Unemployment: Costs to the Exchequer (Hansard, 2 March 1981)

§ Lord Beswick
My Lords, I beg leave to ask the Question which stands in my name on the Order Paper, and, in doing so, may I point out that the first figure in the Question should be £340 million and not £350 million as printed?

§ The Minister of State, Treasury (Lord Cockfield)
No, my Lords. The estimate given in February's Economic Progress Report, which, as the noble Lord himself says, was in fact £340 million for each additional 100,000 unemployed, measured only the direct costs of unemployment to the Exchequer. Debt interest payments depend on the total borrowing requirement and the level of interest rates and hence indirectly on a variety of economic factors. It would be wrong to attempt to attribute interest payments to individual flows of revenue or expenditure.

§ Lord Beswick
My Lords, in thanking the noble Lord for that reply, may I ask two questions? First, is it not a fact that the extra amount of unemployment created in the last 12 months will, on the Treasury's own estimate, cost some £3,825 million a year and that the interest charges for funding that amount will be not less than £500 million to £550 million? Secondly, if those figures are correct—and they may be higher—would it not be more seemly if Government Ministers would refer to those costs rather than the investments in public sector industries as being a haemorrhage in our economic system?

§ Lord Cockfield
No, my Lords. I would not accept any of the assumptions made by the noble Lord in the series of supplementary questions that he has asked. First, as was explained in the article in the Economic Progress Report, it is not possible to gross up the cost to the Exchequer of 100,000 unemployed to some higher figure; nor is it the position that the rise in unemployment is due to Government policies. I dealt at length with the reasons for the rise in unemployment in the debate in your Lordships' House about a fortnight ago, and it is unnecessary for me on 1216 this occasion to repeat what I then said.
So far as the second part of the first supplementary question is concerned, that relates also to an attempt to attribute interest payments to particular flows of expenditure and is not a valid exercise. So far as the second supplementary question is concerned, the Government have given very considerable support to a number of nationalised industries: in particular, the steel industry, British Leyland and now the coal industry. The money thus provided will help to sustain a higher level of employment than would otherwise exist.

§ Lord Kilmarnock
My Lords, would the noble Lord not agree that apart from the item mentioned in the Question of the noble Lord, Lord Beswick, there are other items which have been omitted from these costs? I refer specifically to payments from the Redundancy Fund and also the loss of indirect tax receipts. It would have been more realistic if these had also been included.

§ Lord Cockfield
No, my Lords, I would not agree. It was specifically stated in the article that the calculation referred to direct costs only. Once one tries to include indirect costs, one is in the field of examining the reasons for the particular rise in unemployment. If I may give the noble Lord an example: to the extent that a rise in unemployment is due to an excessive level of wage settlements, the tax the Government recoup on those excessive settlements is greater than the amount of tax that they lose as a result of the consequent unemployment.

§ Lord Mishcon
My Lords, would the noble Lord the Minister consider referring the Government's economic policy to the Monopolies Commission bearing in mind the fact that The Times, the Financial Times and the Economist all regard that policy as completely wrong, misplaced and dangerous, and so do so many institutions in the City? Is it not a matter that the Monopolies Commission should consider?

§ Lord Cockfield
My Lords, the noble Lord destroys his own argument. The reason for referring any matter to the Monopolies Commission is because of the existence of a monopoly. He is now claiming that there are all sorts of other people offering alternative policies. The fact that those alternative policies are uniformly wrong does not provide a case for reference to the Monopolies Commission.

§ Lord Mishcon
My Lords, the Minister, with his usual quick, witty reaction, has answered my question by a definition of "monopoly". Does he not realise that I was saying that the Government's view was a monopoly to itself since nobody else was allowed to share it?

§ Lord Cockfield
No, my Lords, obviously I do not accept that view. This is a very serious matter and I am sorry that the noble Lord should seek to deal with it in a flippant manner. There is nothing flippant about this. The Government have devoted, and will continue to devote, all their efforts to securing a solution of our present economic difficulties.

Lord Morris
My Lords, would not my noble friend agree that to suggest that the Government, as of themselves, are capable of creating employment—and, likewise, of creating unemployment as of themselves—is not only extremely inaccurate but quite wrong?

§ Lord Cockfield
My Lords, I entirely agree with my noble friend. The solution to our present problems must come through a revival of the private sector, and the efforts of Her Majesty's Government are directed to that end.

§ Lord Beswick
My Lords, while accepting the qualifications that are in the Economic Progress Report article, would the Minister disagree with the figure that I have given that £3,825 million is the cost within the 12 months' period excluding redundancy payments, other items and the fact that those not on the employment register are not included in the cost? Secondly, while accepting that the Government have in recent weeks made certain investments in the publicly-owned companies to which he referred, could they not have done it with better grace? Could they not have used rather different language and admitted that it would be even more expensive to the taxpayer if all the subsidies went in the cost of the unemployed?

§ Lord Cockfield
No, my Lords; I disagree with both supplementary questions. The figure of £340 million is a marginal cost for a specific change in the level of unemployment. As I have said before, you simply cannot multiply these figures together and argue that this is the total cost of unemployment of a very much greater order of magnitude. There are so many other variables which come into this figure. So far as the second supplementary question is concerned, I think that it is universally agreed that there is very considerable scope for improvement in the level of efficiency of the nationalised industries. I have made it clear on a number of occasions—I did so in the last speech I delivered in your Lordships' House—that we are very anxious to see an improvement in that level of efficiency. We have been prepared to put a great deal of money in in the hope of securing that improvement in the level of efficiency, and I think that it is legitimate to draw attention to this fact.