Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 12th March 1973.

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Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford 12:00 am, 12th March 1973

The hon. Gentleman, whilst making his intervention, wags an admonitory finger at me. I agree with him that these are difficult, complex and technical matters. The hon. Gentleman presided over the general sub-committee which produced the report, and its criticisms have been widely reported in the Press and have caused the Government some embarrassment. I believe its criticisms to be misconceived and I must be allowed to develop my case.

The second general point I wish to make, and again I do not think there will be much general disagreement, is that within the broad trend of spending short-term fluctuations are entirely appropriate as part of the Government's overall management of demand. As recently as last July the Select Committee supported that proposition.

Thirdly, continuing measures are needed to achieve a better balance between the different regions in the country. I do not believe that these three propositions are challenged anywhere in the House.

That being so, let me, coming to the point the hon. Gentleman has made, examine the recent additions to the spending programmes which formed the basis of his criticisms. I remind the House that these additions were made at a time when unemployment was high and rising, when there was much unused capacity in the economy, and when both unemployment and spare capacity were particularly evident in the regions.

The bulk of the additional spending falls under three main heads. There is the short-term counter-cyclical spending to which the hon. Gentleman referred and which amounts to over £675 million in the two years 1972–73 and 1973–74. [Interruption.] It is £207 million for the one year 1973–74. Second, there are continuing programmes of assistance to the regions amounting to about £475 million in 1973–74 and quite deliberately continuing thereafter. Thirdly, there are improved social security benefits amounting to over £200 million in 1973–74 and continuing thereafter.

The committee's complaints are, of course, directed to the second and third of those headings. The committee does not quarrel with the short-term counter-cyclical spending. So what is our answer? It is, first, that the cost is acceptable and can be accommodated in the medium term. That is not disputed. Second, by their timing these additions have contributed, and are still contributing, to the general stimulus to the economy and have thus helped to raise growth and reduce unemployment. Third, the continuing regional measures are right and proper in themselves, not only because we still face, and will continue to face, an intractable problem of regional unemployment, but also because the way their demand effect operates is particularly valuable. Expenditure which brings idle resources into use does not add correspondingly to overall demand pressure.

Finally, the increases in social security spending have been warmly welcomed on all sides of the House. As my right hon. Friend said, we have yet to hear any criticisms of those.