Public Expenditure

Part of the debate – in the House of Commons at 12:00 am on 29th January 1974.

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Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton 12:00 am, 29th January 1974

That may be one of the ways but we shall be able to discuss how it should be done in dealing with the incomes side of the matter when we discuss the Budget. I would naturally prefer to reverse some of the more harshly unfair tax measures taken by the Chancellor over the last three and a half years, but maybe the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) will not necessarily agree with me in that.

There is clearly a much greater benefit to be derived by reducing the level of imports than by following the course set by the Chancellor. But the only other case made by many commentators at the moment is that, taken together with oil price increases, the Chancellor now needs to borrow until North Sea oil comes on flow. In other words the Conservative slogan will now presumably be "Conservatives will borrow bigger". Even if it were possible—and the cost would be very high and some borrowing will obviously be essential—it does not remove the need to switch from personal consumption to exports. Indeed, it makes that course all the more necessary. Oil will certainly remove the need to borrow after, say, 1980, but it will not of itself repay the debts we shall have to build up between now and 1980. So I hope we do not place too much reliance on this new golden era that will arrive with North Sea oil.

The cuts in public expenditure alone will certainly not stop the level of inflation rising to as much as perhaps 15 per cent. in 1974. Those cuts alone will not stop the pound sinking in 1974. Both these problems will require a reduction in personal consumption and demand at home. That will itself help in the fight against inflation and above all it will strengthen exports, the balance of payments and the economy. That way only shall we stop the pound sinking and because of the export demand it would not lead to such heavy unemployment as would otherwise be created. To pretend that the problem can be solved in another way, as the Chancellor seems to be doing, is to give people a false impression of the urgency of the problem. Our charge is that the Chancellor is simply putting off the evil day by concentrating all his cuts on public expenditure.

I should now like to turn to precisely that concentration and pose the question that forms the latter part of our amendment. Assuming, for the sake of argument, that £1,200 million was about the right amount to cut in public expenditure, should it have been taken wholly from public expenditure or should some have been derived from private consumption? If it were correct to take it all from public expenditure, was it right to spread the cuts in the way that the Chancellor has done?

Let me make it clear that we accept in the present economic circumstances that all options are off and that many of the vitally important increases in public expenditure that my hon. and right hon. Friends and I want to see will regrettably have to wait. That does not mean that existing levels in every field should be chosen for cuts rather than tampering with the Chancellor's sacred cow of tax reliefs, which he has boasted so frequently of handing out over the last three and a half years. If there is little room for expansion in public expenditure in the present crisis, across-the-board cuts could be both dangerous and costly. Sharing cuts between all spending Ministers is a practice which has grown up amongst successive Governments on both sides of the House. That may be fairer as between Ministers in Cabinet, but it often does the maximum harm to the country.

Perhaps I may give a few examples of what I mean. Capital expenditure on goods and services in law, order and protective services will be cut by £32 million. That saving could very well have been more than balanced by the cost of undetected crime and fires. Then there is to be a cut in the capital expenditure of the British Steel Corporation of £67 million. I should imagine that that will prove a very expensive cut if, as we hope in the not-too-distant future, we revert to economic growth. Yet I imagine that once again we shall probably find ourselves short of steel.

I wish to examine the arguments for cuts exclusively in public expenditure rather than in a mixture of public and private expenditure. First, there is the matter of fairness. It was audacious of the Chief Secretary to suggest that what the Chancellor of the Exchequer had ever done was fair. I doubt that even the Chancellor, in his fairer moments, would have claimed that. An increase in direct taxes would fall hardest, where it should at such a time of national crisis, on those most able to bear the burden. That is what the Chancellor should have done. Cuts in many areas of public expenditure will hardly affect the wealthier members of the community. Take, for example, community services. On page 85 of the White Paper we were told—before the most recent cuts—that increased expenditure: … reflects the Government's policy of providing additional help to areas of urban deprivation. One knows that the Department concerned will try to protect community services, yet they will inevitably be hit by the cuts. One can only assume that the cuts announced on 17th December reflect the fact that the Chancellor of the Exchequer's concern for higher-rate taxpayers in 1974–75 is greater than his concern for areas of urban deprivation. The policy will almost certainly be counter-productive, for it will increase admissions to hospitals, thus costing the State more than the amount of the cut announced on 17th December.

Regarding personal social services, it is stated in paragraph 8 of page 100 of the White Paper: Capital expenditure by local authorities is largely devoted to the provision of additional or replacement residential accommodation or day facilities for the elderly, the physically or mentally handicapped, the mentally ill and children in care, and to the improvement of existing facilities. I know that the Department involved will try to differentiate in favour of these areas, but some cuts will be unavoidable.

We are bound again to come to the conclusion that the Chancellor of the Exchequer appears to prefer cuts or delays in this type of expenditure to increasing taxes, and again this policy will be counter-productive.

I turn to one of the most urgent needs of today, council housing, a need with which we all constantly come into contact. Rented accommodation is becoming more and more difficult to find in all our constituencies because fewer and fewer people are moving from council houses into owner-occupied houses. It is possible for the Chancellor of the Exchequer to boast that there are no cuts in housing expenditure, yet his policy has led to the cuts which have been made in recent years.

There is an incredible statement in paragraph 8 on page 70 of the White Paper: The assessment of local needs for rented accommodation is a matter for the local authorities and no limit is currently placed on the numbers of houses they may build to meet those needs. As we all know, there is a considerable limit—a financial limit. Thus we find in Table 3.12, as my hon. Friend the Member for Willesden, East (Mr. Free-son) pointed out—the Chief Secretary promised to deal with the matter but did not—a forecast of a tragic net reduction of net investment of £190 million a year over four years in new building. That is a shocking cut at a time when the housing situation in local authority areas—particularly in heavily built-up industrial areas—is becoming explosive. Pressures on councils, especially in the north, regarding housing and other services is such that the councils need increased assistance—not a reduction. The councils are now faced with an appalling choice between cuts in vital services or increases in the worst tax of all, local rates.

Another cut which will have serious consequences—but again not for the wealthier people in the community—is that affecting public transport. We know from an Answer to a Question on 21st December that there will be a cut of £178 million in roads and transport on the Department of the Environment Vote and a cut of £6·7 million on the Department of Trade and Industry Vote. Roads are an obvious choice for cuts—I do not quibble about that—but cuts in public transport would not only fall most harshly on an already long-suffering travelling public, but would also prove to be very costly if they forced more and more people away from public transport and on to the roads, at a time when the reverse should be happening.

Among the worst cuts will be those in education, amounting to £150·7 million. These cuts will not affect those who do not use State schools. My hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) gave some examples of the effect of cuts in education during yesterday's debate. He spoke about cuts in the number of under fives who are to be admitted to schools. Such a move will not affect people who do not use State schools. In Essex there are to be capital and revenue cuts of £626,000 in nursery programmes. In addition, the education authority in that area, and almost certainly many other education authorities, will not now be able to improve the teacher-pupil ratio, an improvement which is needed if we are to make improvements in our education system.

The Secretary of State for Education and Science said in yesterday's debate: I recognise that the cuts are serious, but they are not disastrous."—[OFFICIAL REPORT, 28th January 1974; Vol. 868, c. 49.] Those cuts will not be disastrous for the section of the nation which the right hon. Lady and her hon. Friends have divided from the rest, but they will be disastrous for that section which uses State schools.

In parts of Lancashire, including my own area, there are still primary schools over 100 years old where in high winds pupils who have to go to disgraceful outdoor toilets have to carry a bucket weighed down with books to prevent them being lifted off their feet. That situation is likely to continue unless funds are found to deal with such matters. [Interruption.] It is not very funny. I invite the hon. Member for Brighouse and Spenborough (Mr. Proudfoot) to visit the areas where what I have mentioned is being experienced. The people there are not laughing.