Orders of the Day — The Economy

Part of the debate – in the House of Commons at 12:00 am on 22nd May 1975.

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Photo of Mrs Margaret Thatcher Mrs Margaret Thatcher Leader of Her Majesty's Official Opposition, Leader of the Conservative Party 12:00 am, 22nd May 1975

The hon. Member will remember that the Conservative Government had to announce its public expenditure cuts one month after the oil crisis had started, on 17th December 1973—cuts greater in real terms than those which the Chancellor has now announced. They are all on the record. I took the view, I believe rightly, that at a time when growth in the economy was going well and we were expanding, education should be a major beneficiary, and the nation did very well at that time. That is the view of my colleagues, too. We took the view that when we had to have cuts, education also had to share more in those cuts than it had on 17th December 1973. I notice that some of the cuts which were made, although they were greeted with howls of derision by the then Opposition, have never been restored, even though this Government have added some £20,000 million of expenditure to their plans over the current two years.

The present level of public expenditure is well beyond the country's tax capacity and the Government's decision not to match it by increasing taxation really reveals that. It is evident that the population has nearly reached the limit of what it will take in increased tax. One cannot go on increasing public expenditure in times of no growth in the same way as, or even faster than, when the economy was growing. To do that is to redistribute the nation's income from the people to the public sector in a way which the people and the private sector will not accept and which they will strain by wage increases to correct.

The Government have no alternatives in this deteriorating situation but to reduce public expenditure, first because they cannot get enough in tax and, secondly, because they will not be able to borrow enough on a sound financial basis and therefore may be forced to use the printing press. Of course, the Government challenge us about where we would make cuts, implying that if political decisions were too difficult we need not make any decisions to cut. But in the present deteriorating situation they will make them anyway. They have been listed in the Official Report on 15th April—£1,100 million that could be brought forward to this year but are not.

In the present deteriorating economic position we have no choice but to make some cuts and, like the Economist this week, I have no doubt that at least the Treasury is preparing a substantial contingency package for later in the year. As a start, the Chancellor of the Exchequer could bring forward his £1,100 million in cuts, at present prices. I understand that effectively they will be worth only £900 million at 1974 prices. He could bring those forward and implement them now. Beyond that, all who have sat on the Front Bench know the processes that go on when there are Treasury cuts, and doubtless those on that Front Bench will have had experience of the process that goes on.

Those who were upstairs in the Public Expenditure Committee the other day heard evidence given in public by the Chief Secretary about how the Treasury goes about it. It would seem that times have not changed, and that the usual procedure has been followed. In practice, individual Departments are told to cut expenditure by a certain amount, and the choice of cuts is left to them, in the light of the state of current contracts and commitments and the costs of dislocation. Things are still the same, but the Chancellor of the Exchequer knows that below the Blue Book on Public Expenditure there is a Public Expenditure Survey Red Book which gives far more detail, at which I would love to have a look now. Below that there is a great sheaf of papers from each and every Department dealing with everything.

The Chancellor knows full well that when a direction goes out to cut expenditure it cannot be done just like that. Certainly, in my own Department one had to go through contracts pending, contracts signed, costs of compensation and cost of transfer payments to see where cuts could be made. There are certain places where one can cut, and then one is left with making cuts on things such as procurement. It is my suspicion that that is exactly what is going on now. If the Chancellor would give us access to those figures it would give us great pleasure to go through them and to see where cuts could be made.