HL Deb 21 May 1973 vol 342 cc989-1004

3.49 p.m.


My Lords, with your Lordships' permission I should like to repeat a Statement which is being made in another place by my right honourable friend the Chancellor of the Exchequer. His Statement is as follows:

"A primary objective of this Government has always been to set our nation on a course of faster economic growth. In the 1972 Budget our aim was a rate of 5 per cent. That we achieved.

"Having lifted the economy on to this path of higher growth, the aim of this year's Budget was to continue on that path over the next year or so. All the indicators confirm that the economy is continuing to expand at an annual rate of at least 5 per cent., as we intended. Production, industrial productivity and retail sales have all been rising well. Industrial investment is now beginning to forge ahead, and exports are growing strongly—indeed, more strongly than I expected. Unemployment has continued to fall. These are the welcome signs of success.

"Despite some of the problems associated with that success—pressure on the construction industry in some areas and a shortage of skilled labour in certain sectors of industry—we shall still have for some time ahead the spare resources necessary to continue that faster rate of growth which is a primary objective of our economic strategy. Furthermore, the nation is firmly behind the Government's counter-inflation policy, which is a key part of the strategy for expansion.

"But if we are to secure a lasting improvement in our economic performance, and so in our prosperity, we must at this stage look beyond the present financial year, and take whatever action is necessary now to secure the opportunity for steady and sustained economic growth during the next financial year, 1974–75, and beyond.

"This sustained growth will depend crucially on the continued strong expansion of industrial investment and exports which we can now expect. It is therefore essential that we now seize this opportunity to get industrial investment and exports on to a higher level and a faster growth path. At the same time we must allow for a reasonable rate of increase in personal consumption. Looking ahead beyond this financial year, in order to make sure that we have sufficient reseources for these three vital elements of demand—industrial investment, exports and personal consumption—it is necessary to moderate the growth of the remaining principal element of demand: public expenditure.

"This was deliberately expanded at the end of 1971 as a temporary measure to reduce unemployment. Now, with unemployment falling at a good rate, and—what we have always wanted—with exports and industrial investment rising fast, is the time to look beyond this year. To permit the changes in the pattern of output required to meet these expanding demands we must take decisions now to ensure that public expenditure, while continuing to grow to meet essential needs, does not preempt too much of the nation's output and so jeopardise the continued expansion of the economy in 1974–75 and beyond.

"In my Budget Statement I announced that certain work on public expenditure had been put in hand last year. That work is now complete and my colleagues and I have decided on certain changes in public expenditure next year, 1974–75.

"We have throughout adopted a selective approach, and the result is that a net saving will be achieved without any reduction in the building programmes for hospitals; for schools, including nursery schools and the replacement of the older schools; without any reduction in the building programmes for colleges and universities; for old people's homes, and other buildings for the local health and personal social services; and without any change in the rates of regional development grants. Expenditure programmes on all these items as well as, of course, Social Security, will continue as planned. The changes include no increases in charges.

"Furthermore, because the changes are being announced well in advance, there should be no question of cancelling existing contracts.

"In deciding upon the geographical spread of savings in individual programmes, the Ministers responsible will take account of the varying circumstances, including the load on the construction industries, the level of unemployment and the particular needs of the various parts of the country.

"So that the specific changes can be strictly compared with the most recent Public Expenditure White Paper (Cmnd. 5178), they are expressed at 1972 Survey prices.

"The savings are as follows:


"Deferments for the time being of new schemes and a reduction in maintenance affecting both central and local government. The roads necessary to support Scottish oil developments will not be affected. The saving will be £100 million.

"Miscellaneous Local Services:

"This will involve deferment of approvals; a substantial part of the saving will come in the non-key sector, where the selection will be made by the local authorities themselves. Here again the total saving will be £100 million.

"Local Authorities' Current Expenditure:

"Out of a total estimated local authority current expenditure of nearly £5,000 million there will be a saving of £80 million. The largest part of this—£50 million—is already included in the totals which I have mentioned, particularly road maintenance. The rate support grant negotiations this autumn will proceed on the basis that these economies are being made. It is important that the new local authorities as well as the existing ones should be given this early notice of the changes.

"Various Public Building Projects or Improvements:

"In this area also the Government and the local authorities will both make contributions, amounting to £15 million in all.

"I should add here that there could be no question of incurring any expenditure on the proposed new Parliamentary Building during either this or the next financial year.

"The Civil Service:

"Figures are being published to-day which show that the total number of civil servants is now less than when we took office. By continuing to contain the growth of Civil Service manpower there will be a saving of £20 million on previous plans.

"Selective Government Assistance to Industries:

"As a result of the expansion of the economy, and the increasing ability of industry to finance its own requirements, the amounts which were at one stage envisaged are not now expected to be required in full, and there will be a saving of £35 million.


"We expect to maintain the Defence budget in 1974–75 at broadly the same level as in the current financial year. A saving of £50 million will be found, by economies and postponements of expenditure, including works projects. Our contribution to NATO will not be prejudiced.

"The Nationalised Industries:

"Those industries for which the Secretary of State for Trade and Industry is responsible, a saving of £100 million; the Post Office £30 million; the surface transport industries £10 million. Investment in the nationalised industries will still be on a rising trend, and fully adequate to sustain a faster rate of national growth.


"As our agriculture becomes more integrated with the Common Agricultural Policy, the need for Exchequer aid will become less and so there will be a reduction of £25 million in expenditure in 1974–75 on current production grants.

"Industrial Training:

"It is important not only that the momentum of this programme should be maintained but that it should be increased. A further £6 million will therefore be added to the existing programme. The plans for meeting expenditure by the Industrial Training Boards out of Government funds instead of out of levies will be deferred for 8 months. The increased programme and this deferment will result in a net saving of £20 million.

"My right honourable friend the Secretary of State for the Environment has already announced a major switch of resources to housing. I can now inform the House that this priority for housing will involve additional expenditure in 1974–75 of £35 million—again, for convenience, expressed at 1972 prices. Taking this into account, and also the additional expenditure on industrial training to which I have referred, the total net saving in public expenditure for the next financial year, 1974–75, as a result of all these changes will be, at 1972 prices, some £500 million. These decisions will be reflected with estimating and other changes in the course of the year in the next annual White Paper.

"As shown in the last White Paper on public expenditure, we start with the advantage that we had already deliberately planned for the rate of increase to begin to slow down during this financial year, by the end of which the special counter cyclical expenditure which we put in hand in 1971 will have largely run its course.

"I have explained why the various savings I have announced relate to the year 1974–75. I should also take this opportunity to give the House an assessment of how they will affect the present financial year, 1973–74.

"The changes which I have announced for 1974–75 will build up gradually, and will result in a saving in public expenditure in this year approaching £100 million.

"This saving will be in addition to the reduced provision which I fore- shadowed in my Budget Statement, and which on present estimates now amounts to a net reduction of about £225 million. Public expenditure this year is therefore likely to be over £300 million less than the figure in the last White Paper (Cmnd. 5178).

"We have before us the greatest opportunity our country has had for very many years—an opportunity to achieve a faster and lasting improvement in our national prosperity. The changes which I have announced will ensure just that."

My Lords, that concludes the Chancellor's Statement.

4.0 p.m.


My Lords, may I thank the noble Earl for repeating that Statement. May I also congratulate him on the superbly disarming way in which he now tells us that everything in the garden is not quite so rosy as has been made out. We shall of course want to study this Statement. May I take it that the Government will make time in this House for a debate on the implications of the Statement? When the noble Earl says there are problems associated with what he euphemistically terms success, why is it that the Government can list those problems—a list of two: pressure on the construction industry in some areas and a shortage of skilled labour in certain other areas—without putting in the list the record balance-of-payments deficit? Are we to take it that this is not considered a problem by Her Majesty's Government? When he says that industrial investment has to be put on to a higher level, can he say how he reconciles this with the proposed cuts in the nationalised industries? Or is it a fact that these monies in nationalised industries are expenditure and in private industries are investments? How could it possibly be that we have allowed calculations previously to be accepted in the public industries if they were not essential investments?

The noble Earl referred to the cuts in the Civil Service. May I ask whether it is a fact that in the other place earlier to-day the noble Earl's right honourable friend agreed that the Civil Service, far from going down, had, so far as the non-industrial sector was concerned, gone up by 14,000? In so far as there have been reductions in the industrial Civil Service particularly, to what extent is this reduction a transfer from a Government Department to another agency? To what extent has there been a hiving off here? Will he give a figure to that? The noble Earl also referred to the fact that the reduction in expenditure will now be—one has to get these double negatives correctly because the Statement is difficult to follow—£300 million less than it was going to be. Will the noble Earl tell me the background against which it is going to be £300 million less? Is it a fact that the Budget provided for a deficit of £4,000 million? Can it possibly be that we are budgeting for these huge deficits if we are really concerned about public expenditure? If we are to get these deficits down, will it be in the autumn that we shall, after all, get another Budget? Will it be that Budget which will deal with the taxation that will be required?

4.4 p.m.


My Lords, I should like to thank the noble Earl for repeating the Statement. Where there are to be changes of this magnitude early notice is very welcome indeed. I cannot help being slightly sceptical about the degree of accuracy which the Government have brought into their prophesies. Is it really possible to forecast the savings as accurately as the Government are hoping to do? When are we to be given the details of these cuts? It is the details—not the global sums—that really matter when one comes down to long-term planning. What are the cuts going to be in the nationalised industries? The nationalised industries are largely the service industries of the other industries upon which our export performance depends. Regarding the saving of £30 million on the Post Office, I think the time has come to increase the investment and expenditure on the Post Office if we are to get the efficiency that we need. I welcome the increased industrial training grants—that is excellent—but I cannot help asking the noble Earl whether the Government know what they are doing.


My Lords—


Perhaps I may now answer the two noble Lords who have spoken from the Front Benches. My Lords, first may I deal with the question of debating this important Statement in your Lordships' House. I recognise that if there is a general demand—and I take it that there is—for us to debate this matter, this is something we should clearly acquiesce in. I suggest that as usual the usual channels should consult on this. One possibility might be to debate this at the time when we debate the Budget, but that might be thought by noble Lords to be rather late in the day. Until then we have a very crowded programme. But I am sure that by agreement through the usual channels we could adjust that programme. In that event I should like to express the hope that we take our debate on the Budget rather more formally.


On the Finance Bill.


On the Finance Bill. My Lords, in everything I have said, for "Budget statement" please read "Finance Bill".

The noble Lord, Lord Beswick, referred to the balance of payments. All I would do is inform the noble Lord, Lord Beswick (this is something of which I am sure he must be aware), that exports are now rising by something like 12 per cent. in volume over the level reached at the end of last year. The expectations are extremely favourable, and although one swallow does not make a summer and it would be very foolish of anyone to read too much into one month's figures—either the month before last or last month—last month's figures showed the most favourable balance-of-payments figures that we have had for a considerable time.

So far as the nationalised industries are concerned, to which the noble Lords, Lord Beswick and Lord Byers, both understandably directed our attention, the cuts here—and I think "cuts" is probably the wrong term: the deferment of certain expenditures, because expenditure on investment in the nationalised industries is still on a rising curve—are designed to leave room in the economy in 1974–75, given the fact that exports are now rising fast, that the economy is now showing every sign of rapid expansion and there are many signs at the present time that industrial investment is now beginning to come through. I can assure noble Lords that it is my right honourable friend's estimate that these deferments will in no way impair the ability of the nationalised industries concerned to supply the needs which underlie and will underpin our increased industrial production.

I am not aware of what may have been said in another place—I happen to be dealing with water—about the Civil Service matter to which the noble Lord, Lord Beswick, referred. I am aware of what my colleague, the Parliamentary Secretary, was saying. He was announcing a reduction, taking the industrial and non-industrial Civil Service together, which is the way we have been issuing the figures for a considerable time. We can play an almost endless "numbers game" in this particular area, and perhaps we may defer that for the time being.

So far as the accuracy is concerned, the point that the noble Lord, Lord Byers, asked me about, these are the best estimates available. So far as the detailed breakdown is concerned, there will be—indeed, there is already—consultation with those responsible for the nationalised industries concerned. Until those consultations are finished it would not be right for me to try to give a detailed breakdown of the global figure, which I repeated from the Chancellor's Statement.


My Lords, if the details are not known how do we get the total?


My Lords, the details are known, but I am afraid I am not being drawn on them at the present time pending that consultation which is now going on.

4.10 p.m.


My Lords, may I pay the noble Earl the Leader of the House the compliment of saying that I am quite sure he believes all that he put to us this afternoon, and I am quite sure that the Government as a whole believe it, but is it not a fact that this Statement is a warning to the country that we have moved from "go" to "stop"? This is the traditional sign of the economy becoming overheated, and the spokesman for the Government draws attention to all the favourable dummies in the shop window but completely ignores the inside. May I question the noble Earl in specific terms. First, presumably the economies announced this afternoon are in diminution of the £4,400 million that the Chancellor announced in his Budget Statement he was going to finance by deficit borrowing. Second, in his Statement has the noble Earl taken account of the change in prices? The House will no doubt know that Cmnd. 5178, which was introduced only last December, was based upon the 1972 figures, and as there has been a constant and unremitting rise in prices since that time these figures are in fact invalidated. Therefore it may well be that the £300 million net announced this afternoon is no more than an adjustment of the rising prices. Third, in the favourable factors taken into account of the rise in exports, have the Government taken into account the fact that the pound is gaining (so it is said) in terms of the dollar, which of course must put a brake, long term, on our export prices and therefore our exports must inevitably move against us? There is also of course the possibility that the Prime Minister may have his arm twisted while he is in Paris and may in fact agree to a change in the parity of the exchange.

Finally, I am completely at a loss to know how a responsible Government can come to this House and to another place and announce the cuts that are being announced in regard to roads—and, God knows! our roads need to be improved and our Post Office services need to be improved and not cut—and at the same time announce a piffling decrease in Defence costs. In the Defence Statement the Government announced the possibility of spending £200 million on a through-deck cruiser. Anyone who knows anything about it at all knows that its purpose is completely unproven; indeed, if one wanted to find a name for that particular class of ship one would call it the "white elephant class". Is it not a fact that if the Government are really seriously concerned about pruning the Budget the place for them to start is on the Defence Budget, by applying a strict cost effective principle to all Defence expenditure?


My Lords, the noble Lord, Lord Wing, suggested that this was a replica of cuts in public expenditure announced by a previous Administration in 1966 and 1968, and that it was the prelude to "stop" as part of the "go/stop" syndrome. I would tell the noble Lord, Lord Wigg, that the situation is precisely the contrary. All the signs at the present time are of expansion in the economy. They are both implicit and explicit in the Chancellor's Statement which I have repeated: the growth in production, the growth in the important area of productivity, the significant growth in exports and, above all, the significant and mounting growth in industrial investment. What we are doing is to ensure the conditions for that continuing sustained growth, and in the field of public expenditure we are making room for that sustained growth, and in plenty of time. The great difference between these measures and those undertaken by the Administration which the noble Lord, Lord Wigg, supported is that we are acting in the fullness of time.


My Lords, on the contrary the noble Earl is not correct. This is a repeat of what happened in 1964. When we became a Government in 1964 we found a deficit waiting for us, running at the rate of £1,000 million a year because the Conservative Government, then as now, had gone for what they were pleased to call "growth at all costs". It is a growth essentially in the consumer durable fields, supported by hire-purchase, extended credit and all the paraphernalia that goes with that, plus deficit financing—a deficit of £4,400 million which the Chancellor is going to meet by borrowing. This is not growth; this is a "con" operation, and like all successful confidence tricksters the Government have started by "conning" themselves.


My Lords, I think it would be wrong for me to allow myself to "hog" too much of this discussion in order to reply to the noble Lord, Lord Wigg. However, I would point out that his statement that this is a consumer growth is controverted both by the rise in investment and the very significant rise in our exports.


My Lords, does my noble friend agree that this Statement is an extremely important one and, in my view, highly relevant to our economic problems? In the past Governments of both Parties have on several occasions over-estimated our potential resources available, and it must be right at this moment to look ahead so as to avoid this happening again and so as to make the best use of our expanding but still limited resources. It seems to me that the Statement in principle must be greatly welcomed.


My Lords, since it is quite obvious that we shall need to debate this extremely important Statement it may be desirable, in view of the length of the business before us, if the noble Earl can agree in principle to arrange a debate, in Government time, at the earliest possible opportunity. This is a major Statement which we shall need to examine very closely indeed. I can understand that the Government have a certain feeling of optimism, but as my noble friend Lord Wigg made clear, there are all the signs of this being a dangerous prelude to problems which will catch us fairly soon, and certainly later this year. Of course I hope that will not be so. Therefore I think it will be necessary for us to probe very deeply indeed.

There is one point which the noble Earl dealt with which caused me some anxiety, and that was the way in which he replied to my noble friend Lord Beswick on the subject of Civil Service numbers. He said, "We can all play the numbers game"; but I do not myself recollect—although he may be able to correct me on this—that when I held the office which he now holds I "played the numbers game". I gave the figures of non-industrial civil servants, and although there were occasions when one gave the total figures I do not recall making the sort of bland statement that "the numbers have gone down" when we know effectively they had gone up. If I am wrong in that I will apologise, but the noble Earl is the Minister responsible and I think it would be very much better if he would give the numbers.

It is this sort of over-sanguine, rather smooth, "rubbing over the issues" remark in his Statement that causes us the anxiety we feel in regard to the Government because we think it may be applied in other areas. Therefore I think we should have a debate very soon. It will not be possible next week, but I think as soon as we return from the Recess we should have such a debate.

4.20 p.m.


My Lords, I share the view expressed by the noble Lord the Leader of the Opposition, that in view of the importance of this Statement, of the fact that it is to be followed by another Statement and that we have a great many speakers who wish to speak on the not-unimportant Water Bill, it might be wise if we were to curtail, as much as is reasonably possible, our discussion on my right honourable friend's Statement. If it is helpful in that respect I shall or course give noble Lords opposite an assurance that I, for my part, shall be very ready to respond to their suggestion that we should debate this at an early stage and that the arrangements should be discussed through the usual channels.


My Lords, without taking up an undue amount of time, would the noble Earl give me two figures? First, how many civil servants have been transferred to other authorities; and, second, is it or is it not a fact that there are 14,000 more non-industrial civil servants now than there were one year ago? Would the noble Earl also answer the point made by my noble friend Lord Wigg about the consumer boom? How can the Government hope to deal with the balance of payments unless they deal with the question of the boom in consumer durables?


My Lords, so far as Civil Service numbers are concerned, the Parliamentary Secretary answered a Question to-day in another place. A very full Statement indeed will be found in the Commons Hansard and I shall be very glad to have that Statement inserted in our own Hansard, in answer to a Written Question, if that would be helpful to noble Lords opposite. That Statement sets out the whole picture. It would be better if we were to discuss this matter on the basis of the detailed breakdown which is given in the reply to a Question to-day.


My Lords, it is quite outrageous that the noble Earl does not tell us whether the numbers of non-industrial civil servants have gone up or down. When the present Government Party were in Opposition they always attached enormous importance to this matter. We have not pursued the Government in the same way. The noble Earl is always very courteous, but we have had one very discourteous reply from his noble friend Lord Carrington to my noble friend Lord Shinwell earlier in the day and I think that he might give this figure. Failing that, perhaps he could arrange to make a Statement to the House to-morrow.


My Lords, I do not know why the noble Lord, Lord Shackle-ton, is making such a fuss about this. He knows the numbers perfectly well. They have been announced in another place. If he had wished to know them he could have asked me a question at any time in the last year on the subject. There has been no disguising this whatsoever.


My Lords, it was the noble Earl who made the statement to-day—and a most misleading statement. I hesitate to use strong words, but it was a most misleading statement which I think ought not to have come from the Minister responsible.


My Lords, may I ask the noble Earl a simple question? What bearing has the Statement he has just made, repeating the Statement made by his right honourable friend in the other place, on the report which has just been published on the shipbuilding industry? Is he aware that in that report it is explicitly stated that unless £250 million of additional expenditure is injected into the shipbuilding industry, many of the shipbuilding yards will have to close? What bearing has the Statement on that report?


My Lords, so far as I know, and here I speak subject to correction, that implies no reduction in the support available to the shipbuilding industry.


My Lords, in view of the fact that we have another Statement to come, we have already spent 34 minutes on this particular matter, and we have a long debate before us, would it not be possible to move on?


My Lords, it may be possible to move on, but may I ask another question? The Leader of the House has told us—and he is repeating what the Chancellor and the Prime Minister have said on every possible occasion—that investment is rising. Will he produce, before the next debate, a White Paper, or give us some proof of it?—because I, for one, am not convinced, particularly in view of the question asked by my noble friend Lord Shinwell, that there is an industry which wants at least £250 million. Are they going to get it or not? What is the good of the Minister saying that investment is rising when there is absolutely no proof at all that such is the case?


My Lords, is the noble Earl going to give an answer to my noble friend? In view of the fact that we have had this Statement—and I am not gloating about it, as it is a very difficult Statement—may I say that technology also brings with it side effects. At the present moment no figures have been given of the massive consumer boom, or of the amount of existing credit and hire-purchase. Will the Minister, when we have this debate, see that we get a full Statement on this question? Finally, in my supplementary questions, would the Minister not think that in view of the fact that we have gone into the Common Market some Committee with the necessary ability should look into our overseas spending, particularly military spending? That is one of the bugbears we have had to bear over the last 20 years or so, and consequently I think that, as the position is to-day, we should reassess our military commitments. That would be a duty for the Commission to look into.


My Lords, I think there is a general desire in your Lordships' House that we should move on. I find myself in this respect in a rather difficult position because I do not wish to speak, as it were, as Leader of your Lordships' House when I am answering questions on a particular point.


Saved by the bell!


The noble Lord, Lord Shackleton, has made a remark which I thought to be grossly unfair, if I may say so, at this particular juncture. What I should like to say is that I shall be glad to pass on to my right honourable friend the suggestion made by the noble Lord, Lord Wigg, that further information about investment prospects should, if possible, be made available. I suggest to the noble Lord, Lord Davies of Leek, and to the noble Lord, Lord Wigg, that the other points might be covered in any debate which we have arising from this Statement.