HC Deb 02 July 1981 vol 7 cc992-3
6. Mr. Adley

asked the Chancellor of the Exchequer how he assesses the value to the economy of investment in the public sector.

Mr. Brittan

Investments in the public sector are assessed by the industry, department, or other public body which is making the investment, by comparing the costs and benefits using recognised investment appraisal techniques.

Mr. Adley

In making these comparisons, does my right hon. and learned Friend accept the essential difference between investment in industry and investment, for example, in the nation's transport infrastructure? Does he accept that, whereas cars, steel or coal can be imported from abroad if necessary, no one other than ourselves will modernise our transport infrastructure? Will he give me an assurance that this factor is taken into account?

Mr. Brittan

That factor should be taken into account and is taken into account. That does not necessarily mean that any particular investment is justified. However, it is a relevant consideration.

Mr. Woolmer

Does the Minister still believe in his crowding-out theory—that increases in public investment will crowd out private investment in the economy? How does he explain to the British people that with nearly 3 million unemployed we cannot afford to build more houses to reduce the housing waiting list, we cannot improve the railways and we cannot improve our rapidly deteriorating water and sewerage facilities? How can he explain to the public that the resources are not available for more public investment?

Mr. Brittan

I assure the hon. Gentleman that I lay no claim to the authorship of the crowding-out theory or of any other theory. However, if we increase public borrowing totals, the effect is to increase interest rates, which has an effect on the private sector. It is significant that the major call from industry in the past year has been for lower interest rates.

Mr. Bruce-Gardyne

If one could take one specific example—

Mr. Skinner

Ask a question. You are not writing for the Sunday Telegraph now.

Mr. Bruce-Gardyne

—could I ask—[HON. MEMBERS: "Question."]

Mr. Speaker

Order. I think that the hon. Gentleman is going to put his example in his question.

Mr. Bruce-Gardyne

May I ask my right hon. and learned Friend whether he thinks that we are likely to obtain a good return on investment in electrification in British Rail, for example, so long as the average freight train crew on British Rail covers 11 miles a day?

Mr. Brittan

My hon. Friend has identified one major problem in British Rail. I think that he will welcome the statement by my right hon. Friend the Secretary of State for Transport, which stressed the link between improvements in productivity and investment in electrification.

Mr. Robert Sheldon

In her speech to the CBI, the Prime Minister said that nationalised industries should be assessed on their performance rather than on their promises. Why are the Government penalising British Gas, for example, by selling off its most profitable and successful part? Will the right hon. and learned Gentleman cease to blame nationalised industries and instead regard them as sensible outlets for investment during the present slump?

Mr. Brittan

The justification for privatisation does not depend solely on the considerations that the right hon. Gentleman mentioned.