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 Robert Brown Mr Robert Brown , Newcastle upon Tyne West 12:00 am, 29th January 1974

We are facing three crises and, Heaven knows, a crisis in terms of 3½ years of this Government is nothing new. But three at one time is a bonus even for this lot.

We have inflation and the balance of payments crisis with an annual deficit, if the Governor of the Bank of England is anywhere near right, of some £3,000 million a year. Secondly, we have the oil crisis. Thirdly, we have an industrial relations crisis. The measures of 17th December imposed cuts in public expenditure of £1,200 million—£264 million on the nationalised industries, £212 million on roads and transport, £182 million on education, £128 million on defence, £80 million a year tax on capital gains on property, a 10 per cent. surcharge on surtax totally £35 million, and control of hire purchase. If those measures were meant to deal with the crisis, they are hopelessly inadequate.

As for inflation, the December budget is not likely to have any effect in the short term other than a dramatic slowing down in the building industry. With the housing situation that we have, this is one of the tragedies of the present situation. Long term, the likely effect will be governed by the extent to which inflationary pressure may have resulted from excess money supply associated with official deficit financing or excessive consumer credit.

The balance of payments is an immediate problem. The public expenditure cuts will make a minimal import saving contribution. I suggest that it will be about a third of a like amount of additional taxation. In any event, April is the starting date so the effects will not be felt much before this time next year or the back end of this year.

Obviously the hire-purchase restrictions will have a marginal effect on imports. But they will also hit home industries, not least the motor industry. Meanwhile the rapidly worsening value of the pound caused by our deteriorating balance of payments is like pouring petrol on the flames of inflation.

When we come to consider ways of dealing with the oil crisis, we find nothing in the Government's measures except for the hire-purchase restrictions which will damp down the demand for cars. But the oil crisis in itself was already doing this job, so that there is not much of a bonus in the hire-purchase restrictions, either.

Turning to the industrial relations front, I say at once that any attempt to present the Budget as hitting the rich is not even a starter. If we look at the £35 million surcharge on surtax, compared with the £300 million awarded to surtax payers in the 1972 Budget which is to be picked up this year, it is nothing short of a calculated insult to the lower and average wage earners.

The £80 million capital gains tax on property is like using a feather duster to move away deep, sticky mud. I do not think that a feather duster will do that job very successfully. Unless this tax is taken alongside better planning control it may well in itself prove inflationary.

The public expenditure cuts obviously will hit hardest the nationalised industries, public transport and education, which are all areas from which the poorer people mainly seek to benefit. This package is not calculated to convince trade unionists, least of all the miners, that this Government are pursuing a socially just policy, and the sooner that the Government realise that social justice can make one of the biggest appeals to the so-called rapacious trade unionists, the better we shall get along.

The cuts in public expenditure will affect not only socially desirable projects such as schools and public passenger transport schemes but, much worse, they will also reduce growth in the economy by about 2 per cent. below what it would have been without the cuts.

It is probable that unemployment will not increase as a result of the budget much before the end of the year. But in my view it is likely to double—in other words back to more than 1 million—and that is over and above any long-term unemployment resulting directly from the fuel crisis.

A package which does nothing in the short term is socially and economically damaging in the long term. Direct control on prices and on imports are what was needed. I have no doubt that on prices the Government find this politically unacceptable. But on import controls I have no doubt that we should soon run into trouble with our EEC relations.

I turn to the implications of the cuts for my constituents. At the back end of last month, the Department of the Environment issued a circular to local authorities calling for cuts on capital of 20 per cent. and on revenue of 10 per cent. What this means is that the new Newcastle-upon-Tyne District Council will not be able to initiate new capital schemes of any description.

Clearly this is a serious state of affairs, and it cannot be denied that a similar situation will prevail in all the other district councils within the Tyne and Wear County Council area. North Tyneside, South Tyneside, Gateshead and Sunderland will face the same problems as the new Newcastle district, and all five district councils have worthwhile schemes which should be commenced in the next 12 months.

The locally determined allocation will mean that the Newcastle District Council will barely be able to cover schemes already under contract. I understand that the total allocation for the whole of the Tyne and Wear County Council area for locally determined capita! schemes is £8 million for the coming financial year. Of that sum Newcastle District Council needs £3 million, which fortunately the other district councils have agreed, for its central area alone.

Newcastle is committed to central area redevelopment with two major contractors already working on site during the coming financial year to the extent of £3 million. It now learns that the proposed Department of the Environment allocation is to be £1·2 million. This is the type of problem that will face not only Newcastle District Council but every district council throughout the country.

The Government must appreciate that central area redevelopment cannot be financed from revenue and that such schemes already in midstream cannot be turned off like a tap. Therefore, this type of allocation is a complete nonsense. Goodness knows, the citizens of my fair city have suffered long enough with the central area redevelopment making the centre of the city resemble something like a battlefield. We do not want this to be protracted over years to come.

Last week at Question Time I asked the Secretary of State about the East Central Urban Motorway in Newcastle, and I should like to broaden this issue. Whatever one's view on the environmental argument that is now raging about urban motorways, only an idiot would argue that a scheme should be left in limbo when the major part of it has been completed. That is the situation with the East Central Urban Motorway in Newcastle. But added to that we have the nonsense of the Secretary of State for the Environment caving in to local pressures, he or his predecessor already having had a prolonged major public inquiry on the coast road extension scheme, and we are now in the midst of a further inquiry into that scheme. The initial inquiry resulted in massive demolition. We now have vast areas of dereliction waiting for the coast road extension scheme to go ahead.

Alongside that scheme we have the three-level major intersection at Brandling Park now almost completed. That major intersection will have two spurs, one to connect with the coast road extension and the other to connect with the North-West radial route. Neither of those spurs will be going anywhere.

The Secretary of State must realise that this is a lot of nonsense. He must urgently announce his decision on the coast road extension and give both grant and loan sanction for the coast road extension and the North-West radial route, so that we do not have the nonsense of this beautiful—some would argue that it was hideous—expensive three-level junction having two spurs going nowhere at all. It is complete lunacy to suggest that we should put up with that situation.

In the economic and energy situation debate on 19 th December I referred to the unequal effects of the Government's cuts on areas like the North-East where there is no question of any selectivity. In effect, this means that the poorer regions such as the North-East are carrying an unfair burden, because we are pushed faster into further poverty than the pot-bellied areas in the South-East and elsewhere. There is no doubt that we are carrying more than our share of unemployment at present. Clearly we shall carry a further burden of unemployment in the future.

If the Government believe in regional development, why do they not accept the case put forward by the Newcastle Airport Committee for an extension of the airport to international standards? Why do not the Government accept the case for the extension of regional airports on this basis and do away with the notion that everyone wants to fly from London? If the Maplin project were given a decent burial at once, we could do all of these things.

Finally, I turn to page 37 of the White Paper and to paragraph 7 thereon. That reads as a complete nonsense. The chapter is headed "Regional support and regeneration". Paragraph 7 is entitled "Regional employment premium". It states: At present no account is taken of any extension beyond 1974 of the premium, which is paid in respect of manufacturing establishments in development areas; though there is provision for residual claims into 1975–76. Once the precise form of phasing out the premium is decided, this provision will require amendment. Precisely what do the words "require amendment" mean? If they do not mean that REP will be maintained under some other name, it is a nonsense to talk about regional regeneration because the abolition of REP will spell absolute murder in the regions of this country.