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Part of Oral Answers to Questions — Overseas Development – in the House of Commons at 12:00 am on 19 March 1979.

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Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton 12:00, 19 March 1979

I hoped that I had made that reasonably clear. I am obliged to the right hon. Gentleman for asking me to repeat it. If there is a higher growth of pay and prices, inevitably there will be consequences for the volume of public expenditure. That is one of the major reasons why I regret that we are not likely to achieve as great a moderation in pay settlements as I had thought.

I was about to examine the implicit and explicit proposition in the second part of the Opposition's amendment. To put it in the kindest possible way, I find the assumptions somewhat nonsensical.

Explicitly, the idea would be substantially to cut public expenditure and to provide scope to cut personal taxation. If a cut in public expenditure were offset by a cut in personal taxation, there would not, at least initially, be a great effect on either the borrowing requirement or interest rates. On the other hand, implicit in the second part of the amendment is the intention to cut the borrowing requirement to achieve lower interest rates. It does not necessarily follow that a lower borrowing requirement will automatically mean lower interest rates, but let us assume for the purpose of the second part of the argument, which is a serious one, that the borrowing requirement is cut and that from that simple cut lower interest rates are achieved.

I have examined the proposition seriously. I want to see cuts in personal taxation. However, to pretend that that can be done on the substantial scale needed to cut substantially both personal income tax and the borrowing requirement, regardless and in advance of improving Britain's industrial performance, is to present a fraudulent prospectus to the nation. It is to perpetrate on the public a great hoax, which is bound to backfire when the hoax is exposed, as it certainly would be. I hear murmurs from the Opposition Benches. It seems to be assumed that by cutting personal taxation there will be a result sufficient to reduce the borrowing requirement.

Public expenditure could be cut. I have never said that it is impossible to cut it. I argue that some public expenditure can and should be cut. I have a little more experience in that direction than those on the Opposition Front Bench. However, I did not cut public expenditure with the same gleeful anticipation that those on the Opposition Front Bench seem to have. To pretend that public expenditure can be cut on the scale that the Opposition imply in the second part of their amendment to achieve both a lower borrowing requirement and huge income tax cuts is, first, to delude themselves—which has obviously happened—and, secondly and much worse, to seek to delude the public.

I wish to examine seriously whether it is possible to do what the Opposition imply. I do so on the basis of my little experience of cutting public expenditure. First, I wish to demonstrate why a cut on the scale proposed by the Opposition is not possible. As a background I give four reasons. The first is that to make cuts on such a scale it is necessary to take account of the consequences on others of so doing. The second is the sheer impracticability of the exercise. The third is the economic consequences in the short and long terms. The fourth is the time scale. Against that background, I examined seriously the proposition that is implicit and explicit in the second part of the amendment.

I share the desire to make personal income tax cuts, if not to make them in the manner proposed by the Opposition Front Bench. I shall put forward certain ways in which personal income tax cuts might conceivably be achieved. I have tried in the past, without avail, to put these ways in the form of questions to the Opposition Front Bench. On this occasion I hope that I shall be forgiven for stating the possible ways as facts. If I am wrong, no doubt the Opposition will tell me.

We are now privileged to have much greater access to the thinking, if that is the right word, of the Opposition Front Bench. We find that the hon. Member for Blaby is writing articles in FinancialWeekly. We have a better idea of its thinking because we know that the hon. Gentleman's voice on these matters is clearly that of the right hon. and learned Member for Surrey, East, the Shadow Chancellor—at least, we assume so. I see from a smile of the hon. Member for St. Ives (Mr. Nott) that possibly it is the other way round.

The White Paper figure for general assistance to industry is over £500 million. Being a large figure, it has clearly caught the attention of the hon. Member for Blaby and other members on the Opposition Front Bench. A large part of that sum is already committed. The National Enterprise Board has committed the largest part of it to British Leyland and Rolls-Royce. For the purposes of my argument I assume that the Opposition Front Bench does not propose—at least not in 1979–80—to close down British Leyland or Rolls-Royce. I do not see any movement of heads, so I assume that that is correct.

The next area is future industrial support. It will not surprise the Opposition Front Bench when I say that I have examined that support with a fine-tooth comb. The savings that could be made would not start until 1980–81. Even then there would be some existing commitment. Some provisions would be needed for contingencies. However, I do not dispute that some savings could be made. I estimate that about £70 million a year could be saved for the next two years if all new NEB investment were curtailed.

Given the substantial queue of small businesses, especially, at the door of the NEB, it seems that if the Opposition were in Government they would have to leave some contingency funds available. I note from the smile on the lace of the hon. Member for Blaby that small business men had better not think along those lines if ever they are unfortunate enough to operate under a Conservative Government.

If future industrial support on a selective assistance basis were restricted to contingencies only, some savings could be made, but they would be small. There would be only a small saving, if any, in 1979–80. I reckon that in 1980–81 there could be a saving of about £10 million, with rather more saved in 1981–82. There would be some once-and-for-all savings by selling off some NEB assets. That might achieve savings of between £70 million and £100 million, but not a great deal altogether.

The other large item to which the Opposition have had their eyes attracted is the functioning of the labour market and the figure of £1,243 million in 1979–80—a growth, from 1973–74. of £269 million. That growth has been largely in industrial training, from £116 million to £511 million, and in special employment measures, where expenditure has risen from nil to £446 million.

I do not argue that cuts are not possible in these areas, but do Opposition Front Bench Members argue that they propose, despite everything that the Opposition pressed on the Government about industrial training, to cut expenditure on industrial training? I see that there are no nods or winks, or anything else. I assume that the Opposition do not propose to cut expenditure on industrial training.

I see the Shadow spokesman for employment sitting below the Gangway. I hope that nothing serious has happened. I assume that he would not want to see a cut in industrial training. I understand that when I look at some of his hon. Friends.

The second area would be special employment measures. Do the Opposition have in mind to cut the whole of the expenditure on the special temporary employment measures, youth opportunities, the job release scheme, the small firms employment subsidy and the rest? Do they have in mind to cut those schemes? I suppose they might. If they started with a 25 per cent. cut they might achieve a saving of £60 million in 1980–81. They might attain a more considerable saving if the schemes were cut entirely. However, in last year's debate the right hon. and learned Member for Surrey, East raised this matter.

The hon. Member for St. Ives should not nod, or he will cause me to think that the Opposition plan immediate cuts. Before the hon. Gentleman says what he would do, I remind him that on 16 March 1978 the Shadow Chancellor said that he would taper out these expenditures.