Public Expenditure

Part of the debate – in the House of Commons at 5:11 pm on 18th February 1987.

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Photo of Mr Bryan Gould Mr Bryan Gould , Dagenham 5:11 pm, 18th February 1987

I beg to move, as an amendment to the motion, at end to add: 'but condemns the Government's continuing hostility to public expenditure on vital community services which has produced such damaging cuts and imposed additional costs; regrets that so much public spending still has to be devoted to such unproductive purposes as unemployment; and recognises that the apparent relaxation of spending limits has been largely inadvertent, falls far short of what is needed to achieve satisfactory provision of services, and is in any case not intended to survive the General Election.'

We are invited in this debate to take note of a more than usually uninformative White Paper. It is particularly coy about some of those details on which the Government rightly feel political sensitivity, for example, on the matter of the cost of some aspects of the privatisation programme. Even where it does tell us things, we are bound to remark that that information must be treated with great caution in view of the obvious point that that, like so much else currently emanating from the Government. is so clearly geared to their pre-election needs.

The Chief Secretary demonstrated again today the basic unease that the Government always demonstrate when they talk about public spending. It was remarkable how much more comfortable he was when he was attacking what he fancifully called Labour's spending plans and how much more reticent and embarrassed he was when talking about his White Paper.

It is worth pausing to speculate as to why that should consistently be so. The reason is that the Chief Secretary has to come to the House and for the third or fourth time—so embarrassing for a Government who maintain that there have never been any alternatives and that their economic prescriptions are set in stone—and go through an exercise in which he concedes that his public spending target has once again had to change. We recall that the first target was that public spending was simply to be cut. There were no ifs or buts; that was what they were going to do. Unfortunately, that proved impossible. The next target was that it was to be kept level in real terms. I am afraid that that, too, proved to be impossible and went out of the window. We are now told that the target, yet to be achieved, is to reduce public spending as a proportion of the national income. What we have now is a pattern of behaviour where targets are fixed and then, in each case, missed. That is the first and obvious example of why the Chief Secretary should feel embarrassed.

There is a second reason. He dare not concede or reveal why he has found hitting his target so difficult. The reason is that he has found it impossible because the rise in public spending that he is now attempting to claim as a victory—a few years earlier he would have hidden it away as a defeat—is a manifestation of economic failure. Of the £19 billion increase in real terms since 1979–80, no less than £16·5 billion can be attributed to economic failure; to the social security programmes, unemployment, debt and interest payments on the national debt. The Chief Secretary has again tried to make a virtue out of necessity.

What has been forced upon him in the past is clearly set to continue because the White Paper concedes, in the assumption that it makes about unemployment, that unemployment will rise from the level specified in the preceding year's White Paper. The Chancellor's hand is still being forced by economic failure and by rises in public sector wage settlements, which he has fought tooth and nail to resist and has condemned root and branch, but which he is now forced to say are the basis upon which public spending has been allowed to rise.

There is a third reason for embarrassment. The Chancellor's efforts to cut public spending have been counter-productive in more than just macro economic terms, although that is very clear because the cuts have led to the economy collapsing in on itself. — [Interruption.] This point may elude Conservative Members but the public sector is a part of the economy. If one makes cuts in the public sector, one damages the economy and increases unemployment arid the cost of unemployment. It is no accident that the cost of unemployment to the public sector budget is now running at £22 billion per year. There are more direct and detailed consequences. The Audit Commission in an earlier report made it clear that the ill-considered and arbitrary cuts forced on local authorities meant that it was more difficult for them to reduce costs and to deliver services efficiently.

The real embarrassment is an ideological one. We have come a long way since the right hon. and learned Gentleman, now the Foreign Secretary, was the Chancellor of the Exchequer and said that public spending was at the heart of our economic problems. Is that still the view of the Chancellor of the Exchequer and the Chief Secretary? If it is, how can they justify the position to which they now have to adhere which is that they have done absolutely nothing to amend the levels of public spending which have risen throughout the bulk of their period in office as a proportion of national income? Do they wish to say that they have adhered to that fundamental proposition made by the first Chancellor in this Tory Administration, or are they to remain silent and to concede by their silence that a fundamental change has been forced upon them by harsh practical experience and by the needs of the pre-election position? I see that they do not rise to that challenge.

No wonder, in the light of those matters, there is a certain ambivalence, not to say schizophrenia, about the way in which the Chief Secretary attempts to deal with public spending. He is not a t all clear which way to face. He is not clear whether to speak to the audience in the City, which he is trying to show by a series of nods and winks and little bits of coded language that nothing has really changed and that the leopard has not changed its spots. He is saying that if the Conservative party was to fluke a win at the next general election the brakes would be on again. At the same time he has to say to the wider audience, the audience with many millions of votes, "Forget about what we used to say. All those bets are off. We have changed. We are reformed characters and we are now set on a course where public spending is a virtue and we shall restore all those cuts which we told you in the past we could not avoid, but which we now concede can be restored. What a wonderful thing that will be."