Public Expenditure

Part of the debate – in the House of Commons at 7:42 pm on 7th May 1980.

Alert me about debates like this

Mr. Giles Radke:

I, too congratulate the Select Committee on the work that it has done. I congratulate it on the broad advice that it has received and on the report that it has produced. More important than the advice and the report has been the Committee's hearings. I have found them to be extremely instructive. I agree with the Committee that it has not been given enough information. Some information has to remain confidential, but I cannot always think what that information is. There have been some improvements in recent years in the information contained in White Papers. The presentation of the White Paper that is now before us, which includes taxation and public expenditure, is a useful improvement.

There are some wide gaps in the White Paper. Attention has already been drawn to some of them. The consequences of the cuts in housing expenditure are not included. It does not deal with the turn-round in the finances of the nationalised industries. That is likely to mean increased charges, which will have their impact on inflation. We are faced with the problem of North Sea oil. The Government's estimates are conservative. Phillips and Drew has said that the Government's estimate is about £3½ billion too small. That means that the Government have a useful card up their sleeve. That may be their reason for wishing to make a conservative estimate.

The forecast for unemployment is set very low at 1·8 million. It is said that that is not a forecast but an assumption. All the advisers that have appeared before the Select Committee have said that unemployment will be far worse. The Treasury should publish all the forecasts that it has made. We all know that it has made a number of different forecasts of unemployment on a number of different occasions. The publication of its forecasts would not commit it to any one forecast. At present it is committed to unemployment of 1·8 million, and if it goes higher it will have failed. It would be much easier for us if we had the range of Treasury forecasts. The Treasury increases speculation by not publishing them. It would be a good thing if it published more information on unemployment. It is not good enough for the Chancellor, for example, to read to the Committee a rather pompous lecture on confidentiality.

The Treasury must come to terms with the new regime. It must accept that we have the new Select Committees. Indeed, the procedures of the House may have to come to terms with that fact. It may be that one day will be set aside for Select Committee reports. If that is done, more hon. Members may attend debates on economic matters. We must all—that includes the Chancellor—come to terms with the existence of the new Select Committees.

I direct my remarks to Tory strategy, which in a sense we have all been assuming. It is something that we should tackle in this debate and in tomorrow's debate. I sec the two debates running into each other.

The Government believe that strict control of the money supply and cuts in public expenditure will eventually lead to a reduction in interest rates, a reduc tion in inflation, from 1982 a mysterious and substantial reduction in tax, an increase in output, and an increase in economic growth. That is what they believe will happen.

The great problem for the Government and for us all is how we get from now—now is an inflation rate of 20 per cent., unemployment high and rising, a stagnant economy with a decline in output and high interest rates—to the sunny uplands of the future as seen by the Treasury. There are three big question marks hanging over Conservative strategy. First, will that strategy reduce the level of inflation? Secondly, what will it do to British industry in the meantime? Thirdly—this is an important question for those who represent constituencies in development areas—what will be the impact on areas of high employment such as Merseyside, the North, Scotland and Wales?

I shall concentrate on the third question, but I shall make some brief remarks about questions one and two. First, I question very much whether control of public expenditure, cuts in public expenditure and control of the money supply will lead to reduced inflation. The behaviour of wage bargainers, among other factors, is extremely important. It is significant that we have seen earnings increase over the past year or so without an incomes policy. It is significant that the cold realities of public sector wage determination have triumphed over cash limits. We cannot proceed to reduce inflation without having an incomes policy.

The next question is the fate of British industry. The Select Committee is right to draw attention to what will happen over the next two years. The Treasury admits that in 1980 there will be a 4½ per cent. decline in manufacturing industry output and an average ½ per cent. decline over each of the three following years. As my right hon. Friend the Member for Leeds, East (Mr. Healey) said, that could be much worse.

High interest rates, high exchange rates, high inflation rates and a depressed market do not form the best environment in which to create the regeneration and the recovery of British industry that we all want. My theory is that by 1982 British industry will be almost on its knees and in condition to respond either to the upturn in world markets, which may occur, or to an internal consumption boom, which might occur because of tax cuts. By 1982–83 we could be in the middle of a balance of payments crisis, despite having the help of North Sea oil at its most full. That is my worry about industry.

I turn, finally, to the high unemployment in the regions. The general level of unemployment is likely to be high, but those of us who represent constituencies in the regions know that most of that unemployment will be concentrated in a few areas. We already know that there is an unemployment gap between the Northern region and the South and the situation is deteriorating very quickly.

To illustrate the point, I quote a few figures. In November, unemployment totalled 109,000 in the Northern region. By December it had reached 111,000. In January it was 114,800; in February 119,000; in March 121,000; and in April 126,000. If we compare March 1979 with March 1980, we see that there was a 30 per cent. drop in the number of vacancies. At the Newcastle jobcentre, which I visited a few weeks ago, the notice board has been taken away because there are no vacancies to put on that board.

Let us look at the unemployment flow. In the first four months of the year there is usually a decline in unemployment at the rate of 3,000 to 4,000 a month. Exactly the opposite is occurring at present. There is an increase of 3,000 to 4,000. Every hon. Member who represents this kind of constituency knows that there will be new redundancies every week.

I am fortunate in having Washington new town in my constituency. That new town was a joint party effort—it was Lord Hailsham's idea, and he was backed by the incoming Labour Government of 1964. The town was described as " the jewel in the Northern crown ". Certainly its balanced industrial structure enabled it to weather the storms of the 1970s. However, in almost every week over the past two months redundancies have been announced in that area.

It is against that background that we must judge the spending cuts. There will be cuts of almost 100 per cent. in the general and industrial support programme. There will be substantial spending cuts in employment creation and training. All those cuts have been announced in the White Paper. I do not pretend that Government support will solve all our regional problems or that regional policy by itself is enough. Nor do I believe that the regional or industrial policies of the Labour Government were satisfactory. But at a time when unemployment is rising very quickly and Government support is most needed, it is suicidal to cut back as this Government are doing.

Whenever we mention regional unemployment the eyes of Conservative Members tend to glaze over. Secretly they feel that as they did not get much support in those areas in the general election, they can probably get by next time without that support. They feel that they need not bother to do anything about the problems, and that they can still win elections, even if there is high unemployment in the North of England.

I believe that the Government ignore the problems of the North at their peril. They forget that there is a significant difference between the 1930s and the present. In the 1930s there was no television and people in the South did not know what was happening in the North. Today they know. They know that firms are going under and unemployment is rising month by month in the regions. They know when they see the fate of young people in places such as Newcastle, Sunderland and Durham. They know the desperate plight of towns such as Consett, which is about to be destroyed, and they see the decline in social morale and the gradual breakdown in the social fabric. When they see all these things the British people will reject the approach of the hard-faced men on the Treasury Bench and turn to a different approach. Every Government have their Achilles' heel and I believe that unemployment, particularly regional unemployment, will be this Government's Achilles' heel.