PUBLIC EXPENDITURE CUTS (Hansard, 16 January 1980)

§ Lord MILVERTON
My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

§ The MINISTER of STATE, TREASURY (Lord Cockfield)
My Lords, our present economic difficulties are due in no small measure to an excessive level of public expenditure. We must tackle this problem. We are determined to do so. We have the support of the public and we shall continue to enjoy that support. We want a better future for all of our people, but we will only secure it by harder work and greater productivity.

§ Lord MILVERTON
My Lords, I thank my noble friend the Minister for his Answer. However, is it not possible that in one's zealousness to get the economic situation right one can overcut, or overcut too quickly, in much the same way as one can overspend, and that the problem has a greater dimension than economics? Therefore, through the economic wizards, could the Government give a little encouragement to the ordinary people of this land?

§ Lord COCKFIELD
My Lords, I understand entirely the point that my noble friend is making. There is, however, no evidence that we have proceeded too quickly or too far in restraining the level 110 of public expenditure. It is of course essential to get down the rate of inflation, and our policy on public expenditure is an integral part of that policy.

§ Lord WELLS-PESTELL
My Lords, may I ask the noble Lord the Minister whether the Government are really living in such a fool's paradise that they can believe that they have the support of the public, having regard to the most recent by-election? Secondly, may I ask the noble Lord whether he does not realise that the cuts in public expenditure are falling very heavily on those sections of the community that are helpless and can least afford it? Thirdly, may I ask whether it is not a fact that the creation of unemployment is a central part of the present Government's economic policy?

§ Lord COCKFIELD
My Lords, extrication of our country from the fool's paradise in which they were living under the Labour Government is a central part of our policy. Nobody takes any great pleasure in cutting public expenditure or in cutting public services, but the nation is in exactly the same position as an individual. We cannot spend money we do not have. The future of our country must lie in a rise in the level of production, and that can be achieved only if we lift from the shoulders of our people the burdens imposed upon them by an excessive level of public expenditure.

Lord CAMPBELL of CROY
My Lords, can my noble friend confirm that the present position is that so far the total of public expenditure is being held at about the same level, and it is future planned increases in public expenditure which are now being considered for reduction?

§ Lord COCKFIELD
My Lords, as my noble friend says, the position is that the current level of public expenditure in real terms is the same as it was last year. We are of course now engaged in a major review of the whole field of public expenditure.

§ Viscount MASSEREENE and FERRARD
My Lords, would not my noble friend agree that the present cuts are merely—

Several noble Lords
Order!

§ Lord UNDERHILL
My Lords, may I ask the noble Lord whether the Government accept the report of the EEC Commission of July 1979, that the proportion of GDP spent on central Government and local expenditure in Britain is the lowest of all nine EEC countries and 4 per cent. below the EEC average. and in the light of that what are the Government's criteria for determining their own level of public expenditure?

§ Lord COCKFIELD
My Lords, the criterion that we apply is whether the nation can afford the level of public expenditure concerned. It is perfectly obvious from what has happened in this country, particularly in relation to the level of the Government's borrowing requirement and the resulting rate of inflation which has flowed from that, that the level to which public expenditure was raised under the previous Administration was an insupportable one.

§ Viscount MASSEREENE and FERRARD
My Lords, would not my noble friend agree that the present cuts are merely scratching the surface of the problems of waste, inefficiency and over-manning, so much responsible for our excessive public expenditure? And would he not further agree that it is the duty of Governments to govern in the interests of the whole community (which the present Government are doing) and not to pander to the misinformed and uninstructed opinions of certain members of the community?

§ Lord COCKFIELD
My Lords, it is of course the objective of the Government to govern in the interests of all the people of our country, and we shall continue to do so. As I have said, we are reviewing in detail public expenditure in every aspect, and the question of waste and inefficiency are two important matters that are in mind.

§ Lord BLYTON
My Lords, is the Minister aware that he stated that it is the Government's objective to reduce inflation? The Government have decided to put up the price of gas by 29 per cent. and electricity by 22 per cent., and when that percolates through the economy everything will go up. How can inflation 112 be reduced when the Government adopt such policies?

§ Lord COCKFIELD
My Lords, that particular question goes somewhat wide of the one on the Order Paper; but deficiencies, in particular in the case of nationalised industries, are reflected in the public sector borrowing requirement and at the same time surpluses made by the nationalised industries appear as credits in the public sector borrowing requirement. Therefore, one would not get any improvement by failing to charge proper prices.

§ Lord LEATHERLAND
My Lords, will the Minister agree that a good deal of public expenditure is expenditure on goods and that this raises production and keeps unemployment down, and to that extent is it not a worthy object?

§ Lord COCKFIELD
My Lords, public expenditure is expenditure not only on goods but of course on wages and salaries as well. The reason for trying to curb the level of public expenditure is to make room in the economy for the growth in the private sector, and from the point of view of the long-term health of the economy that is preferable to and much healthier than a growth in the public sector.

§ Lord ROBBINS
My Lords, can the noble Lord remind the House of the gap between the present rate of inflation and the present rate of productivity?

§ Lord COCKFIELD
The gap, my Lords, is unfortunately very wide indeed. We have a rate of inflation of approximately 17 per cent. per annum and a growth in productivity at present of virtually nil. That is why I said at the end of my Answer that our future rests upon achieving a much better level of productivity.

§ Lord WELLS-PESTELL
My Lords, if wage settlements are below the rate of inflation does not that depress consumer expenditure and, as an ultimate consequence, lead to increased unemployment?

§ Lord COCKFIELD
No, my Lords; it does not have any such effect at all.