HC Deb 29 January 1981 vol 997 cc1059-61
3 Mr. Wigley

asked the Chancellor of the Exchequer what is his latest estimate of the public sector borrowing requirement for the current financial year.

15 Mr. Allan Stewart

asked the Chancellor of the Exchequer what is the latest estimate for the level of the public sector borrowing requirement for this financial year.

16 Mr. Meacher

asked the Chancellor of the Exchequer what is his latest estimate of the public sector borrowing requirement.

The Chief Secretary to the Treasury (Mr. Leon Brittan)

I ask the honourable Members to await the Budget Statement.

Mr. Wigley

Will the Chief Secretary confirm that when the Budget Statement appears the public sector borrowing requirement is likely to be about £10 billion to £12 billion, or even more if unemployment keeps increasing at the present rate? Will he accept that with the average cost to the Treasury of keeping someone out of work running at between £5,000 and £6,000 a year, it would merit the Government giving consideration to all schemes to take people into employment, either in the public sector or by helping small companies to take them into the private sector, rather than incurring the tremendous costs of unemployment, which are leading to the large PSBR?

Mr. Brittan

I shall not comment on the hon. Gentleman's figures, because to do so would be to anticipate the Budget. The average figure in relation to unemployment is not £6,000 a year. That relates to a family man with two children. The average figure is probably nearer £3,500. However, it does not follow that by spending comparable sums it would be possible to create employment to the same extent. One would have to take into account all the consequential changes of spending money in that way in relation to inflation and everything else.

Mr. Stewart

I congratulate my right hon. Friend on his appointment to the Treasury. Does he agree that a major cause of the Government's difficulties in controlling the public sector borrowing requirement is the high level of subsidies to nationalised industries and British Leyland? Does he agree that a substantial reduction in the level of those subsidies is essential if the Government's financial strategy is to succeed?

Mr. Brittan

I am grateful for my hon. Friend's congratulations. There is no doubt that any substantial sector of public expenditure that one isolates can be regarded as making a major contribution to the PSBR. In terms of the increase that has taken place, borrowings by local authorities and public corporations, reflecting higher than expected expenditure and worsening trade conditions, have made a major contribution to the present situation.

Mr. Shore

I do not understand why the Chief Secretary is being so coy about the figure. The Chancellor's statement in November anticipated a PSBR for the year of £11½ billion. The Financial Secretary added to that in a recent speech. We know that it is about £12 billion or more. Will the Chief Secretary at least confirm that the major causes of the overshoot this year are the falling off of tax revenue and the increase in social security benefits owing to the massive rise in unemployment? Does he think that there is any sense in publishing long-term estimates for the PSBR? In the light of recent experience, will the hon. and learned Gentleman adhere to the published target for 1981–82, or not?

Mr. Brittan

I am not sure whether the right hon. Gentleman is seriously suggesting that the forecasts published at the time of the Budget and under the Industry Act should not have been published. If so, that is a major change in Opposition policy. I said earlier that major factors in the increase are higher borrowing by local authorities and public corporations and an increase in Government expenditure on defence and as a result of the effects of the recession. Those are well-known factors, and they are the correct ones.

Mr. Shore

It is not a question of the PSBR level being a forecast. It is one of the targets of the Government, with one or two minor variations, taking account of the real world—of which even the Government have to take account. It was put forward as a target. Will the Chief Secretary tell us whether he thinks that he is sensible and wise in continuing to target when he knows that a major cause of the overspend is the rise in unemployment? Will he also tell us how much of the overspend is due to that cause?

Mr. Brittan

I do not intend to bandy words with the right hon. Gentleman about "forecast" and "target". It was necessary to give figures at the time of the Budget and under the Industry Act, but no one can guarantee that there will not be factors that will lead to the figures changing during the year. If the right hon. Gentleman thinks that any Government of whom he has been a member have been able to give such figures and never change them, his memory must be failing.

Mr. Waldegrave

Does my right hon. and learned Friend agree that, even if the figures are as predicted by the right hon. Member for Stepney and Poplar (Mr. Shore), they would not be too disturbing in the depths of a recession? Will he confirm that they will not be a very high proportion of the GNP, and no higher a proportion than in other countries in a similar situation?

Mr. Brittan

Other countries are not in the same situation as Britain. We all share the problems of the recession, but the results of unemployment, which have understandably been mentioned in this connection, differ in this country. We are suffering, as are other countries, from the recession, but, on unemployment, we are also suffering from the consequences of past excessive wage claims. I do not believe that such comparisons always take us far.