Public Expenditure

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

Alert me about debates like this

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury 12:00 am, 29th January 1974

I pay tribute to the hon. Gentleman's honesty in that matter. I want only to make it clear that even if £100 million were raised from industry, commerce and the better off, which in my opinion would have a serious effect upon the invisible account, one of the main earners on overseas account, it would go nowhere to meet the gap in the Government's accounts which must be closed.

I welcome the cuts made in December by my right hon. Friend the Chancellor of the Exchequer. I believe that he had no alternative, for a very good reason. There was a less good reason which can now, I hope, be disposed of—that the Government clearly wanted to keep an election option. The reason which is impressive is that any increases in taxation, particularly direct taxation, could not have been made in one week before Christmas. They would have required a great deal of preparation and then legislation, and clearly would not be possible until a Budget. Therefore, I think that my right hon. Friend had little alternative but to make a fairly strong gesture towards reducing the Government's deficit without precluding tax increases, which I believe will certainly be necessary as soon as they can be prepared. Therefore, I do not think that the Government are to be blamed for making the cuts.

But we must acknowledge that postponing programmes and postponing the purchase of stores will in due course have to be put right, because those programmes will have to be completed and those stores will have to be purchased.

The amount of the cuts is probably inadequate, at £1,200 million. To do in simple terms the arithmetic of the trade balance, we know that we are running a £2,500 million non-oil trade deficit. When we add £2,000 million for oil, we have a figure of £4,500 million. Against that, though it is seldom done, we must set the profit on invisibles, which may be £1,500 million, giving us a net gap of about £3,000 million. Much of that can no doubt be covered by long-term or short-term capital, but it does not seem wise to cover the bulk of it by capital borrowings. I very much hope that that deficit can be as to two-thirds reduced by tightening up the domestic economic situation.

What has happened is that the terms of trade have turned against us dramatically and in an important way. Although the Government said that they were prepared to let the balance of trade go wrong last year, because they expected an improvement in the terms of trade, that improvement has not occurred. Indeed, the terms have become worse, owing to the oil crisis. That must force us to accept a major change in our domestic economic circumstances to improve the position.

In relation to the details of the White Paper and the programmes, the responsibility of the State remains, once it has accepted the responsibility to discharge a programme, whether in education, pensions or whatever. By making cuts one can only put off the day when one must spend the money.

Although I support what the Government did, and believe that it was the only thing they could do in the circumstances, I think that there are only two ways in which Government expenditure can truthfully be reduced. The first is by greater efficiency in the public sector, by less use of men and materials. The second is by taking programmes out of the public sector and putting them back into the private sector. I want to talk briefly about those two possibilities in relation to the White Paper.

My right hon. and hon. Friends on the Front Bench have been very careful and rigorous in looking at Estimates and cutting out waste, in so far as it is possible for Ministers to do that when the papers finally reach them. But before the papers reach them there are many opportunities for improving efficiency in many services that the Government provide. I should like to see a much more rigorous attitude to measuring the performance of output of whole areas of Government activity, comparing it with similar figures abroad and, where possible, with similar figures in the private sector, and appointing people whose sole task it is to manage certain pseudo-industrial and pseudo-administrative parts of the machine more efficiently.

I cannot believe it right that big public companies such as ICI or Shell should spend large sums of money and employ many people on management efficiency and bonus schemes, and make endless checks into the efficiency of their organisations, whereas in the public sector practically half of our gross national product goes unmonitored and unsupervised. I hope, without being critical of the Government, that they will press on with plans to ensure, as has been done successfully in America, that higher standards of public efficiency are achieved.

We have had striking tax cuts from the Government, which are essential if in future the economy is to thrive and prosper. A much lower rate of taxation than the present rate is required in the decades ahead. I do not believe that we can achieve even the present level of tax cuts, let alone more, without compensating real cuts in public sector expenditure. We must consider the services which we deem necessary to be performed by the State as opposed to those which we can leave to individuals to pay for themselves.

The figures have now become quite interesting. The total of public sector spending in the White Paper is £32,000 million. I take off £1·2 million, which is the amount of the reductions made on 17th December. I am talking about a rough figure of £31,000 million after cuts have been made. That works out at £622 per inhabitant per year or £1,711 per household. Although it can be seen that a great deal of public expenditure is justified in terms of the conditions of 30 years ago when few people had an income of £1,711, let alone being able to afford to give that amount of money to the State to spend on their behalf, we now have a society with a higher standard of living, a higher standard of education and a higher standard of responsibility. Could not the public now be trusted with some of that expenditure rather than for all control to be with the State?

I recognise that there are many social services which the individual cannot provide for himself. For instance, the individual cannot provide defence, overseas services, law and order or roads. However, I believe that the individual can be trusted more to provide for his own health and part of his own education. Greater parts of the social security system could be insured for rather than provided by the State.

In future, with the terms of trade swinging so heavily against us, no Government of either party can afford not to look at the possibility of giving back responsibility for at least some parts of the welfare services to the citizen. At present State expenditure on the nationalised industries is £175 million. That is not the capital but the subsidies which are given to those industries. The State provides £590 million for agriculture, £1,965 million for trade and industry and £2,169 million for housing. They are all areas where definitely more and more of the responsibility could be put back into the private sector.

I recognise that all the areas which I have mentioned are areas of Government expenditure which the Government intend to reduce.