credits. My belief is that, if the Conservatives were to get in, that £6 billion would vanish before they were able to implement the very first of their policies, and the visionary ideal that so many of them have would come down to earth very rapidly indeed.

The right hon. and learned Member for Surrey, East, as I mentioned earlier, talked about tax incentives which were to be provided to enable people to get rich and to prosper out of post-tax income. No one can doubt that at a time of economic difficulty, the level of taxation is bound to be higher than that which we would otherwise be prepared to accept.

It is also true that at a time when there has been a decline in the standard of living—necessitated by the increased price of oil—there should be a sharing of the burdens. Whenever there is a sharing of the burdens, that, by its very nature, is bound to have a greater effect on those with high incomes than on those with medium incomes, while at the same time one hopes to be able to assist—as we have done—those on low incomes.

That is the best way of dealing with the population and the country when we experience economic difficulties. This was understood in 1940 when we had a level of taxation which no one could ever justify on economic grounds. We had an excess profits tax of 100 per cent. and income tax at 19s. 6d. in the pound. Their economic effect was nil, but their uniting effect on the country as a whole was enormous. In that kind of situation, given these economic difficulties we have been able to keep the country united by sharing burdens in the most equitable way possible.

But that was not understood in 1931 when the Tories had another chance, because at that time the wealthy and leisured society did not change its amusements and even sharply increased the divisions in our society. Many people will consider that what happened at that time has led to many of the industrial problems that we have subsequently seen.

I believe that reductions in taxation can make a valuable contribution to the economy. But I make no apology for the level of tax which was consequent on the decline of our national income as a result of the oil price increase. Had there been a Tory Administration to carry out the particular programme that was needed then as a result of the profligacy of the previous Conservative Government, we would have seen not only privilege under attack but we might not have remained free from its being only a verbal conflict. It could have assumed more dangerous and unpleasant forms.

What we have seen is the debate that is going on in the Conservative Party, that has still not been resolved and is unlikely to be resolved satisfactorily—certainly not for the country—between those who advocate the control of the money supply and those who advocate some sort of pay policy. The argument is seen in its most personal form between the right hon. Member for Leeds, North-East and the right hon. Member for Lowestoft (Mr. Prior).

The right hon. and learned Member for Surrey, East complained that there was no monetary analysis in the White Paper. I myself find that the conflict going on inside the Conservative Party is now at a very interesting stage, because the Conservative Party is now seeing the possibility of its having to come to an agreed decision as to whether it will have the recklessness and the audacity to risk—on the strength of a disputed theory—the task of running the country.

Not many hon. Members were present on Monday night when the hon. Member for Blaby made an astonishing commitment. He said: The Bank of England"— as a result of his proposals— would then, in effect, be charged by Parliament with ensuring that the target was met".— The hon. Gentleman ended his speech by saying: it will fall to the next Conservative Government to embark on this course".—[Official Report, 13th March, 1978; Vol. 946, c. 168, 170.] I see the hon. Gentleman still on the Front Bench. Apparently it is now his commitment to tie the Government's hands and to settle in advance—by some form of legislation—what the monetary target of this country should be and then to take it out of the hands of the Government and leave it to the Bank of England to implement.

Those who understand these problems know that a dollar crisis or something similar can occur within a few hours and they know the sort of flexibility that is needed. Hon. Members who have scorned and disdained this Government's regular fine tuning should know that the fine tuning we have done so far is nothing compared with the fineness of the tuning that would be needed to keep to the statutory monetary targets that are to be laid upon the civil servants responsible.

This would be an unnecessary strait-jacket and it makes us wonder why the Opposition have such a peculiar attitude to what is, after all, only one indicator among many that could be produced to achieve much the same purpose. If we look at what has happened over the years, we can understand what makes them so neurotic about a monetary target that was barely known to the general population more than a decade ago. If we look back, we can understand why the Opposition take these matters to heart so strongly.

In 1971, the figure for sterling M3 was 13 per cent. It went to 27 per cent. in the following year and it remained at 27 per cent. the year after. Since this Government came to power, the annual figures have been 10 per cent., 6 per cent., 9 per cent. and 8 per cent. We see that the Opposition are trying to tie the hands of the Government, but their quarrel is not with this Government but with the previous Tory Administration. That is what it is all about.

No conflict is ever fought with greater bitterness than the conflict of the civil war within the Conservative Party. We hear the distant sound of artillery as the struggle continues.

The great danger that we face with this Opposition is that, under the respectable and fashionable cloak of monetarism, they are trying to abdicate from monetary control. They will really be seeking heavy devaluation, assisted by cuts in public expenditure, which will inevitably lead to cuts in confidence. We see all this as further evidence of pre-war unenlightened Toryism. In this form of monetarism we see the use of new theories to justify old intentions.

If the Conservatives ever came to power, they would realise the nonsense of implementing this absurdity. If they tried to implement it, they would find themselves having to withdraw it. If they did not change their minds, they would be defeated by the facts they strove to oppose. They would be like a stage army marching to the top of the hill and down again with barely enough time at the top to admire the view.

What is all this about? Why do the Conservatives feel that this is so important? They want to have scope to reduce the highest levels of taxation among the wealthy. They still believe, despite the facts of the past, that they are able to introduce incentives that will produce an increase in productivity and will set the country going again.

We have the example of the past. This happened in 1962, when Mr. Selwyn Lloyd, as he was then, decided that he would reduce the level of taxation for the wealthy to see whether the incentive effects produced results. The surtax threshold was raised from £2,000 to £5,000 a year. What happened? The Tories had to change their minds within two years. They did not learn from their experience. They tried the same thing again in 1971. Once again, they found themselves assisting those paying the highest levels of income tax in the guise of the changeover to the new unified tax system. They tried the same trick again. It took three years this time, and at the end of the three years, despite the enormous incentives given at the top end of the scale, they still found themselves with an economic crisis on their hands.

To try to go along the same road once again and to try to justify handouts to the wealthy in order to produce results in industry is to fail once more in the task that they have set themselves.

I do not believe in the concept of a fixed maximum proportion of public expenditure to gross domestic product. I regard that concept as silly. At a time of slow economic growth, if public expenditure is to be increased, personal consumption may fall to unacceptable levels. There are cycles in these matters, and, given a large increase in growth, there could be a demand for better services voiced by the people of this country. If such a situation arises, as we hope it will shortly, we must be ready to respond to these wishes.

The increase in public expenditure that can be made can respond in this way. The burden with which we have had to contend for so long has been the difficulty of reducing levels of public expenditure because the growth of the domestic economy has not increased as much as both parties would have wished during the last decade or so.

We must seek the approach that is made in the White Paper—the changes made must increase public expenditure rather than our going through the agonising task of reducing it.

This has been another instalment in the saga of Opposition demands for reductions in public expenditure without proper acknowledgement or acceptance of the problems involved. A number of my hon. Friends have called the amendment hypocritical. I have no quarrel with that assumption, and I urge hon. Members to oppose it.

9.59 p.m.

Mr. Norman Tebbit (Chingford)

In a most extraordinary speech, the Minister has been unable to talk about his own White Paper's expenditure plans for more than five minutes. He could not even make his speech last the full half hour. The scene that we have seen tonight is a Minister unable to justify his own policies before his own party.

Question put, That the amendment be made: —

The House divided: Ayes 256, Noes 294.

Division No. 151]	AYES	[10.00 p.m.
Adley, Robert	Atkins, Rt Hon H. (Spelthorne)	Bendall, Vivian (Ilford North)
Aitken, Jonathan	Atkinson, David (Bournemouth, East)	Bennett, Sir Frederic (Torbay)
Alison, Michael	Awdry, Daniel	Bennett, Dr Reginald (Fareham)
Amery, Rt Hon Julian	Baker, Kenneth	Benyon,W.
Arnold, Tom	Bell, Ronald	Berry, Hon Anthony
Biffen, John	Havers, Rt Hon Sir Michael	Page, John (Harrow West)
Biggs-Davison, John	Hawkins, Paul	Page, Rt Hon R. Graham (Crosby)
Blaker, Peter	Hayhoe, Barney	Page, Richard (Workington)
Body, Richard	Heath, Rt Hon Edward	Paisley, Rev Ian
Boscawen, Hon Robert	Heseltine, Michael	Parkinson, Cecil
Bottomley, Peter	Hicks, Robert	Pattie, Geoffrey
Bowden, A. (Brighton, Kemptown)	Higgins. Terence L.	Percival, Ian
Boyson, Dr Rhodes (Brent)	Hodgson, Robin	Peyton, Rt Hon John
Bradford, Rev Robert	Holland Philip	Pink, R. Bonner
Braine, Sir Bernard	Hordern, peter	Powell, Rt Hon J. Enoch
Brittan, Leon	Howe, Rt Hon Sir Geoffrey	Prentice, Rt Hon Reg
Brocklebank-Fowler, C.	Howell, David (Guildford)	Price, David (Eastleigh)
Brooke, Peter	Hunt, David (Wirral)	Prior, Rt Hon James
Brotherton, Michael	Hunt John (Ravensbourne)	Raison, Timothy
Brown, Sir Edward (Bath)	Hurd, Douglas	Rathbone, Tim
Bryan, Sir Paul	Hutchison, Michael Clark	Rawlinson, Rt Hon Sir Peter
Buchanan-Smith, Alick	Irving, Charles (Cheltenham)	Rees, Peter (Dover & Deal)
Buck, Antony	James. David	Renton, Tim (Mid-Sussex)
Budgen, Nick	Jenkin, Rt Hon P. (Wanst'd & W'df'd)	Rhodes, James R.
Bulmer, Esmond	Johnson Smith, G. (E Grinstead)	Ridley, Hon Nicholas
Burden, F. A.	Jones, Arthur (Daventry)	Ridsdale, Julian
Butler, Adam (Bosworth)	Jopling, Michael	Rifkind, Malcolm
Carlisle, Mark	Joseph, Rt Hon Sir Keith	Roberts, Wyn (Conway)
Chalker, Mrs Lynda	Kaberry, Sir Donald	Rodgers, Sir John (Sevenoaks)
Channon, Paul	Kershaw, Anthony	Ross, William (Londonderry)
Clark, Alan (Plymouth, Sutton)	Kilfedder, James	Rossi, Hugh (Hornsey)
Clark, William (Croydon S)	Kimball. Marcus	Rost, Peter (SE Derbyshire)
Clarke, Kenneth (Rushcliffe)	King. Evelyn (South Dorset)	Royle, Sir Anthony
Cockcroft, John	King. Tom (Bridgwater)	Sainsbury, Tim
Cooke, Robert (Bristol W)	Kitson, Sir Timothy	St. John-Stevas, Norman
Cope, John	Knight, Mrs Jill	Scott, Nicholas
Cormack, Patrick	Knox, David	Shaw, Giles (Pudsey)
Costain, A. P.	Lamont, Norman	Shelton, William (Streatham)
Crouch, David	Langford-Holt, Sir John	Shepherd, Colin
Dean, Paul (N Somerset)	Latham, Michael (Melton)	Shersby, Michael
Dodsworth, Geoffrey	Lawrence, Ivan	Silvester, Fred
Douglas-Hamilton, Lord James	Lawson, Nigel	Sims, Roger
Drayson, Burnaby	Lester, Jim (Beeston)	Skeet, T. H. H.
du Cann, Rt Hon Edward	Lewis, Kenneth (Rutland)	Smith, Dudley (Warwick)
Durant, Tony	Lloyd, Ian	Smith, Timothy John (Ashfield)
Dykes, Hugh	Loveridge, John	Speed, Keith
Eden, Rt Hon Sir John	McAdden, Sir Stephen	Spence, John
Edwards, Nicholas (Pembroke)	McCrindle, Robert	Spicer, Michael (S Worcester)
Elliott, Sir William	McCusker, H.	Sproat, lain
Emery, Peter	Macfarlane, Nell	Stainton, Keith
Eyre, Reginald	MacGregor, John	Stanbrook, Ivor
Fairbairn, Nicholas	MacKay, Andrew (Stechford)	Stanley, John
Fairgrieve, Russell	Macmillan, Rt Hon M. (Farnham)	Steen, Anthony (Wavertree)
Farr, John	McNair-Wilson, M. (Newbury)	Stewart, Ian (Hitchin)
Fell, Anthony	McNair-Wilson, P. (New Forest)	Stokes, John
Finsberg, Geoffrey	Madel, David	Stradling Thomas, J.
Fisher, Sir Nigel	Marshall, Michael (Arundel)	Tapsell, Peter
Fletcher, Alex (Edinburgh N)	Marten, Neil	Taylor, R. (Croydon NW)
Fookes, Miss Janet	Mates, Michael	Taylor, Teddy (Cathcart)
Forman, Nigel	Mather, Carol	Tebbitt, Norman
Fowler, Norman (Sutton C'f'd)	Maude, Angus	Temple Morris, Peter
Fox, Marcus	Maudling, Rt Hon Reginald	Thatcher, Rt Hon Margaret
Fraser, Rt Hon H. (Stafford & St)	Mawby, Ray	Thomas, Rt Hon P. (Hendon S)
Fry, Peter	Maxwell-Hyslop, Robin	Townsend, Cyril D.
Galbraith, Hon T. G. D.	Meyer, Sir Anthony	Trotter, Neville
Gardiner, George (Relgate)	Miller, Hal (Bromsgrove)	van Straubenzee, W. R.
Gardner, Edward (S Fylde)	Mills, Peter	Vaughan, Dr Gerard
Gilmour, Rt Hon Ian (Chesham)	Miscampbell, Norman	Viggers, Peter
Gilmour, Sir John (East Fife)	Mitchell, David (Basingstoke)	Wakeham, John
Godber, Rt Hon Joseph	Moate, Roger	Walder, David (Clitheroe)
Goodhart, Philip	Molyneaux, James	Walker, Rt Hon P. (Worcester)
Goodhew, Victor	Monro, Hector	Wall, Patrick
Goodlad, Alastair	Montgomery, Fergus	Walters, Dennis
Gorst, John	Moore, John (Croydon C)	Warren, Kenneth
Gow, Ian (Eastbourne)	More, Jasper (Ludlow)	Weatherill, Bernard
Gower, Sir Raymond (Barry)	Morgan, Geraint	Wells, John
Gray, Hamish	Morris, Michael (Northampton S)	Whitelaw, Rt Hon William
Grieve, Percy	Morrison, Charles (Devizes)	Wiggin, Jerry
Grist, Ian	Morrison, Hon Peter (Chester)	Winterton, Nicholas
Grylls, Michael	Mudd, David	Wood, Rt Hon Richard
Hall-Davis, A. G. F.	Neave, Airey	Young, Sir G. (Ealing, Acton)
Hamilton, Michael (Salisbury)	Nelson, Anthony	Younger, Hon George
Hampson, Dr Keith	Neubert, Michael
Hannam, John	Newton, Tony	TELLERS FOR THE AYES:
Harrison, Col Sir Harwood (Eye)	Nott, John	Mr. Spencer Le Marchant and
Haselhurst, Alan	Onslow, Cranley	Mr. Michael Roberts.
Hastings, Stephen	Oppenheim, Mrs Sally

NOES
Abse, Leo	Fletcher, Ted (Darlington)	Mahon, Simon
Allaun, Frank	Foot, Rt Hon Michael	Mallalieu, J. P. W.
Anderson, Donald	Ford, Ben	Marks, Kenneth
Archer, Rt Hon Peter	Forrester, John	Marshall, Dr Edmund (Goole)
Armstrong, Ernest	Fowler, Gerald (The Wrekin)	Marshall, Jim (Leicester S)
Ashley, Jack	Fraser, John (Lambeth, N'w'd)	Mason, Rt Hon Roy
Ashton, Joe	Freeson, Rt Hon Reginald	Maynard, Miss Joan
Atkins, Ronald (Preston N)	Freud, Clement	Mellish, Rt Hon Robert
Atkinson, Norman	Garrett, John (Norwich S)	Mendelson, John
Bagier, Gordon A. T.	Garrett, W. E. (Wallsend)	Mikardo, Ian
Bain, Mrs Margaret	George, Bruce	Miller, Dr M. S. (E Kilbride)
Barnett, Guy (Greenwich)	Gilbert, Rt Hon Dr John	Mitchell, Austin
Barnett, Rt Hon Joel (Heywood)	Ginsburg, David	Molloy, William
Bates, Alf	Golding, John	Moonman, Eric
Bean, R. E.	Gourlay, Harry	Morris, Alfred (Wythenshawe)
Beith, A. J.	Graham, Ted	Morris, Rt Hon Charles R.
Benn, Rt Hon Anthony Wedgwood	Grant, George (Morpeth)	Morris, Rt Hon J. (Aberavon)
Bennett, Andrew (Stockport N)	Grant, John (Islington C)	Moyle, Roland
Bidwell, Sydney	Grocott, Bruce	Mulley, Rt Hon Frederick
Bishop, Rt Hon Edward	Harrison, Rt Hon Walter	Murray, Rt Hon Ronald King
Blenklnsop, Arthur	Hart, Rt Hon Judith	Newens, Stanley
Boardman, H.	Hattersley, Rt Hon Roy	Noble, Mike
Booth, Rt Hon Albert	Hayman, Mrs Helene	Oakes, Gordon
Boothroyd, Miss Batty	Healey, Rt Hon Denis	Ogden, Eric
Bottomley, Rt Hon Arthur	Hetter, Eric S.	O'Halloran, Michael
Boyden, James (Bish Auck)	Henderson, Douglas	Orbach, Maurice
Bradley, Tom	Hooley, Frank	Orme, Rt Hon Stanley
Bray, Dr Jeremy	Hooson, Emlyn	Ovenden, John
Broughton, Sir Alfred	Horam John	Owen, Rt Hon Dr David
Brown, Hugh D. (Provan)	Howell, Rt Hon Denis (B'ham, Sm H)	Padley, Walter
Brown, Robert C. (Newcastle W)	Hoyle, Doug (Nelson)	Palmer, Arthur
Buchanan, Richard	Huckfield, Les	Pardoe, John
Butler, Mrs Joyce (Wood Green)	Hughes, Rt Hon C. (Anglesey)	Park, George
Callaghan, Rt Hon J. (Cardiff SE)	Hughes, Robert (Aberdeen N)	Parker, John
Callaghan, Jim (Middleton & P)	Hughes, Roy (Newport)	Parry, Robert
Campbell, Ian	Hunter, Adam	Pavitt, Laurie
Canavan, Dennis	Irvine. Rt Hon Sir A. (Edge Hill)	Pendry, Tom
Cant, R. B.	Irving, Rt Hon S. (Dartford)	Penhaligon, David
Carmichael, Neil	Jackson, Colin (Brighouse)	Perry, Ernest
Carter, Ray	Jackson, Miss Margaret (Lincoln)	Phipps, Dr Colin
Carter-Jones, Lewis	Janner, Greville	Price, C. (Lewisham W)
Cartwright, John	Jay, Rt Hon Douglas	Price, William (Rugby)
Castle, Rt Hon Barbara	Jeger, Mrs Lena	Radice, Giles
Clemitson, Ivor	Jenkins, Hugh (Putney)	Rees, Rt Hon Merlyn (Leeds S)
Cock,, Rt Hon Michael (Bristol S)	John, Brynmor	Reid, George
Cohen, Stanley	Johnson, James (Hull West)	Richardson, Miss Jo
Coleman, Donald	Johnson, Walter (Derby S)	Roberts, Albert (Normanton)
Conlan, Bernard	Johnston, Russell (Inverness)	Roberts, Gwilym (Cannock)
Cook, Robin F. (Edin C)	Jones, Alec (Rhondda)	Robinson, Geoffrey
Corbett, Robin	Jones, Barry (East Flint)	Roderick, Caerwyn
Cowans, Harry	Jones, Dan (Burnley)	Rodgers, George (Chorley)
Cox, Thomas (Tooting)	Judd, Frank	Rogers, Rt Hon William (Stockton)
Crawshaw, Richard	Kaufman, Gerald	Rooker, J. W.
Cronin, John	Kelley, Richard	Rose, Paul B.
Crowther, Stan (Rotherham)	Kerr, Russell	Ross, Stephen (Isle of Wight)
Cryer, Bob	Kilroy-Silk, Robert	Ross, Rt Hon W. (Kilmarnock)
Cunningham, Dr. (Whiten)	Kinnock, Neil	Rowlands, Ted
Davidson, Arthur	Lambie, David	Ryman, John
Davies, Bryen (Enfield N)	Lamborn, Harry	Sandelson, Neville
Davies, Rt Hon Denzil	Lamond, James	Sedgemore, Brian
Davies, Ifor (Gower)	Latham, Arthur (Paddington)	Sever, John
Davis, Clinton (Hackney C)	Leadbitter, Ted	Shaw, Arnold (llford South)
Deakins, Eric	Lee, John	Sheldon, Rt Hon Robert
Dean, Joseph (Leeds West)	Lestor, Miss Joan (Eton & Slough)	Shore, Rt Hon Peter
Dempsey, James	Lever, Rt Hon Harold	Short, Mrs Renée (Wolv NE)
Doig, Peter	Lewis, Ron (Carlisle)	Silkin, Rt Hon John (Deptford)
Dormand, J D.	Litterick, Tom	Silkln, Rt Hon S. C. (Dulwich)
Douglas-Mann, Bruce	Lomas, Kenneth	Silverman, Julius
Duffy, A. E. P.	Loyden, Eddie	Skinner, Dennis
Dunnett, Jack	Luard, Evan	Smith, John (N Lanarkshire)
Eadie, Alex	Lyon, Alexander (York)	Snape, Peter
Edge, Geoff	Lyons, Edward (Badford W)	Spearing, Nigel
Ellis, John (Brigg & Scun)	Mabon, Rt Hon Dr J. Dickson	Spriggs, Leslie
English, Michael	MacCormlck, Iain	Stallard, A. W.
Ennals, Rt Hon David	McDonald, Dr Oonagh	Steel, Rt Hon David
Evans, Fred (Caerphilly)	McElhone, Frank	Stewart, Rt Hon Donald
Evans, loan (Aberdare)	MacFarquhar, Roderick	Stewart, Rt Hon M. (Fulham)
Evans, John (Newton)	McGuire, Michael (Ince)	Stoddart, David
Ewing, Harry (Stirling)	MacKenzle, Rt Hon Gregor	Stott, Roger
Faulds, Andrew	Maclennan, Robert	Strang, Gavin
Fernyhough, Rt Hon E.	McMillan, Tom (Glasgow C)	Strauss, Rt Hon G. R.
Fitt, Gerard (Belfast W)	McNamara, Kevin	Summerskill, Hon Dr Shirley
Flannery, Martin	Madden, Max	Swain, Thomas
Fletcher, L. R. (Ilkeston)	Magee, Bryan	Taylor, Mrs Ann (Bolton W)

Thomas, Dafydd (Merioneth)	Walker, Harold (Doncaster)	Williams, Alan Lee (Hornch'ch)
Thomas, Jeffrey (Abertillery)	Walker, Terry (Kingswood)	Williams, Rt Hon Shirley (Hertford)
Thomas, Mike (Newcastle E)	Ward, Michael	Wilson, Alexander (Hamilton)
Thomas, Ron (Bristol NW)	Watkins, David	Wilson, Gordon (Dundee E)
Thompson, George	Watt, Hamish	Wilson, Rt Hon Sir Harold (Huyton)
Thorne, Stan (Preston South)	Weetch, Ken	Wilson, William (Coventry SE)
Thorpe, Rt Hon Jeremy (N Devon)	Weitzman, David	Wise, Mrs Audrey
Tierney, Sydney	Wellbeloved, James	Woodall, Alec
Tinn, James	Welsh, Andrew	Woof, Robert
Tomllnson, John	White, Frank R. (Bury)	Wrigglesworth, Ian
Tomney, Frank	White, James (Pollok)	Young, David (Bolton E)
Torney, Tom	Whitlock, William
Tuck, Raphael	Wigley, Dafydd	TELLERS FOR THE NOES
Urwin, T. W.	Willey, Rt Hon Frederick	Mr. James Hamilton and
Varley, Rt Hon Eric G.	Williams, Rt Hon Alan (Swansea W)	Mr. Joseph Harper.
Wainwright, Edwin (Dearne V)

Question accordingly negatived.

Main Question put:—

The House divided: Ayes 283, Noes 258.

Division No. 152]	AYES	[10.16 p.m
Abse, Leo	Davis, Clinton (Hackney C)	Irving, Rt Hon S. (Dartford)
Allaun, Frank	Deakins, Eric	Jackson, Colin (Brighouse)
Anderson, Donald	Dean, Joseph (Leeds West)	Jackson, Miss Margaret (Lincoln)
Archer, Rt Hon Peter	Dempsey, James	Janner, Greville
Armstrong, Ernest	Doig, Peter	Jay, Rt Hon Douglas
Ashley, Jack	Dormand, J. D.	Jeger, Mrs Lena
Ashton, Joe	Douglas-Mann, Bruce	Jenkins, Hugh (Putney)
Atkins, Ronald (Preston N)	Duffy, A. E. P.	John, Brynmor
Atkinson, Norman	Dunnett, Jack	Johnson, James (Hull West)
Bagier, Gordon A. T.	Eadie, Alex	Johnson, Walter (Derby S)
Barnett, Guy (Greenwich)	Edge, Geoff	Johnston, Russell (Inverness)
Barnett, Rt Hon Joel (Heywood)	Ellis, John (Brigg & Scun)	Jones, Alec (Rhondda)
Bates, All	English, Michael	Jones, Barry (East Flint)
Bean, R. E.	Ennals, Rt Hon David	Jones, Dan (Burnley)
Beith, A. J.	Evans, Fred (Caerphilly)	Judd, Frank
Benn, Rt Hon Anthony Wedgwood	Evans, loan (Aberdare)	Kaufman, Gerald
Bennett, Andrew (Stockport N)	Evans, John (Newton)	Kelley, Richard
Bidwell, Sydney	Ewing, Harry (Stirling)	Kerr, Russell
Bishop, Rt Hon Edward	Faulds, Andrew	Kilroy-Silk, Robert
Blenkinsop, Arthur	Fernyhough, Rt Hon E.	Kinnock, Neil
Boardman, H.	Fitt, Gerard (Belfast W)	Lambie, David
Booth, Rt Hon Albert	Flannery, Martin	Lamborn, Harry
Boothroyd, Miss Betty	Fletcher, L. R. (Ilkeston)	Lamond, James
Bottomley, Rt Hon Arthur	Fletcher, Ted (Darlington)	Latham, Arthur (Paddington)
Boyden, James (Bish Auck)	Foot, Rt Hon Michael	Leadbitter, Ted
Bradley, Tom	Ford, Ben	Lee, John
Bray, Dr Jeremy	Forrester. John	Lestor, Miss Joan (Eton & Slough)
Broughton, Sir Alfred	Fowler, Gerald (The Wrekin)	Lever, Rt Hon Harold
Brown, Hugh D. (Provan)	Fraser, John (Lambeth, N'w'd)	Lewis, Ron (Carlisle)
Brown, Robert C. (Newcastle W)	Freeson, Rt Hon Reginald	Litterick, Tom
Buchanan, Richard	Freud, Clement	Lomas, Kenneth
Butler, Mrs Joyce (Wood Green)	Garrett, John (Norwich S)	Loyden, Eddie
Callaghan, Rt Hon J. (Cardiff SE)	Garrett, W. E. (Wallsend)	Luard, Evan
Callaghan, Jim (Middleton & P)	George, Bruce	Lyon, Alexander (York)
Campbell, Ian	Gilbert. Dr John	Lyons, Edward (Bradford W)
Canavan, Dennis	Ginsburg, David	Mabon, Rt Hon Dr J. Dickson
Cant, R. B.	Golding, John	McDonald, Dr Oonagh
Carmichael, Neil	Gourlay, Harry	McElhone, Frank
Carter, Ray	Grant, George (Morpeth)	MacFarquhar, Roderick
Carter-Jones, Lewis	Grant, John (Islington C)	McGuire, Michael (Ince)
Cartwright, John	Grocott, Bruce	MacKenzie, Rt Hon Gregor
Castle, Rt Hon Barbara	Hamilton, James (Bothwell)	Maclennan, Robert
Clemitson, Ivor	Harper, Joseph	McMillan, Tom (Glasgow C)
Cocks, Rt Hon Michael (Bristol S)	Harrison, Rt Hon Walter	McNamara, Kevin
Cohen, Stanley	Hart, Rt Hon Judith	Madden, Max
Coleman, Donald	Hattersley, Rt Hon Roy	Magee, Bryan
Conlan, Bernard	Hayman, Mrs Helene	Mahon, Simon
Cook, Robin F. (Edin C)	Healey, Rt Hon Denis	Mallalieu, J. P. W.
Corbett, Robin	Hetter, Eric S.	Marks, Kenneth
Cowans, Harry	Hooley, Frank	Marshall, Dr Edmund (Goole)
Cox, Thomas (Tooting)	Hooson, Emlyn	Marshall, Jim (Leicester S)
Crawshaw, Richard	Horam John	Mason, Rt Hon Roy
Cronill. John	Howell, Rt Hon Denis (B'ham, Sm H)	Maynard, Miss Joan
Crowther, Stan (Rotherham)	Hoyle, Doug (Nelson)	Mellish, Rt Hon Robert
Cryer, Bob	Huckfield, Les	Mendelson, John
Cunningham, Dr J. (Whiten)	Hughes, Rt Hon C. (Anglesey)	Mikardo, Ian
Davidson, Arthur	Hughes, Robert (Aberdeen N)	Miller, Dr M. S. (E Kilbride)
Davies, Bryan (Enfield N)	Hughes, Roy (Newport)	Mitchell, Austin
Davies, Denzil (Llanelli)	Hunter, Adam	Molloy, William
Davies, Ifor (Gower)	Irvine, Rt Hon Sir A. (Edge Hill)	Moonman, Eric
Morris, Alfred (Wythenshawe)	Rogers, Rt Hon William (Stockton)	Tierney, Sydney
Morris, Charles R. (Openshaw)	Rooker, J. W.	Tinn, James
Morris, Rt Hon J. (Aberavon)	Rose, Paul B.	Tomlinson, John
Moyle, Roland	Ross, Stephen (Isle of Wight)	Tomney, Frank
Mulley, Rt Hon Frederick	Ross, Rt Hon W. (Kilmarnock)	Torney, Tom
Murray, Rt Hon Ronald King	Rowlands, Ted	Tuck, Raphael
Newens, Stanley	Ryman, John	Urwin, T. W.
Noble, Mike	Sandelson, Neville	Varley, Rt Hon Eric G.
Oakes, Gordon	Sedgemore, Brian	Wainwright, Edwin (Dearne V)
Ogden, Eric	Sever, John	Walker, Harold (Doncaster)
O'Halloran, Michael	Shaw, Arnold (Ilford South)	Walker, Terry (Kingswood)
Orbach, Maurice	Sheldon, Rt Hon Robert	Ward, Michael
Orme, Rt Hon Stanley	Shore, Rt Hon Peter	Watkins, David
Ovenden, John	Short, Mrs Renée (Wolv NE)	Weetch, Ken
Owen, Rt Hon Dr David	Silkin, Rt Hon John (Deptford)	Weitzman, David
Padley, Walter	Silkin, Rt Hon S. C. (Dulwich)	Wellbeloved, James
Palmer, Arthur	Silverman, Julius	White, Frank R. (Bury)
Pardoe, John	Skinner, Dennis	White, James (Pollok)
Park, George	Smith, John (N Lanarkshire)	Whitlock, William
Parker, John	Snape, Peter	Willey, Rt Hon Frederick
Parry, Robert	Spearing, Nigel	Williams, Rt Hon Alan (Swansea W)
Pavitt, Laurie	Spriggs, Leslie	Williams, Alan Lee (Hornch'ch)
Pendry, Tom	Steel, Rt Hon David	Williams, Rt Hon Shirley (Hertford)
Penhaligon, David	Stewart, Rt Hon M. (Fulham)	Wilson, Alexander (Hamilton)
Perry, Ernest	Stoddart, David	Wilson, Rt Hon Sir Harold (Huyton)
Phipps, Dr Colin	Stott, Roger	Wilson, William (Coventry SE)
Price, C. (Lewisham W)	Strang, Gavin	Wise, Mrs Audrey
Price, William (Rugby)	Strauss, Rt Hon G. R.	Woodall, Alec
Radice, Giles	Summerskill, Hon Dr Shirley	Woof, Robert
Rees, Rt Hon Merlyn (Leeds S)	Swain, Thomas	Wrigglesworth, Ian
Richardson, Miss Jo	Taylor, Mrs Ann (Bolton W)	Young, David (Bolton E)
Roberts, Albert (Normanton)	Thomas, Jeffrey (Abertillery)
Roberts, Gwilym (Cannock)	Thomas, Mike (Newcastle E)	TELLERS FOR THE AYES:
Robinson, Geoffrey	Thomas, Ron (Bristol NW)	Mr. A. W. Stallard and
Roderick, Caerwyn	Thorne, Stan (Preston South)	Mr. Ted Graham.
Rodgers, George (Chorley)	Thorpe, Rt Hon Jeremy (N Devon)
NOES
Adley, Robert	Cormack, Patrick	Hampson, Dr Keith
Aitken, Jonathan	Costain, A. P.	Hannam, John
Alison, Michael	Crouch, David	Harrison, Col Sir Harwood (Eye)
Amery, Rt Hon Julian	Dean, Paul (N Somerset)	Haselhurst, Alan
Arnold, Tom	Dodsworth, Geoffrey	Hastings, Stephen
Atkins, Rt Hon H. (Spelthorne)	Douglas-Hamilton, Lord James	Havers, Rt Hon Sir Michael
Atkinson, David (Bournemouth, East)	Drayson, Burnaby	Hawkins, Paul
Awdry, Daniel	du Cann, Rt Hon Edward	Hayhoe, Barney
Baker, Kenneth	Durant, Tony	Heath, Rt Hon Edward
Bell, Ronald	Dykes, Hugh	Heseltine. Michael
Bendall, Vivian (Ilford North)	Eden, Rt Hon Sir John	Hicks, Robert
Bennett, Sir Frederic (Torbay)	Edwards, Nicholas (Pembroke)	Higgins, Terence L.
Bennett, Dr Reginald (Fareham)	Elliott, Sir William	Hodgson, Robin
Benyon, W.	Emery, Peter	Holland. Philip
Berry, Hon Anthony	Eyre, Reginald	Hordern, peter
Biffen, John	Fairbairn, Nicholas	Howe, Rt Hon Sir Geoffrey
Biggs-Davison, John	Fairgrieve, Russell	Howell, David (Guildford)
Blaker, Peter	Farr, John	Hunt, David (Wirral)
Body, Richard	Fell, Anthony	Hunt, John (Ravensbourne)
Boscawen, Hon Robert	Finsberg, Geoffrey	Hurd. Douglas
Bottomley, Peter	Fisher, Sir Nigel	Hutchison, Michael Clark
Bowden, A. (Brighton, Kemptown)	Fletcher, Alex (Edinburgh N)	Irving, Charles (Cheltenham)
Boyson, Dr Rhodes (Brent)	Fookes, Miss Janet	James. David
Bradford, Rev Robert	Forman, Nigel	Jenkin, Rt Hon P. (Wanst'd&W'df'd)
Braine, Sir Bernard	Fowler, Norman (Sutton C'f'd)	Johnson Smith, G. (E Grinstead)
Brittan, Leon	Fox, Marcus	Jones, Arthur (Daventry)
Brocklebank-Fowler, C.	Fraser, Rt Hon H. (Stafford & St)	Jopling, Michael
Brooke, Peter	Fry, Peter	Joseph, Rt Hon Sir Keith
Brotherton, Michael	Galbralth, Hon T. G. D.	Kaberry, Sir Donald
Brown, Sir Edward (Bath)	Gardiner, George (Reigate)	Kershaw, Anthony
Bryan, Sir Paul	Gardner, Edward (S Fylde)	Kilfedder, James
Buchanan-Smith, Alick	Gilmour, Rt Hon Ian (Chesham)	Kimball, Marcus
Buck, Antony	Gilmour, Sir John (East Fife)	King, Evelyn (South Dorset)
Budgen, Nick	Godber, Rt Hon Joseph	King. Tom (Bridgwater)
Bulmer, Esmond	Goodhart, Philip	Kitson, Sir Timothy
Burden, F. A.	Goodhew, Victor	Knight, Mrs Jill
Butler, Adam (Bosworth)	Goodlad, Alastair	Knox, David
Carlisle, Mark	Gorst, John	Lamont, Norman
Chalker, Mrs Lynda	Gow, Ian (Eastbourne)	Langford-Holt, Sir John
Channon, Paul	Gower, Sir Raymond (Barry)	Latham, Michael (Mellon)
Clark, Alan (Plymouth, Sutton)	Gray, Hamish	Lawrence, Ivan
Clark, William (Croydon S)	Grieve, Percy	Lawson, Nigel
Clarke, Kenneth (Rushcliffe)	Grist, Ian	Lester, Jim (Beeston)
Cockcroft, John	Grylls, Michael	Lewis, Kenneth (Rutland)
Cooke, Robert (Bristol W)	Hall-Davis, A. G. F.	Lloyd, Ian
Cope, John	Hamilton, Michael (Salisbury)	Loveridge, John

McCrindle, Robert	Page, Richard (Workington)	Spicer, Michael (S Worcester)
McCusker, H.	Paisley, Rev Ian	Sproat, lain
Macfarlane, Nell	Parkinson, Cecil	Stainton, Keith
MacGregor, John	Pattie, Geoffrey	Stanbrook, Ivor
MacKay, Andrew (Stechford)	Percival, Ian	Stanley, John
Macmillan, Rt Hon M. (Farnham)	Peyton, Rt Hon John	Steen, Anthony (Wavertree)
McNalr-Wilson, M. (Newbury)	Pink, R. Bonner	Stewart, Ian (Hitchin)
McNair-Wilson, p. (New Forest)	Powell, Rt Hon J. Enoch	Stokes, John
Madel, David	Prentice, Rt Hon Reg	Stradling Thomas, J.
Marshall, Michael (Arundel)	Price, David (Eastleigh)	Tapsell, Peter
Marten, Nell	Prior, Rt Hon James	Taylor, R. (Croydon NW)
Mates, Michael	Raison, Timothy	Taylor, Teddy (Cathcart)
Mather, Carol	Rathbone, Tim	Tebbitt, Norman
Maude, Angus	Rawlinson, Rt Hon Sir Peter	Temple Morris, Peter
Maudling, Rt Hon Reginald	Rees, Peter (Dover & Deal)	Thatcher, Rt Hon Margaret
Mawby, Ray	Renton, Tim (Mid-Sussex)	Thomas, Dafydd (Merioneth)
Maxwell-Hyslop, Robin	Rhodes, James R.	Thomas, Rt Hon V. (Hendon S)
Meyer, Sir Anthony	Ridley, Hon Nicholas	Townsend, Cyril D.
Miller, Hal (Bromsgrove)	Ridsdale, Julian	Trotter, Neville
Mills, Peter	Rifkind, Malcolm	van Straubenzee, W. R.
Miscampbell, Norman	Roberts, Wyn (Conway)	Vaughan, Dr Gerald
Mitchell, David (Basingstoke)	Rodgers, Sir John (Sevenoaks)	Viggers, Peter
Moate, Roger	Ross, William (Londonderry)	Wakeham, John
Molyneaux, James	Rossi, Hugh (Hornsey)	Walder, David (Clitheroe)
Monro, Hector	Rost, Peter (SE Derbyshire)	Walker, Rt Hon P. (Worcester)
Montgomery, Fergus	Royle, Sir Anthony	Wall, Patrick
Moore, John (Croydon C)	Sainsbury, Tim	Walters, Dennis
More, Jasper (Ludlow)	St. John-Stevas, Norman	Warren, Kenneth
Morgan, Geraint	Scott, Nicholas	Weatherill, Bernard
Morris, Michael (Northampton S)	Shaw, Giles (Pudsey)	Wells, John
Morrison, Charles (Devizes)	Shelton, William (Streatham)	Whitelaw, Rt Hon William
Morrison, Hon Peter (Chester)	Shepherd, Colin	Wiggin, Jerry
Mudd, David	Shersby, Michael	Wigley, Dafydd
Neave, Airey	Silvester, Fred	Winterton, Nicholas
Nelson, Anthony	Sims, Roger	Wood, Rt Hon Richard
Neubert, Michael	Sinclair, Sir George	Young, Sir G. (Ealing, Acton)
Newton, Tony	Skeet, T. H. H.	Younger, Hon George
Nott, John	Smith, Dudley (Warwick)
Onslow, Cranley	Smith, Timothy John (Ashfield)	TELLERS FOR THE NOES:
Oppenheim, Mrs Sally	Speed, Keith	Mr. Spencer Le Marchant and
Page, John (Harrow West)	Spence, John	Mr. Michael Roberts.
Page, Rt Hon R. Graham (Crosby)

Question accordingly agreed to.

Resolved, That this House takes note of 'The Government's Expenditure Plans 1978–79 to 1981–82', (Command Paper No. 7049); and approves the plans to increase public expenditure in view of the need to reduce unemployment and improve public services.