Public Expenditure

HC Deb 07 July 1983 vol 45 cc412-23 3.46 pm

The Chancellor of the Exchequer (Mr. Nigel Lawson)

It is now clear that public expenditure is running at a significantly higher level than is consistent with the 1983–84 planning total of £119.6 billion announced in the public expenditure White Paper, Cmnd 8789, presented by the then Chancellor on 1 February. Some adjustment is clearly needed. I have therefore decided that immediate action must be taken to bring about savings that will bring total spending closer to the planned path. It is both more efficient in terms of departmental management of programmes and more effective to take this action straight away.

Accordingly, the cash limits for the current year will be reduced. The effect will be a 1 per cent. reduction in respect of the pay and central Government administrative element and 2 per cent. reduction in the remainder. The new cash limit figures will be announced as soon as possible.

The total provision for the external financing limits of the nationalised industries will similarly be reduced by 2 per cent. This reduction will be allocated in proportion to their turnover.

The effect of these measures will be to remove at least £500 million of overspending beyond the planned total.

In addition, the programme of asset sales during the current year will be increased by a further £500 million.

Finally, I am also taking the opportunity to introduce some improvements in expenditure control. In particular, a scheme of end-year cash limits flexibility will be introduced. This will permit some carry-forward of underspend on central Government capital programmes. Such a change has, of course, long been advocated by Departments such as the the Ministry of Defence, with substantial capital programmes involving expenditure stretching over a number of years. The change, I believe, is fully justified on managerial grounds, but introducing it as from this financial year should in practice, by reducing the end-year surge, reduce expenditure in the current year by some £100 million. The effects in future years will be taken into account in the forthcoming public expenditure survey. I am satisfied that parliamentary control of expenditure will not be diminished.

The overall effect of the savings and other measures that I have announced will be to reduce this year's likely public expenditure outturn by more than £1 billion. They do not imply any reductions in total as published in the February White Paper. Rather, they are designed to bring spending closer to the course laid down in my predecessor's White Paper.

I told the House on 29 June that in order to maintain the right balance between public borrowing and interest rates we intended to maintain firm control of public spending. I also made clear my determination to take action should our objectives be endangered. Our economic strategy has brought about low inflation and a quickening recovery. We are determined to ensure that unplanned overspending does not deflect our course and put that recovery at risk.

Mr. Peter Shore (Bethnal Green and Stepney)

This is an astonishing statement in content and timing. Whatever it does for the Chancellor's reputation as an axeman, he has this afternoon at a stroke destroyed the credibility and integrity of the Prime Minister, his predecessor and his colleagues. Does the Chancellor recall that, only four weeks ago on 5 June, when asked point blank whether she intended to cut public expenditure, the Prime Minister said: We have laid out our plans for the next three years on Government spending. They are there for everyone to see and discuss … I wish more discussion concentrated on those, instead of the scares and leaked documents we had. Is it not plain, four weeks later, that a disgraceful fraud and swindle has been perpetrated on the British people? Does the Chancellor recall also his statement only last Sunday on Channel 4 that he had seen no papers on public expenditure proposals and that the public expenditure review was "about to start"?

Since it has taken the Chancellor exactly four days to produce and announce these measures involving £500 million of cuts in public expenditure and £500 million in the forced sale of public assets, will he tell the House what new factors to justify these cuts have emerged this week which were not present a week ago or, for that matter, four weeks ago before the general election? Is not the cause of this alleged overspending the Government's deliberate decision to make inadequate provision for the Contingency reserve, which was slashed by over £1,000 million in the public expenditure White Paper earlier this year, and, further, to make provision for the first lime for an alleged shortfall of over £1,200 million? This was cynically done in advance of the general election, and it was revealed swiftly afterwards for what it was—a fraud.

Can the Chancellor also tell us whether, before he produced these proposals, his colleagues knew about them when they produced yesterday's record-spending defence White Paper or agreed to yesterday's Finance Bill provisions in which the Government propose to give away £400 million for the benefit of the rich? Was the Chief Secretary speaking yesterday with the Chancellor's approval when he said, panic measures will not characterise this Administration."— [Official Report, 6 July 1983; Vol. 45. c. 284.]

Is this not a classic example of a Treasury panic and a Cabinet bounce? Is not the only possible excuse for this piece of outrageous political cynicism the Chancellor's obsession with the medium-term financial strategy and the money supply and his grovelling subservience to City opinion? Does the Chancellor understand that it is unacceptable not only to the Labour party but to the British people that he should continue with his Finance Bill proposals to give away £400 million a year to the already well-off and allow thousands of millions of pounds of British capital to flow overseas while he wields his axe on social services, including health, education and social welfare, which are of crucial importance to 95 per cent. of our people, including the disadvantaged poor?

Let him publish, and show the House in detail, the proposals that he has put in such general terms in the statement. Let him withdraw his Finance Bill and let the Prime Minister and him make an unreserved apology to the British people whom they have deceived.

Mr. Lawson

I understand the desire of the right hon. Member for Bethnal Green and Stepney (Mr. Shore) to make a good impression on his colleagues because of the leadership stakes. However, it would have assisted the House more if his comments had borne more relation to my statement. He said, for example, that I had departed from the statements made by my right hon. Friend the Prime Minister on a number of occasions during the election campaign that our plans were set out in the public expenditure White Paper. The purpose of these savings is to bring the figures back from overspending closer to those that are in the public expenditure White Paper. That is precisely what they are.

The right hon. Gentleman knows well that the public expenditure survey deals with the years 1984–85 and thereafter—

Mr. Jack Straw (Blackburn)

Lies.

Mr. Speaker

May I ask the hon. Member who made that remark to withdraw it?

Mr. Straw

I withdraw.

Mr. Speaker

I am grateful to the hon. Member.

Mr. Lawson

There are no cuts in public expenditure totals as a result of these measures. They are the result of a prudent budgeting and are what any prudent Chancellor and Government would seek to do.

The Finance Bill was the second half of a Finance Bill which began during the previous Parliament. It was designed to cut income tax at all levels, which is and will continue to be the Government's objective wherever the opportunity arises to carry it out.

Mr. Shore

The Chancellor has not begun to answer the questions that he was asked. Let me put one straight question to him. Is he telling the House that neither he nor the Prime Minister knew four weeks ago, before polling day, with full access to all the information available to his colleagues in the Government, that a £1,000 million cut in public expenditure was going to come almost immediately after the polling stations had closed. Tell us now.

Hon. Members

Answer.

Mr. Lawson

I will gladly answer if I am given an opportunity to do so. As the right hon. Gentleman ought to know, information about central Government borrowing, public expenditure and so on gradually flows in. As the year progresses, a fuller picture emerges, out there comes a time when, if action is to be taken during the course of a year, it has to be taken. That action has to be taken now.

Mr. Edward du Cann (Taunton)

I welcome and, indeed, applaud my right hon. Friend's early expressed determination to keep Government expenditure within control, which is in the interests of us all. I applaud especially the arrangements he is making for the end-of-year difficulties which have been much discussed in the House in the past. Will he be good enough to say what action he has taken to give effect to the wish, also often expressed in the House, that a greater proportion of Government expenditure should go to capital projects and a lower proportion to administration?

Mr. Lawson

I believe that I have met the point made by my right hon. Friend because local authority capital expenditure is excluded from my announcement.

Mr. Richard Wainwright (Colne Valley)

Does the Chancellor realise that his curt and peremptory diktat shows far too little regard for the responsibilities of the House of Commons? How does he square his statement with the words in this year's White Paper on public expenditure on page 9 that Cash limits will not normally be changed during the year"? Will the Chancellor give the House his best estimates of the effect of what he has said on health, housing, law and order and other programmes?

What does the right hon. Gentleman mean by the words A scheme of end-year cash limits flexibility"?

Mr. Lawson

On the hon. Gentleman's third question, what I mean is what I said—there will be provision within limits for underspend on capital in one year to be carried forward into the next.

As for how it affects the National Health Service, there will be no resulting reduction in expenditure on the National Health Service beyond the White Paper figures, spending on the family practitioner service is running ahead of what was planned and, therefore, there will be savings of an equivalent amount elsewhere in the National Health Service to pay for the additional expenditure on the family practitioner service.

As for the question about cash limits not normally being changed in the year, that is the case. They are not normally changed in the year.

Mr. David Howell (Guildford)

Does my right hon. Friend accept that the proposal for end-year flexibility will greatly assist with the planning of sensible capital projects by central Government Departments, and will therefore help with the development of central Government capital spending of precisely the type that hon. Members on both sides of the House have demanded?

Mr. Lawson

I am most grateful to my right hon. Friend for his remarks. He has great experience in this area.

Mr. William Ross (Londonderry, East)

Does not the proposal for end-year cash limit flexibility represent a major change in the procedure followed hitherto? Will that £100 million saving be added to next year's expenditure, or deducted from it?

Mr. Lawson

That is a matter for consideration in the normal way, in the context of the public expenditure survey discussions.

Mr. Terence Higgins (Worthing)

Is it not now clear that cash limits are an effective way of controlling expenditure in real terms when prices are rising but a very slack method of controlling it when inflation is falling rapidly, as it has done under this Government? That being so, will my right hon. Friend consider whether we do not need some basic change in the system instead of such ad hoc measures?

Mr. Lawson

I shall gladly consider my right hon. Friend's suggestion. He is right that, because prices have been rising rather more slowly than we expected, there is scope, particularly in the non-pay cash limits, for the type of saving that I have mentioned.

Mr. John Morris (Aberavon)

Is it not a remarkable coincidence that this great truth should be revealed exactly four weeks after the election? Were there not indications of the situation a month ago? Would it not have been more honourable of the Government to disclose the reality and the truth in the prospectus that they offered the British public? Are not people put behind bars in the commercial world for issuing a false prospectus? Exactly how will the right hon. Gentleman's statement affect the British Steel Corporation and part of its proposals for Port Talbot?

Mr. Lawson

Although I have not made a study of the matter, I should have thought that on the whole more business men are put behind bars through not sticking to their budgets than through sticking to them.

Mr. Robin Maxwell-Hyslop (Tiverton)

Having stated that he is not cutting expenditure, but checking overspend, will my right hon. Friend demonstrate his competence in administration as a Chancellor of the Exchequer by ensuring that those who overspend are checked, and, equally, that those who do not overspend do not suffer a cut because of the overspending of others? Will he particularly bear in mind the local authorities that have kept a tight control on their expenditure and that should not suffer cuts because others have failed to do so?

Mr. Lawson

It is clear from my hon. Friend's remarks that he is particularly concerned about local authority expenditure, and I am sure that my right hon. Friend the Secretary of State for the Environment, who heard those comments, will take note of them.

Mr. Jack Dormand (Easington)

Does the right hon. Gentleman intend to await the result of the Government's investigation into regional aid before deciding on what action to take on such expenditure, or are cuts already envisaged and contained in his statement?

Mr. Lawson

I have announced reductions in cash limits pretty well across the board. No specific programmes or policy decisions, such as those suggested by the hon. Gentleman, are affected.

Mr. Anthony Nelson (Chichester)

Notwithstanding the Opposition's huffing and puffing, will my right hon. Friend confirm that his statement really does not announce any increase in expenditure and that, far from being a false prospectus, it sticks to the existing White Paper on public expenditure? Will he also confirm that many people feel that the best prospect of revitalising industry and of achieving a higher level of employment lies in lower interest rates, which are more likely to be achieved if we restrain runaway public expenditure and the consequential public sector borrowing requirement?

Mr. Lawson

My hon. Friend is right on both scores. His second point is particularly important. The alternative to allowing the overspend to remain unchecked would almost certainly be much higher interest rates, which would be very damaging to the private sector and industry in general, as well as to the recovery and to jobs.

Mr. Norman Atkinson (Tottenham)

Even in terms of Thatcherite morality, how can the Chancellor justify butchering 50,000 jobs for the sake of a minimal effect on interest rates, when other methods are open to the Government for achieving exactly the same aim, without the loss of jobs?

Mr. Lawson

I do not completely recognise that point, but then we have often discussed the hon. Gentleman's understanding of how the economy works and mine, and his understanding is slightly different.

Mr. Matthew Parris (Derbyshire, West)

As the cut is very small and is really no more than the difference between a good winter and a bad winter, why occasion all the fuss for such a small prize?

Mr. Lawson

My hon. Friend has made a fair point, but I do not consider a reduction of £1 billion in an overspend to be insignificant.

Mr. Harry Ewing (Falkirk, East)

If the Chancellor of the Exchequer is saying that there has been no change from his earlier proposals in February, why on earth is he proposing to reduce the cash limits by 2 per cent. and to apply, for the first time in history, a cash limit to the general practitioner service? If the right hon. Gentleman is now introducing a cash limit to the general practitioner service and the Health Service he had better tell the country as much. Given this bad economic news, the bad economic news from the building societies and the petrol companies, and the fact that the Prime Minister said, during the election, that there was no bad economic news to come, can he blame the people of this country for thinking that the Conservative party, led by the Prime Minister, cheated them during the election?

Mr. Lawson

I am glad to have the opportunity to set the hon. Gentleman's mind at rest. I did not say that the family practitioner service was being cash limited; it is not. Some public expenditure is cash limited and some is non-cash limited. It is demand determined. Basically, there is an entitlement, and the demand determines the expenditure. To a considerable extent this year, expenditure in a number of the non-cash limited programmes—of which the family practitioner service is one—has increased beyond the level planned, expected and implied in the public expenditure White Paper. Therefore, offsetting savings have to be made in the cash limited expenditure.

Sir Kenneth Lewis (Stamford and Spalding)

What new public assets, over and above those already on our list, do the Government propose to sell to make up the £500 million? Will my right hon. Friend give an assurance that we shall not sell capital in order to spend as revenue?

Mr. Lawson

The House will, of course, be informed when the time is right, but I am sure that my hon. Friend would not wish me to reveal in a clumsy way possibly market-sensitive information.

Dr. Jeremy Bray (Motherwell, South)

Can the Chancellor explain that what is really happening, in the words of the Bank of England, is that there has been a continuing tendency for the money supply to grow faster than nominal incomes, reflecting financial innovations? Therefore, it is not surprising that sterling M3 and PSL2 are growing faster than the 7 to 11 per cent. target range. However, to keep down interest rates the right hon. Gentleman is having to take token action on public expenditure. Does he acknowledge that the £500 million cut is less than the change in the seasonal adjustment made in the central Government borrowing requirement in only the first two months of this year? Is not the change that he is making thus purely trivial?

Mr. Lawson

The change is certainly not trivial, but I note the hon. Gentleman's advice that I should have gone for a larger reduction.

Mr. Tim Smith (Beaconsfield)

Why is public expenditure running so much higher in the fourth quarter of the fiscal year than the planned total which was published as recently as February this year? What action does my right hon. Friend propose to take to ensure that such a wide discrepancy will not occur in future?

Mr. Lawson

There is a problem with monitoring and controlling public expenditure. I have mentioned one innovation, the end-year flexibility on capital projects, which I hope will be of some assistance. I hope to agree a better system of information flows in that area with my ministerial colleagues.

Mr. Sydney Bidwell (Ealing, Southall)

Have still rising unemployment and the increasing costs therefrom caused the Chancellor to predict future cuts in real terms in unemployment benefit?

Mr. Lawson

I have made no such proposals.

Mr. Nigel Forman (Carshalton and Wellington)

I recognise my right hon. Friend's understandable ambition as Chancellor to keep public expenditure to its planned path, but does his decision today reveal an underlying doctrine that wherever and whenever demand-driven public expenditure rises discretionary public expenditure will have to be further reduced?

Mr. Lawson

There is no automatic formula. It is a matter of judgment. My judgment in the present circumstances was that the overspend occurring this year should not be allowed to go unchecked. I have announced the savings that will enable us to check it.

Mr. Jack Ashley (Stoke-on-Trent, South)

The Chancellor now denies that he made any proposal to cut unemployment pay. Is he aware that his statement today and his more incautious statement on televison a few days ago to cut unemployment pay are contemptible, and that to describe the present low rate of unemployment benefit as a disincentive is an insult to the 4 million who are unemployed because no jobs are available?

Mr. Lawson

The right hon. Gentleman will be well aware that in November unemployment benefit will increase by substantially more than the rate of inflation.

Mrs. Edwina Currie (Derbyshire, South)

I welcome year-end flexibility on capital programmes, but does my right hon. Friend recognise that slippage is often the excuse for incompetent management of capital programmes in the public sector? Does he further recognise that the execution of public sector capital programmes needs speeding up, particularly in the National Health Service, and that capital should not be allocated where it cannot be spent?

Mr. Lawson

My hon. Friend has made some shrewd observations.

Mr. Dick Douglas (Dumfermline, West)

Does the Chancellor accept that his statement clearly shows economic mismanagement which was well known to the Government prior to the election? What will be the effect on jobs of the curtailment of the external financing limits of the nationalised industries? What will be the effect on jobs in British Shipbuilders? Further to the question by the hon. Member for Stamford and Spalding (Sir K. Lewis), is the right hon. Gentleman really asking the House to accept that he is prepared to raise £500 million from the market but that he does not know which assets to sell?

Mr. Lawson

That was not precisely what I said.

On the first part of the hon. Gentleman's question, prices are rising more slowly than we had earlier expected. The recovery is going ahead a little quicker than was expected at the time of the Budget. The economy is on course. The purpose of this adjustment of the public sector borrowing requirement is to keep it on course. Keeping it on course is the best prospect for jobs.

Mr. Tim Eggar (Enfield, North)

Will my right hon. Friend confirm that the 2 per cent. cash reduction for the nationalised industries will be met by their increasing efficiency rather than by raising prices?

Mr. Lawson

I very much hope that that will be the case. I am sure that those of my ministerial colleagues with responsibilities for nationalised industries will see that that is so.

Mr. Robert Maclennan (Caithness and Sutherland)

Why does not the Chancellor's statement show how this overshoot came about? Why should we accept that he will not in future depart from the rubrics about the reduction in cash limits in the course of the year to which the hon. Member for Colne Valley (Mr. Wainwright) referred if he was not able to maintain better control within the four months of the year which have passed since the public expenditure White Paper was published?

Mr. Lawson

This problem has arisen not over four months but during the final quarter of 1982–83—

Mr. Straw

The right hon. Gentleman knew about it.

Mr. Lawson

—and continued into the first quarter of this year.

Mr. Straw

rose—

Mr. Lawson

My right hon. and learned Friend the Foreign Secretary made it clear that the final outturn for the public sector borrowing requirement for 1982–83 was considerably in excess of the figure that he had estimated at the time of the Budget.

I assure the hon. Gentleman that I would not have come to the House today to make this statement had it not been necessary.

Mr. Barry Henderson (Fife, North-East)

Does my right hon. Friend agree that the rather ill-informed comments of the Opposition show more huff than puff? Does he further agree that the significance of his statement today is that it is more of a signal about the Government's determination to keep firm control over public expenditure than specific measures, important though they are?

Mr. Lawson

I think it is both.

Several Hon. Members

rose—

Mr. Speaker

Order. I propose to call first, those hon. Members who have been seeking to catch my eye and then the Opposition Front Bench.

Mr. Dennis Skinner (Bolsover)

Is it not true that we now know why the Tory Government cut and run and had the election only a few weeks ago? Even assuming that a few Tory Members behind the Chancellor—there are not many—might believe this story, did the right hon. Gentleman know about this looming catastrophe at the time of the Government's decision to spend several hundred million pounds on an airport in the Falklands, especially when the Prime Minister had been urging banks to hand over money to the Argentines so that they could buy more missiles to blow up the airport which would then have to be rebuilt? Is it not a fact that the Government are handy at giving money to the Falklands, and to the Argentines but that they provide only the dole and poverty for those in Britain?

Mr. Lawson

I notice some difference between the hon. Member for Bolsover (Mr. Skinner), who describes this as a looming catastrophe, and the hon. Member for Motherwell, South (Dr. Bray), who described it merely as a triviality.

The overwhelming majority of the British people believe that we have a duty to preserve the freedom of the Falkland Islanders.

Mr. John Wilkinson (Ruislip-Northwood)

I welcome my right hon. Friend's statement that the Treasury is to move away from the principle of annuality in the budgeting of costly equipment programmes as this will greatly enhance the efficiency of their project management. Will he initiate discussions with the Ministry of Defence with a view to moving over to the American system of public tendering for costly equipment programmes as that could be an economic and efficient way of dealing with the matter?

Mr. Lawson

I note my hon. Friend's remarks. It is important that throughout the public sector—this applies to the Ministry of Defence as much as to any other Department—we should get value for money.

Mr. Derek Foster (Bishop Auckland)

Are not the Chancellor's proposals a desperate attempt to avoid increasing interest rates which the logic of his policies implies? The right hon. Gentleman knows that a rise in interest rates will cut off this thin and patchy recovery.

Mr. Lawson

I have no wish to see interest rates rise unnecessarily, and I am sure that that goes for Members on both sides of the House. This is not a desperate attempt but a prudent measure to bring public expenditure closer to the figures published and approved by the House of Commons.

Mr. Richard Body (Holland with Boston)

Further to the allegation a few weeks ago about a false prospectus, does my right hon. Friend agree that a few weeks ago Conservative Members were saying that any Government who failed to match expenditure with taxation would be cheating the British people because that would lead to a higher rate of inflation which in turn would create more unemployment?

Mr. Lawson

My hon Friend is correct. The false prospectus put before the British people was that of the Labour party, which claimed that it had a magic cure for unemployment.

Mr. John McWilliam (Blaydon)

Will the Chancellor of the Exchequer reflect on the answer that he gave to his right hon. Friend the Member for Taunton (Mr. du Cann) about the need to stress capital projects? When he makes his cuts in the external financing limits of the nationalised industries, will he bear in mind that the proposed method by which he wishes to do it will have no relationship to their expenditure programmes and will therefore cause unemployment problems? Will the right hon. Gentleman tell us how many jobs his proposals will cost now, not how many jobs he thinks might be created in the future? He has admitted that whatever figure he uses about the future will be inaccurate; his planning is so rotten anyway that he cannot give the right figure.

Mr. Lawson

The hon. Gentleman is under the illusion that simply spending public money creates jobs. That is not the case, as the last Labour Government found to their cost.

Mr. Tony Marlow (Northampton North)

Does my right hon. Friend agree that his statement makes it absolutely essential that we get our budget rebate from the European Community this year? As the House is anxious to help him, will he let us in on his thinking about the measures which the Government would take should the European Assembly put a block on our budget rebate?

Mr. Lawson

Nobody could have fought harder for our budget rebate than the Prime Minister. I suggest that we need not consider what measures might be taken in the sort of hypothetical circumstance my hon. Friend cites.

Mr. Robert C. Brown (Newcastle upon Tyne, North)

It is normal for end-of-term reports to refer to performance. Is the Chancellor aware that, on his performance at the Dispatch Box today, the comment on his beginning-of-term report must be, "Must do better" because he has not answered frankly ore question that he has been asked about the statement?

Is the right hon. Gentleman aware that we in the northeast of England who have been crucified by the Conservatives in the last four years must feel the deepest anxiety about the 2 per cent. cutback on the nationalised industries, particularly shipbuilding, where jobs are already severely at risk? What is now proposed must bring about further job losses. Will the right hon. Gentleman be a little less coy and say exactly where the added £500 million of public asset-stripping will take place this year?

Mr. Lawson

The total amount of the 2 per cent. for the nationalised industries as a whole is between £50 and £60 million, so perhaps the hon. Gentleman is exaggerating the impact which that might have.

Mr. Alfred Dubs (Battersea)

On what date did the Chancellor first become aware that he would have to take the steps he has announced today?

Mr. Lawson

As I mentioned in answer to an earlier question, there is a continual flow of information during the course of the financial year; it comes week by week, almost day by day. Eventually a picture emerges, and when that picture emerged and I thought that the time had come when action had to be taken— [HON. MEMBERS: "When?"]— I put that proposal to my colleagues and they accepted it.

Mr. D. N. Campbell-Savours (Workington)

Is it not clear to the Chancellor that my hon. Friends believe that he is deliberately ducking telling the House what the public sector implications are in terms of unemployment as a result of the statement? Will he now give a figure from the Dispatch Box, because his departmental officials will have provided him with that figure?

Will he also answer the question put by my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) as to why yesterday he introduced a Bill to reduce taxation by £400 million for 3 per cent. of the population, the better off in society, when, within 24 hours he must come to the House further to cut public expenditure by £500 million? Where is the consistency?

Mr. Lawson

This is not a cut in public expenditure. [HON. MEMBERS: "It is."] No, it is a measure to reduce an overspend and to bring public expenditure closer to the budgeted totals and the published totals in the public expenditure White Paper.

As for the measures in the Finance Bill which we debated yesterday, they must be seen as part of the Finance Bill which was introduced by my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) which are for a reduction in income tax across the board and which were welcomed by hon. Members in most parts of the House. It might have eluded the hon. Gentleman that Conservative Members are in favour both of firm and proper control of public expenditure and reductions in taxation, and there is no inconsistency between the two.

Mr. Campbell-Savours

When they are for only 3 per cent. of the population?

Mr. Michael Meadowcroft (Leeds, West)

If the Chancellor is to represent end-year cash limit flexibility as a way of controlling expenditure, will he assist local authorities also to control their expenditure by giving them a similar power?

Mr. Lawson

Local authorities already have a form of end-year flexibility which central Government do not possess.

Mr. Mark Fisher (Stoke-on-Trent, Central)

The Chancellor has twice said that there were new sources of information, not available to him in the past, which led to today's statement. Will he please specify what those sources of information were and the dates on which he received them? Unless he can satisfy the House on those two points, surely he would concede that he must be misleading the country and the House? Will he therefore specify the information and the dates?

Mr. Lawson

I am afraid that I cannot give the hon. Gentleman my working diary. [HON. MEMBERS: "Why not?"] For one thing, I do not have it with me. To suggest that the House is being misled could not be further from the truth. [HON. MEMBERS: "Answer."] The plain truth—as the Prime Minister and the then Chancellor made clear during the election campaign — is that we undertook not to reduce public expenditure this year below the figures in the public expenditure White Paper. What I am proposing now is a measure to reduce an overspend so as to get closer to the figures which were published and approved by the House.

Mr. Shore

The House is entitled to rather more frankness and directness from the Chancellor than it has received so far. I am looking at the script of the right hon. Gentleman's broadcast as recently as last Sunday. Then, when asked specifically about public expenditure proposals and cuts, he said: I have seen no such paper. I am not looking at papers of that kind. We want to know what new material came forward, or what previous material was available to his predecessor as Chancellor and the Prime Minister before Sunday. We want to know the full details of the proposed cuts which are scattered about in the statement. When will we get those details?

I find it almost unbelievable, in the light of the separate statements made by his ministerial colleagues on defence yesterday and on Health Service expenditure a few days ago, that those two services should be included in the proposed cuts. If they are, what kind of a Government have we who change their mind within 24 hours?

And that brings us back to the question as to what has caused this major change in Government policy. The Chancellor has time and again refused to give what every Government, when contemplating public expenditure, give to themselves and their colleagues, and that is an estimate of the unemployment effects. We want to know what the unemployment effects now are. We shall demand a full debate at an early opportunity on these appalling proposals and, indeed, on the whole statement.

Mr. Lawson

The right hon. Gentleman referred to my statement on Sunday. That was when I was being questioned on papers about unemployment benefit, which has nothing whatever to do with what we are talking about today.

As for defence and the Health Service, despite the reduction in the cash limits which I have announced, defence expenditure this year will still be 3 per cent. in real terms higher than in the previous year. As I said earlier, there is no reduction in total expenditure on the National Health Service below the total figure in the public expenditure White Paper.

Mr. Campbell-Savours

What about jobs?

Mr. Lawson

The proposals which we are putting forward are part of a policy—the best policy—for securing new jobs on a sustainable basis in the future.

The answer to the question about the new cash limits is that they will be published as soon as possible.