As my right hon. Friend has made clear on numerous occasions, we do not think it desirable, at a time of high unemployment and when the economy is working below capacity, to make reductions in public expenditure this year. Indeed, in September and October we announced increased expenditure on quick-acting measures to alleviate unemployment.
I think my hon. Friend will agree that these were very minor. Does he also agree that unemployment breeds on unemployment? Even in the orthodox sense, what is the use of depriving people of the opportunity of going to work—people who, therefore, have to claim rate and rent rebates, supplementary benefits, unemployment benefits and the 40 other means-tested allowances, when at the same time those who remain in work are the very taxpayers who have to contribute a greater amount to pay for all those allowances? Is this not the policy of the lunatic asylum? If the system cannot be changed within the present boundaries, is it not important that, as members of the Labour movement, we change the system which breeds this kind of policy?
I agree with my hon. Friend about the need to change the system. However, whatever may be the system that we have today, we would not help those who are unemployed by taking measures of general reflation, which, in the long term, would be positively damaging to those who are now unemployed and to others who might become so.
Both the public sector borrowing requirement and the present and proposed levels of public expenditure are bound to absorb all the cash that is presently and likely to be available. Where will the money come from for the revival in investment which was planned yesterday at Chequers, if there is not a further cut in public expenditure?
We have constantly made it clear that, in order to make room for the upturn in the economy that we expect, there will need to be cuts in public expenditure. Following next year, we expect that this will be absolutely right, in order to make room in the economy for precisely the investment to which the hon. Gentleman referred.
Despite the Chancellor's lamentable lack of courage in refraining from acting now, will he at least confirm that an essential element in his new industrial and economic strategy is steadily to reduce the share of gross domestic product taken by public expenditure in general and by social expenditure, however worthy, in particular?
Will he also say whether he still expects to be able to fulfil his Budget promise to phase out completely the price restraint subsidies to the nationalised industries by next April?
On the first question, it is my intention—I have made this clear on many occasions—to bring down the size of the public sector borrowing requirement drastically as recovery takes off. All the other countries which have public sector deficits of comparable size with ours, like Germany and the United States, have announced similar intentions. I do not think that it is possible to achieve this objective without substantial cuts in currently planned public expenditure programmes in 1977–78 and 1978–79, and I told the House in the debate in July that for that reason the whole Cabinet had agreed that there was very little room indeed for further growth in public expenditure beyond next year, in those two following years.
We also made it clear in the statement that we debated at Chequers, at the NEDC meeting yesterday, that, if we give first priority to industrial growth, as not only the Government but the CBI and the TUC now do, it must mean a lower priority for private consumption and for some of our social objectives. I am glad to say that the same view was taken by the Labour Party conference, when it unanimously accepted a document entitled "Labour and Industry", which contained this undertaking.
Is it not obvious that further cuts in public expenditure in the next two years will only worsen unemployment—[Interruption.] In view of today's survey by the CBI of forthcoming lay-offs, is not unemployment—[Interruption.]—now reaching such levels that there will be more than sufficient workers in the years ahead both—[Interruption.]
I made it clear that I do not propose to cut public expenditure this financial year. I also made it clear in my Budget Statement that the Government were cutting—they have now programmed these cuts in detail—planned public expenditure for the next financial year by about £1 billion at current prices, and in the following years there will have to be further cuts in programmes. This is for reasons which are fully accepted by the Labour Party conference, and I look to my hon. Friend, as a member of the National Executive Committee of the Labour Party, to show the same loyalty to conference decisions as he is always requiring of others.
Dealing with the point my hon. Friend made about unemployment and capacity, what he must accept is that, although it is possible for the Government to finance, without undue inflationary consequences, a public sector borrowing requirement of the current size while there is a very high level of private saving and a very low level of company investment, that will not be possible without printing money once the economy recovers. Both sides of the House must accept this as an arithmetical and statistical fact, from which there is no escape.
I congratulate the Chancellor on that last statement, which was much plainer than anything we have had before. Would it not be a kindness if he were to take every opportunity of ramming home to his supporters the fact that there will have to be massive public expenditure cuts, and that the argument is between people like himself, who find it politically easier to delay them, and people on the Opposition side of the House who believe that the cuts should be made now, however painful, if private industry is to have the resources and the opportunity to make new investment and create new jobs next year?
I do not need lectures from the hon. Gentleman about the way in which I should address my hon. Friends. However, if he is determined that we should cut public expenditure this year, he has a duty to fulfil an obligation which his leaders have continually dodged, namely, to tell us by how much—I do not even ask him to state where we must make the cuts; Opposition spokesmen have never been prepared to give any indication of that—he wants to make the cuts and what would be the unemployment consequences of those quantities. If he is not prepared to answer that question—his right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) has never been prepared to do so—all this rhetoric is so much hypocritical humbug.
When the decisions on the public expenditure cuts are taken, will my right hon. Friend ensure that the top priorities in Labour's social programmes, such as housing, pensions and regional development, are protected?
I accept that it is most important not to make cuts across the board but to relate the cuts to the priority which the Government have set themselves, and I can assure my hon. Friend that we shall do so.
Is the Chancellor aware that the people of Scotland will not accept any cuts in public expenditure in Scotland, particularly as Scottish oil is beginning to flow? Any cuts in public expenditure in Scotland will lead to even higher unemployment in Scotland, where unemployment is now running at six times that of another oil producing nation—Norway.
When he makes these remarks the hon. Gentleman should reflect on the fact that Scotland enjoys a higher proportion of public expenditure per capita than do other parts of the United Kingdom and, partly as a result of this, has seen unemployment increase very much more slowly than most parts of the United Kingdom, particularly the Midlands and the South-East.
The hon. Gentleman should know that the increases in the Customs and Excise are the exclusive result of the value added tax introduced by the Tory Government, and we warned them at the time that that was bound to be the result. We do not propose to try to conceal increases in the Civil Service by hiving off, from Government Departments to bodies like the Manpower Services Commission, functions which in fact are part of Government policy. Nevertheless, in spite of these devices, Civil Service numbers increased under the Tory administration.
As my right hon. Friend and I lay great store by Labour Party conference decisions, will he tell the House and the Labour Party Conference precisely what his public expenditure plans are for 1977–78 and 1978–79 and thereby get the approval of the party conference before the event, not after the event, and so that the party knows precisely where it stands?
Unfortunately, my understanding is that there will not be another Labour Party conference until October next year, and I cannot guarantee that it will not be necessary to tell the House of my plans for public expenditure in those years before that date.
Is the Chancellor really saying that, in face of the substantial excess of the public sector borrowing requirement, as of now, over the forecast that he made at the time of the Budget—which he would be willing to reveal if he were going to have a Budget next week—he has no further plans for reducing public spending next year beyond those announced in his last Budget Statement? If that is the position—and the whole House believes that the borrowing requirement is already £3 billion beyond his Budget forecast—is the right hon. Gentleman not taking the gravest possible risks of a serious economic situation? Is it not cruel folly to believe that he can run the economy without planning further substantial cuts in public spending next year?
I have answered that already today. I have made it clear that the answer is "No". I am not prepared to take these general lectures from a putative leader of the Conservative Party who refuses to give any indication of how big an increase of unemployment he is prepared to engender by cuts in public expenditure, this year or next year, of a size which he refuses to tell the House.