Public Expenditure

HC Deb 20 February 1986 vol 92 cc501-77

Mr. Speaker

I have selected the amendment in the name of the Leader of the Opposition and his right hon. and hon. Friends.

4.43 pm

The Chief Secretary to the Treasury (Mr. John MacGregor)

I beg to move, That this House takes note of the White Paper on the Government's Expenditure Plans 1986–87 to 1988–89 (Cmnd. 9702). I welcome this opportunity to open the annual debate on the Government's public expenditure White Paper. I should like first to refer briefly to the role of public expenditure in the economic strategy; second, to outline the main features of this year's White Paper; third, to respond as is customary to the report prepared on the White Paper by the Treasury and Civil Service Select Committee; and, finally, to say something about two other key issues, value for money and capital expenditure.

There are many reasons why restraint of public expenditure to levels the nation can afford lies at the heart of the Government's economic strategy for achieving a strong economy with low inflation. First, experience has taught us that restraint of public expenditure is essential if inflation is to be held down. In the 1960s and 1970s almost all industrial countries saw public expenditure rise faster than national income. In part this reflected the view that public spending could be an engine for growth and could sustain employment. In part it came from the rise in the pressure group society—and of course there are always boundless good causes —and the failure of Governments to make the choices required of them. In part it arose because the systems and mechanics for controlling expenditure were inadequate, especially in the face of rising inflation. How well some of us recall what planning in volume terms did for control of public spending under the last Labour Government.

In Britain public expenditure rose from around 35 per cent. of GDP in the early 1960s to around 45 per cent. at the start of the 1980s. This was accompanied by accelerating inflation, increasing debt, rising unemployment, increasing uncompetitiveness and, hence, slow destruction of many of our industries. There is little empirical evidence here that public spending was strengthening our economy, thus shattering the thesis that throwing more taxpayers' money at any problem produces higher growth and more jobs. Between 1970 and 1980 spending in the economy in money terms rose by 35 per cent. —but only 19 per cent. of that was real output. The rest was dissipated in rising prices.

The realisation that expenditure should be planned against a prudent assessment of what the nation can afford —that finance should determine expenditure and not the other way round —is now widely shared. For when growth fell short of optimistic assumptions, it was not public spending that was cut back. It was the private sector that took the rap in higher taxes, higher interest rates, and hence an inevitable squeeze on output and on its contribution to GDP. The burden of creating the wealth was falling on fewer and fewer shoulders—the process of transferring wealth was assuming a larger and larger share of GDP.

Secondly, restraint in public spending is essential if the overall amounts recouped in direct taxation from the pay packets of people, often with very modest incomes, are to be reduced and if we are to overcome the problem of incentives to work.

Mr. Roy Hattersley (Birmingham, Sparkbrook)

If the Chief Secretary has completed his initial passage, I wish to correct a slip of the tongue which he has made. The right hon. Gentleman says that GDP rose to its peak in the early 1980s. Its peak was in the mid 1980s after five years of this Government.

Mr. MacGregor

I do not recall saying that.

Today I am looking at the long-term picture and making no comments about the interrelationship between public expenditure and taxation in the next few weeks. The message of the Green Paper on longer term trends in public expenditure and taxation published two years ago was that if we are to reverse in time the rising trend of taxation, then restraint of public expenditure must be sustained over a number of years. In a world where there are so many uncertainties outside our own control —the House is very conscious of the impact on tax revenues of the falling price of oil recently —sticking to prudent targets of public spending is more vital than ever.

Thirdly, restraint of public spending goes even wider than improving the way our economy works, critical though that is. It is at the heart of the kind of society which this Government are seeking to build: a society based on choice, on freedom and on responsibility; a society in which people keep more of what they earn to spend or save as they decide; and a society in which industrial and commercial companies are left with greater capacity of their own to invest, and to earn a good return.

The White Paper that we are debating today is an important part of that strategy. As the House knows, it represents the final stage in the annual review of public spending, which began almost a year earlier. It sets out the Government's plans for spending over the next three years, but obviously in greater detail and with more precision and finality for the first year. With a document as bulky as this—some 400 pages—within the limited time at my disposal, the House would not expect me to do other than touch on the broad themes.

The first message is that public spending is under control. In this year, 1985–86, we expect it to be lower in real terms, even after allowing for the effects of the coal strike, compared with 1984–85. The remorseless growth in public spending has been stopped. The White Paper shows that for the three years ahead spending in real terms is expected to remain broadly stable at around this level. As a result, during the period of the plans, public spending as a percentage of national income will fall, and that applies however the proceeds from privatisation are treated. Let me say to the House that I am well aware, of the immense difficulties in consistently implementing a prudent and sensible expenditure policy, and I am not so naive as to believe that simply wishing it makes it so.

Secondly, within this overall objective some deliberate choices have been made to increase spending now compared with the last White Paper—in other words, additional sums compared to what we spent a year ago. The priorities I would single out are employment measures —first announced in last year's Budget—and increased spending as a result of the public expenditure survey round on the Health Service, on roads and on renovation of public sector housing.

Mrs. Elaine Kellett-Bowman (Lancaster)

Will my right hon. Friend add to his priorities important research and development upon which the whole future of this country will depend? If we do not keep up our basic science funding, especially in the universities, we shall never keep up with our competitors abroad.

Mr. MacGregor

I was singling out the main priorities. We have increased expenditure on research and science spending in the universities this year compared to last year. I am sure that my hon. Friend will agree that if one makes international comparisons then one of the main features of this country has been the low level of research and development spending by industry. There is also the pull through from basic research, often publicly funded, into products and processes in the manufacturing industries which can be sold. It is to those sectors that we need to devote as much attention.

Mr. Tam Dalyell (Linlithgow)

Has the right hon. Gentleman seen the annual report of the Medical Research Council, which talks in its foreword of the severely damaging effect of the financial situation on medical research? Will he pay special attention to that?

Mr. MacGregor

I have not seen that annual report. We look at these matters from year to year. I was involved in the agricultural research spending sector, where we have reduced the amount of money by comparatively modest sums. Many sensible decisions can be taken on that basis by changing priorities to ensure that we can get value for money from research.

I have another point about the broad theme of this year's White Paper. A feature of it—building on improvements in recent years—is the extent to which, throughout its pages, and especially in the departmental programmes in volume 2, large numbers of examples are given of better value for money, achieving more in terms of output of goods and services for the same amounts of money as before. We are talking of huge programmes and huge sums of money, although to listen to Opposition Members one would not always think so. The emphasis on getting better value for money and better output for the same amount of money going is of particular importance. We are determined to go on getting value for the money that we spend on behalf of other people. We are always conscious of the fact that the Government are not a spender in their own right but the trustee for the money raised from families and business.

Mr. John Townend (Bridlington)

My right hon. Friend said that revenue determines expenditure. There has been a significant drop in oil prices and therefore a large drop in oil revenues, which has happened since the public expenditure White Paper was prepared. If revenue determines expenditure, does this fact not make the White Paper out of date and should we not be reviewing our public revenue and expenditure targets?

Mr. MacGregor

I shall be making one or two comments later in my speech about progress on the public expenditure front for expenditure for this year. My hon. Friend will know that the overall statement about the economy is one for my right hon. Friend the Chancellor in his Budget statement, and I am sure that he will not expect me to say anything in advance of that. The principles of responsible budgeting, of careful choices of priorities and of better value for money are the hallmarks of this White Paper.

I move on to the report of the Select Committee on the Treasury and Civil Service, which will also enable me to touch on a number of other important matters in this White Paper. Not long after I entered this House, I became a member of this Committee's predecessor, the general Sub-Committee of the Expenditure Committee, and found it a most rewarding Committee on which to serve. I have always been greatly interested in its work and in the major contributions that it has made to previous expenditure debates and to the improvement of the White Paper itself, and this year is no exception. I know the pressures under which the Committee has to work, although I hope that the fact that we have been able to bring out the White Paper earlier this year than for many years —indeed I am tempted to say almost as early as I think it may now be possible to achieve it—has helped the Committee in its own work.

I am grateful to the Committee for the welcome that it has given to the further presentational improvements in this year's document. Without question, the document has been becoming more informative, easier to follow, and more linked in with the other parts of the public expenditure process over the years. This is in large measure due to the constructive dialogue which my predecessors and my officials have had with the Committee, and I assure the members of the Committee, and the House, that a great deal of effort goes into responding constructively to its helpful suggestions.

This year, apart from straightforward presentational improvements, there are three particular points to which I draw attention. The first is the shift to analysing spending chiefly by Department rather than by programmes. The second is making it easier for the House to relate material in the White Paper to the figures in the Supply Estimates for 1986–87 to be presented on Budget day. The third is the increased emphasis on the description of what public spending is achieving, rather than just setting out the resources being used. So I am grateful to the Committee, and in particular to my right hon. Friend the Member for Worthing, (Mr. Higgins), for its bouquets. The barbs of course I expected, and they too are there. Perhaps I can now respond to them.

The Committee has cast some doubt on the credibility of the aggregate planning totals. This is a crucial point, not just for those who follow these matters in the House, but for many interested bodies outside, and I shall deal directly with it.

The first point of which the House will want to be aware is my estimate that in the current financial year we remain firmly on course for achieving the planning totals set at the time of last year's Budget. There have been substantial upward pressures on spending to absorb, such as the continuing cost of the coal strike, higher local authority expenditure and the cost of the last social security uprating. Although it is still too soon to be certain, all the signs available to me show that we have been able to meet these pressures within the reserve that we have set aside for such unforeseen contingencies, and that the outturn will be within the planning total that we set at the time of the last Budget. That is one point to give credibility.

Next, in 1985–86, considerable amounts have had to be shifted from the reserve to social security, export credit and agricultural programmes to take account of the change in economic factors—the inflation blip in the context of the first, higher interest rates for existing export credit facilities in the second and the big increases in agriculture support intervention costs arising from the operation of the CAP and the record cereal harvest of 1984. In this White Paper, for 1986–87 we have taken account of the effects of these directly in the programmes themselves, and they have involved large additions to them. This means, I hope, that we have already anticipated what last year were adverse movements in economic and other assumptions. Therefore, we should not have to meet such additions from the reserve in the coming year. That is another reason for credibility.

Moreover, the House will note that the reserves for the next three years are higher than in any previous White Paper. That of itself seems to concern the Committee, which says that it involves a significant diminution in the value of the White Paper as a guide to government intentions", by which I suppose that it means that more should have been transferred from reserves into programmes.

It would be so much easier in one sense if we could have a precise planning process unclouded by uncertainties in the three years ahead. But that is not the world in which we live, and the Government are not unique in having to grapple with this problem. Any business in drawing up its corporate plan on the spending side must make sufficient allowances for uncertainties too. I would have thought that the fact that we have larger reserves than before in this White Paper is not a failing, as the Committee seems to imply, but rater a virtue, and. I believe that it lends greater strength to its credibility.

Mr. Robert Sheldon (Ashton-under-Lyne)

Many of us saw that comment by the Committee and were impressed by it. If the Government have public expenditure under control, one would assume that the reserves can be allowed to fall, not to rise. We are faced with an unattributed reserve that should be allocated to the programme if the Minister is as successful as he says that he is.

Mr. MacGregor

I believe in prudence. There is also the problem about local authority spending in the past two years, which I have discussed with the Committee, although I do not want to go into detail now. The overall point is that the fact that we have managed to keep the planning totals where they are and still have high reserves is a sign that we are pursuing a prudent and sensible public expenditure policy.

In its meeting with me and in its report, the Committee devoted a good deal of attention yet again to how, within the planning totals, relative priorities are set. The Opposition amendment also refers to this. I shall give a few reflections on this subject, as a relative newcomer to the inside, as it were.

I agree entirely with the Committee that this is a key issue, because a clear view of priorities and the willingness to make the hard choices involved are at the heart of public expenditure control. The Labour party's approach to priorities is that of "Animal Farm" —all priorities are equal but some are more equal than others. I am not even sure about some being more equal than others. Every spending idea seems to be a priority. That, of course, is how it lands itself with a bill of a further £24 billion.

I should like to turn to some of the specific criticisms made by the Committee. First, it is argued that the process of setting priorities is too bilateral —I suppose that means between me and the spending Minister—and that no overview at any stage is taken between Departments. That is not so. As several charts in the White Paper make clear, there have been substantial variations in the relative position of different programmes over the years. Some have grown substantially in real terms, others have declined in real terms. If the mechanisms were purely bilateral and within Departments, as the Committee fears, this would not have happened.

I should like to refer to chart 1-11 on page 20 of volume I. This shows that between 1978–79 and the end of this White Paper, 1988–89, there have been quite significant variations between different programmes. In the interests of making progress, I will not read them all out, but chart 1-11 demonstrates that when one takes into account the sums involved these changing percentages reflect substantial shifts in priorities.

Mr. Terence Higgins (Worthing)

I am not sure that what my right hon. Friend is saying is logically correct. It would have been quite possible for priorities to vary between different programmes when the entire process was done by bilateral agreement, depending on what pressure the Chief Secretary of the day happened to put on one Department as against another.

Mr. MacGregor

Yes, it would, but that was only my first point and it was made to demonstrate that there has been an overall view of changing priorities.

Mr. Austin Mitchell (Great Grimsby)

The first point was wrong.

Mr. MacGregor

No. It demonstrates in practice that there are substantial shifts in priorities.

It is argued that the public expenditure process is all about changes at the margin and that it should be, to use the jargon, more zero based. For those who are not accustomed to the jargon, which I am sure does not include any hon. Member present, this means looking at each programme anew each year and judging its relative priorities. I grant the Committee that we do not have a full zero based system, but I make two points. First, the Committee makes some mild criticism of the fact that individual Secretaries of State proposing increased expenditure are asked if they can find offsetting savings. Most Secretaries of State are responsible for several billion pounds of expenditure and it is perfectly reasonable, in the first instance, to ask them to consider what adjustment could be made to their own priorities. Second, in a sense this is asking them to do zero basing themselves.

I suspect that the view that the public expenditure round each year is only about changing minor things at the margin arises because of an excessive concentration on the closing stages of the survey. By the time Cabinet meets, normally in November, the options facing it will be limited in scope, but the process starts much further back than that. I am already discovering that it is like the Forth bridge and I am already embarking on the re-painting programme for next year.

Mr. Dalyell

As the hon. Member for the Forth bridge, I can say that it has structural problems.

Mr. MacGregor

I know the Forth bridge extremely well and that was certainly not meant to be an uncomplimentary remark. There is, of course, no ideal system for setting priorities, and if we had an academically or theoretically perfect system it would not work. There are many decisions, some small, some major, to be taken through the year. It just does not all happen in the basic public expenditure round. Outside events and changing economic assumptions can have a material effect on plans. Ministers have to make judgments individually, bilaterally and collectively on a range of issues, and have to take into account the many pressures upon them, not least from hon. Members in this House, and to judge what is sensible and acceptable. It is not just in the annual PES round that priorities are set and decisions are made.

Although the Government do not operate a formal zero-based budgeting system of the kind that has been tried abroad, we do ensure that a number of areas of policy are fundamentally reviewed each year. These reviews will ask: is this programme essential, does it have to be carried out in the public sector, has its objectives kept pace with changing circumstances and can these objectives be achieved more economically?

Over the past two years there have been major reviews into virtually every aspect of social security expenditure, accounting for nearly one-third of public expenditure. Those reviews have covered regional policy, urban policy and National Health Service purchasing of drugs, and there have been numerous smaller reviews into other areas of policy. There are few areas which have not been reviewed in recent years. The results of these reviews were discussed collectively so that before decisions are taken in the closing stages of the survey Ministers will be able to form views of the relative merits of different programmes.

I apologise to hon. Members who are not specialist devotees of public expenditure rounds for the time I have given to this subject, but I thought it worth doing so because I know that it greatly and rightly exercises the minds of those who are specialists. As I said at the outset, no system is perfect. I hope that I have said enough to refute the accusation that the Government's decisions are no more than the push and shove of politics, because they reflect a well considered view of priorities. That is why we have been able consciously to raise spending, and considerably in real terms on health, where expenditure is up 20 per cent. in real terms under this Government, on pensions for the increasing number of our elderly, and on strengthening our defence, where spending is up 30 per cent. since 1978. That has now stabilised, however, and the programme will be declining slightly in real terms because we now have the benefits in equipment and in many other ways, including better public sector procurement, to achieve more for the same amount of money. Spending in the fight against crime is up 40 per cent.

We have been able to achieve this by reducing the size of the Civil Service, saving £750 million per year; by cutting our contributions to the European Community; by reducing the subsidies to industry which were of doubtful economic value; by spending less on building council houses, reflecting the overwhelming desire of people to own their own homes and not to have the town hall as their landlord. We have made positive priority decisions. They reflect the right priorities and ones which are in accord with the wishes of the people.

I referred earlier to the increased emphasis in this White Paper on what public spending is achieving. Public expenditure control is as much about achieving more in goods and services for a given unit of taxpayers' money as it is about simply controlling the amount of money going in. We have to look constantly for value for the money we spend on the taxpayers' behalf. This is an unglamorous area in that it does not immediately excite public attention, but at the end of the day it is what matters to the citizen who is the recipient of public services. This White Paper records the substantial progress that has been made. It contains over 1,200 output measures and over 100 forward looking performance targets, and we must aim to do better each year.

We have a number of weapons in our armoury. In central Government, Departments' efficiency scrutinies have brought savings of £300 million a year and multi-departmental reviews have led to targets to save £400 million a year on Government purchasing within two years, and £50 million a year on office accommodation. Within individual Departments we see the results of the emphasis on value for money. In defence, competitive tenders have saved £60 million on the estimated cost of the new RAF trainer, and £100 million on the production contract for the Army's new mechanised combat vehicle. In the Health Service, £150 million of efficiency savings are planned in 1985–86 and more in 1986–87.

We are getting 20 per cent. more roads for the same amount of money as we were getting five years ago. Contracting out of services for central Government and the National Health Service has brought a net saving of £50 million a year.

All these figures sound impressive, but it is when one gets down to what they mean in terms of increased goods or services elsewhere that their true impact becomes clear. The net saving in the reduction in the number of civil servants employed to administer public spending equals the building of 20 new hospitals a year. [Interruption.] We are building them. In the last few years there have been 150 hospital building projects and that programme is well up on any programme by the previous Government. The savings in defence amount to more than the cost of a type 23 frigate, of 10 new Harriers or of over 100 new Challenger tanks. Value for money is worth stressing because this is the occasion when we can draw attention to the substantial progress that has been achieved through a lot of hard work.

Capital expenditure is one area to which the Labour Government gave very little priority. Our record compares favourably with that of the Government in which the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) served. Under Labour total capital expenditure fell in real terms by 20 per cent. Under this Government, capital expenditure has continued at a substantial level and is currently running at some £21 billion a year. That level has been broadly stable in real terms. There are two priorities to which we have devoted such attention. One is the Health Service. Capital expenditure on the Health Service, to which the right hon. Gentleman referred, fell by 38 per cent. under Labour and has risen by 12 per cent. in real terms under the Conservatives.

Mr. Robin Corbett (Birmingham, Erdington)

There are fewer beds.

Mr. MacGregor

There are not fewer beds.

Mr. Corbett

There are in the west midlands.

Mr. MacGregor

Expenditure on roads, capital and current, by local and central Government fell by 36 per cent. gross under Labour and has risen by 10 per cent. in real terms under this Government. By their performance and record do you judge them. The House should consider the package in our plans and in the White Paper. It should consider the railways, for example. Next year, rail investment is planned to be 9 per cent. up in real terms on this year. Water is up by 4 per cent. in real terms. Trunk roads and motorways are up 5 per cent. in real terms. As for housing renovation, capital expenditure has increased by more than 35 per cent. during the past few years and is expected to rise a further 4 per cent. in real terms next year. I have already referred to the health authorities. That is a record of increases in priority areas of which we can be proud.

Moreover, capital expenditure, as shown in the White Paper, does not tell the whole story about capital expenditure on infrastructure. We ought also to take into account spending on repair and maintenance, which has grown in real terms and now approaches £5 billion a year.

Some commentators, including the Treasury and Civil Service Select Committee, have looked at the capital spending plans in the White Paper for the period ahead and concluded that the trend is downwards. The Select Committee makes the understandable error of comparing the outturn figures in the White Paper — expenditure incurred—with plans, without making any allowance for future capital spending from the reserve. As we get nearer to the years in question and shift sums from the reserve into specific departmental programmes, capital expenditure will feature in that. It is the outturn figures in the three years ahead that we must consider.

It is also necessary to take into account the fact that, for very good policy reasons, capital expenditure is sometimes switched out of the public into the private sector, and thus reduces the overall public sector figures on that account. I have in mind the continuing impact of our policies to switch provision to the private sector in housing. The figure that ultimately matters is the total capital investment in the economy. Last year, it was at a record level of about £60 billion, with a further increase expected this year.

I have dwelt on the value for money aspects of the White Paper because of the need to spell out its importance, because our record is increasingly an impressive one and because I do not think that the Labour party begins to understand its relevance to managing the public expenditure programme as a whole, just as it does not subscribe to the need for a prudent economic policy. For Labour all that matters is being seen to spend more.

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

Will the Minister give way?

Mr. MacGregor

I am coming to the end of my speech. I have spoken for a long time. The hon. Gentleman will be able to make his speech. Very well; this really must be the last time.

Mr. Campbell-Savours

Page 278 of the White Paper refers to the need in Ulster for expenditure to be higher than on comparable programmes in Great Britain. Why do we have these ever-escalating levels of expenditure in Ulster when the level of unemployment in Ulster is no greater than in the northern region, and other parts of the United Kingdom? What is so special about Ulster that it seems to have a very special place in the Government's heart?

Mr. MacGregor

I cannot remember every line of the White Paper.

Mr. Campbell-Savours

I have told the right hon. Gentleman what it said.

Mr. MacGregor

Indeed, the hon. Gentleman has, but I have not had time to look it up. I think, from memory, that the point is that there is an extra security aspect in those figures. My right hon. Friend the Financial Secretary to the Treasury will happily deal with that when he winds up.

I can quite understand why the hon. Gentleman wanted to interrupt my flow. All that matters for the Labour party is being seen to spend more—until the chips are down and those who have to pay suddenly wake up. I said last week that we have been calculating the cost of Labour pledges. Leaving out one-off promises and renationalisation, the cost so far is £24 billion extra a year. I was charitable to the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). I conceded that if he ever found himself having to preside over a public spending programme, he would be forced to trim. Indeed, he is beginning to show signs of panic already—like the host at a party who promised everyone a splendid binge but, as the food and drink bill began to mount up, took fright at the hangover that everyone would face the following day and so began to hack away at the wilder commitments that he and his colleagues had made. He cannot get away from the fact that his colleagues, in criticising our spending plans, are constantly promising more. I shall give a few examples. He asked me to do so.

Last summer, the Leader of the Opposition committed a new Labour Government to doubling aid within two or three years of taking office. That is a fine pledge, but even on a conservative assumption of the build up, it amounts to about a further £900 million. I notice how the hon. Member for Thurrock (Dr. McDonald) is starting to mutter. Perhaps she will listen to some of these commitments and tell me whether I am right.

At the end of last year, the Opposition's industry spokesman committed himself in Tribune to increasing industrial support by at least 50 per cent. He gave no indication of its cost effectiveness. He gave no assessment of how much money was thrown down the drain in unwise industrial support during the time of the Labour Government. That amounts to about a further £1,100 million a year.

The Labour party remains committed to giving a substantial weekly grant to over-16s in full-time education. Does that remain the commitment, or does the right hon. Gentleman disown the "Charter for Youth" of June 1985? If not, the sum is a further £965 million a year.

In the document "Working Together" last year, there was a commitment to a 35-hour week. The cost in the public services alone would be some £3 billion a year. I shudder to think what it would be for the private sector. Has that been abandoned?

The Financial Secretary to the Treasury (Mr. John Moore)

Answer.

Mr. MacGregor

The right hon. Gentleman will have plenty of time to answer. Labour has also committed itself, at its 1983 party conference, to introducing a minimum wage of two thirds average earnings, costing another £1 billion from the public purse alone. This amounts to a legal obligation on the lower paid to price themselves out of work. I wondered whether the right hon. Gentleman might say that a 1983 conference pledge is no longer valid, but I see that the hon. Member for Oldham, West (Mr. Meacher) repeated the pledge in Tribune last week. I know that the right hon. Gentleman has already had to slap down his hon. Friend on one proposal, so perhaps he could say which member of the Opposition Front Bench will win on this one.

There are proposals to phase out independent schools, or have they gone too? That would cost a further £300 million, at a conservative estimate.

That all amounts to several billion pounds extra on the expenditure programme. I give it to the right hon. Gentleman that I am sure that he knows the lunacy of commitments on this scale. He knows the massive crisis of confidence that it would create in the economy, the huge inflation and the destruction of jobs on a scale that would rapidly outdo those that he was trying to build up. If he is to sound at all credible, he has to get some grip on his colleagues. The Opposition Front Bench have to come clean and stop pretending that they can undertake so many of these programmes.

The contrast is clear. The Labour party has a programme of massive public spending that would do immense harm to the economy and impose a tax burden on our people that they would find quite insufferable. The 41 per cent. VAT rate that I put to the right hon. Gentleman last week gave him the benefit of many doubts. We, however, have spending programmes that have enabled us to increase substantially in real terms the right priorities. They have contained the overall programme within what the nation can afford and contributed to the economic policies that have produced the longest period of sustained growth for many years. The White Paper continues that programme, and I recommend it to the House.

5.19 pm

Mr. Roy Hattersley (Birmingham, Sparkbrook)

I beg to move, at the end of the Question to add: 'but deplores that once more the Government's expenditure plans compound the errors of previous years and therefore further increase the prospects for higher unemployment, inhibit investment, inflict additional damage on industry, intensify the severe shortage of adequate housing in many parts of the country and demonstrate the bankruptcy of this Government's economic philosophy which chooses to finance increases in unemployment rather than additional employment opportunities.'. You were in the Chair, I think, Mr. Deputy Speaker, and therefore will recall that last Wednesday, in the debate on unemployment, the Chief Secretary categorically promised that he would today, on what he described as the appropriate occasion, answer a question which I put to him directly, and one which the country has asked for six years, that is, why do the Government choose to spend national resources on the cost of keeping men and women unemployed when they could invest the country's wealth in capital programmes which would begin to put Britain back to work and at the same time build desperately needed houses, replace decaying schools, renovate other areas of capital necessity and rebuild our collapsing sewers.

I do not believe that the Chief Secretary even attempted to keep that promise. But he did, refer to another item in the debate last week. In the last passage of his speech—what he no doubt regarded as a peroration — he reproduced the assertion he made eight days ago, that the programme of the Labour party committed that party, when it came into power, as he is right to anticipate, to increase spending by £24 billion.

The Chief Secretary explained last week that careful calculations had been made by the Treasury. He said that their computers and their recording machines were hot with the work that they have been doing. Therefore, taking him at his word, I assumed—for this must be the case if what he told us was true—that the careful calculation was there in the Treasury file waiting to be taken out, photographed and sent to me.

I therefore wrote to the Chief Secretary and asked him for it. After six days of havering, and conversations between his private office and mine, I received late yesterday afternoon a letter which told me that he either could not or would not supply me with the careful calculations he claimed the Treasury had made. Of course, he does not need to, because his work has been done. He has insinuated the unsubstantiated figure into the minds of sympathetic journalists who, naturally enough, parroted it in last week's papers.

I hope that those who have listened to the Chief Secretary this afternoon have managed to keep up with this calculation for, when he returned to the subject today and said that I asked for details and he was therefore going to give them to me, the details which he gave—and he was not at that time in his reticent mood—did not add up to one third of the total to which he claimed the Labour party was committed.

I want to give the Chief Secretary the benefit of the doubt. Let us assume that this piece of paper does exist, and let us assume that the only reason that he did not show it to me, and was not prepared to publish it, was the ridicule which would naturally be his were it to be clear that his assumption was based on the Labour party meeting all the aspirations of its programme in its first year of existence. There is, even so, another problem that the Chief Secretary has to face. After he announced with portentous authority last Thursday that he had carefully calculated Labour's programme and it came to £24 billion, I had to point out to him that on 3 August the chairman of the Conservative party made an equally portentous annoucement that he had costed the Labour programme, and it came to £39 billion. Where did the missing £15 billion go? I will tell the Chief Secretary where it went. Both those figures are an invention intended to do one single job which now characterises all that the Government do. The Government do not like talking about their record or their policies. The Government like to distract attention from what they have done and what they have failed to do on to their scare stories about the Opposition.

Indeed, I must tell you, Mr. Deputy Speaker, that it was actually my intention to suggest that the Government would fight the next election on the slogan, "Hold on to nurse for fear of something worse". The Paymaster General actually used that phrase in an answer he gave to the Commons this afternoon. It does show the confidence the Government have in their own performance, and it shows the misunderstanding that the Government have of the British people. When I saw "nurse" on "Panorama" last Monday, it did not seem to me that many people would want to hang on to her.

Mr. MacGregor

The right hon. Gentleman seems unable to read either my reply or his own letter. He implied that, in my reply, I said that I could not give the figures. In fact, I said: If you wish, I could go into more detail … of the way in which the figure of £24 billion, to which I referred last week, is made up, although I have to say that I was surprised by the implication in your letter that you have not done these calculations for yourself. I then proceeded to go into detail today. I agree with the right hon. Gentleman that I have not actually given the full £24 billion — did not want to go on all day—but that will come. What he must tell us is whether the figures that I have given so far are correct.

As to the hon. Gentleman's second point, he claimed in his letter of 13 February that the then chairman of the Conservative party had said that the figures amounted to £50 billion. I am glad to notice that he changed that today because it was £39 billion, and that was based on past spending proposals and excluded such items as renationalisation and other commitments which I have not included in the £24 billion.

Mr. Hattersley

The paper is there, it is in the Treasury, the Chief Secretary has done the work and his machinery is hot from the calculations. Am I therefore to assume that he will put into the Library, or give to me, the piece of paper which adds up to £24 billion? Is he going to do that?

Mr. MacGregor

Can the right hon. Gentleman tell us whether I have been right so far on the policies?

Mr. Hattersley

If the Chief Secretary thinks that he can get away with that, he thinks that he can get away with anything.

There are, in a word, two essential truths in this issue. One is that the Chief Secretary, having made the allegation, is pathetically incapable of substantiating it. The second is that, while Conservative Members may find it convenient to invent stories about the Labour party's spending programme, we do not have to look into the crystal ball to examine the spending programme of the Government. That is a matter of record. Let me describe what that record demonstrates. The truth of the matter—

Sir William Clark (Croydon, South)

rose—

Mr. Hattersley

No, I will not give way. I suppose that I shall give way once or twice in my 40 minutes, and I suspect that it will be to the hon. Gentleman that I give way.

I want to deal now with the spending record of the Government, which is a matter not of speculation but of fact. The spending policy of the Government is to promise cuts in public expenditure, but those cuts never come. If next year's target is to be hit—and that in itself will be a unique episode in the life of this Government—the percentage of gross domestic product which goes to public expenditure will be no less than it was in the year in which the Government were elected.

What the Government do, claiming it to be cuts in public expenditure, is to transfer spending from productive and desirable projects to the financing of various catastrophes that have been created by their own policy. So we spend less in real terms on education, less on the urban programme, less on housing overall — and the Chief Secretary thinks that he is going to fool somebody by plucking one item out of the housing programme and telling us that it has increased — less on industrial support and even less on the fire service. As I propose to demonstrate, we spend far too little on health, about which the Chief Secretary bragged, to keep up with scientific advance and demographic change. At the same time we spend much more on unemployment benefit and on interest charges.

There is at this moment a national consensus in favour of reducing unemployment by increased investment in public sector capital projects, yet the Government propose to cut capital spending by £l.6 billion, and they know that, as a direct result of that, the cost of unemployment is bound to rise.

We need to look carefully at the Government's spending record, because yesterday it was once more demonstrated that every Government statistic is likely to be massaged and manipulated to make it appear more acceptable. No wonder the polls show that 70 per cent. of the electorate believes that we do not have a trustworthy Government. On the Government's admission, public spending is 9 per cent. higher than it was in 1979. In truth, it is 12 per cent. higher, because the £4.75 billion which is to be raised by the sale of British Gas, British Telecom and other assets is, by any honest analysis, a contribution to Government revenue — not, as the Government continually pretend, a public expenditure saving.

Economically, selling assets is no different from selling gilts. In both cases, cash is raised to finance a deficit at the expense of long-term income. In the case of gilts, interest must be paid. In the case of asset sales, income is lost. Indeed, selling gilts is probably a more prudent method of financing Government expenditure if, as has been the case with the Government, the assets are sold at well below their real value.

I make my position on public expenditure levels absolutely clear. I believe that they should be increased. I am not alone in that. I quote a letter which I received yesterday which stated: 80 per cent. of respondents to the … consultation said that public expenditure on roads, railways, hospitals, housing etc should be increased in the 1986 Budget. Moreover, nearly all were prepared to forgo cuts in personal taxation to allow for the greater spending on infrastructure. That letter was not from a constituency Labour party or the TUC; it was from the British Institutute of Management, representing the views of British management. Its complaint against the Government is like mine — the Government attempt to cut spending year after year and fail year after year and, in the process of failing, damage the economy and undermine social services.

The Government's management of public expenditure is as incompetent as their public expenditure policy is misconceived. It is typified by a plaintive paragraph from the report by the Treasury and Civil Service Select Committee, which states: it is not altogether clear how far the totals represent what the Government hopes will happen as opposed to what it expects the most likely outcome to be. Too often, the Government have the wrong objective. Too often, they pursue their objectives incompetently. The combination of misjudgment and mismanagement means that desirable programmes are cut while undesirable costs, such as unemployment benefit and debt charges, are increased.

Sir William Clark

rose—

Mr. Hattersley

I think that I should give way to the hon. Gentleman in case something terrible happens.

Sir William Clark

The right hon. Gentleman did not give way when he was making the point about which I am concerned. Many of us are confused. My right hon. Friend the Chief Secretary has said that the Labour party's programme would cost £24 billion. I am not arguing about whether it is £24 billion. I should have thought that, if the Labour party put forward a proposition to increase public expenditure, we have a right to know what it will cost. If it will not cost £24 billion extra, how much will it cost?

Mr. Hattersley

I take that point and I shall respond to it exactly. I said at the time of the last Budget that I believed that there should be a net increase in spending of £5 billion. When I respond to what the Chancellor says this year, I shall make my own assessment and judgment and shall offer my figure for what the Budget spending pattern should be for the forthcoming year. The idea that I shall take advice on prudence from a Government who have consistently exceeded their spending totals, having been elected to cut spending public expenditure and having increased it year after year, is a pretty bizarre proposition, even from the hon. Member for Croydon, South. He has asked what I believe this year's spending pattern should be. I believe that it should be £5 billion higher than it is now. I shall tell him when the Budget debate begins what the amount should be in the financial year then heralded.

I shall return to the Government's policy, for it is that which we are debating. The net result of the Government's policy is an outturn which, until the Conservative party was elected, most people would have thought was impossible—a simultaneous reduction in public services and an increase in public spending. This year, according to the Chief Secretary at the press conference at which he launched his document, public expenditure is broadly flat. Yet, with public expenditure broadly flat, the Government still cut the education budget by a net £200 million; they still plan over the next two years to cut regional aid and industrial support by 31 per cent.; they still plan to cut local authority spending by 13 per cent.; and they still cut the housing programme by 18.5 per cent. this year and plan a 4 per cent. cut next year.

I want to ask the Chief Secretary specific questions about those individual programmes, most of which he prudently chose not to mention. My first point is not so much a question as a plea. I hope that we can be spared more fantasies about how the Health Service has improved. Of course, Health Service spending has increased but in many areas the service has deteriorated tragically. The Chief Secretary is right to say that, allowing for the normal correction for inflation, Health Service spending during the past six years has increased by 20 per cent. Part of that increase has been financed by patients' contributions through charges which take up 10 per cent., rather than 7 per cent., of the cost.

I agree, before the Chief Secretary tells me, that the important point is not how the money is raised but how it is spent. What the Chief Secretary did not tell us but what he must know is that two thirds of the real increase is absorbed not in improving standards in any way but, first, in meeting the needs of demographic change in an increasing population which is growing older and which, in the Health Service area, has better survival rates and, secondly, in matching the excessive inflation costs which are not reflected in the normal regulator which determines the real increase in spending.

Consequently, the "real" increase, in the proper meaning of that word, in Health Service expenditure since the Conservative party was elected is rather less than 1 per cent. Therefore, the funds available to the Health Service are not sufficiently large to allow it to develop and to make common among all our people the new developments in medical treatment and techniques. The hard truth is that people still die because the Health Service cannot provide the necessary equipment to keep them alive. The Government's claim that enormous steps have been made confirms this and underlines and makes us all understand why only 6 per cent. of the population think that we have a caring Administration or a caring Prime Minister.

Mr. Robin Squire (Hornchurch)

Will the right hon. Gentleman give way?

Mr. Hattersley

No. [HON. MEMBERS: "Give way."] I shall follow the Chief Secretary's habit in this, if not in my statistical accuracy. I shall tell the truth about the statistics. I shall not give way any more. Hon. Members will then be able to make their contributions.

In the White Paper, the Chief Secretary does not even stipulate a local government spending target—so much for urging town halls to take responsible attitudes and so much for all the suggestions to town halls that they should undertake long-term planning to minimise their costs. How does the Financial Secretary expect councils to make any preparation for financial prudence next year and the year after when they not only do not know how rate support grant is to be distributed, but do not even have the faintest idea of the total RSG?

We know the general trend. We know what the record is. We know what future policy will be—there will be cuts and more cuts in RSG. The result will be deteriorating services and increasing rates, even in Tory-controlled council areas. Once again, the Government's incompetence will have produced the opposite result from that which they intended—to hold down RSG, with all the pains and penalties, or to keep rates down. The net result has been to push rates up.

I shall take another example from the programme about which I should like the Chief Secretary to tell us—the reduced support for industry. I ask him about only one example, although I could give many more and beg the right hon. Gentleman's comments on all of them. How can the Chief Secretary or the Financial Secretary—whoever replies — justify or defend the fact that over the next three years the export credit guarantee scheme is to be cut by 75 per cent.? Would the Financial Secretary regard that as an adequate response to the loss of the Bosphorus bridge contract, a loss which largely came about because the Japanese competition was endorsed, underwritten and supported by more Government assistance than was provided in the United Kingdom?

How does he defend the cut in the education budget? The Minister has chosen to reduce that direct investment in the country's future. I have quoted the reductions for this year. In real terms, education expenditure is to fall by £1 billion between 1983–84 and 1986–87. I fear that that is just further evidence of the contempt in which the public education system is held by the Government.

Meanwhile, I must and do gladly concede that one spending programme has increased consistently over the past five years. That programme is the cost of unemployment. The total annual bill is now somewhere between £21 billion and £24 billion. I offer the Chief Secretary—who seems to have a penchant for this kind of calculation—an explanation of what that means in terms of taxes. The amount now spent on keeping 3.5 million men and women on the dole and the amount we lose from their being unable to pay taxes or national insurance contributions is equivalent to reducing the basic rate of income tax to 12p in the pound.

There have been two growth industries under this Government — poverty and unemployment. Yet perversely, with unemployment trebled and long-term unemployment now greater than the total number of those unemployed in 1979, the Government reject the one certain way of putting Britain back to work. Capital programmes are being cut, not expanded. Capital spending has been cut by 37 per cent. in the lifetime of the Government. Since Labour's last year in office, expenditure on housing has been cut—

Mr. Michael Forsyth (Stirling)

Will the right hon. Gentleman give way?

Mr. Hattersley

No. I have made it absolutely clear that I will not give way.

Since Labour's last year in office, housing expenditure has been cut by 59 per cent. and the Government plan further cuts between now and 1989.

Mr. Michael Fallon (Darlington)

Will the right hon. Gentleman give way?

Mr. Hattersley

I have already made it quite clear that I will not give way.

If the Chief Secretary wants to be taken seriously, he had better produce better defences for his policy than the one he wheeled out to defend the cut in the housing investment programme. The Chief Secretary said that the housing investment programme has been cut in the recognition that more and more of our people wish to live in private housing. That apology might have some weight if there had been an increase in private housebuilding but private housebuilding has also fallen. To imagine that we would be fooled by the implication that the gap in public housing would be filled by increased private building shows the triviality of the Chief Secretary's approach to these matters.

The Chief Secretary said that more and more people want to live in their own homes. I must tell him that more people want to live in a decent house of any kind and, because of the cuts in the housing investment programme, more and more people are living in slums, in multi-occupation and in housing unfit for human habitation. We could overcome that problem and at the same time reemploy some of the 400,000 construction workers now on the dole. We could reduce homelessness, overcrowding and end the misery of multi-occupation. Yet the Government's condemnation of that is evident in the White Paper. There are 4.6 million local authority houses in need of repair. The cost of repairing them would be £19 billion, yet the Government propose to spend only £2 billion a year on that. In fact, the speed of further deterioration is likely to outstrip the speed with which the present repairs are carried out. That will simply store up more and greater costs for future generations. No commercial undertaking would allow its capital to deteriorate in that way particularly since the resources—

Mr. Fallon

rose—

Mr. Hattersley

—to finance these jobs are available. The Government persist in behaving as if unemployment cost the nation nothing. However, each man and woman who is out of work costs the Exchequer between £6,300 and £7,000 a year. I repeat the question that I asked the Chief Secretary last week, the question I have asked today and the one that the Opposition will continue to ask until we can answer it ourselves when we are in government: why not spend public money on jobs rather than the dole?

Mr. Michael Forsyth

rose—

Mr. Fallon

rose—

Mr. Hattersley

I have been asking questions, yet an aphorism about organ grinders and monkeys comes to mind when I see the two hon. Gentlemen rising.

I know what the Chief Secretary's theoretical answer would be. He says that the public expenditure cuts which he aims for but never quite achieves would liberate economic energy. He believes that such cuts would make tax reductions possible. In fact, public expenditure cuts have generated unemployment and promoted other forms of public expenditure. Far from having tax cuts, we have seen the annual tax bill increase by £29 billion. I must tell Conservative Members that, after the Budget, in which no doubt tax cuts will figure, the vast and overwhelming majority of families will still be paying more in taxes than they were paying on the day that the Government were elected in 1979.

I said that I had no doubt that tax cuts will come in the Budget and I will now try to justify the feeling of optimism that I have engendered in some desperate Conservative breasts. Last week's gloom, intentionally engendered by the Prime Minister and the Chancellor of the Exchequer, was just the black propaganda phase of the Lawson cycle. We all know what the Lawson cycle is. It begins each Christmas with bragging and boasting about tax cuts. It is followed each January by a sterling crisis and record high interest rates. It then moves quickly through its next phase. First, critics question the Chancellor's judgment, the Chancellor then abuses the critics and the critics are then proved right. Finally, attempts are made to revive the Government's standing by predicting catastrophe in the hope that when it turns out to be only failure everybody thinks that everything has turned out right in the end.

That is a dishonest as well as an incompetent way of governing the finances of the country. In short, that is typical of the Government and that is why the Opposition will vote against them tonight.

5.48 pm

Mr. Terence Higgins (Worthing)

Clearly this debate should be among the most important in the annual parliamentary cycle, dealing as it does with the allocation of the entire resources of the Government. It is true that the presentation of this year's White Paper, which is significantly improved, provides a better basis than ever before for the House to discuss these vital matters. I should like to express my appreciation of the way in which the Government have responded to recommendations of the Treasury Select Committee as far as the presentation of the accounts and the diagrams in the White Paper are concerned. There is obviously a problem about how much bigger the White Paper should get in terms of the amount of detail it contains. Nonetheless, it now provides a reasonable foundation for the House to discuss these issues.

Having said that, we should recognise that this debate has never been a very satisfactory parliamentary occasion. It was rather worse when it used to be a two-day debate. It may be worth while to spend a few moments analysing why that should be. First, the fact that there is a vote at the end of the proceedings is irrelevant to any subsequent events, as was demonstrated clearly when the previous Labour Government lost the vote on the public expenditure White Paper and nothing happened in consequence. That does not greatly help one's interest in the proceedings in relation to determining an outcome.

The second reason why this occasion tends to be unsatisfactory is that it is very much a post mortem on decisions already taken in the previous public expenditure round. We ought to be able to deal with these matters more efficiently. That brings me to the third problem. There is great pressure on the House, particularly from the Opposition, to debate the White Paper soon after its publication. That has considerable disadvantages, because it means that the Treasury Select Committee is under considerable pressure to produce a report at short notice. It also means that other Select Committees, which might now usefully study the considerable amount of detail that appears in the document, do not have the opportunity to do so in time for the debate.

The next reason why it is rather unsatisfactory is that the autumn statement contains a great deal more information over a period of years than was previously the case. The emphasis has tended to move towards the debates on the autumn statement and the Budget, which means that this debate, for the reasons that I have given, tends to become a much more technical exercise. That being so, the Committee carefully studied the position and has given a clear recommendation at the beginning of its report that the timing of the debate is wrong.

The correct time, following publication of the White Paper, for those matters to be debated is May or June, when the next round of public expenditure decisions are just going to Ministers. The House can then express a view of what it believes the public expenditure priorities should be.

I hope that it will be possible to persuade both sides of the House that such a change in our parliamentary timetable would be a significant improvement. We do not have much opportunity to debate economic affairs in June or July. I hope, therefore, that the Opposition and Government Back Benchers will agree that that would improve the overall way in which the House and the Committees can monitor what the Treasury is doing.

That brings me to the priorities, which were dealt with at some length in the report to which the Chief Secretary referred. We spent a large chunk of our report questioning the machinery by which priorities are determined. That gave us considerable cause for concern. We picked out three examples of the way in which that is seen not to be working properly. Last year, for example, there was a problem over student grants. The Department of Education and Science was then told that it had to find savings elsewhere within its own budget.

We had another case with regard to overseas aid. The Foreign Office had again to find offsetting savings within its own budget. There has clearly been a decision that the Department of the Environment should apply more money to the inner city problem—something which I am sure is correct, but it is being done at the expense of the shire counties, again because the Treasury insisted that the additional resources needed to meet unexpected expenditure must be found within the same Department.

I and the Committee do not believe that that is a sensible way of proceeding. If one is going to allocate resources in the light of some new demand upon them, priorities should be reassessed, not merely within the Department involved but across departmental boundaries.

That brings me to a point which the Chief Secretary mentioned-whether negotiations should take place, to the extent that they do, bilaterally. It is possible to reallocate priorities on that basis, because the Chief Secretary puts more pressure on one Department than another. We then have some reallocation of reserves. It does not seem that the Cabinet as a whole considers the overall picture when determining which item should be given greater priority and which less.

The whole pattern of expenditure has a tremendous momentum of its own. It can only be adjusted comparatively slightly, but, nonetheless, all the priorities should be reassessed in the course of the annual expenditure round.

There was an interesting article in the Financial Times today which claims that in future there will not be proposals for increases and additional expenditure during the course of the round. The Chief Secretary did not comment on that. I do not know whether the Financial Secretary will when he replies. The thrust of the argument in the article, if it is valid, is that the savings will be found within the Department rather than resources being allocated afresh across Departments if there is an increased claim in one area. It is only with regard to the overall picture that one should say that we should find offsetting savings if more expenditure is incurred elsewhere. To prevent a position where priorities are assessed across Departments seems to lead to a serious misallocation of resources over time.

I hope that the Chief Secretary, whom I congratulate on his new job and who will bring his personal approach to the problem, will carefully appraise the way in which the machinery is operating. I am far from sure that it would be to the Treasury's detriment if something along those lines is done.

I should pick up one point made by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). He seems to be under the impression that the Government's and the Treasury's present plans are to cut public expenditure. That was the original intention. I believe that I should be right in saying that that intention has now been modified and that the present intention is to control rather than to reduce public expenditure.

Another important point in the Chief Secretary's speech is that he continues to assert that finance—revenue if one prefers it— determines expenditure, not the other way about. The Treasury Select Committee has had considerable doubts about that. My hon. Friend the Member for Bridlington (Mr. Townend) intervened in the Chief Secretary's speech and questioned him on that point. If that is indeed the case, we must carefully consider what the effect of the oil price fall and the consequent reduction in available resources is. Clearly, it alters—if what the Government say is true—the amount of money we have available to spend.

In response to the intervention, the Chief Secretary said that it would all be sorted out in the Budget. I suspect that the logic of that is a little shaky, to say the least. Either finance determines expenditure, in which case the way in which it is raised is irrelevant because it is a constant, or we must adjust for changes in the economic environment. I believe that that is a false argument, because I do not believe that in government finance determines expenditure. The reality is that the expenditure pattern is fixed and the revenue is then produced to finance it. I am puzzled about why the Government should have got themselves into that argument.

Some other important points arise from the White Paper which I should like to mention briefly. I am worried about one aspect of the presentation. A summary of the main points at the beginning of volume I of the White Paper points out where expenditure has increased. It should perhaps also include some reference to where it has been reduced.

The reserves are of considerable interest. Our report deals with them in paragraph 30. We found more and more in the course of questioning that, whenever there was an unanswered question, the answer was that it would all be found in the reserves. The Chief Secretary did not explain why apparently the uncertainty is becoming greater and greater and so bigger and bigger reserves are needed.

That tends to undermine the White Paper's purpose, which is supposed to be to show where the resources are likely to be allocated. We must have some reserves, but it is far from clear why they have to become bigger and bigger, except that we find that local authority expenditure is based on a straightforward assumption without any genuine attempt to appraise likely expenditure over the planned period.

In those two respects — the reserves and local authority aspects of the White Paper—the House is being given less information than it was before.

I do not wish to go into the subject of privatisation and how the proceeds should be treated. The Committee has dealt with that issue at considerable length on a number of occasions. I merely wish to point out that the right hon. Member for Sparkbrook changed his ground halfway through. We can consider the proceeds as reductions in public expenditure, as revenue or as a means of funding the public sector borrowing requirement. He said that they should be treated as revenue but then went on to argue that they should be a means of financing the PSBR. The final view—that they are a means of financing the PSBR—is correct.

I want to deal with the matter of infrastructure and tax cuts. I think that the argument is becoming absurdly black and white. It is a matter not of whether we have one or the other but what priority we give to them, whether a particular tax cut is more beneficial in relation to unemployment as against a particular item of public expenditure. One has to assess the priorities, but the issue has now become very black and white. The Opposition say more should be spent on infrastructure and Conservative Members are accused of wanting only tax cuts. We have to have a balance. In fact, that is what we have— a considerable amount is being spent on infrastructure and at the same time there is a tax policy related to that.

The final paragraph of the Committee's report gives cause for concern. It shows what is happening on capital expenditure or net capital formation in the public sector. We give a table for public expenditure on total fixed capital formation excluding defence which shows a worrying trend, if one looks at it in terms of index numbers, which is perhaps the easiest way of doing it.

Many hon. Members wish to speak and I do not want to detain the House for much longer. Traditionally, this debate has ranged very widely over the whole subject of economic policy and I have to say that the White Paper is based on an underlying assessment about the economy and economic forecasts. I think that we would be foolish to suppose that the current economic position is other than perilous. The Chancellor of the Exchequer has been successful in hitting the right balance between interest rates and exchange rates. It was a close-run thing at the beginning of the year, but ultimately it has not worked out too badly.

However, the position in the United States still gives very grave cause for concern. Today we heard various statements by the chairman of the Federal Reserve, Mr. Paul Volcker, which appeared to be in conflict with some of the remarks made by the Treasury Secretary, Mr. Baker. The American budget deficit gives grave cause for concern. It has not been significantly reduced and it still imperils the world economy and there is the risk of a so-called hard landing in which the dollar collapses. We would then find high interest rates and a world recession. That development could seriously jeopardise the plans in the White Paper. Therefore, I believe that the Chancellor should do everything possible to resolve that.

The so-called Group of Five solution, which in the end turned out to be a group of two—Japan and the United States of America—has been successful in producing a considerable decline in the value of the dollar. That has been done on the basis of intervention and on threats on intervention, and the underlying position still remains very dangerous. I think that the Chancellor should consider that in his negotiations with the Group of Five.

Unless we deal with that problem, and it cannot continue indefinitely unresolved, the basis of the figures in the White Paper, complex and detailed as they are, is in jeopardy. Nonetheless, I think we should be grateful for the way in which the Government have responded to the Committee's report, certainly the improvement in presentation. I believe that we are in a much better position to debate the issues now than previously, but I hope that in future this debate will take place in June rather than at this time of the year.

6.3 pm

Mr. Robert Sheldon (Ashton-under-Lyne)

It is always a pleasure to follow the right hon. Member for Worthing (Mr. Higgins) because it gives me the annual opportunity to congratulate him and the Treasury and Civil Service Committee on providing what is becoming ever more important to our debates—its own report upon the Government's expenditure plans. I was particularly pleased to see the serious, full and thorough way in which the Chief Secretary to the Treasury dealt with it. We are all grateful to him for attaching the importance to the report which I always thought it had.

I heard the comments of the right hon. Member for Worthing about the timing of the debate. I am not sure that the timing will make much difference. He will know my annual plea for all the Select Committees to involve themselves in the total expenditures in the areas in which they have interests and he will know their flat denial and lack of interest year after year. I am not sure that changing the date will do very much.

I was particularly interested in the comments on priority. That is an important aspect of the White Paper and it deals with it in a way that no other White Paper has. It obviously largely stems from the valuable memorandum by Mr. Christopher Johnson, who is the specialist adviser to the Committee. Paragraphs 13 to 23, a large part of the report, deal with the determination of priorities. It is not an easy subject but I am grateful that the Committee has tackled it.

Paragraph 23 deals with one aspect of priority. It is talking about the programmes which are increased: The principal increased allocations in the current year's White Paper are … 'employment and training measures, the health service, capital spending on roads … renovation of local authority housing … higher costs of existing policies on social security, agricultural support and export credit.' The Chief Secretary made a great deal of many of those matters but he did not say anything about the fact that paragraph 23 points out that there is no comment on the reductions.

The Chief Secretary told us about the increases but we have to read the report from the Committee to learn about the reductions. The Committee concluded that an analysis of this kind, together with an explanation of the underlying policy and other considerations, ought to be produced. The report goes on, in the work of its specialist adviser, to deal with those reductions. It deals with the spending cuts which are not mentioned, in defence, foreign and Commonwealth affairs, the European Community — I have objection to cuts there — agriculture, interest support, trade and industry, energy and so on. In page after page we see those cuts spelt out, and they are the mirror image of the expenditure increases that the Chief Secretary mentioned. It is becoming more fashionable to talk about expenditure than cuts.

In questioning the Treasury and the Chief Secretary the Committee dealt with priorities in certain programmes. In particular, my hon. Friend the Member for Great Grimsby (Mr. Mitchell) dealt with the priorities in housing, education, urban programme, prison accommodation, social security and so on. He talked about which of those should have priority and where the priorities lay. That was splendid, but we have to ask why we had to wait for the Committee and my hon. Friend to mention the priorities when we have departmental Select Committees. If they are not interested in seeing money allocated to the areas in which they have a special interest, why should it fall to the Treasury and Civil Service Committee?

We are grateful to the Committee for showing what can be done and how we can bring those matters into the light of day. We can ask the departmental Select Committees only to look at their areas of interest and see whether they will be satisfied with the expenditure of £130 billion and how it affects them. I should have thought that few things were more important or interesting than how much money will be received and where it will be spent. That should interest the departmental Select Committees, and I hope that they will be prompted in that way.

We have seen one example, which I know something about because it was the subject of the Public Accounts Committee report—the way the urban programme was underspent year after year. Little can be more important than spending on our urban problems. The urban programme was underspent in its first year—it is not easy to get these things right—it was underspent in its second year, and the problem grew worse, and it was underspent in its third year when the problem had become even worse. Both the departmental Select Committees and the Treasury should take that lack of control into consideration.

Paragraph 20 of the report deals with savings within Departments rather than from other Departments: it seems clear that additional grant for the Inner Cities is to be accommodated by offsetting reductions in rate support grant for the Shire Counties. There was no reappraisal of where savings should be found from other departments. That is the easiest way for the Chief Secretary to conduct his bilaterals. It is easier to allocate a sum to a Department and ask the Department for its priorities than to bring the matter before the Star Chamber or the Cabinet, and reappraise the amounts that will be obtained from different Departments.

Although I appreciate the point made by the right hon. Member for Worthing, there are difficulties and problems. It is only right that we are aware of them, and we must continue to press for sensible allocations. I hope that the anxiety and interest of the departmental Select Committees will back us up in that. I hope that the time is not too far distant when the Benches will be filled with members of departmental Select Committees, complaining about the lack of expenditure in their particular area. I am glad to see one Select Committee Chairman present, my hon. Friend the Member for Wolverhampton, North-East (Mrs. Short). I only wish that she had come prepared to show her anger and frustration at the lack of expenditure on matters which worry her deeply, and that more Select Committee members were present.

I share the scepticism of the right hon. Member for Worthing at the statement year after year that revenue determines expenditure. I doubt whether that is true. If it were true, the collapse in oil prices would certainly determine expenditure. The Chancellor of the Exchequer said: The overall effects of falling oil prices on output and inflation are expected to be broadly neutral — if anything, slightly beneficial."—[0ffical Report, 13 February 1986; Vol. 91, c. 1084.] I am not sure whether all hon. Members were convinced by that statement. If anybody can believe that cheap oil benefits us, as an oil producer and exporter, it illustrates only our failure to use oil profitably on behalf of the whole country. Why should the effect of falling oil prices be neutral? It can be neutral only because we have done nothing with the revenue from oil.

I am not a theorist, but I always think of the potato farmer. He has one simple objective—a high price for potatoes. He produces and sells potatoes, and we produce and sell oil. Just as we benefit from world expansion which has resulted from cheaper oil prices, so the potato farmer benefits from the increased prosperity of his customers. Nevertheless, a high price is important. We have an asset which is in great demand, and it should have made us prosperous. It requires extremely able Ministers to use this heaven-sent blessing to impoverish so many British people.

Mr. David Howell (Guildford)

When the right hon. Gentleman says that we have done nothing with oil revenues, does he define as nothing investing more than £70 billion overseas and producing an annual income of £8.2 billion each year to the United Kingdom?

Mr. Sheldon

I do not think that it is an advantage to be a rentier or a remittance man for the world in future, and to deny our manufacturing industry what it should have. But the position is even worse than that because sometimes remittance men do not stay in the United Kingdom. Even newspaper proprietors who tell us how we should operate, behave and conduct our affairs live and pay their taxes overseas. Therefore, there is no particular connection between sending all our money overseas and getting it hack. Moreover, we lose through industrial decay and decline.

We should have had a policy for oil depletion. Then, when the amount of oil was restricted, we could have discussed it, at least with Norway, and possibly with other countries. The other European countries will be the great beneficiaries of reduced oil prices—much more than we can be. We should have considered the oil question, not with the lumber of dogma, but with a clear understanding of where our interests lay. Obviously, if oil prices fall, there will be advantages in lower inflation, but we could have used higher oil prices to reduce oil taxes, such as the hydrocarbon oil duties, and so could have had cheaper oil for our industries and for other purposes. Our failure to use oil revenues is caused by our failure to understand how they can best be used. Our supreme task is to ensure the prosperity of our people, and oil revenues should have been directed to that aim.

We depend on our manufacturing industry, and we can foresee a considerable reduction in industrial assistance. Regional and general industrial support will plunge from £888 million in 1982–83 to £320 million in 1988–89. We are becoming more dependent on our manufacturing industry, and, after almost contemptuous references to it, we are now hearing new and even kind words of encouragement to it. The trouble is that much of that newfound concern is coming too late. More than one third of the firms in my constituency closed during the first two years of the Government's passion and zeal—one third in the number of firms, and about one third in the number of jobs. That was the direct and immediate consequence of the 17 per cent. interest rate, coupled with the exchange rate of $2.40 to the pound.

The Government are supposed to encourage small firms. Such firms do not have great resources. They could not export at that exchange rate, or stay afloat with those interest rates. They were trapped. They closed their doors and dismissed their workers, whose skills were lost. Those firms included medium-tech companies, highly skilled in engineering, which all countries, whether Japan, Germany or the United States, find of value to their economies. At last, the Government are beginning to understand that they need such firms, and to speak warm, encouraging words to them. But it is four years after the funeral for many such companies.

It is difficult, but not impossible, to help industry, and the easiest thing in the world to damage it and drive it out of business. That is what has happened. The bankruptcy figures and liquidation statistics do not attempt to convey the misery and wretchedness of the owners, the hopelessness of the managers in their middle years, and the unemployment of the workers, whose training, acquired so laboriously, is no longer needed.

Money will be spent on some firms that will get into difficulties. Earlier this week the Financial Times leader, which was about what may happen after the big bang in the City, and how public expenditure should not be used for some purposes for which claims are likely to be made, stated: The Government should make it plain that banks and other financial institutions that get into trouble … will be treated with exactly as much sympathy as an uncompetitive West Bromwich metal basher, the special pleading of the Bank of England notwithstanding". The Government have their favourites, including the financial institutions that are just down the road from the House, but the manufacturing industries are far away.

There are political pressures; the Treasury and Civil Service Select Committee refers to those political pressures for expenditure. The military bands were mentioned in the Public Accounts Committee. I have nothing against political pressures, but I like to know when they are being applied. We had the humiliation of the permanent secretary speaking about social need and not the political requirements.

I see that the right hon. and learned Member for Dover (Mr. Rees) is present. I have nothing against the right hon. and learned Gentleman. He is obviously right to fight for his constituency's interest as I will fight for mine.

When there are political considerations, it is only right that they should be justified on the grounds of financial common sense and good housekeeping or that the claim is made openly that they are different matters and discussion can take place on the Floor of the House.

As industrial assistance has declined, there has been a massive rise in the stock market. As the stock market rises, interest in mergers of companies increases considerably. In the rising stock markets, those who have exchanged the long view for immediate profits discover that their share prices are sharply improved, which could be a base for a takeover that makes no industrial sense and about which any Government should be concerned.

The Government seem to be saying that we should forget industrial logic and concentrate on competition. They are rightly in favour of competition, but that is not enough. The trouble about limiting takeovers to mergers that do not reduce competition is that the growth of conglomerates is encouraged. In all our years of changing industrial policy, in which public expenditure has featured strongly, we have learned that no firm exists with such managerial wisdom and experience that it can advance and rejuvenate the industry in which it operates. At a time of a booming stock market it is wise to call a halt to takeovers and mergers and calm down frantic companies by introducing a long period of delay and reflection.

A major aspect of public expenditure and the implications for public expenditure will come from the sale of gas during the next 12 months. We know that the political dogma of denationalisation has changed to the claim that tax cuts are valuable. We have seen a change from dogma to straightforward tax cuts. Public monopolies are being converted into private monopolies. We have seen the selling off of capital assets, which has been called selling off the silver, and we have experienced the difficulties of regulating such monopolies. However, the House has a right to be concerned about the price that we receive for selling off public assets.

Perhaps the Financial Secretary to the Treasury does what I used to do and makes a trip to the City to see the Government broker. Why do we see the Government broker? The sales of Government gilt-edged stock over the years have amounted to between £4 billion and £10 billion. He makes the visit to ensure that we are selling Government stock at the highest possible price. The margins are extraordinarily fine. We discuss one eighth of one per cent. as a major issue, but it is not as major as £5,000 million.

When we began to sell off Government assets held on the people's behalf at £50 million or £100 million it was not so important. But it is now reaching the level of the sale of Government stock—between £4 billion and £10 billion—and the Government's sale is in the middle of that range. The way in which we devised, with care and consideration, the method to ensure the best possible price must now be matched by the Government to ensure that we get the same best price from the assets that are to be sold.

There is no need for a forced sale. We sell assets like oranges on a Saturday night in Ashton market. At some times of the year we can get a cheap box because they are going off, but our assets are not going off. The Government should take their time and sell them bit by bit as the Government broker does. We should learn from the Government broker. He studies the market, decides how much can be sold and releases them according to the desires and requirements of the market. He disposes of them at the best possible price. If he gets one issue wrong, he has time to correct it on the next and so he learns. We sell our assets at one go. Who makes the money? Who advises the underwriters on the price? The same underwriters that are buying them. The merchant banks are the people who advise and buy. There are also those people overseas who buy and immediately cash in the assets in the City, so we just hand them a nice present.

If those assets held on behalf of our nation are to be sold, we must ensure that they are sold at the best possible price. I urge the Chief Secretary to the Treasury to set in hand a proper review of the way in which our assets are sold in the future.

6.26 pm

Mr. Nicholas Soames (Crawley)

If the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) will forgive me, I shall not follow his extensive and, I am sure, important arguments, because this is the first time that I have dared to step into this arid atmosphere, this dead sea of parliamentary debate. As the right hon. Member said, I come along with a piece of special pleading for one area that is mentioned in the White Paper—Government spending on the science budget.

I applaud the Government's continued resolve, as expressed in the White Paper, to keep total spending under firm control. I accept that the Government must have priorities. It is intended that provision for employment, for example, is to rise substantially in the period that we are debating tonight. In many areas there have been substantial increases and further increases are forecast. I applaud the Government's resolve to obtain value for money, which is vital in any endeavour, whether in the private or public sector. The Government's initiatives have had a most salutary effect.

Obviously there is constant pressure on the Government. I see my right hon. Friend the Chief Secretary nodding his head, knowing that a piece of heavy special pleading is coming. The Government have in their wisdom set aside extra money for the science budget and I congratulate them on it. However, it is a woefully inadequate figure if one considers the challenges that face British science and technology in the highly advanced and competitive world in which we live. I appreciate the Government's view that within the resources available their aim is to maintain and enhance the strength and quality of the British science base. This year the Government are adding £15 million to the amount originally stated in the White Paper. That is a welcome and valuable increase, but it is not enough to cope with the real problems with which we must deal.

In reply to my right hon. Friend the Secretary of State for Education and Science, the Advisory Board for the Research Councils' report in June stated: Over the last five years the Government has reduced the level of investment … (in scientists and their research) … in real terms —against the trend in other developed countries. The economic and social effects on the UK of this may not become obvious for a few more years. However, we should warn the Government that when they do they are likely to be grave and effectively irreversible. Of course the hardest decisions of all on public spending are those where there is so much that is right on each side of the argument and where there are so many competing considerations, but it has always seemed to me that common sense is the only real solution to the country's problems. Common sense dictates that we must make a further substantial increase in the amount of money that we put into the science budget. In scientific and technological terms, where we are behind we must catch up, and where we are in the lead we must continue to hold on to a very tenuous lead. That is the task that befalls the scientific and technological community in this country, but it cannot do it without a substantial Government commitment in terms of both aid and money.

Industry has accepted the priorities that this Government have consistently made plain: the control of inflation, the need to improve competitiveness and the need to increase incentives. I know that they understand that this strategy is a solid foundation for jobs and prosperity, but there is a further and most important foundation to the jobs of the future,: and it is in the harnessing of the opportunities that science and technology increasingly are opening to us and to use them for the creation of jobs.

Never before have there been such luscious scientific fruits for us to pick, to the enormous benefit of all. However, in quality, design and innovation, British companies have until recently lagged seriously behind their international competitors. It is in the area of innovation that we have to do a great deal more, otherwise our situation will not improve. Companies will continue— as my right hon. Friend the Chief Secretary to the Treasury said a few days ago in a debate on the economy— after searching all other markets, to choose foreign capital goods for their investments so as to remain competitive.

The Government make regular and wise incantations about their desire to have a lively, dynamic manufacturing industry. The position is much improved, but we shall not improve our industrial and manufacturing base unless more of our most brilliant people are science-based and unless more scientists have assistance from the state to develop and explore the opportunities that they know exist but that they are unable to exploit for lack of resources.

If we are to take a bigger share of existing markets, we shall have to challenge the Germans and the Japanese. In order to have a hope of taking them on, we must be able to put a very great deal more into industrial research and at least reach the levels of investment that they make. Putting money into scientific research is one of the finest long-term investments that can be made to cure unemployment. There is a very real role for the Government to play in helping to seek out opportunities and give a lead by showing industry that they are serious about funding a major science budget to assist industry.

I fear that unless we tackle this problem we shall begin to lose out in the highly competitive scientific and technological drive that is fuelling and will continue to fuel the prosperity of other more successful nations. For my part, I see little distinction in a nation that professes to wish to compete in the international, commercial and industrial markets of the world but which is so miserly with its science budget that effectively it cuts off its nose to spite its face. We have the opportunity to create, as partners with industry, the kind of heady atmosphere that senses and feels the possibilities, the opportunities and the vastly increased potential of high-tech world-wide markets.

A critical factor in achieving such confidence is the working together of Government, scientists and industry. However, the Government are making a severe miscalculation. They appear to believe that national strength in basic research is not essential for economic success. However, it is now clearer than the light of common day that all of the new industries are based on technologies that are dependent upon pure science —hence the substantially increased investment in basic research by the Japanese, French and American Governments. The Government's policy is to encourage scientists and technologists of high quality and to underpin such excellence by raising the technological literacy of the nation as a whole. That is a very welcome and splendid aim.

Between 1979 and 1983 the number of students on science and engineering courses rose dramatically. This is an important success. The Government are to be congratulated upon steering people in this direction, but it remains a fact that, because of the adverse climate for science and research, the brain drain is materially affecting our prospects. Why is it that some of our most brilliant and gifted scientists end up by going abroad? I understand from the survey conducted by the Advisory Board for the Research Councils that it feels that more opportunities exist overseas at a time when the chances of research appointments in our universities are very restricted.

Apparently, there are more handsome facilities overseas, in terms of both grant and equipment. Furthermore, there is a deep and increasing frustration with the difficulty of getting research grants in the United Kingdom. There is aggressive recruiting by industry and universities in the United States. There is also, sadly, greater receptiveness abroad to some of our more novel ideas. I find this deeply depressing. It is not just worrying that we are losing a great deal of our young talent; there is also an exodus of some of our older scientists. I understand that some senior scientists have been persuaded to stay in Britain only by the receipt of major equipment grants under the three-year £18 million windfall scheme.

Mr. Dalyell

The hon, Gentleman is making a very important speech, but does he agree that some of the responsibility for this must be laid at the door of the "Minister for Science"? The Prime Minister told Parliament that she is the Minister for Science. Would it not be better for the Prime Minister either to devolve this responsibility to somebody who has more time or to take the job more seriously?

Mr. Soames

I am not here to apportion blame, nor is that the point of what I am saying. I agree with the hon. Gentleman that there should be a Ministry for Research and Technology, with a Minister of Cabinet rank in charge of it.

All of this spells a problem for Her Majesty's Government. It is up to them to set the climate for scientific research in this country, as it is set in all the other countries throughout the world with which we compete. Research is far more valued and far better viewed in those countries than it appears to be here.

I draw to the attention of the House the policies in France and Germany. In its policy statement on research the Federal Republic of Germany says: Basic research is the expression and support of the culture of an industrial state, as well as being the foundation of applied research on which the future depends. The French go a good deal further than that. A report of the French Ministry of Research and Development says: First and foremost it is a question of putting France among the leading ranks of the great technological powers. To guarantee an increase of 4 per cent. per annum (in real terms) of the Government financing of civil research and development during a period of relative economic difficulty demonstrates the Government's recognition of the absolute priority given to research. What is so particularly distressing about our own position is that this country still has its greatest and most valuable scientific resources. It still has scientists of great ingenuity and skill. They have developed in a tradition of training that our competitors acknowledge to be among the best in the world. However, the problem is that even the most brilliant researcher cannot do research on the leading frontiers of technology without adequate equipment.

If we aspire to remain a nation contributing to the advance of knowledge and a leader in the development of modern technologies, the Government must make a further financial commitment to the science programme. I urge the Government to recognise their responsibility. Our science funding policy reflects the failure to take seriously the grave need to modernise manufacturing industry quickly.

I call for three specific changes, which would greatly benefit the science budget. First, may we redirect at once a handsome proportion of public sector research and development to more commercially productive areas? A good slug should be taken away from the ever greedy hands of the Ministry of Defence. Secondly, may I ask the Chancellor to introduce generous fiscal changes to provide for smaller companies to have the benefit of tax relief on research and development? Thirdly, may I ask the Government to extend the partnership programme for innovation grants and to make it more radical and broader? Sadly in Great Britain today we are wasting excellence, a resource we have in scarce supply. I urge my right hon. Friend to recognise that today's Nobel prizewinners were born of yesterday's handsome investment in the 30 years following the war.

6.40 pm

Mr. Seamus Mallon (Newry and Armagh)

I thank you, Mr. Speaker, and hon. Members for the opportunity to make my maiden speech in a very important debate. My predecessor, Jim Nicholson, held the seat of Newry and Armagh until 23 January. It is difficult to lose elections. It is traumatic. I have lost enough to know that. But to lose an election that one has called oneself must be a shattering experience. I say that in no sense of triumph, but because I know what it is to be the loser.

I cannot let the opportunity pass—I regret that they are not here—without paying thanks to the leaders of Unionism who have given me the opportunity to make this speech and to represent the constituency of Newry and Armagh, which I am proud to do.

My record might be deemed dubious. I have been a member of a Northern Ireland legislature and a member of a Republic of Ireland legislature; now I am a member of a British legislature. That sounds impressive except for one point. The first one fell after five months and the second after 10 months; so I am keeping my election posters. I think hon. Members will understand why.

The constituency of Newry and Armagh is probably one of the most historic places in Ireland and certainly very much a microcosm of the problems and contradictions that exist in Northern Ireland. I see the Minister of State, Northern Ireland Office, who is responsible for economic affairs. I remind him that in Armagh we have the oldest fort in western Europe. Its importance is that it predates religion and Christianity. It predates Britain coming to Ireland. It even predates the Celts coming to Ireland. What are we doing there? We are quarrying in it for limestone. That focal point was the seat of the Irish kings yet with planning permission we are quarrying there for limestone. I ask the Minister of State to refer to that in his deliberations with his colleagues. Can we not preserve something from the heritage that we should all share in Northern Ireland?

Further down the road, not far from where I live, is a place called Dan Winter's cottage where the Orange Order was formed. So there we have the other element of diversity. The theme of civil and religious liberty, as expounded by the Orange Order, was first formulated there. I note each year that the concept of civil and religious liberty has not changed much since the days when the Orange Order was formed.

A few more miles down that road is the ecclesiastical centre of Ireland, not of Northern Ireland or a piece of Ireland but of the whole island. The two cathedrals of the Protestant Church and the Catholic Church look across at each other in the city of Armagh. Just as the bells tolled in the new year I saw the obscenity of two policemen being blown to smithereens. The person who killed them probably thought that he was doing it for religious or political reasons. That shows the contradictions with which we must get to grips.

The right hon. Member for Barnsley, Central (Mr. Mason) unfairly and unjustly labelled part of my constituency as bandit country. That is part of the island of Ireland, the south Armagh of the poets, of Art McCooey, where there was culture long before it existed elsewhere. That is now occupied by the Army. I shall give a startling statistic. For every 3,000 people there is a fortified Army camp in south Armagh. Hon. Members should think about that. That is the problem we have. Hon. Members will understand when I say that it is a microcosm of the whole Northern Ireland problem.

One constant factor in that constituency, as in the whole of Northern Ireland, is the tremendous craving for one thing, peace, not as a sanctimonious word nor a platitude, but as something organic and constructive. I am attracted to one definition of peace, the definition of Spinoza, which says: Peace is not an absence of war. It is … a state of mind, a disposition for benevolence, confidence, justice. That is very apposite to our position as we deal with the problems that I have to cope with on a daily basis.

Only when people realise the utter obscenity of violence, whether it be paramilitary violence, military violence or institutional violence, will we be able to end the obscenity and remove it from our society. It is only through benevolence and a benevolent approach that we will begin to understand the other fellow's point of view. It is only through benevolence that we will be able to deal with the one certainty that exists in Northern Irish life. The only thing that I am sure of is that, irrespective of a decision by a British Government or an Irish Government or a joint decision by both, the Unionists and the Nationalists will still be living in the north of Ireland.

We have two stark and clear choices. We can live together in generosity and compassion or we can continue to die in bitter disharmony. I ask for the confidence that Spinoza spoke about. Underlying all the problems that face us today is a lack of confidence. I know that I am not supposed to be controversial in this speech but one of the real factors affecting the Unionist community in the north of Ireland is lack of confidence. Why? Is there a leader there who will step away from the pack, who will not threaten, and who will not say, "No, no, no," to everything? Is there a leader who will turn round to his people and say, "I will lead you towards reconciliation, peace and accommodation."?

That confidence must be created, and when it is it will bring self-respect. Unionists will not secure self-respect in this Chamber and Nationalists will not do so in the Dail. They will have self-respect jointly only when they realise that their futures are so closely intertwined that they must create their own dynamic. I ask pointedly and directly of the only representative of the Unionists in the Chamber, the right hon. Member for South Down (Mr. Powell), is there someone who will take that courageous step?

Justice was the last requisite of Spinoza's definition. Jefferson once said that if justice is sacrificed for security, both are lost. Anyone who has followed events in Northern Ireland will recognise that that is what has happened. Let us consider the Rake's Progress since 1969. The law has been bent, turned and twisted to try to solve a political problem. That is an example of the necessity to examine the issues clearly.

I cannot imagine anyone on either side of the House being happy, content or satisfied with internment without trial, emergency legislation, Diplock courts, supergrass trials, shoot-to-kill policies and a section of the security forces within which the ratio of serious crime is twice that of the general community in Northern Ireland. I refer to the Ulster Defence Regiment. The ratio of serious crime within that section of the security forces — I repeat myself— is twice that of the ratio within the general community, and we have a violent community.

Can anyone be satisfied with that? Can anyone be happy when he sees the law twisted, bent and manipulated every day of every week? If we want peace, we must base it on justice. If we fail to do that, the result will be a spurious peace which will not last. If peace is not based on justice, it will not withstand the political battle that may come when we seek a solution to the problems.

I welcome the creation of a chance to move forward, which is the first one that we have had since 1973. The House will know that I refer to the Anglo-Irish accord. I do not see it as a solution, but it provides a framework within which we can start to work together to try to create a solution. It would be remiss of me not to express a tribute to those Conservative Members, who may be Unionists by instinct or commitment, who saw the potential of the accord. A tribute should be paid to them because of their courage. A tribute should be paid also to those on the Opposition Benches who, like myself, wanted much more fundamental changes. They had to make a concession. They had to say, "Yes, let us give this a chance and make it work." Similarly, tribute should be paid to the British and Irish Governments, who have taken a courageous step. Time will show the need for that courage.

A previous Prime Minister has had attributed to him the saying that politics is the art of the possible. That saying is true up to a point. However, much more is required if we are to solve the problems of Northern Ireland. As I see it, politics, especially in relation to the continuing problem of Northern Ireland, is the art of creating circumstances within which the seemingly impossible can become possible. If we rely on the Disraeli definition, there is a thin line between pragmatism and expediency.

We need something new. For one thing, we need strong nerves. The storm clouds are gathering. Those who should be sitting in their places in the Chamber and leading are threatening instead. They are threatening the community in my constituency and they are threatening British institutions. They are threatening the very forces within Ireland which are working towards peace. That is not leadership. Courage is needed from the Government and from the Irish Government. The accord will only be as good as what it achieves, nothing more and nothing less. It must narrow the gap between the decisions and deliberations at inter-governmental level that have an effect on people's lives and deaths.

How can the accord improve the economic situation and the life of everyone living in the north of Ireland? If it does not have that effect, I shall be the first to say that it is failing. I shall be the first to argue that it is not doing what it was geared to do. We do not have any luxuries in Newry and Armagh. We do not have the luxuries of courting ideas, people and attitudes. Instead, we are dealing with life and death. I ask that there will be the courage to proceed with an agreement which is new and which has created a framework that can make it possible to create a new future.

We have moved into a new year and we are moving into a new century, and we need something to take us on our way. Are we to move into the new century with a millstone of blood, as it were, hanging around our necks, with a millstone of division and sectarian bickering, with the daily catalogue of threats of violence and death? Or are we to create a new vision for a new century and a new Ireland that will be created by the people of the island of Ireland, on the basis of agreement and reconciliation that will work for a unity of purpose that in itself will create the only real unity that will last within Ireland?

I make no apologies, and never do, for saying that my aim is to create Irish unity by peaceful, democratic, constitutional and political means. I shall create it, if I can, on the Floor of the House, or on the floor of whatever other forum is available to me. I wish to create that unity in such a way that will not cost one drop of blood and will not remove anyone's self-respect for him. I ask the Unionists in the north of Ireland to say for the first time, "Come and build with us. Say yes."

6.58 pm

Mr. Peter Rees (Dover)

It is a rare privilege for me to take up the remarks of the hon. Member for Newry and Armagh (Mr. Mallon), who made a maiden speech of power and eloquence on which I congratulate him. That power and eloquence is not surprising because of his experience of other legislatures. He spoke with fluency, wit, modesty and feeling. I hope that I speak for the whole House when I say that we appreciated the way in which he recalled the history of his constituency and of Northern Ireland and the manner in which he emphasised the qualities and problems of Northern Ireland.

I warmed to the tribute which he paid to his predecessor, Mr. James Nicholson, who in the brief time that he was a Member of this place established himself, I venture to think, as a likeable and charming person who championed the interests of his constituency most vigorously, especially when dealing with agriculture. I am sure that I speak for the whole House when I say that we look forward to the hon. Gentleman's future contributions, which I hope will not be limited to debates on Northern Ireland. I do not know whether I should draw too much of an inference from the fact that he has chosen a public expenditure debate for his maiden speech.

I turn now to the main subject of our debate. I congratulate my right hon. Friend the Chief Secretary on the mastery he has shown of this complex subject and the skill with which he presented his paper to the House. Volume 1 of the public expenditure White Paper is glossier and clearer than previously and volume II is more detailed than before. One appreciates the additional information given—I understand that there are something like 1,200 output measures given. That demonstrates the right emphasis which was underscored by my right hon. Friend's speech.

My right hon. Friend has—like all Chief Secretaries —a difficult menu to commend to the House. There will always be legitimate champions of special interests, such as my hon. Friend the Member for Crawley (Mr. Soames), who make their cases powerfully. Such special interests are, however, too often detached from the overall figures and it is sometimes difficult to reconcile all the competing cases made in such a debate with the premise with which one starts—the overall figure. I shall deal later with the characteristic contribution of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley).

I congratulate my right hon. Friend the Member for Worthing (Mr. Higgins) and the other right hon. and hon. Members of the Treasury and Civil Service Select Committee on the work they have done, in the relatively short space of time, in considering the issues in the White Paper. There are one or two points on which I must take issue with them. My right hon. Friend the the Member for Worthing has suggested that the appropriate moment for this debate would be May or June. I share with him and other hon. Members the regret that this important debate should be debated in such a thin House. That is not a novel experience for those of us who have participated in these debates. However, I do not reach the same conclusions as my right hon. Friend. If the White Paper were debated in May or June it would be either too early or too late. It would be too late in the sense that the public expenditure White Paper is, and should always be, a counterpart to the Budget. I do not believe that we can have a meaningful debate on Budget measures unless we can relate them to the public expenditure White Paper. If one day of the Budget debate was specifically allocated to a first debate on the public expenditure White Paper we would have a more realistic and more helpful debate on the dimensions of the problems faced by the Chancellor and the Cheif Secretary. It would force those who argue for higher expenditure to suggest which elements of public expenditure they would like to see pruned. It would also force them to state clearly—it has not been done today —how those increases should be financed.

The Treasury and Civil Service Select Committee has made this suggestion because it believes it should make a prospective rather than a retrospective contribution to the formation of policy. I quite understand the Select Committee's ambitions in this matter. I am not certain, however, that May or June would be the appropriate moment unless the Select Committee was prepared to state unequivocally what overall figure it would commend to the House. I am not confident that a contribution from other Select Committees—signally lacking this year and in previous years, though I understand the difficulties—would be helpful unless they were prepared, in the aggregate, to limit their claims to the overall figure that the Treasury and Civil Service Select Committee was prepared to commend to the House. I believe that is a far more difficult exercise than my right hon. Friend would care to admit.

It would perhaps force out into the open—one of the difficulties or the weaknesses that underly the Select Committee system when transplanted to the Westminster scene — the party differences that cannot be entirely submerged in the debates in Select Committees. The Select Committee has considered how priorities should be determined. The Select Committee has encouraged the Cabinet to take an overall view and has suggested that the current procedures and methods are inadequate. I am not confident that, at the end of the day, it would be possible to devise some formal machinery that would meet this charge—a charge also made last year in the report of the Select Committee.

My experience is that the priorities of a Government are broadly known to their members. This knowledge colours the debate in Cabinet on the overall figure and the first attempts at allocation between the various Departments. It colours the debates of the Star Chamber — if this useful piece of machinery does become a permanent feature of the Government scene. It colours the various Cabinet debates. In the autumn, the Cabinet has more than one opportunity to consider public expenditure priorities and the totals. It is always possible for a Cabinet to detach itself from the immediate preoccupations and the details of the public expenditure to determine its priorities at some earlier or later period in the year. Such debates tend, however, to be unclear and not over-helpful and can assume real importance only if they are related to actual figures. The only Cabinet that has faced up to the difficulties of determining these questions is the Japanese Cabinet. I understand that that Cabinet goes into permanent session for two or three days. It may reach more satisfactory conclusions, though I shall leave that to those who have a more detailed knowledge of Japanese public expenditure.

The Opposition will recall that No. 10 played a powerful role in broking between the various interests of the last Labour Government, especially when it was necessary to respond to the pressure of the International Monetary Fund. Whether that is the type of intervention and type of machinery that we would wish to see as a permanent feature in the Governmental scene, I leave to others to determine.

Mr. Higgins

I am sure my right hon. and learned Friend will recall from his own experience of international negotiations that it is often possible to say something in English which will take three times as long to say in Japanese.

Mr. Rees

That is a perceptive comment on a different governmental process. I am not certain of the nuances of either the Japanese Government or the Japanese language.

I congratulate my right hon. Friend the Chief Secretary on facing so well the difficulties which, indeed, face all Chief Secretaries. There are now many areas of public expenditure that are not under the control of the Treasury. There are the public expenditure programmes which are demand-led, especially the social security programme and the common agricultural policy programme. We could develop a very interesting debate on how they should be regulated. There is a constant pressure from this Government, as I am sure there was from the last Labour Government, to moderate the demands of the common agricultural policy. The question of the social security programme would probably not command quite the same measure of common agreement across the House. However, the Department responsible for the administration of that programme must bear in mind some overall public expenditure constraint. It cannot be right that a system should be devised that is not subject to any kind of control mid-year, although I am fully aware of the practical difficulties that that would occasion.

Again, other programmes are secured by pledges—I do not necessarily mean partisan pledges given in the heat of election. I have in mind, for example, the programme of the Ministry of Defence for last year, which was subject to the NATO commitment, to which even the previous Labour Administration paid lip service. There are other programmes that will inevitably be partially outside the control of central Government, such as those of local authorities. When all this is added up, the room for manoeuvre of the Chief Secretary is seriously circumscribed, and when there is pressure to reduce public expenditure it falls on a diminished number of ministerial programmes.

The Select Committee criticised the fact that lump sums are allocated by the Treasury to the various Departments, and then it is left to the Department to determine how the lump sums are apportioned between various objectives. This does not accord with my recollection of the process. The omnipotence that is sometimes, with a certain levity, attributed to the Treasury is not borne out by my experience of this Administration, although my right hon. Friends the Chief Secretary and the Financial Secretary will correct me if the atmosphere has altered a little over the autumnal months. Nor do I believe that that was true of the last Labour Administration.

I do not wish to show any disloyalty for a great Department of State, for which I have great affection and respect, when I say that it is not healthy that the Treasury should he drawn too regularly and in too much detail into the minutiae of departmental spending. It must be concerned where a particular project is of enormous size, or has political implications, perhaps going beyond departmental boundaries, where a decision may carry a continuing liability that may be hard to confine within the figures determined for subsequent years. Therefore, the Select Committee's criticism is not valid.

There are some attractive aspects of the public expenditure White Paper. I commend the emphasis that my right hon. Friend the Chief Secretary places on efficiency and value for money in his speech. I am delighted that in practically every departmental contribution there is a reference to those objectives. I am also delighted, and rather touched, to find that for two years in succession the Office of Arts and Libraries has recognised, even in its special sector, that there is and should be a public concern with value for money.

All too often in the cruder debates that we have on the economy, and on other subjects, the test of the Government's motives, objectives and sincerity is the amount of cash that they have allocated to particular sectors of governmental activity. This is a rather indifferent test. It is as important to determine the skill and prudence with which those sums will be expended. In every large organisation, in both the public and the private sector, this should be so. I recognise that zero budgeting on an annual basis will be virtually impossible in Government, in view of the statutory responsibilities that Government have to discharge.

I turn to the question of departmental costs. A head count was necessary and the proper approach in 1979 and the years that followed thereafter, but a more sensitive method of control is now right and possible. That is why I fully support my right hon. Friend in the adoption of the running costs approach. This should continue to yield a rich dividend.

The Government, at least since 1983, have set as their objective that public expenditure should remain broadly stable in real terms. The right hon. Member for Sparkbrook, with whom I have often the pleasure of debating on the subject, became a little carried away with his own rhetoric. The Government will have to balance the legitimate increases in some departmental budgets, but, since 1983, they have not set their targets on cutting the overall figure for public expenditure.

I commend the heroic measures undertaken at the behest of the IMF in the Administration of which the right hon. Member for Sparkbrook was so distinguished an ornament. He is fully entitled to hold that up as an object lesson to my right hon. Friend of what can be achieved, but it was achieved in rather special circumstances against a rather special background that is unlikely to be reproduced in the lifetime of this Government. The right hon. Gentleman made much of the point that perhaps the target has not been hit every year.

Mr. Hattersley

Any year.

Mr. Rees

That depends. I readily concede that there has not been mathematical accuracy in these matters. if the right hon. Gentleman is fair to my right hon. Friend and the Administration, he will admit that the divergence has not been great, except when there have been special circumstances, such as the miners' strike.

Here I come to the rather unusual and extraordinary criticism of the amount of the reserve, no longer called the contingency reserve. I should have thought that it would be a hallmark of prudence and excellent housekeeping that my right hon. Friend followed the practice of last year, although curiously it did not occasion too much comment when the reserve was increased by design in last year's Budget. By that stage, it was possible to calculate with a little more certainty the cost occasioned by the miners' strike.

I feel no shame that the increase in the reserve has been considerable. My right hon. Friend the Chief Secretary is right to have and maintain a reserve of this dimension. It is right that the further out that one looks, the greater the reserve should be, because the contingencies and uncertainties are greater. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) made the surprisingly cheap point that this demonstrates that public expenditure is not under control. He is making a bad point, because no Government can be totally in control of the course of events. However, they can make a prudent provision against those events. It would be wrong, and a misuse of the reserve, if it were allocated in greater detail to various departmental heads before the start of the year. Of its very nature, the reserve is to meet contingencies and events that cannot reasonably be foreseen and quantified.

I realise that the Government's overall objective is an aspiration that is not necessarily achieved, although I am sure that my right hon. Friends have the good wishes at least of Conservative Members in hoping that it will. It may not sound a heroic objective to keep public expenditure broadly stable in real terms, and it may at times perhaps be a little overcharged to say that it calls for heroic virtues, but it requires a certain dogged persistence and fidelity to the main objective. I am sure that those qualities will be commended, at least by Conservative Members. What has been set for the next three years and what we attempted to achieve over the past three years is and was a firm financial framework within which both public and private sectors can order their affairs. That kind of prudent housekeeping is the firmest possible evidence of the good government that has characterised this Administration.

In conclusion, because it does not require more than a casual but I hope not too dismissive glance, I should like to turn to the speech of the right hon. Member for Sparkbrook. It was full of his customary vivacity, not to mention bombast, and full of indignation that does not sit all that easily with his naturally genial character.

The right hon. Gentleman advanced a rather curious proposition. When challenged and pressed he said he advocated an increase in public expenditure—I assume for next year, but it may be for every year or the triennium —of £5 billion. If he looks at the public expenditure White Paper that includes those three years he will see that there were privatisation proceeds of £4.7 billion. That was criticised by the right hon. Gentleman. Unless he has become a convert to the virtues of privatisation, it means that if he were to halt the process of privatisation he would, in effect, be advocating a net increase in public expenditure of £300 million a year.

I suspect that will strike a rather sombre note with his colleagues. But they and I suspect the House and the world outside do not pay much attention to the right hon. Gentleman's figures. They are more concerned with the tone of his contributions and interventions. He may have been misreported and if that is the case I will give way and apologise to him. In one of his last challenging contributions outside the House the right hon. Gentleman coined the slogan "Cash in on Labour". For a person with experience of government, such a slogan is highly irresponsible because it must give rise to expectations that cannot be met, at least with the kind of resources that any responsible Chancellor will be able to command.

I say diffidently to the right hon. Gentleman that if he ever goes to that desert island where he was so charmingly ensconced a short time ago, he should take with him a framed photograph of Philip Snowden or, if that raises too many sad memories, a framed photograph of Monsieur Jacques Delors, because one of the iron laws of politics, at least in western Europe, is that when the parties of the Left come to power after a long period in opposition they overspend in a quite reckless way for the first two or three or sometimes four years of their Administration. Then they might live to rue the day.

Under a system of elective democracy such as we enjoy there will always be pressure for higher spending, perhaps on laudable objectives, than the resources at the command of any Chancellor will allow. If the Opposition are foolish enough to divide the House, that will only serve to demonstrate once again how weak, how ill-thought-out and how fundamentaly dishonest is their approach to one of the central and continuing problems of government.

7.24 pm

Mr. Ian Wrigglesworth (Stockton, South)

It is my pleasure to begin by agreeing with the right hon. and learned Member for Dover (Mr. Rees) in his congratulations to the new hon. Member for Newry and Armagh (Mr. Mallon) who made a vivid, clear and memorable maiden speech. The whole House will welcome the clear dedication to peace and harmony that he expressed. We look forward to many more contributions of that sort from the hon. Member.

I cannot agree with much of the rest of the speech by the right hon. and learned Gentleman. In his final swipe at the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), he employed a little bit of cheek by criticising the first two years of Administrations. I say that because the first two years of this Administration are still regretted by a vast army of unemployed, people who are out of work because of the catastrophic economic policies pursued during the early years of this Government. Those policies led to a high exchange rate and crippled the manufacturing industries of the midlands and of many other parts of the country in such a way that they have still not recovered.

I had hoped that the right hon. and learned Gentleman might have learnt that the commitment entered into in opposition and the rhetoric of Opposition party conferences are often bad guides to the policies of a Government in their early years. If he looks at the early years of Governments over the past couple of decades he will see how true that is.

In commenting on the White Paper, I want to refer to the subject that formed the major part of the two opening speeches — the aggregate level of public expenditure. The right hon. and learned Gentleman referred to that when he talked about the debate on infrastructure versus tax cuts.

There is an absurd black and white view of public expenditure that does nobody in the House or in the country any good. On the Government side of the House there is a general philosophy that all public expenditure is bad. Hon. Members on the Labour Benches hold an equally absurd view, caricatured in many of the speeches from those Benches and from the Benches in another place, that all public expenditure is good. When talking about the aggregate level of public expenditure it does not help to have as a background those two absurd and simplistic views, because the level of public expenditure in the country cannot be determined as if there was a magic total which is the right total at any one time. The aggregate level of public expenditure needs to be determined by circumstances in the economy and circumstances internationally.

Mr. Austin Mitchell

The point made by the hon. Member is a valid one, but surely this is the time for an increase in public expenditure because resources are so under-employed. If he looks at the figures for 1979 to 1984 he will see that those countries with the biggest increases in public expenditure over that period have also had the lowest increase in unemployment.

Mr. Wrigglesworth

I entirely agree with the hon. Gentleman. I was about to say that, at a time when unemployment is at the unacceptably high level of 3.5 million, and when so much output is being wasted because capacity is lying idle, this is the time that we should be borrowing more to invest in the economy to get the growth and wealth and output that will get people back to work. That does not mean that one would agree with high levels of public expenditure at another time.

We do not know what determines the Government's view. When the Government came to office, in their criticisms of public expenditure they relied heavily upon the argument that the size of the public sector borrowing requirement was the most important indicator in the economic tables. They advanced the view at that time that too high a PSBR led to crowding out and to higher levels of interest rates and growth in the money supply, that that led to inflaton and that it was deeply damaging to the economy.

Most of those arguments seem to have gone by the board, although we are not sure what has replaced them. At the moment it seems that the justification for cutting the level of public spending is that it is too high a percentage of GDP. If we compare our PSBR as a percentage of GDP with that of virtually every other country in the western world we will find that it is extremely low. That is a curious combination of figures. Surely the level of public expenditure cannot be determined purely in relation to GDP. The size of GDP must also be taken into consideration. West Germany has a substantially higher GDP than Britain, so we must expect the percentage of GDP going on public expenditure there to be rather lower.

Our clearly stated view is that public expenditure should be expanded to increase demand, to get some growth and to get unemployment down.

Mr. David Alton (Liverpool, Mossley Hill)

Bearing in mind the importance of the debate and the massive number of unemployed people, does my hon. Friend agree that it is disgraceful that only one Labour Member, out of 209, is present in the Chamber? If the Labour party took this issue more seriously and was honestly worried about the problems of unemployment and public expenditure, more Labour Members would have taken the trouble to attend.

Mr. Wrigglesworth

My hon. Friend has referred to a feature that is common to many debates these days. When important subjects such as unemployment are being debated, the Labour party is virtually unrepresented in the House. Only one Labour Member is present, and there are no Labour Members on the Front Bench.

Our amendment outlines our major criticisms of the White Paper. The House will not be surprised to learn that we are critical of the proposed cuts and of the proposed levels of public expenditure on certain programmes which appear in the White Paper. I refer to housing, the urban programme, regional assistance, education and science, support for industrial research and innovation. We are especially critical of the 12.5 per cent. cut in capital expenditure during the period covered by the White Paper.

In each of those areas, we should give a much higher priority to public expenditure than do the Government. They are some of the key areas in which public expenditure could lay the short and long-term foundations for growth in industry, and increases in employment. If we do not lay the foundations in education, science, training and industrial research and innovation, our long-term future as a competitor with, for example, Germany, France and Italy, whose GDP per head of population has now overtaken ours, is extremely bleak.

We want increased expenditure, not the cuts that are outlined in the White Paper. We want an increase in the capital programme, especially in housing, which I know that my hon. Friend the Member for Liverpool, Mossley Hill (Mr. Alton) understands well. The White Paper proposes a substantial cut in housing expenditure, yet increased expenditure could meet a great social need in many of our urban areas. Moreover, such expenditure is labour-intensive and therefore cost-effective in getting people off the dole.

Mr. Alton

Does my hon. Friend agree that it is absurd that some 400,000 building workers are being paid unemployment benefit and social security to stay idle while there are still 500,000 homes without inside sanitation and the public housing stock is falling into disrepair? If the adage that the Prime Minister used at the general election—she is fond of them—about a stitch in time saving nine means anything, it must be nonsense to leave houses to fall into disrepair and to expect them to have a life of 1,000 years. Will they not simply become ruins?

Mr. Wrigglesworth

My hon. Friend is quite right. The Government have been told that many times, but they take little heed. Construction workers and workers in many other sectors of industry are idle and being paid unemployment benefit when they could be working and satisfying the community's needs.

It is absurd to spend so much money on unemployment benefit, as the right hon. Member for Sparkbrook said. It is also a dreadful reflection on the Government's record that the contribution of revenues from North sea oil to the balance of payments has not provided the means of expanding the economy much more rapidly. The Government have not used those resources to provide capital investment which we would like.

The plans in the White Paper project a real fall of some £2.6 billion in total public sector capital spending. They are very depressing figures. To restore capital spending to the share that it took of general Government spending in 1980 or 1981 would require an increase of more than £2 billion. However, if one goes further back and compares the figures, the problem is shown to be even deeper. No business man or company director would be happy to set that level or trend of capital expenditure for his company.

Even if one goes back to the end of the 1960s, to the fiscally stringent years when my right hon. Friend the Member for Glasgow, 1Hillhead (Mr. Jenkins) was Chancellor of the Exchequer, public sector capital investment, net of depreciation, was 7 per cent. of GDP. Today it has fallen to under 2 per cent. That is a dramatic fall. We can drive around and see the state of public services. We can read the report of the National Economic Development Office on public buildings' need of repair and the need for new buildings. We can see clearly the effects of the decline in capital expenditure, which should be reversed. We are critical of the projections in the White Paper on capital expenditure and we hope that the Government will reverse them.

Mr. Timothy Wood (Stevenage)

Is it not the case that a great deal of expenditure on repairs, particularly on housing repairs, could be met out of revenue, and for housing, out of rent income? One of the difficulties is that councils often choose to keep their rents down rather than to carry out the necessary repairs on a yearly basis.

Mr. Wrigglesworth

Even if that were the case, the dramatic change that has taken place in the figures—their basis has not changed over the years—must worry everybody who wants the country's capital assets to be maintained at a proper level. Any business man, any director of a company, would certainly want to see his assets maintained in that way, and that is not happening today. I hope that the Government will take that point on board, because investment in that sphere can be so productive in terms of jobs.

I and my colleagues would much prefer to see the sort of national accounts for which the Institute of Fiscal Studies and others have been pressing for many years, which distinguish between capital and current spending. As we do not have a balance sheet for the country, we cannot make a clear assessment of the level of capital expenditure and what is required. I hope that the Select Committee, which has done such excellent work, as has already been mentioned, will take this up much more vigorously than it has in the past and press the Treasury to move in that direction.

In the amendment, we have mentioned a number of other areas about which we have anxieties. One is the level of overseas aid, which I think the whole country would like to see increased. I am very much aware of the high cost of increasing the level of overseas aid to the targets laid down by the United Nations. It would be difficult in current economic circumstances to take one great leap to the 0.7 per cent. of gross domestic product which I think all of us would like to see.

There has been a marginal increase in the level of overseas aid, and I am pleased that the Government have responded to the enormous pressure that has been brought to bear. If one considers the total overseas aid budget, which includes administration, one sees that aid has increased only marginally. We would like it to have increased substantially.

Part of our budget and spending proposals before Christmas contained such an increase in expenditure. We give a high priority to that. As the Band Aid exercise so clearly demonstrated, there is a broad spectrum of opinion in the country and a great deal of good will that wants to see more assistance given much more generously. People are prepared to put their hands in their pockets for such expenditure. They are prepared to put their hands in their pockets for an appeal by Bob Geldof and his friends, as they are if the taxman asks them to do it for that purpose. We believe that the Government would get the backing of a great deal of public opinion if they were prepared to move in that direction.

I acknowledge—this is why I made the remark about not being able to leap to United Nations targets—the difficulty of containing public expenditure. Every Government have found it difficult to do so. I do not agree with the right hon. Member for Sparkbrook, who gives the impression that magic wands can be waved. It is difficult for any Administration to control public expenditure. I do not think that the Chief Secretary will find it easy to come to the Dispatch Box and cost the alliance's programmes, and come up with the sort of absurd figures which he justifiably gave for Labour's programme of expenditure. We are keeping very close monitoring of our expenditure commitments and, I think, are being as responsible in our commitments as any Opposition could be with the resources available.

For that reason, when we published our statements of economic policy for last year, even a newspaper like the Daily Telegraph was able to refer to them as model Opposition documents. I therefore hope that the House, and indeed the country, will respond to that desire to be responsible in our proposals. However, we disagree fundamentally with the strategy which the Government outline in the White Paper. We have described in the amendment the areas which we believe should not have been cut. We also believe that it is wrong to restrain the aggregate level of public expenditure to its present level when there is such a desperate need to expand the economy and achieve greater growth so as to get people back to work.

Several Hon. Members

rose—

Mr. Deputy Speaker (Sir Paul Dean)

Order. I remind the House that time is moving on fast, and many hon. Members are hoping to speak in the debate.

7.44 pm

Mr. Timothy Wood (Stevenage)

First, I take the opportunity to join other hon. Members in praising the maiden speech of the hon. Member for Newry and Armagh (Mr. Mallon). I thought that he spoke with great fluency and sincerity about his constituency and his desire for peace. I am sure that we shall hear many more excellent speeches from him.

I welcome the Chief Secretary's emphasis on value for money in the public sector, and the emphasis which the Government continue to place on returning items from the public to the private sector. The less that Government are involved in these businesses the better it will be for all of us, whether those in the House or people at large in the country.

The introduction of much more widespread competitive tendering is something for which we should continue to press. There is no doubt that lower costs have been achieved, and a greater incentive has been given to people to provide goods and services more effectively and efficiently than has all too often been the case in the past.

Apart from those general points, the Chief Secretary laid emphasis on priority on public spending. In this regard, I wish to express some concerns. I want to direct my comments to spending on higher education and, to a much lesser degree, on scientific research. I might have said slightly more on the subject of scientific research had not such a substantial case been put by the hon. Member for Crawley (Mr. Soames). My few remarks will be a mere shadow of his, following what he had to say. Therefore, I will pursue the matter of higher education.

Overall the percentage of public expenditure devoted to education and science is expected to fall from 14.3 per cent. to 12.1 per cent. between 1978.79 and 1988.89. I am well aware that falling school rolls have enabled savings to be made, but in higher education the position is not so straightforward. In the last few years the Government have rightly sought savings and improved effectiveness in universities, polytechnics and colleges of higher education. In universities, and to an even greater extent in polytechnics, there have been greater reductions in the number of staff to pupils and the moves in that direction thus far are welcome. In universities the figure has moved in the period 1979 to 1984 from 9.3 to 10.2 students to staff, and in polytechnics from 8.4 to 11.1. I am not convinced, however, that further savings in higher education can be sensibly undertaken.

I want to see a growing proportion of young people pursuing higher education courses. In particular, I want to see an increase in the number of students pursuing some of the more expensive science and engineering courses. I believe that the resources planned for higher education are not sufficient for the country to meet its needs in highly educated and skilled manpower.

Even in the last few years, we have seen a paradox in university education and admissions to universities. There has been success in encouraging young people to pursue courses in mathematics, science and electronic engineering. However, the hurdles to be jumped to pursue such courses at university have been raised substantially. If one examines the A-levels required to pursue such courses, one finds, as one might expect, that law and medicine are two which require high quality entrants. I am pleased at that. One also finds, rather more surprisingly, that, in the next six most difficult courses to pursue in terms of entry qualifications, one has mathematics, physics, electrical engineering and combined biological and physical sciences. Employers have difficulties in recruiting graduates in these subjects, yet we make it difficult for young people to pursue those subjects at university. Incidentally, it is much easier to obtain the qualifications necessary to pursue university courses in history and sociology, so the Government have certainly not followed a philistine approach.

To be a more successful, competitive nation, we must maximise the potential of able young people. Commerce and industry demand more well-qualified young people. It is essential that higher education should have sufficient resources to meet that challenge. The resources need not come from the public purse. However, I regret that there is insufficient evidence of enough private funding to make me believe that enough public expenditure is allocated. There is still considerable scope for improvements to induce universities and polytechnics to look for more private finance. More imagination is required in joint financing schemes between Government and industry.

I return to the essential point that, if we are to be a competitive nation, so that we are prosperous, we must find the resources to educate and to train people to maximise their effectiveness. If we do that, we shall pull through some of the less able people in lesser skilled jobs. If we do not, this country will suffer in the coming years.

Although the debate is about overall public spending, I am certainly not one of those who want a massive increase in public spending. I believe that in corning years greater emphasis must be placed on higher education than the public expenditure White Paper shows.

7.52 pm

Mrs. Renée Short (Wolverhampton, North-East)

I wholeheartedly support the hon. Member for Stevenage (Mr. Wood) in what he said about the need to support science. The debate has been remarkable because there have been two speeches on that theme. Two days ago, three or four members of the Parliamentary and Scientific Committee had an interesting discussion with the Secretary of State for Education and Science about this matter. I hope that as the hon. Member for City of London and Westminster, South (Mr. Brooke), who was the Under-Secretary of State for Education and Science, is now a Treasury Minister, there will be a voice in the Treasury pressing the need for more support for science.

The Select Committee on Social Services always makes a point of looking at the public expenditure proposals. It always takes oral evidence from the responsible Ministers and produces a report on the proposals in the White Paper. In response to the Select Committee's recommendations several presentational changes have been made in the White Paper. This includes the chapters on DHSS expenditure. We welcome the additional information that has been published in the White Paper.

Despite the successive recommendations by the Select Committee, the White Paper still does not include an analysis of trends in real costs and volume of spending and in the volume of services. The Select Committee intends to take evidence later this Session on the Government's expenditure plans for 1986–87 to 1988–89 and will report in due course.

I support the recommendations of the Treasury and Civil Service Select Committee on the White Paper. The Committee recommended that next year the White Paper should be deferred until later in the Session to enable other Committees, such as the Select Committee on Social Services, to report to the House. There would then be better informed debate on other aspects of expenditure.

The DHSS spends more than any other Department. In 1985–86, it estimates that it will spend £16.7 billion on health and personal social services and £41.2 billion on social security. The Minister for Health has acknowledged that hospital and community health services will need to grow by 2 per cent. a year to meet the Government's objectives, and this is to be achieved by a mixture of additional expenditure and efficiency. We always talk about improved efficiency.

The public expenditure White Paper states that health authorities are expected, from the total resources available to them, to meet pay and price increases, to meet the needs of the growing number of elderly people and to improve services. They are expected to do a great deal, are they not? The extent to which health authorities can do this will depend crucially on the level of this year's pay settlements and on their ability to make "cost improvements".

One might ask when is a cut in Health Service spending not a cut? The answer is when it is a cost improvement. The public, bemused by departmental gobbledegook, may well think that it means an increase in resources, but it is just the opposite. This gloss does not fool the Select Committee, the medical profession, the Royal College of Nursing, the Institute of Health Service Administrators or other royal colleges, all of which see their problems deepened by the closures, the increasing work load and the general decline in morale stemming from the Government's refusal to face up to the damage they are doing to our most precious asset.

We shall be monitoring the Government's efforts to achieve increased efficiency in hospital services, including the real impact of the Government's policy on competitive tendering and the effects of the Griffiths' recommendations, about which there are disturbing reports from some quarters. The Social Services Select Committee expressed a number of reservations when it looked at the proposals before they were introduced.

In 1981, the Social Services Select Committee recommended changes in the medical staffing patterns in hospitals to improve the quality of care to patients and to relieve the logjam of experienced senior registrars who were unable to obtain promotion. We recommended that there should be an increase in the number of consultant posts and a reduction in training posts. The Government accepted that recommendation, and we were delighted that they did.

In 1985, the Social Services Select Committee again looked at the issue, as it always does, to check what progress has been made, and found that the ratio of consultants to junior doctors had hardly changed. The Government have replied to our follow-up report, agreeing that little has happened and stating: there appears therefore to be an impasse". To resolve the problem, there is to be yet another review of the whole subject by the Government and the joint consultants' committee. The Minister for Health must be aware that there is support for the Committee's proposals among the responsible organisations in the profession, including the royal colleges and an enormous number of professional bodies which are concerned about this.

What will happen if action is not taken soon? I must refer to the warnings and recommendations that the Select Committee on Social Services made in its first report on perinatal mortality. In the past five years since the report was published, we should have seen a consistent improvement in all the regions if our advice had been followed. If our advice regarding regional intensive care units had been followed, and units had been established which were well staffed and well equipped to save distressed new-born babies, there could have been improvements. A serious situation is developing in some of the teaching districts in London. I attended a conference across the river at St. Thomas's hospital about the situation in the South-East Thames region and was alarmed at the information supplied.

My own region, the West Midlands region, was one of the very seriously disadvantaged regions when we presented the report. It had a high perinatal mortality rate. However, I read in the local press only five days ago that plans to reduce the number of babies that die at birth in the west midlands are not working.

Some district health authorities could soon have their knuckles rapped unless there is a drop in the infant mortality rate. An article in the Express and Star on Wednesday 12 February 1986 stated that the districts causing most concern to the regional health authority are Wolverhampton, Dudley, South-East Staffordshire, North Staffordshire, Shropshire, and Coventry, where the number of consultants are way below the RHA guidelines". Despite all the plans for improvement and despite the health promotion campaigns that have been carried out, the expected improvement in the perinatal mortality rates has not come about. The article continued: The report showed that the majority of the 22 health districts in the West Midlands region were suffering from staff shortages in their gynaecology and obstetrics departments. The report also stated:— 'There is scant evidence in district programmes of targeted smoking prevention campaigns, and only seven of the 22 districts short-term programmes contain any plans for the development of ante-natal preparations for pregnancy-planned parenthood services.' There has been very little improvement, after five years, in a region that had one of the highest perinatal mortality rates, and that is a very serious situation. I hope that the Minister will consider that something needs to be done in order to provide more resources for the Department to carry out the policies that have been accepted.

In the White Paper, the Government repeat their original estimate that savings of £75 million would arise from the introduction of the limited list. We have noted that in the winter and spring supplementary estimates the cost of drugs has none the less risen considerably during the current year. In the reply to last year's report on the White Paper, the Government undertook to report to Parliament what savings were achieved from the introduction of the limited list. When and how is that information to be made available? Perhaps the Minister will provide that information shortly.

The information about future expenditure on personal social services given in the White Paper is so brief as to be almost meaningless. The level of local authority expenditure on social services will be determined in part by the Government's policy of reducing overall local authority spending. We shall continue to press the Government about the amount of money available for the development of community care, in particular for those transferred from the National Health Service to the care of local authorities. The Government have accepted these policies and yet the resources to carry them out—whether for the care of children or the mentally ill and mentally handicapped in the community—are not being made available.

How much money is available from the sale of land and buildings now belonging to the Health Service to provide bridging funds for the range of homes, workshops, and community facilities that are needed for former patients from mental institutions when they live in the community?

Last week the committee published a report commenting on the Government's proposals for the reform of social security. Very little information has been given by the Government about the public expenditure implications of these proposals. It is estimated that the proposed family credit will cost nearly twice as much as family income supplement costs at present but that will depend on how good is the take up of the new benefit. Given the poor take up of family income supplement and the fact that it is not possible to predict how the change in paying the benefit through the pay packet instead of direct to the mother will affect take up, that estimate can be little more than guesswork at present.

Between 1986 and 1989, the DHSS is planning a huge investment in computers to administer social security benefits. I do not know how much the computers will cost, but the Committee will be keen to see if the Department's expectation of an eventual reduction in the administrative costs of social security is achieved. We do not know if that will happen. In the short term, many additional, temporary DHSS staff will be needed during training in the administration of the new benefit structure. I wonder how much that exercise will cost. The White Paper contains no estimate of the implementation cost of the new benefit structure or of the total cost of changing the dates of benefit uprating. There are many questions that the Select Committee will want to pursue during the course of the Session. We shall want to question Ministers about these matters. I hope that the Minister who replies will be able to answer some of the questions that I have raised.

8.6 pm

Mr. Richard Alexander (Newark)

I join many of my hon. Friends in congratulating my right hon. Friend the Chief Secretary to the Treasury on the emphasis in his speech today on value for money and efficiency. Often in these debates there is a call to make it clear what the distinction is between public investment and current public expenditure. That call is made every year and just as regularly that call is rejected.

If a public company went to its shareholders every year, without making that important distinction clear in its annual report, its directors would soon be in trouble. That means that outside pressure groups are left to decipher what parts of the White Paper mean a real rise in resources and how they will be properly spread. In turn, that means that outside pressure groups, which are hostile to the Government—by virtue of being pressure groups, they usually are hostile to the Government—are there to place the worst possible public construction on the Government's actions.

The Chief Secretary could claim that he is being benevolent in what he has announced today. I have no doubt that he is benevolent, but he ought not to make and allow such a public relations opportunity to slip by if he is being benevolent. We all want to see the expansion of public investment, but when that investment is blurred by wage claims, wage costs and current expenditure, which in themselves often conceal unnecessary waste, support for increased expenditure is less warm particularly on Conservative Benches. Those who welcome increased infrastructure spending begin to wonder if the money is actually being spent on the infrastructure.

Under the present system, if cuts have to be made, they can be made easily by cutting public capital programmes. If waste occurs, as happened in the development of the Liverpool Crown court, where there was a slippage of some £36 million, that can be concealed under a global figure, and no one is any the wiser or greatly concerned. If my right hon. Friend wants an increased programme of support for the infrastructure, I urge that in these White Paper statements he should spell that out.

When the Government are making an effort to deal with the matter and, at the same time, create jobs, my right hon. Friend should say so and take the credit for it. To do otherwise, to blur what is being spent and where, is to invite the charge that we are merely throwing money away—as it is said, throwing money at the problem, with the implication that the policies are non-caring and badly thought out and that money is often wasted, which, in the present circumstances, it sometimes is. The charge is sometimes made that the Conservative Government cannot make up their mind whether they want increased public expenditure or less public expenditure.

Politicians are accused of giving evasive answers to questions on that subject. That is often because the wrong questions are asked. Conservative Members are in favour of increased capital spending which is not the same as increased public expenditure. There are essential works to be done in this country. Many of them are being tackled, but the fudge over what is capital and what is current expenditure does not help, as a study commissioned by the Federation of Civil Engineering Contractors made clear last July.

I wish to make one other brief but important point, related to the hostility of my right hon. Friend the Chancellor of the Exchequer, and presumably his colleagues on the Treasury Bench, towards allowing public utilities to borrow on the open market for their capital expenditure and expansion. It is beyond my comprehension that it somehow screws up my right hon. Friend's total financial strategy if the National Coal Board or water authorities wish to borrow from banks or elsewhere at rates which they believe they and their consumers can afford. The name of the game is, surely, expansion and jobs. If our utilities can achieve that, the Government's goals are achieved. In addition, that relieves the consumer from having to pay for expansion out of current annual charges.

One day someone will tell my right hon. Friend that the emperor genuinely has no clothes. I put that to him recently because the Anglian water authority told me that if it could borrow on the marker it could finance its current capital programme and increase this year's water charges by only 7.5 per cent., whereas if capital expenditure had to come out of the annual water bills, the ratepayer would have an increase of 14.6 per cent.

My right hon. Friend remained unmoved. He told me that it was no cheaper to borrow on the market than from the public works loan fund. I was not arguing about the cheapness of the rates. I was arguing that, like any prudent business, the water authority must be entitled to borrow for future capital expansion instead of passing on large increases in the current year to pay for capital expansion in that current year. If public utilities were not monopoly suppliers, the customers would never stand for it. Water authorities do not want to finance expansion out of revenue, but the Treasury and my right hon. Friend the Chancellor oblige them to do so at present. I urge a rethink on that point. As the advertising hoardings used to say a year or so ago: You know it makes sense.

8.15 pm

Mr. Roy Hughes (Newport, East)

I have gained the impression today that scepticism is felt on the Conservative Benches about the Government's policies. I put the hon. Member for Newark (Mr. Alexander) into that category. It would be fair to say that most, if not all, Opposition Members approach the Government's expenditure plans with some trepidation. They hear Ministers speak of cutting public expenditure, holding it steady and so on. The reality has been rather different.

The Government's record shows that our public services have deteriorated. The Government have had little success in reducing overall expenditure and, so far, their promises to cut taxation have been little more than a mirage. It can be said, of course, that hope springs eternal and that there is another Budget on the horizon.

When discussing such matters, I unashamedly reflect on the present plight of Wales. I think of the serious unemployment and the social distress which is a byproduct of that unemployment. I think of our south Wales valleys and the spirit of hopelessness about the future which lies alongside that heavy unemployment.

There has been a deterioration in the social services, including the National Health Service upon which many additional calls are made as a result of social conditions. There is a great deal of substandard housing, yet our local authorities are allowed to spend only 15 per cent. Of the revenue that they have obtained from the sale of council houses. An effort should be made to build many more houses. But I do not wish to dwell on the Welsh scene.

On page 9 of volume I of Cmnd. 9702, we see that the Department of the Environment's public spending on housing in 1984–85 is put down as £3.2 billion. That was estimated to drop to £2.7 billion in 1985–86, rising only to £2.9 billion in 1988–89. There is not much more on the horizon. The Government should be heading a housing drive at present. It would improve the environment, put people into decent homes and take a great many people out of the dole queue.

On Monday this week, my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) unveiled the Labour party's plan to use £5 billion of local authority receipts from council house and other asset sales to create 750,000 new jobs. It includes investment in housing, roads, sewers, railways, hospitals, schools and industry. What could be more sensible? That plan would help build a more efficient economy and put people back to work.

What is the Government's reaction to those proposals? In the Daily Telegraph on 18 February, the Secretary of State for the Environment is quoted as saying that my right hon. Friend the Member for Sparkbrook was like a pools winner with a policy of 'spend, spend, spend'. Surely there is a vast difference between spending money on worthwhile projects and squandering money, as the Government have done so profusely. We should think of the massive revenues that they have received from North sea oil. No other Government in history have received such largesse. Public assets such as British Telecom, the ports and Cable and Wireless have been sold. The sale of British Leyland is on the horizon. There are proposals for the sale of British Gas and even of our water resources.

Vast resources have been simply showered on the Government and all they have to show for it, after nearly seven long years, is mass unemployment. That, for me, is the essential difference between the spending which my right hon. Friend the Member for Sparkbrook envisages and squandering our resources which the Government have done on such a massive scale.

Defence expenditure is still going up. According to the document, it went up from £15.5 billion in 1983–84 to £19 billion in 1988–89. During defence questions last week we were told that Trident was costing nearly £10 billion at 1984–85 prices. That amount is for ever escalating, and we have been promised a new figure shortly. The policy of the Labour party is to scrap Trident and to spend the money on more worthwhile projects. We believe that conventional weaponry is sufficient for our defence needs. I believe that money spent on Trident is simply money poured down the drain.

Youth unemployment is a vital issue. Our young people have become known as the lost generation. On Tuesday my hon. Friend the Member for Huddersfield (Mr. Sheerman) sought information on the youth training scheme. The answer he received suggested that more than half our Welsh youngsters coming off the YTS last year failed to get a job. With the exception of the north of England, Wales has the worst youth employment record in the United Kingdom. We need to attract new jobs to the north of England, Wales and Scotland. The Government should be in the vanguard of those efforts.

One recognised way of doing that over the years has been the policy of regional aid. Since 1979, regional aid to Wales has fallen by 40 per cent. It is set to plunge further by the end of the decade, despite the fact that Wales has lost 110,000 jobs in manufacturing since 1979. Is it any wonder that our young people have become so alienated from society and that crime statistics are going through the roof?

At Prime Minister's Question Time on Tuesday, my right hon. Friend the Leader of the Opposition accused the Prime Minister of breaking all manner of records: record and rising unemployment, record real interest rates, record manufacturing trade deficits and a record tax burden."—[Official Report, 18 February 1986; Vol. 92, c. 185.] In reply, the Prime Minister spoke of what she considered to be her record-breaking achievements. All I can say is that Wales has been on the receiving end and our people are punch-drunk with the effects of those policies. Surely the time has come for a change of course.

8.24 pm

Mr. John Townend (Bridlington)

I am sure that my right hon. Friend the Chief Secretary will be relieved to know that I will not make my special pleading for an increase in expenditure. However, before I begin my remarks I should like to raise a point which I had hoped to make during the speech of the hon. Member for Stockton, South (Mr. Wrigglesworth). I was rather surprised that he was advocating a substantial increase in overseas aid when some of my constituents have received a letter from his right hon. Friend the Member for Plymouth, Devonport(Dr. Owen)telling them what a poor country we are and how our share of world trade has dropped by half between 1980 and 1984. The letter said that we were in the same league as Yugoslavia, Taiwan and Puerto Rico. If that is true, I cannot see how he could justify spending more than the £1 billion we already spend on overseas aid. In fact, we probably could not afford that.

My first reaction on studying the White Paper on public expenditure this year was that hope springs eternal. I am relieved that the Government, in their own words, still intend to hold spending broadly level in real terms. However, I must say that based on past performance I am sceptical as to whether that can be achieved. I think, like other hon. Members of the Select Committee, that it represents what the Government hope will happen rather than what they think will happen. In last year's expenditure White Paper the expenditure for 1985–86 was estimated to be £132.1 billion. This year's White Paper shows that that figure was exceeded by about £2 billion. We have heard from the Chief Secretary that he hopes that there will be no overspend this year. If he keeps to the figures, I think that he will deserve our congratulations.

For 1986–87, last year's White Paper showed that the planning total, less receipts from asset sales, was to be £138.9 billion whereas for the same year in this year's White Paper it amounts to £143.8 billion, an increase of £5 billion. I think that that confirms what many of us have been saying for years, that the relentless increase in departmental spending seems to continue year after year. The full extent of the rise is, to a certain extent, hidden by an increase in asset sales between the two years of £2.5 billion. So much for all the Opposition talk of cuts.

I was pleased to hear the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) admit that there have been no cuts. Across the board there have not been cuts. However, he was less than honest when he talked about cuts in education. In fact, the real expenditure per pupil today is higher than it has ever been in our history. We have more nurses, doctors and more patients being treated, so it is rubbish to talk about cuts. I am saddened that the Government have given up the battle to cut public spending and are now merely aiming to reduce it, as a percentage of GDP. I think that change of policy was forced on the Treasury by the high-spending Ministries. They have undermined a major thrust of Thatcherite economic policy. As a result of that, we have not been able to make the significant reductions in taxation that we had hoped for, particularly for the average wage earner, and we have not been able to bring the standard rate down to 25p in the pound. We have not been able to deal with the "Why work?" problem which has been so ably highlighted over so many years by my hon. Friend the Member for Norfolk, North (Mr. Howell). If we had been able to keep departmental cash spending down to the figure set out in 1984 White Paper, only two years ago, we would have had an extra £5 billion to dispose of this year. With that money we could have reduced the standard rate by almost 3.5p in the pound which would have put us well on the way to achieving our target of 25p in the pound. In view of the drop in oil prices which will cost us anything from between £5 billion and £7 billion in lost oil revenue, I believe that the control on spending is even more important. I was sorry that my right hon. Friend the Chief Secretary did not really deal with the point that I raised in my intervention. If revenue is to determine expenditure, and we have a significant loss of revenue, as we have had, surely we must reconsider our spending plans. In view of those factors, I strongly urge the Government to return to their policy of cutting expenditure.

We have not been as successful as we hoped in controlling expenditure by local authorities, the Department of Health and Social Security, and on debt interest. Local authority spending for 1985–86 turned out to be £2 billion more than was forecast in the 1984 White Paper. That hides some disturbing facts. On the one hand, careful low-spending councils in the districts and shires have reduced spending, or kept it level, while many of the Left-wing-controlled councils in the big cities, such as London, Liverpool, Hull and Sheffield, have increased spending. In some extreme cases, they have spent money as if it was going out of fashion. It is unfair that many careful low-spending councils have had their grants reduced, while profligate inner-city councils have received additional grants to deal with their problems as a result of pressure from the Opposition, the churches, charities and some of my hon. Friends, especially as many of those problems have been self-imposed.

The Government are optimistic that local government spending will fall, as the table in the Select Committee's report shows. I wish that I could be as optimistic as the Government. However, I am delighted that they have decided to grasp the nettle of rate reform. If only our party had dealt with the problem in 1980, as the Prime Minister wanted to do, we would not have encountered many of the problems that we have since faced.

Social security spending is £1.7 billion more than was estimated in the 1984 White Paper. In recent years, some aspects of social security spending have been almost out of control. Housing benefit has increased from £300 million to £3 billion in 10 years, and the costs of board and lodging and the black economy have also increased. Most people will agree that the social security system is in a mess. It is a complicated morass and suffers from enormous abuse which we cannot afford.

Recently, I was horrified to learn that before the DHSS fraud squad arrived to investigate and prevent taxpayers being defrauded, the beneficiaries, many of whom may have been claiming improperly, were warned by the staff at the local DHSS office. That is wrong.

Mr. Alexander

Does my hon. Friend agree that as soon as that squad went in the number of people claiming benefit decreased significantly in those areas?

Mr. Townend

That is absolutely right, and shows that the social security fraud squad was a good investment. The number of claimants would have decreased still further if it had received more co-operation from the local offices.

The reform and simplification of the social security system is vital, and should be undertaken with determination and with a view to reducing the overall cost. Originally, the Government intended to make savings through the review, but because of pressure that aim has been watered down, and it is now being said that the review will have a neutral effect in terms of revenue. I am particularly perturbed that if we are successful in simplifying the procedures there will inevitably be a significant increase in take-up, and the review, instead of being broadly neutral in revenue terms, could provide another burst of spending in that Department.

The Government must accept some of the blame for social security costs. We introduced housing benefit. Indeed, I remember serving on the Bill in the previous Parliament. To be fair, when the Government tried to control the cost which was getting out of hand, they met nothing but resistance from both Opposition parties and some of my hon. Friends. The same is true of the board and lodging allowance. When it became generally known by our young people that they could be subsidised by taxpayers to leave the disciplined environment of their parents' home, and could receive twice, and sometimes three times, as much money as they could earn in a job immediately after leaving school, the costs soared sixfold. Again, when the Government, rightly, tried to control the cost, they received nothing but opposition from Labour Members.

Now we have yet another explosion, which is worrying me greatly and which will cost my right hon. Friends at the Treasury a great deal of money. I refer to the establishment of private homes for old people subsidised by the DHSS to the extent of about £165 a week. The costs of that are spiralling. It is inexplicable to a man in the north of England who is struggling to keep a wife and two children on a wage of about £100 a week that the state should pay £165 a week for a person in a private home. It encourages families to abrogate their responsibilities, and to make the state responsible for their old people.

That is having a significant effect in many constituencies in seaside towns, such as Bridlington, as it is undermining the base of the tourist industry. One can understand why hoteliers, who must work hard for 13 weeks to make a living for the whole year, are encouraged to turn their hotels into old people's homes, which will be full for 52 weeks a year and will receive a large weekly subsidy from the DHSS. Many of them think that they have struck a gold mine, but the result is the undermining of our tourist base.

The black economy is enormous and growing. About 1 million people are probably involved in it, and the cost to the Exchequer runs into billions. Those people draw benefit, increasing the cost to the DHSS, although they work in the black economy. Because they draw benefit they are included in the unemployment figures when, in reality, they are not unemployed. The black economy spreads throughout the country, but is most prevalent in the south, especially the south-east. It is incredible to think that 800,000 people are registered as unemployed in the south-east when one considers the large numbers of vacancies, and learns that employers in the hotel and restaurant business have had to import 150,000 foreigners from the Philippines, Spain and Germany to fill those jobs. The most important evidence of the black economy is that in the south more people are registered as long-term unemployed than in the north, yet, as hon. Members on both sides of the House will readily accept, the problems of unemployment are significantly worse in the north. Therefore, there can be only one possible explanation—there are more long-term jobs in the black economy in the south. Until we tackle that problem we shall never reduce public expenditure in the social services Department, and we shall not reduce the numbers of unemployed. We should take a much tougher attitude to withdrawing benefit from people registered as unemployed who will not accept a vacancy. We may even have to experiment, as the Americans have done, with providing work for some of those people at the level of unemployment pay.

Because of Government spending and borrowing, the costs of servicing the national debt rise inexorably year after year. As the Select Committee report points out, the figure of £17 billion in the 1985 White Paper will increase to £19 billion by 1989. Indeed, if the interest that we have had to pay this year had been the same as our estimate for it four years ago, we would have had a further £5 billion to spend on Budget day. Those who say, "Spend more and borrow more"—they include many Conservative Members as well as Opposition Members—should not forget that in future the debts must be serviced and repaid. The higher the national debt, the higher the burden that we hand on to our children and grandchildren.

I congratulate the Chancellor of the Exchequer on the way in which he has handled the economic position during the past four weeks in the face of an enormous drop in the price of oil. If we had not had such a steady hand on the tiller, we would inevitably have had significant further increases in interest rates, and Opposition Members would have been the first to criticise. But our Chancellor has kept his head, and kept the boat steady. He is under great pressure to increase spending on everybody's little pet scheme. There are voices on the Tory side of the House and in the country that say to the Government, in view of the drop in oil revenue, "Go back to your original policy of reducing spending and borrowing."

8.40 pm

Mr. Tam Dalyell (Linlithgow)

As one who rightly or wrongly voted against the Anglo-Irish agreement, perhaps I am in a position to say that I found the maiden speech of my hon. Friend—for that is what he is—the Member for Newry and Armagh (Mr. Mallon) deeply moving.

It comes a bit rich for the hon. Member for Bridlington (Mr. Townend) to lecture us on social security when we see in the Register of Members' Interests that he is a member of Lloyd's. Like the old biblical saying about motes in one's own eye, I believe that members of Lloyd's who make that type of speech should show a little humility when they talk about those problems. I do not doubt that the black economy is a problem, but he told us about the firm hand on the tiller. When the Prime Minister and the then Financial Secretary to the Treasury were in the early stages of this Government they said that they would sort out the black economy. They have not done very much. It may be a difficult task, but those who keep the Inland Revenue Staff Association so short of personnel cannot be entirely surprised when they get into difficulties.

If we make remarks about those on social security, we should deal not with the minnows but with the massive problems, such as those of insider trading. The Department of Trade and Industry has had difficulty in achieving more than five prosecutions for insider trading. In one case the wrong person was prosecuted, and acquitted. He happened to be my constituent. Let us see some sense of proportion. Frankly, the middle of the speech of the hon. Member for Bridlington was vulgar and odious.

My constituency has many thousands of acres of Forestry Commission land. It is well managed and well organised. The planting scheme has been carried out with great care and with great community acceptability. It is wholly unacceptable for the Government to suggest that Forestry Commission land should be sold off to private interests in lumps of tens of thousands of acres. My hon. Friend the Member for Aberdeen, North (Mr. Hughes) knows what that would do in the Grampian area. That is not the way in which Britain should be run in the 1980s.

I declare an interest. I have the good fortune—the money accrues to my constituency party and not to me—to be a Member sponsored by the National Union of Railwaymen. In his opening speech the Chief Secretary said that expenditure on the railways would increase by 9 per cent. in real terms. That was followed by the chiding about the £21 billion to £24 billion spent on unemployment benefit. For every million pounds spent on electrification, which I do not believe is very job creative, on track maintenance, which is job creative, and on replacement of new rolling stock, which is job creative, how much money will return to the state? When the unemployment benefit that would have to be paid out, the taxes collected that would not otherwise be collected from firms and individuals, adjustments to national insurance and housing benefits are taken into account, we are faced with a cost benefit analysis that may make much needed investment in the railways cheaper in the short term than is being made out. I ask for some type of Treasury assessment, because the matter was raised in depth at the political committee of the NUR this morning. There are many other people who would like a Treasury assessment.

The blue paper refers to the Falklands. The figure of £192 million is quoted for two years hence. If the islands are to be properly defended, as they must be as long as the commitment continues, some of us believe that what the Chief Secretary said about the finality of the figures may be relevant, but we doubt very much the figure of £192 million. I should like a letter on how the Government arrived at that figure.

I wish to discuss the science budget, which was raised by the hon. Member for Crawley (Mr. Soames) and other hon. Members. Save British Science and those in science in Britain believe that something must be done. I interrupted the Chief Secretary's opening speech to ask about the Medical Research Council. He talked about priorities to help the council. The council refers to the prospects of new ventures which continue to open up. It says: The challenge presented by such opportunities is, sadly, tempered by the grave concern which the Council must continue to express over the inadequacy of the funds which are made available through the Science Budget. During the course of the year the Chairman and Secretary met the Secretary of State for Education and Science and, subsequently, the Prime Minister, and took the opportunity to emphasise the severely damaging effect that the financial situation was having on medical research in the UK. Representations were also made through the Advisory Board for the Research Councils. Yesterday I had the opportunity to talk to the secretary of the MRC, Sir James Gowans. He pointed out that whereas in the days of his distinguished predecessor, Sir Harold Harmsworth, there was a five year basis on which people could be assured of having their research financed, the basis was now year to year and, in some cases, month to month. That is not the way to run medical research in Britain. The councils' report continues: In December 1984 the Secretary of State announced a small but welcome increase in the Science Budget as a result of which the Council received an addition to the planned allocation for 1985/86. This will increase the total resources the Council can make available for capital equipment and thus assist towards the provision of the PET scanner referred to in the Introduction and allow slightly increased funds for research grants to universities. However, the overall net effect of these supplements will do no more than maintain in 1985/86 the same purchasing power as existed in 1984/85—the severe difficulties the Council had in matching expenditure to income in that year are set out. The likelihood of concurrent reductions in research funding through the University Grants Committee can only exacerbate the Council's problems. The Council recognises the government's commitment to controlling public expenditure and accepts the need to ensure that resources granted to it are deployed efficiently and reviewed critically. But if strenuous efforts to make better use of resources do no more than allow the Council to accommodate to a declining budget, and do not allow resources to be found for new activities, then the wealth of opportunities presented by biomedical research cannot be exploited. For example the explosive growth in the understanding of molecular and cell biology means that there are now opportunities for advances in such diverse fields as: cancer therapy; inherited, parasitic and psychiatric diseases; clinical diagnosis; and drug design. Each of these could bring significant benefits to the health of individuals in the community and to the quality of life of future generations yet unborn. That is the considered judgment of these careful people of the MRC.

I have had eight Ten-minute Bills on the subject of kidney transplantationss. Those who know about the shortage of matching tissue for kidneys and about the problems associated with kidney machines and the financial problems now associated with those unfortunate sufferers from kidney disease realise that this presents just one example of raised expectations that cannot be fulfilled in this financial climate.

The same story applies to the Science and Engineering Research Council. It says: The limiting factor in the Council's work at present is the shortage of funds. In all its fields, ideas and projects which have been judged worthy by its own high standards are going unfunded. In many of these fields, reviews by independent scientists and engineers have come up with even further constraints of selection. The Council is grateful that its grant has been maintained in real terms over the last few years. However, the external pace made not only by the United States of America and Japan but by France and Germany; the continuing growth of the sophistication of scientific equipment; the under-provision of staff costs; the greater training needs as manufacturing technologies also become more sophisticated and new markets are sought; the frequently disadvantageous effect of international exchange rates,"— we have seen this in relation to the problems of CERN—make this very difficult.

Two weeks ago I spent an afternoon at the Department of Biochemistry at Oxford. Postdoctoral and young scientists, Professor Southern said, are facing something akin to a cultural revolution. I wonder whether the House realises that by the 1990s the Department of Nuclear Physics at Oxford will have more than half of its staff over 60 years of age. Yet this is a young person's science. When we consider what our competitors in other countries are doing, that is tragic.

I was at the University of Dundee in January. The same story applies to its electrical engineering and other departments. It is the same story in the schools. The recent reports of Merrison at Bristol and the letter of Mr. J. T. Jardine, which I have asked to be published in Hansard on behalf of Scottish teachers of physics, tell a story that makes one wonder where all the seed corn for this important area will come from.

I shall cut what I intended to say about the Nature Conservancy Council. However, when he was the Minister of State, Ministry of Agriculture, Fisheries and Food, the Chief Secretary to the Treasury said that it should become more efficient. Those who have studied the matter say that to do away with the Macaulay Institute of Soil Research at Aberdeen is but one example of the madness of dismantling British science.

I was not called, but I sat through yesterday's debate on the strategic defence initiative. I understand why Professor Desmond Smith and Dr. Andrew Walker of the Physics Department at Heriot Watt University want to have the crock of gold of American money, otherwise where will the finance for their physics come from? Some of us believe that a great issue is at stake and that Dr. Burnett, who is the Principal and Vice-Chancellor of the University of Edinburgh, was right to say that there should be no SDI research at Edinburgh university until there had been further discussions.

It is tragic that we should embark on the militarisation of space simply because there are no alternative funds for distinguished science departments in British universities to call upon. I plead with the Government to do something for British science. An indication of the urgency of this need has been the formation of the Save British Science campaign.

8.55 pm

Mr. Tim Yeo (Suffolk, South)

In view of the shortness of time available to me, I hope that the hon. Member for Linlithgow (Mr. Dalyell) will forgive me if I do not go down that avenue. Instead, I shall return to some of the themes that were dwelt upon so eloquently by my right hon. Friend the Chief Secretary to the Treasury when he opened the debate, and I will deal first with the objectives of public expenditure.

I welcome the fact that the White Paper refers in each of its departmental sections to the aims of public spending. That is an improvement upon previous White Papers. I readily acknowledge that there has been considerable improvements in the presentation of this White Paper and I pay tribute to my right hon. Friend, whose interest in the better management of resources and in greater efficiency is well known. However, these aims are still stated in fairly vague terms.

For example, it is stated that the main aim of the overseas aid budget is to promote sustainable economic and social development and to alleviate poverty in developing countries…Political and commercial considerations are taken into account in allocating funds. There is no reference to any percentage target or gross national product that we hope to reach for overseas aid, or to any Government mechanism for monitoring whether it is more cost-effective to grant aid directly, Government to Government, or through the medium of voluntary agencies. I should have been comforted by references of that kind.

Furthermore, the aims make no reference to a Government target for reducing the number of dwellings that are still below standard, or to any objective for providing housing in areas where the employment option exists. The aims would be greatly strengthened by references of that kind.

Above all, as my right hon. Friend the Member for Worthing (Mr. Higgins) and his Committee point out, no attempt seems to have been made in the White Paper to distinguish between the relative priorities of one area of expenditure compared with another. Although my right hon. Friend the Chief Secretary of the Treasury refers to chart 1.11, that is not the whole answer. It may simply reflect the consequences of different bilateral battles that have been fought between the Treasury and individual Departments.

Somebody who read the White Paper wanting to find out whether the Government attach greater priority to education or to transport would find that the only clue is on page 2 of volume 1, in the section entitled "Main points from this White Paper." It draws attention to the fact that additional funds have been allocated this year to four areas, one of which is capital spending on roads.

Education is not mentioned in any of those four areas. That might suggest that at least during the period when the White Paper was being drawn up—I understand it was a number of months—transport was given a higher priority than education. I wonder whether that was a conscious or collective decision. I hope it was not; if it was, I doubt whether that reflected the mood of the country.

The first conclusion that I draw from the White Paper is that, despite a considerable advance in its presentation, it still reflects the basis upon which expenditure decisions are made; that is, basically bilateral negotiation, as the Select Committee pointed out. One consequence is that, if a Department wants to increase expenditure in one sector for which it is responsible, it has to attempt first to meet that extra expenditure by a saving from somewhere else within its departmental budget.

Suffolk county council, for example, which has been a model of efficiency in its management and which has a prudent and impeccable expenditure record, finds that this year its rate support grant is cut substantially, despite all its efforts to comply with Government policy, so as to pay for the extra expenditure which the Department of the Environment wishes to allocate to inner cities.

My second point, which follows from the first, is that the vagueness with which the aims are stated makes it difficult to measure whether public expenditure is effective in reaching those aims. If no criteria are clearly defined in the White Paper for judging success, how are we to analyse the performance of Departments? There are still far too few measures of output in the White Paper, although I welcome the fact that there are more measures of output than we have ever had.

The section on the Department of Health and Social Security includes figures for patient treatment, one output measure which is welcome, but it is not complete or adequate, nor is it necessarily the most important. Others that might have been included are life expectancy, mortality rates, the incidence of specific disease, the number of days lost from work through illness and the variation in health between classes and occupations. If those output measurements had been included in the White Paper, we should have had a real basis for judging whether the National Health Service was effective in achieving the aim of a healthy nation. Incidentally, if we reached that aim, it might result in a reduction in patient treatments and in NHS expenditure.

On my third point, value for money and efficiency, again I welcome the much greater emphasis which the White Paper appears to put on getting value for money. There are many references to it. The emphasis on privatisation and on outside sub-contracting is to be applauded, but huge areas of public expenditure are not touched. Anyone who comes into contact with the public sector could identify areas where improvements and savings could be made, but in the main improvements are not being made. It is no use expecting officials to change the habits of a lifetime and suddenly to be driven out of their comfortable ways into innovatory initiatives aimed at improving efficiency. The only way it will happen is if there is determined leadership.

From my experience of organisations which are not threatened with commercial competition and where the ultimate sanction of bankruptcy or redundancy does not hang over the employees I know that a relentless and laborious drive from the top is required to achieve better value for money. Parliamentary pressure encourages Ministers to concentrate on policy development and presentation, but I urge them to pay more attention to the unglamorous task of good management, without which we shall not achieve a better use of resources.

I wanted to make a fourth and final point about expenditure on unemployment, to which the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) drew attention as the fastest area of expansion, but I am aware of the time. As a Back Bencher I appreciate that seven minutes is a generous allocation. Having sat through the whole debate, I should not wish to encroach on the half hour that is available to the Opposition Front Bench. So I shall leave out the last point, which might have been mildly helpful to them.

9.3 pm

Mr. Terry Davis (Birmingham, Hodge Hill)

This debate will be remembered for the maiden speech of the hon. Member for Newry and Armagh (Mr. Mallon). The House heard a moving description of the problems of his constituency, economic and political, and his plea for a spirit of benevolence and justice.

Mr. J. Enoch Powell (South Down)

I wonder where the friends of the hon. Member for Newry and Armagh (Mr. Mallon) have all gone to. I wonder why they did not tell him that it would be convenient for him to be in the Chamber at 9 o'clock.

Mr. Davis

I think that most hon. Members, in a spirit of courtesy and generosity, will extend to the hon. Member for Newry and Armagh the usual understanding for a new Member and will not wish to draw attention to that fact.

I was impressed by the hon. Gentleman's sincere declaration of his aim to create Irish unity by peaceful means and his equally sincere condemnation of the obscenity of violence—as he referred to it—in Northern Ireland. The hon. Gentleman paid a tribute to his predecessor, and I think that he will find that the House will accord him even greater respect as a result. It was a poignant tribute as his predecessor was his political opponent. It is also there that there is a bond between those of us who have lost elections. On a lighter note, there is an even closer bond between those of us of all parties who have lost our seats. I express the hope that the hon. Gentleman does not join our group.

This debate also gives me the opportunity to welcome an old opponent, the right hon. and learned Member for Dover (Mr. Rees), to his new role. His was not a maiden speech, but I shall treat it as such. I am glad that he has decided to maintain his interest in our economic affairs and to contribute to our debates from the Back Benches. I suspect that if he continues to do so we shall all benefit from contributions based on his insider knowledge. Perhaps we shall benefit almost as much as we do from the contributions of my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon). The right hon. and learned Gentleman bids fair to become the next Chairman of the Public Accounts Committee when my right hon. Friend becomes the Chairman of the Select Committee on the Treasury and Civil Service after the next election.

That brings me to the contribution of the present Chairman of that Select Committee. I am sure that the right hon. Member for Worthing (Mr. Higgins) will not mind if I do not comment on his detailed remarks about the presentation of the White Paper. I appreciate that he has been in his place for almost all the debate and has listened to the contributions of Members from both sides of the House, and I hope that he will excuse me if I do not go into the detail which he included in his speech. The Opposition are much more concerned about the policies and priorities that are reflected in the White Paper.

The right hon. Member for Worthing told us that it is now the Government's intention to control public expenditure rather than to cut it, but the White Paper does not support that statement. The Government's figures show that they are planning to spend less in real terms next year than they are spending in the current year. The only way in which the right hon. Gentleman can dress up the Government's figures to show stability in public expenditure is to remove the proceeds from selling national assets—something which I agree that we should do—and to include the figure which his Committee, the Select Committee on the Treasury and Civil Service, has described as an "above normal reserve", while ignoring the changes in the procedures for setting priorities and allocating reserves. The Chief Secretary to the Treasury described some of the changes this afternoon, but some remain that he forgot to mention. I will return to this point.

For the present, let us accept the White Paper figures at face value, as we are asked to do by the Government, and move on to consider the Government's priorities. First, there is to be a reduction in social security expenditure. It seems that at last the hon. Member for Bridlington (Mr. Townend) is getting his own way. He has often called for a reduction in expenditure on social security, and this coming year he will be pleased, for there is to be reduction in expenditure on supplementary benefit. The reduction will not arise from any reduction in the number of unemployed. I suspect that instead there will be a reduction in the moneys which are paid to those who are poor. As the Labour party has always claimed, the purpose of the social security review is not to redistribute from the poor to the very poor. The idea behind it is to reduce the total sum which is available to the poor in order to finance tax cuts. If the Government's record is any guide to their future intentions, their aim is to pay for tax cuts for the very rich by reducing expenditure on supplementary benefit.

My right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) spoke about the reduction in expenditure on education. The White Paper shows a reduction of £800 million in real terms—5 per cent.—in the coming year. It also appears that there is to be a reduction of 10 per cent. in real terms by 1988–89. The reduction is scheduled to take place at a time when the school population will decline. However, it will decline by less than 5 per cent. I do not understand how a Government who are supposedly seeking to preserve and improve education standards can use the opportunity of a decline in the school population of 5 per cent. to cut expenditure by 10 per cent. in real terms, and we have had no explanation of why the Government claim to be able to reduce expenditure twice as quickly as the reduction in the school population.

I have studied the more detailed figures in volume II to see where the cuts in education will be made. My hon. Friends will not be surprised to find that, during the next 12 months, the biggest cut in cash terms will take place in the provision of school meals and milk. The cut will be from £426 million to £280 million—a reduction of £146 million—a cut of 34 per cent. in the provisions for school meals and milk. We have had no details of how these cuts will be introduced and no explanation of which children will not receive subsidised school meals and milk in the future, but we do know that only five years ago even this Government were forced to publish the Black report on inequality in health. That report prepared, not by the Labour party, but by a group of independent experts, recommended that there should be an expansion of the school meal service if we are trying to improve the health of British people.

That was the burden of the speech of my hon. Friend the Member for Wolverhampton, North-East (Mrs. Short). My hon. Friend described the many areas in which we needed to extend and improve the National Health Service. She movingly described the needs of the National Health Service. In response, the Government have said that they are going to increase expenditure on the National Health Service next year by 7.5 per cent.in cash terms. However, in real terms the increase is only 1.7 per cent., which is less than we need to stand still. That is not extending the National Health Service—by any yardstick that is a cut in the National Health Service.

The Black report stated that it was important not only to look at the expenditure on the National Health Servce but also at expenditure on other social programmes such as housing. If we are trying to improve the health of British people, we need to improve the housing stock.

The greatest failure of the Government is housing, and the Government's provision for housing deserves the greatest criticism—[Interruption.]—The Chancellor of the Exchequer can snort and sneer, but it is true.

I was pleased at first sight—as I was intended to be pleased—when I studied volume I of the White Paper. It stated that in the coming year, there would be an increase in expenditure on housing. Taken at face value, there will be an increase of £0.1 million next year. Of course, in cash terms £0.1 million—£100,000—is the sum not to be sneezed at. However, when I studied volume II my pleasure disappeared. I found that the sum is not £100,000 but £10,000. The sum of £0.1 million in volume I is shown as a result of simply rounding up. The correct figure of £10,000 increases the housing provision from £2,742 million to £2,752 million. In the White Paper that is shown as an increase of £0.1 million.

They are figures which are designed to confuse. I do not call these figures "fiddled figures" but "misleading figures". They are designed to confuse because they are net of capital receipts whereas it is the gross expenditure which matters in terms of bricks and mortar. How much will be spent altogether? The Government's White Paper refers to an increased provision. If the Chancellor wishes to intervene I will, of course, give way. I would prefer to hear what he has to say instead of listening to his mutterings.

The Government refer to an increased provision of £330 million in 1986–87 over 1985–86. The truth is that it is £40,000 less when compared with the outturn for 1985–86, but even these figures are cash and not real terms. In fact, there is a more substantial cut in housing expenditure in real terms. This year, the Government are spending 18 per cent. less in real terms compared with last year. Next year, they will cut the housing budget by 4 per cent., a cut of more than £100 million in real terms. The Government admit in the White Paper that The major part of public expenditure on housing supports the provision, repair and maintenance of rented housing by local authorities and housing associations.new building by local authorities, housing associations is necessary to provide for the elderly, the disabled and others whose needs cannot be met in the public sector.

Against this background, no hon. Member will have been deceived by the Chief Secretary's attempted sleight of hand today. He admitted that there has been a reduction in the number of houses built by councils and housing associations—the accommodation specifically for the elderly, the disabled and others whose needs cannot be met by the private sector. He then sought to defend that catastrophic decline in council building by referring to an increase in private ownership. He knows that that is a totally different question. The housing shortage will not be solved by the sale of council houses. Whether houses are owned or rented, and owned by councils, housing authorities or individually, is irrelevant in any debate about the housing shortage. We shall solve the housing shortage only by building more houses, and that is precisly what will not happen under this Government.

Whether one looks at starts or completions, the total for 1985 was lower than in both 1984 and 1979. In every year since the Government came into office, the total of council and private new build has been lower than the last year of the Labour Government. Moreover, it has been lower than for every year of the previous Conservative Government. In no year in the 1980s have the Government matched the house builiding figures in the worst year of the 1970s.

Worse, the starts and the completions for both council and private accommodation in 1985 were lower than in the last year of the Labour Government.

At a time when 400,000 building workers are unemployed, it is nothing short of a scandal for the Government to prefer them to spend their lives sitting at home instead of building homes for other people.

Some Conservative Members say that they would like to see a better housing building programme—they remember a time when there was a different Conservative Prime Minister. However, they then go on to ask, "How can we pay for the extra houses?" The Government know the answer, and I shall tell their supporters.

The increase in a housing building programme can be paid for without any extra taxes, borrowing or printing money. All the Government need to do is tell local authorities that they can spend their money on building houses. The councils can spend £3 billion in cash—they have billion in total—that the Government have locked up in bank accounts. It is not the Government's money but the councils' capital receipts.

A Labour Government would unlock the accounts and encourage councils to spend money on providing homes for people. We should increase public expenditure. That policy is supported not just by the Labour party and, as one would expect, the TUC, but by the British Institute of Management, the chambers of commerce, and even in some respects by the CBI, on the basis of the commission established by the Archbishop of Canterbury, the policy is supported by the Church of England. It is not supported by the Select Committee on the Treasury and Civil Service, but it is supported by the Select Committee on Employment, which perhaps cares more about the level of unemployment.

Why will the Government not increase public expenditure? Why do they insist on cuts in social security, in education and in housing? The reason is that they have priorities different from those of the Labour party, the TUC, the British Institute of Management, the CBI and the Church of England. In short, their priorities are different from those of the rest of the nation.

The Chief Secretary devoted a large part of his speech to the procedure adopted by the Government for setting their priorities. We have the testimony of the right hon. Member for Worthing that the Chief Secretary is bringing his own personal approach to the setting of priorities. The Chief Secretary omitted to mention a major part of the new procedure for holding down public expenditure to the planning totals by Departments contained in this White Paper. The Chief Secretary no longer takes such decisions, nor does the Chancellor of the Exchequer. Anyone who managed to get as far as the back page of today's Financial Times will know that it is someone else altogether.

Under the new procedure, any Secretary of State who becomes convinced that he needs more money and has a good case for using some of that above-normal reserve of £1.4 billion; who thinks that the money should be used for job creation instead of tax cuts; or who decides to boost his leadership campaign by showing signs of rising damp must in future not simply seek to persuade the Chief Secretary to the Treasury or even convince the Chancellor of the Exchequer, if that were possible. He must put his request in writing and send a detailed justification to the Chief Secretary. There is nothing wrong with that, but he must then send a copy to the Prime Minister.

Mr. John Townend

Quite right.

Mr. Davis

That is not quite right. The hon. Member for Bridlington welcomes that. We all know about his motives. The Prime Minister will now take the decisions. What is the point of sending copies of correspondence to the Prime Minister? What on earth will the Prime Minister do with all these pieces of paper, assuming that she is not too busy dealing with requests from Cabinet Ministers to leak their colleagues' correspondence? The point of it can only be that the Prime Minister does not trust the Chief Secretary. The Chancellor does not even get a copy. It is the Prime Minister who sets the priorities.

The right hon. and learned Member for Dover spoke about the powerful role of 10 Downing street in economic policy under the last Labour Government. Not even the right hon. and learned Gentleman would ever suggest that any Labour Prime Minister insisted on receiving copies of letters from Members of the Cabinet to the Chief Secretary to the Treasury.

Of course there must he priorities, but in this Government it is the Prime Minister who sets them. The Chancellor of the Exchequer can smile because his in-tray will be empty. He does not even rate a copy.

The Prime Minister is not listening to hon. Members, the TUC, the British Institute of Management, the CBI or the Church of England. She is turning a deaf ear to the people and is impervious to argument or protests. She is turning her face away from all the signs of social unrest, from the riots that have occurred in Bristol, Brixton and Birmingham. She is like a latter day dictator on some island in the Caribbean waiting to be airlifted out with her entourage in a fleet of American helicopters, leaving her Back-Bench Tontons Macoutes to face the wrath of the British people.

The Opposition will vote tonight not only against the White Paper but to prevent the whole of the United Kingdom from becoming like Newry and Armagh.

9.24 pm

The Financial Secretary to the Treasury (Mr. John Moore)

Like the hon. Member for Birmingham, Hodge Hill (Mr. Davis), I should like to start by joining him and others who have congratulated and welcomed the hon. Member for Newry and Armagh (Mr. Mallon). I share the views of the hon. Member for Hodge Hill. The hon. Member for Newry and Armagh made a humorous introduction, although I do not imagine that he would expect me to agree with him about the longevity of this Parliament. We listened with great care, and we understand the seriousness of the issues that he raised. He brings wide experience of elected office, which was clear from the authority in his speech. We are grateful for the hon. Gentleman's remarks about his predecessor, James Nicholson, whose contribution the whole House welcomed and recognised. I am sure that I speak for the whole House when I say that we look forward to the hon. Gentleman's speeches.

Perhaps I might comment on the speech of my right hon. and learned Friend the Member for Dover (Mr. Rees). I am sure that my right hon. Friend the Chief Secretary joins me, having listened to that speech, in welcoming my right hon. and learned Friend's contribution. On a personal note, I should like to say how much we all recognise—especially those of us on the Government Bench—the outstanding record of service to our Government and our country that my right hon. and learned Friend has given already.

As usual, my right hon. Friend the Member for Worthing (Mr. Higgins) did an outstanding job chairing the Treasury and Civil Service Select Committee. As the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) said, my right hon. Friend gave the House the opportunity to benefit from the thorough analysis that that Select Committee brings to out debates. He gave us some bouquets this time. Those in regard to presentation were justified. I shall not weary the House, but I took the time to look back to 1978–79 to assess the changes. I am sure that the whole House welcomes the substantial improvement in presentation.

My right hon. Friend addressed the important matter of the timing of this debate, on which I ought to take a few moments to give the Government's view. The right hon. Member for Ashton-under-Lyme and my right hon. and learned Friend the Member for Dover wondered at the suggestion in the White Paper. My right hon. Friend the Member for Worthing and the Select Committee have suggested that next year's debate on the White Paper should be deferred to late May or early June. They say that that would allow them to consider the White Paper in detail and would concentrate the debate on future years.

I am aware that the Select Committee has to complete its assessment of the White Paper in a relatively short time, although it has been helped by the further squeezing of the publication timetable this year. I fully share the objective that the debate should focus on future years, but there are factors which favour an early date. For example, I know that many hon. Members welcome the chance to discuss the Government's spending plans quite soon after they are published. There would be obvious disadvantages in a delay of nearly five months. By that time, we would already be well into the first of the three years of which the White Paper sets out forward spending plans. The detailed Supply Estimates for that year would have been presented nearly three months before the debate. There would be some danger of having the horse before the cart.

Holding the debate in June would mean that my right hon. Friend the Chancellor would not have the benefit of hon. Member's views on public expenditure when considering his Budget plans. I imagine that some hon. Members might be reluctant to miss the opportunity to make their views known at this time of the year. There is a balance of advantage to be struck, and the House and the Government should reflect carefully before concluding which arrangements would be preferable.

Mr. Higgins

I am happy, at the moment, to keep an open mind on this issue. My right hon. Friend is making his comments against the background of an autumn statement which is now much expanded in scope including the number of years that it covers. Therefore, most of what my right hon. Friend has just mentioned could adequately be discussed on the basis of the autumn statement.

Mr. Moore

My right hon. Friend the Chancellor and, indeed, the whole of the Treasury ministerial team is listening attentively to my right hon. Friend. I am sure that it will take cognisance of what he said. My right hon. Friend mentioned an item in the Financial Times which was elaborated on at some length by the hon. Member for Hodge Hill. I refer to the article by Philip Stephens. I think that an excessive amount is being read into speculative journalism these days. This is obviously the time of year when procedures for the public expenditure survey are regularly reviewed and any changes agreed. Our procedure is under way at present, and I do not think that we should pursue that any further.

Two essential issues have dominated the debate today. They related on the one hand to the quantity and on the other hand to the quality of public expenditure. Those were the two basic themes round which most of the contributions were made. If I may, I will attempt to take the House through those two areas.

I deal with the quantity debate first. Much of it dwelt on the nature of what public expenditure should be as a percentage of gross domestic product. My right hon. and learned Friend the Member for Dover expressed the position very well when describing his experiences in office. According to the earlier remarks of my right hon. Friend the Chief Secretary, the Government in chart 1.2 of volume I of the public expenditure White Paper have made their position clear. They laid out their plans for the future, they saw stable expenditure, that is expenditure decreasing not in real terms but as a percentage of GDP in the next few years, because of our success in achieving growth.

However, it was somewhat more difficult, as it has been throughout, to establish the official Opposition's position. All we can do—as opposed to some of the debates about their very large expenditure plans—is to look at the record. We have heard clear echoes of that record in some of the debates in the last few weeks. If one goes back to the period before 1974–75, the Opposition came into office in 1974 inheriting, as a percentage of GDP, a public expenditure figure of approximatley 42.5. We saw the kind of appalling explosion in expenditure that produced public expenditure of 48.5 per cent. of GDP by 1975–76. The result was not decisions taken by Her Majesty's Government, but decisions imposed upon Her Majesty's Government by the IMF, which brought the figure back to that of 1978-79–43 per cent.—the figure with which the Opposition entered office. With regard to the Opposition's record, the position is confirmed by their attitude which we have observed in so many of their commitments of late.

It is not sufficient to debate what percentage of GDP we would like to see. The question is, what is underlying the potential growth of that GDP? One does not have to look very far to see this Government's clear record. Our record in recent years had been outstanding. Gross domestic product has grown by over 3.5 per cent. in 1985, to top the Community's growth. It grew faster in that year than in the United States. It is the best annual growth rate since 1973, and—this is critical—with lower inflation, the best performance over four years since the 1973 oil shock. The economy is forecast to grow by 3 per cent. at least in 1986. It is that factor, associated with the Government's commitment on public expenditure, that makes a significant difference to the Opposition's potential.

Another question in relation to the quantity is not simply the percentage of GDP, but how it is to be financed. If the method of financing affects the quality and nature of growth, obviously the public expenditure totals will be in jeopardy. Despite any protestations to the contrary, there are essentially only three ways in which expenditure can be financed—one can tax, borrow or print. As we have heard from the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), he has clearly limited himself as to tax. He has made it clear publicly from the Dispatch Box that he would not seek to change the basic rate—at least, he would not increase it. The right hon. Gentleman must be aware by now that taxing 100 per cent. of the income of those earning above £30,000—even on the extraordinary presumption that people will continue to earn beyond £30,000—will at most, for one year, give him a total income of £1.5 billion—not the £3 billion he thought when he first discussed the issue. The right hon. Gentleman obviously realises that he is trapped with respect to taxes.

The only presumption we can draw from the extraordinary spending programme of the right hon. Member for Sparkbrook is that there will be further borrowing or resort to the printing presses. We shall soon return in that case to the precise position we were in when, unfortunately, we had to recover from the vicissitudes of a Labour Government.

The second major theme of the debate has been the quality of expenditure. The debate took two courses—a study of the nature of what my right hon. Friend the Chief Secretary called value for money and a debate on priorities. I thought that my right hon. Friend the Chief Secretary expressed well what was meant by value of money when he talked about achieving more in goods and services for a given unit of taxpayers' money. I know that the right hon. Member for Ashton-under-Lyne as Chairman of the Public Accounts Committee, all the Committee's members, and the Government would regard that as a critical feature of the prudential use of that rare commodity, taxpayers' money.

My right hon. and learned Friend the Member for Dover and my hon. Friend the Member for Suffolk, South (Mr. Yeo) would, I know, be interested in some of the ways in which we have been able specifically to achieve efficiency gains in value for money terms. I do not know how many hon. Members have carefully studied both volumes of the Government's expenditure plans. I accept that volume II, with more than 400 pages, is a little lengthy, but I wish to draw attention to some points with respect to value for money that are critical to public expenditure. I say that as an active member, in many ways, of the Public Accounts Committee. Paragraph 22 on page 8 of volume I refers to value for money being achieved particularly through increased competition in buying equipment. In 1984–85 27 per cent. of contracts by value were placed following competitive tender"— an important achievement; I know of the work that the Public Accounts Committee has done— compared with 14 per cent. in 1979–80". That significant and important improvement will give genuine value for money.

Paragraph 33 on page 11 of volume I refers to improvements in efficiency, for example, in jobcentre services. It states: The jobcentres are expected to place 1.9 million people in jobs in 1985–86 (compared to 1.5 million in 1981–82) at a cost per placing of £59 (£96 in 1981–82). That is another important illustration of clear efficiency gains. Paragraph 33 continues: In the unemployment benefit service the average ratio of claimants to staff has improved from 75:1 in 1979–80 to 119:1 in 1985–86, with a target for further improvement to 130:1 in 1988–89. I know that such efficiency gains will be welcomed by all of us, whatever our views about the quantity of public expenditure.

Priorities were discussed a great deal. There has been some criticism in the Treasury and Civil Service Committee report and, in part, from some of my colleagues, including my hon. Friend the Member for Crawley (Mr. Soames). The right hon. Members for Sparkbrook and for Ashton-under-Lyne, my right hon. Friend the Member for Worthing and my right hon. and learned Friend the Member for Dover covered this area of priorities.

I would like to stress two points. I wish that all hon. Members who have not had the opportunity would examine chart 111 on page 20 of volume I of the White Paper. That chart shows the significant pattern of priority changes over the period that the Government have been in office. I would gently remind the right hon. Member for Sparkbrook that he was rightly conscious of demographic changes in the health areas. That was a perfectly fair point to make. However, when examining the pattern of past, and not future, spending—though we will examine proposed future spending when appropriate—the right hon. Gentleman should realise that when it comes to the education budget there has been a fall of one third in school rolls and happily—I know that the feeling will be shared by all hon. Members—the spending per pupil has risen in real terms.

Mr. Hattersley

That depends on when the right hon. Gentleman begins his accounting. That figure is down in real terms on last year's figure.

Mr. Moore

I was trying to examine the record of the Government as a whole. It is perfectly legitimate to look at how the figures have increased over the Government's period in office. The figure in that period has increased in real terms per pupil.

There was a major debate on capital expenditure, about the way in which the Government should, in public terms, spend more on what has become a wide public debate about infrastructure. I find, and I am sure my hon. Friends also find, that the Opposition's attitude on that is quite extraordinary.

I do not know how many hon. Members were present when my right hon. Friend the Chief Secretary reminded the House earlier of the relative records of this Government and the last Labour Government. I may listen to criticism from the Conservative Benches and from some hon. Members who share no responsibility for the Labour Government's period in office, but it is extraordinary that those who were members of a Labour Government who reduced capital expenditure by 20 per cent. in real terms in their period of office should have the effrontery and gall to criticise the Government who in difficult times have maintained public capital expenditure in real terms. If one looks at the data and at the way the Labour Government reduced expenditure—

Mr. Austin Mitchell

Will the right hon. Gentleman give way?

Mr. Moore

No, I will not give way as I want to complete my point. The hon. Gentleman had more than enough opportunity, not only in the debate, in which, unfortunately he could not participate, but in his interrogation of witnesses in the Select Committee, to state his views.

I want to remind the House of the two critical areas of which we hear so much outside the House—health and roads. During Labour's period of office, capital expenditure on health and roads—

Mr. Hattersley

What does the right hon. Gentleman mean?

Mr. Moore

If the right hon. Member for Sparkbrook had been listening to me, he would know that I was referring to remarks made earlier by my right hon. Friend the Chief Secretary, who mentioned both health and roads. I am glad that the right hon. Gentleman has taken this opportunity to catch up with the debate and that I can now continue.

Mr. Hattersley

I am sure that the right hon. Gentleman will continue.

Mr. Moore

Naturally I will continue, as the figures illustrate the essential hypocrisy of some of the arguments on this subject which occur outside the House.

During the period of the Labour Administration there was a decrease in capital expenditure on the Health Service of nearly 38 per cent. while in this Government's period of office we have increased capital expenditure by almost 11 per cent. That is a classic illustration—

Mr. Laurie Pavitt (Brent, South)

Will the right hon. Gentleman give way?

Mr. Moore

I would like to complete my point and I will give way in a moment.

During the Labour Administration there was a decrease in public expenditure on roads of 36 per cent. and under this Government there has been an increase of 10 per cent. In the past six years there has been an expenditure increase, in real terms, on trunk roads and motorways of 25 per cent.

Mr. Pavitt

Does the right hon. Gentleman realise that the reason for the decrease of capital expenditure in 1974–75 was that the Labour Government decided to give the nurses the Halsbury award and that there was then a deliberate switch from spending on buildings to spending on people?

Mr. Moore

Not only did my right hon. Friend the Chief Secretary remind the Opposition what has been done for the nurses while this Government have been in office, but I just happen to have with me a copy of the 1979–80 Labour Government's expenditure White Paper. It shows quite clearly that throughout the period there was a year in, year out, decline in capital expenditure on the Health Service.

Mr. Pavitt

That was deliberate.

Mr. Moore

The hon. Gentleman says that was deliberate. I find great difficulty in saying anything more about that subject.

Mr. Patrick Thompson (Norwich, North)

Does my right hon. Friend agree that the reason for the large decrease in capital expenditure on the Health Service by the Labour Government was that, at that time, they had to go cap in hand to the International Monetary Fund because they had run this country into a state of bankruptcy?

Mr. Moore

My hon. Friend is right, but he is right only in terms of time. If he studies the figures he will find that, consistently throughout the Labour Government's term of office, they reduced capital expenditure on the Health Service.

My hon. Friend the Member for Bridlington (Mr. Townend) asked me about some facts that he had uncovered, he thought, about the alliance. He endeavoured to intervene in the speech of the hon. Member for Stockton, South (Mr. Wrigglesworth). The hon. Member would not give way. I had received similar information. It is one of the matters that makes it difficult for the official Opposition and the Government to understand the facts upon which the SDP and the Liberals base their arguments.

I have had a letter sent to me by a friend. I do not know how many hon. Members have seen it. It has been delivered throughout the country during February and it is from the right hon. Member for Plymouth, Devonport (Dr. Owen). The letter has the title; Mrs. Thatcher and Mr. Kinnock do not want you to see this letter The letter talks about: The frightening facts of our economic collapse. Facts? Let me just draw to the attention of the House one or two of the facts from which the public is supposed to be learning about the economic policies of a not very present alliance. The facts are: the UK's share of world trade"— I am told in the letter, has declined from 17.2 per cent. to 8.6 per cent. Fact—in 1980, it was 9.7 per cent. as opposed to 17.2 per cent. The letter is relatively demeaning to the United Kingdom. We are told: we are in the third division"— that is a point about which my hon. Friend the Member for Bridlington asked tonight— with Hong Kong, Puerto Rico, the USSR, Yugoslavia and Taiwan. We are told that the United Kingdom's GNP per head—it was repeated in the debate—is below that of Italy.

I did my best to try to establish the facts upon which the alliance argument was based. The data are all in the "World Bank Year Book 1985", the World Bank's latest year book. It shows that, as opposed to the $5,735 shown in the alliance letter, in the United Kingdom it is in fact $9,200. In addition, Puerto Rico is shown as having a GNP per head of $5,004. It is, in fact, $2,500. Those are the facts upon which economic debate is supposed to take place.

I could give many more illustrations, which are critical to the debate. I have listened to a serious Opposition—

Mr. Dalyell

rose—

Mr. Moore

I shall give way to the hon. Gentleman in a moment. The interesting letter which is addressed to those people who might support either of the main parties in the House states that the Government have been making it systematically more difficult for the business community to keep people in work. Employers' national insurance payments now represent a bigger portion of the economy than before the Conservatives gained power. Facts? The SDP and the Liberal party seem to have forgotten that the national insurance surcharge has been abolished. The proportion of GDP represented by employers' NIC has fallen, not increased, from 4.8 per cent. in 1978–79 to 3.5 per cent. in 1985–86. Those are the facts.

I am also told in the same letter, which has been circulated to many of our constituents: The tax burden on corporate income has gone up as a proportion of GDP. Corporation tax on non-North sea companies fell during the period from 2.2 per cent. of GDP in 1978–79 to 2.1 per cent. I gather that the SDP and the Liberal party think that we should not take account of the North sea. That makes it difficult for those of us who come to these debates and try, as I have, to consider the debate from the Opposition's point of view in terms of the quantity and quality of public expenditure to listen to contributions from the alliance below the Gangway.

Mr. Dalyell

Four of us, two from the Opposition and two Conservative Members, have made serious speeches about the science budget in a non-partisan manner. How does the Minister reply to the Science and Engineering Research Council and the grave worries of the Medical Research Council and other scientists?

Mr. Moore

I am endeavouring to proceed. There was an extraordinary amendment on the Order Paper put down by the alliance—although it was not called by Mr. Speaker—which seems to suggest that it had an interest and a role in this debate. I am having difficulty correlating that with the information I have been given.

The right hon. Member for Sparkbrook asked an important question about ECGD credit. I entirely accept that some of the tables and charts in the bound text are rather difficult to get to grips with, but it is an important issue for all of us. I hope that the right hon. Gentleman will not mind if I put the record straight. He referred to what he saw as a 75 per cent. reduction in the provisions for ECGD credit under support costs. I can understand why he should misinterpret that as a lessening of support for our exporters.

It is important to put on record that the White Paper made it clear that the value of export business being supported will remain at around £3 billion a year over the next three years. It shows that the pattern of support has not changed. The cost of interest support reflects the difference between the market rate and the fixed rate set under the international consensus. Since 1981 the measures agreed with trading partners have brought consensus rates more into line with the market rates. As the volume of business at the old consensus rate is replaced by new business the cost of interest support will fall. That is a phenomenon that is occurring with our competitors, too.

I think that it is important, as the autumn statement made clear, that the provision for export support was raised by £200 million a year. We have recently introduced a new soft loan facility under the Aid and Trade Provision. Essentially, the basic provision in terms of the quantity of export is unchanged. I know that the right hon. Gentleman will want to re-examine that because I do not think that he will disagree with it.

The right hon. Gentleman raised the issue, as he has before, of the cost of unemployment. The right hon. Gentleman told us last week that unemployment cost the country between £21$5 billion and £24 billion a year. As he knows, we regard such figures as bogus. We know from the White Paper that social security benefits, which he referred to tonight, paid to the unemployed are expected to total around £6.75 billion in 1986–87. However, as he knows, there is no easy route back to zero unemployment. One cannot know how much even of that sum is an avoidable cost to the public purse. Calculations giving even bigger numbers purporting to take account of tax receipts forgone are equally bogus. It is impossible to say what public finances would look like if somehow unemployment were to be eliminated.

Of course, the right hon. Gentleman's purpose in inflating the figures is to create the illusion that this is the source from which Labour's grandiose spending plan—we still have not had any response to the detailed points my right hon. Friend the Chief Secretary made earlier in the debate —can be financed. A moment's reflection will show just how fanciful that is. The right hon. Member for Sparkbrook told us on the radio last Sunday that he hoped to reduce unemployment by 1 million. The White Paper tells us that that will save him expenditure of £2 billion. That is not going far towards his £24 billion bill for Labour's programme. He will have to find another £22 billion elsewhere and that is before the cost of renationalisation, as my right hon. Friend the Chief Secretary said tonight.

The hon. Member for Linlithgow (Mr. Dalyell) and my hon. Friend the Member for Crawley raised questions concerning the science research budget, and I shall consider them carefully. I shall also consider the points on which the hon. Member for Linlithgow asked for detailed answers, as he always does. I believe that he was fair in making some of those points. However, in the last survey we increased the priority for science. An extra £15 million was spent on the science budget, to be used selectively, on advice from the Advisory Board for the Research Councils to nurture the growth points in research and to get better value for money. The hon. Gentleman was fair enough to recognise that. The universities received an additional £9 million, partly to provide extra equipment to strengthen the research base. The hon. Gentleman made an important point and my hon. Friend the Member for Crawley made a good speech.

We transferred resources from other programmes to fund a further 5,000 higher education places on high-tech courses under the engineering and technology programme. The research councils are continuing to develop relations with industry, and to encourage financial associations with the private sector—[Interruption.] I am trying to respond to the important speech of the hon. Member for Linlithgow. I shall pursue his points beyond the debate, but I hope that my comments have been helpful to him.

The hon. Member for Wolverhampton, North-East (Mrs. Short) raised many detailed points, and no doubt she will pursue her questions on health and social security when the departmental Select Committee takes evidence. I shall not attempt to give a complete list of answers tonight. However, I stress the priority that the Government have given to the Health Service. The White Paper provides an additional £320 million for health and personal social services in 1986–87. Efficiency savings are being achieved so that extra services are being provided. Between 1978 and 1984 in-patient and day-care cases rose by 1 million, and out-patient cases by 3 million. I shall ensure that the hon. Lady's detailed points about that part of the budget are drawn to the attention of my right hon. Friend the Secretary of State for Social Services.

I was asked why the level of aid and assistance in Northern Ireland was higher than in other parts of the United Kingdom. The unemployment level of 21 per cent. in Northern Ireland is higher than the average for the rest of the United Kingdom. Therefore, it is not surprising that the per capita spending to support employment is higher. It is even less surprising that per capita spending on law and order is higher.

I have now covered all the points raised in the debate—[Interruption.] I appreciate the help of the right hon. Member for Sparkbrook. Perhaps he would like to extend his help specifically to answer the question of my right hon. Friend the Chief Secretary. [Interruption.] There is plenty of time. When the hon. Member for Hodge. Hill gave an additional seven minutes to the debate, he sought to ensure that his hon. Friend had the opportunity to intervene. My right hon. Friend the Chief Secretary gave the Opposition the opportunity to explain how they would finance the £24 billion annual expenditure programme, to which they are committed. At the most conservative estimate, that would increase VAT to 41 per cent. a year. But the Opposition completely failed to answer his question. I am happy to continue to consider the detailed commitments of the Opposition regarding maternity and death grants, child benefit, pensions, early retirement and unemployment benefit.

For more than 30 years the state's appetite for the nation's wealth has grown and grown. The Government are now bringing that appetite under control, thereby curbing inflation, and giving the power to choose back to individual people. Public spending is on target and will remain stable in real terms. Thus, as the nation's income continues to rise, the proportion taken by the state will continue to fall. Public expenditure under these plans will take the smallest proportion of GDP since 1972–73.

That is why I urge my right hon. and hon. Friends to reject the Opposition amendment.

Question put, That the amendment be made:—

The House divided: Ayes 186, Noes 345.

Division No. 83]	[10.00 pm
AYES
Adams, Allen (Paisley N)	Crowther, Stan
Alton, David	Cunliffe, Lawrence
Archer, Rt Hon Peter	Cunningham, Dr John
Ashley, Rt Hon Jack	Dalyell, Tam
Ashton, Joe	Davies, Rt Hon Denzil (L'lli)
Atkinson, N. (Tottenham)	Davis, Terry (B'ham, H'ge H'l)
Bagier, Gordon A. T.	Dewar, Donald
Barron, Kevin	Dixon, Donald
Beckett, Mrs Margaret	Dobson, Frank
Benn, Rt Hon Tony	Dormand, Jack
Bennett, A. (Dent'n & Red'sh)	Douglas, Dick
Bermingham, Gerald	Dubs, Alfred
Bidwell, Sydney	Duffy, A. E. P.
Blair, Anthony	Dunwoody, Hon Mrs G.
Boothroyd, Miss Betty	Eadie, Alex
Boyes, Roland	Eastham, Ken
Bray, Dr Jeremy	Edwards, Bob (W h'mpt'n SE)
Brown, Gordon (D'f'mline E)	Evans, John (St. Helens N)
Brown, Hugh D. (Provan)	Ewing, Harry
Brown, N. (N'c'tle-u-Tyne E)	Fatchett, Derek
Brown, R. (N'c'tle-u-Tyne N)	Faulds, Andrew
Brown, Ron (E'burgh, Leith)	Field, Frank (Birkenhead)
Caborn, Richard	Fields, T. (L'pool Broad Gn)
Callaghan, Jim (Heyw'd & M)	Fisher, Mark
Campbell, Ian	Flannery, Martin
Campbell-Savours, Dale	Forrester, John
Canavan, Dennis	Foster, Derek
Carter-Jones, Lewis	Foulkes, George
Cartwright, John	Fraser, J. (Norwood)
Clark, Dr David (S Shields)	Freeson, Rt Hon Reginald
Clarke, Thomas	Garrett, W. E.
Clay, Robert	George, Bruce
Clelland, David Gordon	Gilbert, Rt Hon Dr John
Clwyd, Mrs Ann	Godman, Dr Norman
Cocks, Rt Hon M. (Bristol S)	Gould, Bryan
Cohen, Harry	Hamilton, James (M'well N)
Coleman, Donald	Hamilton, W. W. (Fife Central)
Conlan, Bernard	Hancock, Michael
Cook, Frank (Stockton North)	Hardy, Peter
Cook, Robin F. (Livingston)	Harman, Ms Harriet
Corbett, Robin	Harrison, Rt Hon Walter
Corbyn, Jeremy	Hattersley, Rt Hon Roy
Cox, Thomas (Tooting)	Haynes, Frank
Craigen, J. M.	Healey, Rt Hon Denis

Heffer, Eric S.	Pavitt, Laurie
Hogg, N. (C'nauld & Kilsyth)	Pendry, Tom
Holland, Stuart (Vauxhall)	Pike, Peter
Howells, Geraint	Powell, Raymond (Ogmore)
Hughes, Robert (Aberdeen N)	Prescott, John
Hughes, Roy (Newport East)	Radice, Giles
Hughes, Sean (Knowsley S)	Randall, Stuart
Hughes, Simon (Southwark)	Redmond, Martin
Hume, John	Rees, Rt Hon M. (Leeds S)
John, Brynmor	Richardson, Ms Jo
Jones, Barry (Alyn & Deeside)	Roberts, Allan (Bootle)
Kaufman, Rt Hon Gerald	Roberts, Ernest (Hackney N)
Kennedy, Charles	Robertson, George
Kirkwood, Archy	Robinson, G. (Coventry NW)
Lamond, James	Rooker, J. W.
Leadbitter, Ted	Rowlands, Ted
Leighton, Ronald	Ryman, John
Lewis, Ron (Carlisle)	Sedgemore, Brian
Lewis, Terence (Worsley)	Sheerman, Barry
Litherland, Robert	Sheldon, Rt Hon R.
Lloyd, Tony (Stretford)	Shore, Rt Hon Peter
Lofthouse, Geoffrey	Short, Ms Clare (Ladywood)
McCartney, Hugh	Short, Mrs R.(W'hampt'n NE)
McDonald, Dr Oonagh	Skinner, Dennis
McKelvey, William	Smith, C.(Isl'ton S & F'bury)
MacKenzie, Rt Hon Gregor	Smith, Rt Hon J. (M'ds E)
Maclennan, Robert	Snape, Peter
McNamara, Kevin	Soley, Clive
McTaggart, Robert	Spearing, Nigel
McWilliam, John	Steel, Rt Hon David
Madden, Max	Stewart, Rt Hon D. (W Isles)
Marek, Dr John	Stott, Roger
Marshall, David (Shettleston)	Strang, Gavin
Martin, Michael	Straw, Jack
Maxton, John	Thomas, Dafydd (Merioneth)
Maynard, Miss Joan	Thompson, J. (Wansbeck)
Meacher, Michael	Tinn, James
Michie, William	Torney, Tom
Mikardo, Ian	Wallace, James
Millan, Rt Hon Bruce	Wardell, Gareth (Gower)
Miller, Dr M. S. (E Kilbride)	Wareing, Robert
Mitchell, Austin (G't Grimsby)	Weetch, Ken
Morris, Rt Hon A. (W'shawe)	Welsh, Michael
Nellist, David	Williams, Rt Hon A.
Oakes, Rt Hon Gordon	Winnick, David
O'Brien, William	Woodall, Alec
O'Neill, Martin	Wrigglesworth, Ian
Owen, Rt Hon Dr David
Park, George	Tellers for the Ayes:
Parry, Robert	Mr. Ron Davies and
Patchett, Terry	Mr. Allen McKay.

NOES
Adley, Robert	Bottomley, Mrs Virginia
Alexander, Richard	Bowden, A. (Brighton K'to'n)
Alison, Rt Hon Michael	Bowden, Gerald (Dulwich)
Amess, David	Boyson, Dr Rhodes
Ancram, Michael	Brandon-Bravo, Martin
Arnold, Tom	Bright, Graham
Aspinwall, Jack	Brinton, Tim
Atkins, Rt Hon Sir H.	Brittan, Rt Hon Leon
Atkins, Robert (South Ribble)	Brooke, Hon Peter
Atkinson, David (B'm'th E)	Brown, M. (Brigg & Cl'thpes)
Baker, Rt Hon K. (Mole Vall'y)	Bruinvels, Peter
Baker, Nicholas (Dorset N)	Bryan, Sir Paul
Baldry, Tony	Buchanan-Smith, Rt Hon A.
Banks, Robert (Harrogate)	Buck, Sir Antony
Batiste, Spencer	Bulmer, Esmond
Bellingham, Henry	Burt, Alistair
Bendall, Vivian	Butcher, John
Benyon, William	Butler, Rt Hon Sir Adam
Best, Keith	Butterfill, John
Bevan, David Gilroy	Carlisle, John (Luton N)
Biffen, Rt Hon John	Carlisle, Kenneth (Lincoln)
Biggs-Davison, Sir John	Carlisle, Rt Hon M. (W'ton S)
Blackburn, John	Carttiss, Michael
Blaker, Rt Hon Sir Peter	Cash, William
Body, Sir Richard	Channon, Rt Hon Paul
Bonsor, Sir Nicholas	Chapman, Sydney
Bottomley, Peter	Chope, Christopher

Churchill, W. S.	Hickmet, Richard
Clark, Hon A. (Plym'th S'n)	Hicks, Robert
Clark, Dr Michael (Rochford)	Higgins, Rt Hon Terence L.
Clark, Sir W. (Croydon S)	Hind, Kenneth
Clarke, Rt Hon K. (Rushcliffe)	Hirst, Michael
Cockeram, Eric	Hogg, Hon Douglas (Gr'th'm)
Colvin, Michael	Holland, Sir Philip (Gedling)
Conway, Derek	Holt, Richard
Coombs, Simon	Hordern, Sir Peter
Cormack, Patrick	Howard, Michael
Corrie, John	Howarth, Alan (Stratf'd-on-A)
Couchman, James	Howarth, Gerald (Cannock)
Crouch, David	Howell, Rt Hon D. (G'ldford)
Currie, Mrs Edwina	Howell, Ralph (Norfolk, N)
Dickens, Geoffrey	Hubbard-Miles, Peter
Dorrell, Stephen	Hunt, David (Wirral W)
Dover, Den	Hunt, John (Ravensbourne)
du Cann, Rt Hon Sir Edward	Hunter, Andrew
Dunn, Robert	Hurd, Rt Hon Douglas
Durant, Tony	Irving, Charles
Dykes, Hugh	Jackson, Robert
Edwards, Rt Hon N. (P'broke)	Jenkin, Rt Hon Patrick
Emery, Sir Peter	Jessel, Toby
Evennett, David	Johnson Smith, Sir Geoffrey
Eyre, Sir Reginald	Jones, Gwilym (Cardiff N)
Fairbairn, Nicholas	Jones, Robert (Herts W)
Fallon, Michael	Jopling, Rt Hon Michael
Farr, Sir John	Joseph, Rt Hon Sir Keith
Favell, Anthony	Kellett-Bowman, Mrs Elaine
Fenner, Mrs Peggy	Kershaw, Sir Anthony
Finsberg, Sir Geoffrey	Key, Robert
Fletcher, Alexander	King, Roger (B'ham N'field)
Fookes, Miss Janet	King, Rt Hon Tom
Forman, Nigel	Knight, Greg (Derby N)
Forsyth, Michael (Stirling)	Knowles, Michael
Forth, Eric	Knox, David
Fowler, Rt Hon Norman	Lamont, Norman
Fox, Marcus	Latham, Michael
Franks, Cecil	Lawrence, Ivan
Fraser, Peter (Angus East)	Lawson, Rt Hon Nigel
Freeman, Roger	Lee, John (Pendle)
Fry, Peter	Leigh, Edward (Gainsbor'gh)
Gale, Roger	Lennox-Boyd, Hon Mark
Galley, Roy	Lester, Jim
Gardiner, George (Reigate)	Lightbown, David
Gardner, Sir Edward (Fylde)	Lilley, Peter
Garel-Jones, Tristan	Lloyd, Ian (Havant)
Gilmour, Rt Hon Sir Ian	Lloyd, Peter (Fareham)
Glyn, Dr Alan	Lord, Michael
Goodhart, Sir Philip	Luce, Rt Hon Richard
Goodlad, Alastair	Lyell, Nicholas
Gorst, John	McCrindle, Robert
Gower, Sir Raymond	McCurley, Mrs Anna
Grant, Sir Anthony	Macfarlane, Neil
Greenway, Harry	MacGregor, Rt Hon John
Gregory, Conal	MacKay, Andrew (Berkshire)
Griffiths, Sir Eldon	MacKay, John (Argyll & Bute)
Griffiths, Peter (Portsm'th N)	Maclean, David John
Grist, Ian	McNair-Wilson, P. (New F'st)
Ground, Patrick	Madel, David
Gummer, Rt Hon John S	Major, John
Hamilton, Hon A. (Epsom)	Malins, Humfrey
Hamilton, Neil (Tatton)	Malone, Gerald
Hampson, Dr Keith	Maples, John
Hanley, Jeremy	Marland, Paul
Hannam, John	Marlow, Antony
Hargreaves, Kenneth	Mates, Michael
Harris, David	Maude, Hon Francis
Harvey, Robert	Mawhinney, Dr Brian
Haselhurst, Alan	Maxwell-Hyslop, Robin
Hawkins, C. (High Peak)	Mayhew, Sir Patrick
Hawkins, Sir Paul (N'folk SW)	Mellor, David
Hawksley, Warren	Merchant, Piers
Hayes, J.	Meyer, Sir Anthony
Hayhoe, Rt Hon Barney	Miller, Hal (B'grove)
Hayward, Robert	Mills, Iain (Meriden)
Heath, Rt Hon Edward	Miscampbell, Norman
Heddle, John	Mitchell, David (Hants NW)
Henderson, Barry	Moate, Roger
Heseltine, Rt Hon Michael	Monro, Sir Hector

Montgomery, Sir Fergus	Speller, Tony
Moore, Rt Hon John	Spencer, Derek
Morrison, Hon C. (Devizes)	Spicer, Jim (Dorset W)
Morrison, Hon P. (Chester)	Spicer, Michael (S Worcs)
Moynihan, Hon C.	Squire, Robin
Mudd, David	Stanbrook, Ivor
Murphy, Christopher	Stanley, Rt Hon John
Neale, Gerrard	Steen, Anthony
Nelson, Anthony	Stern, Michael
Neubert, Michael	Stevens, Lewis (Nuneaton)
Newton, Tony	Stewart, Allan (Eastwood)
Nicholls, Patrick	Stewart, Andrew (Sherwood)
Norris, Steven	Stewart, Ian (Hertf'dshire N)
Oppenheim, Phillip	Stokes, John
Oppenheim, Rt Hon Mrs S.	Stradling Thomas, Sir John
Osborn, Sir John	Sumberg, David
Ottaway, Richard	Tapsell, Sir Peter
Page, Richard (Herts SW)	Taylor, John (Solihull)
Parkinson, Rt Hon Cecil	Taylor, Teddy (S'end E)
Parris, Matthew	Tebbit, Rt Hon Norman
Patten, Christopher (Bath)	Temple-Morris, Peter
Patten, J. (Oxf W & Abgdn)	Terlezki, Stefan
Pattie, Geoffrey	Thatcher, Rt Hon Mrs M.
Pawsey, James	Thomas, Rt Hon Peter
Peacock, Mrs Elizabeth	Thompson, Donald (Calder V)
Percival, Rt Hon Sir Ian	Thompson, Patrick (N'ich N)
Pollock, Alexander	Thorne, Neil (Ilford S)
Porter, Barry	Thornton, Malcolm
Portillo, Michael	Townend, John (Bridlington)
Powell, William (Corby)	Townsend, Cyril D. (B'heath)
Powley, John	Tracey, Richard
Prentice, Rt Hon Reg	Trippier, David
Price, Sir David	Trotter, Neville
Prior, Rt Hon James	Twinn, Dr Ian
Proctor, K. Harvey	van Straubenzee, Sir W.
Pym, Rt Hon Francis	Vaughan, Sir Gerard
Raffan, Keith	Viggers, Peter
Raison, Rt Hon Timothy	Waddington, David
Rathbone, Tim	Wakeham, Rt Hon John
Rees, Rt Hon Peter (Dover)	Waldegrave, Hon William
Renton, Tim	Walker, Bill (T'side N)
Rhodes James, Robert	Wall, Sir Patrick
Rhys Williams, Sir Brandon	Waller, Gary
Ridley, Rt Hon Nicholas	Walters, Dennis
Ridsdale, Sir Julian	Ward, John
Rippon, Rt Hon Geoffrey	Wardle, C. (Bexhill)
Roe, Mrs Marion	Warren, Kenneth
Rost, Peter	Watson, John
Rumbold, Mrs Angela	Watts, John
Ryder, Richard	Wells, Bowen (Hertford)
Sackville, Hon Thomas	Wells, Sir John (Maidstone)
Sainsbury, Hon Timothy	Wheeler, John
St. John-Stevas, Rt Hon N.	Whitfield, John
Sayeed, Jonathan	Whitney, Raymond
Scott, Nicholas	Wiggin, Jerry
Shaw, Giles (Pudsey)	Wilkinson, John
Shaw, Sir Michael (Scarb')	Winterton, Nicholas
Shelton, William (Streatham)	Wolfson, Mark
Shepherd, Colin (Hereford)	Wood, Timothy
Shepherd, Richard (Aldridge)	Woodcock, Michael
Shersby, Michael	Yeo, Tim
Silvester, Fred	Young, Sir George (Acton)
Sims, Roger	Younger, Rt Hon George
Skeet, Sir Trevor
Smith, Sir Dudley (Warwick)	Tellers for the Noes:
Smith, Tim (Beaconsfield)	Mr. Carol Mather and
Soames, Hon Nicholas	Mr. Robert Boscawen.
Speed, Keith

Question accordingly negatived.

Main Question put and agreed to.

Resolved, That this House takes note of the White Paper on the Government's Expenditure Plans 1986–87 to 1988–89 (Cmnd. 9702).