Mr George Thomas (Cardiff West): I have selected the amendment in the name of the Leader of the Opposition.
Mr John Biffen (Oswestry): I beg to move, That this House takes note of the White Paper on the Government's Expenditure Plans 1980–81 [Cmnd. 7746]. I do not know whether the House will be able to maintain the passion and excitement that was engendered by Scottish angling for the more prosaic subject of public expenditure.
The debate is being held against the general background of a steady and substantial rise in public spending, which has proceeded throughout the post-war period. Earlier this year the right hon. Edmund Dell, speaking at the London School of Economics, commented: The structure of government in this country reinforces pressure for high public expenditure and the lack of any constitutional limit on borrowing reduces the pressure on a Government to face up at once to the tax consequences of its profligacy. Since 1970–71 public spending in real terms has increased by up to 25 per cent., which is a most formidable statistic. The development has been paralleled by the emergence of large, powerful spending Ministeries which have altered the balance within a modern Cabinet and the historic role of the Treasury. I suspect that we shall all look back upon 1958 and the resignations of the entire Treasury team as a watershed in our post-war history. The right hon. Member for Down, South (Mr. Powell) is in the Chamber as a continuing reminder to us of that event. That defeat in that cause was more honourable than the cynical victory that his adversaries secured.
We have lived to regret the fashion for growth in public spending. Once again I turn to the remarks of the right hon. Edmund Dell. He said: There are some key economic decisions which it is right for the Chancellor of the Exchequer to take in agreement with the Prime Minister alone, and the level of public expenditure and of public borrowing are among these. In no sense do I claim any such presumption. The cheerful chuckle of the right hon. Member for Leeds, East (Mr. Healey) tells me how wise I am. Doubtless he would not wish to make such a claim based upon his experience of office. However, let it be understood that we must master public spending or else it will misrule us.
I deal first with the economic background to the White Paper. There is great international uncertainty. One has only to make the observation to get general consent. Hardly a day passes when we are not reminded of the seriousness of the situation in Iran and the expected impact of energy problems upon the economy of the United States. Wherever we look we see growing recognition that there is likely to be a pause in general economic activity and in the levels of world trade.
At home our forecast in the Industry Act for the movement of the domestic product next year suggests a drop of 2 per cent. A smaller drop is expected by the London Business School. The National Institute of Economic and Social Research estimates a modest rise. However, if we consider the spectrum of the various assessments that have been made of the likely progress of the United Kingdom next year, we must recognise that it is one which is not promising—namely, either a modest decline or at best the achievement of something slightly above breaking even.
The political background is provided by the White Paper that was published in January by the Government of whom the right hon. Member for Leeds, East was a member. That White Paper was optimistic in its assumptions about growth in the United Kingdom economy, and that optimism was reflected in public spending proposals. The Labour Government established expectations of public spending that could not be fulfilled. It is against that background that I shall discuss the contents of the White Paper that is being debated.
The White Paper represents a reduction of the spending plans that we inherited from our predecessors of about £3,500 million. Those who wish to explain away that gap have to do so in terms of taxation or in terms of borrowing, with all that that would imply for interest rates.
The theme of the White Paper that I emphasise is stability. The figures that it contains are broadly similar to those that we expect to be the outturn of public spending in the current year and which have been recorded as the outturn for 1978–79. Therefore, for the three years from 1978–79 up to and including 1980–81 we shall have broadly the same order of magnitude in real terms, with consequent effects on the demands that it makes on the revenue raised by taxation or by borrowing.
The second theme is that there should be broad stability between one year and another over the period to which I have referred. The Government have consciously reordered their priorities in public spending—for example, more will be spent on the Armed Forces and on the enforcement of domestic law and order in 1980–81 than in the current year.
Inevitably that has led to criticism, either that the White Paper is too harsh or that it is too lax. The criticism made by Labour Members is that the White Paper is too harsh. I shall consider that. Some Labour Members have chosen to represent the policy as one of savage cuts and a doctrinaire and heartless attack on the Welfare State.
Mr Dennis Skinner (Bolsover): Hear, hear.
Mr John Biffen (Oswestry): That is confirmed by no less an authority than the hon. Member for Bolsover (Mr. Skinner). The hon. Gentleman speaks with authority as a member of the national executive of the Labour Party.
Mr Dennis Skinner (Bolsover): And I have the full support of my right hon. Friend the Member for Leeds, East (Mr. Healey).
Mr John Biffen (Oswestry): Yes, he has the right hon. Gentleman's support. I admit that that is a formidable partnership. It is formidable for me in the House and frightening for the country.
Their sympathisers in the press have echoed their opinions. According to them, we are slashing expenditure, tearing apart the Welfare State, crippling the Health Service and making a frightening attack on family living standards. That is surprising when the decision announced in the White Paper was to hold the aggregate volume of spending at about the same level as that for 1978–79. That was the last year in office of the previous Labour Government. There is nothing proposed in our White Paper that is anything like the 6 per cent. reduction in spending that occurred in 1977–78 when the Labour Government were in office. Of course, we hear little about that from Labour Members when they are complaining of the allegedly dogmatic and doctrinaire nature of our own plans.
Nevertheless, it is true that certain budgets have been cut against the planned spending for the current year. First, spending has been reduced on industrial subsidies. That is in line with our manifesto commitment. Secondly, spending on the programmes of the Department of the Environment has been reduced by about 4 per cent. Surely there is increasing evidence that housing subsidy and rent control are seriously leading to a distortion in the market and that policies are needed that will ensure greater use of our existing housing stock.
In education, as the number of children in our schools is falling rapidly, some economies can be made without reducing the standard of teaching. The Government's intention is that most of the further reductions should be made on ancillary services such as school transport and school meals, save, as elsewhere, for special provision for the needy. We are also making reductions in expenditure on roads and transport, but, at nearly 3,000 million a year, that will continue to be one of the larger programmes.
As a result of such reductions, local authority expenditure will fall, although not by the same abrupt reduction as occurred two years ago. The planned reduction will be 3 per cent. over a two-year period—less than the cut in current expenditure. My right hon. Friends the Secretary of State for the Environment and the Secretary of State for Scotland have announced that the percentage that we will finance next year will remain the same as for this year.
It has been said that the White Paper is too lax. We envisage a volume of spending in 1980–81 no higher than the amount for last year and that expected this year. This is far from a prescription for massive cuts. It has been criticised for not being severe enough. My hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne) has pointed out that, if sales of assets and changes in the overseas liabilities of nationalised industries are left out of account, public expenditure will still be higher this year than last.
With respect, it is right to include those elements of the expenditure plans in making the comparison. The programme of sales of assets that has been initiated this year, and the further programme envisaged for next year, are destined to contribute towards holding down the public sector borrowing requirement until the longer term effects of our policy changes have worked through. The external financing of the nationalised industries can only sensibly be seen as a whole, as all of it adds to the public sector borrowing requirement. The external financing limits apply to the total requirements of each industry, wherever the money comes from. The Government stand behind the industries in respect of all borrowing. Most of their foreign borrowing is done under exchange guarantees.
Mr Alan Clark (Plymouth, Sutton): My right hon. Friend used the key phrase—"until the longer term effects of our policy changes have worked through." Surely the fundamental aspect of our economic policy is the cut in public expenditure. The White Paper implies that we intend to stabilise public expenditure for the time being. Disguised by the somewhat euphonious phrase that he always uses, my right hon. Friend said that Governent spending will stay the same for the next three years. How can any long-term effect work through unless public spending is significantly cut rather than stabilised?
Mr John Biffen (Oswestry): I am labouring under a slight cold and perhaps my hon. Friend misheard what I thought that I had said. I thought I said that there was a stability and comparability in the public spending for 1978–79, 1979–80 and 1980–81. I did not say that there would be stability in public spending for the next three years as that falls outside the scope of the debate. I will make reference to the later years before I conclude my remarks.
Mr Denis Healey (Leeds East): I recall the Chief Secretary telling us on television the other day that he had not been severe in cutting public spending in the next financial year as given in the plans before us today. We have heard much from the Chief Secretary and his colleagues about the need for further cuts next year. Can the Chief Secretary tell the House when they will be announced?
Mr John Biffen (Oswestry): The right hon. Gentleman is an amiable adversary but does not always quote in full context. On that occasion I was being asked whether I had got all I should have liked to achieve. I do not know of any Chief Secretary in history who achieved all that he would have liked to get in negotiations with his colleagues. It was in that context that those comments were made.
I recognise the concern of those who feel that even a stable volume of expenditure could be too high if output fell. The forecast that we published two weeks ago, with all its uncertainties, suggested that the world trade recession and unfavourable United Kingdom competitiveness could be reflected in a fall in domestic output next year. We shall, therefore, need to keep all our policies under review, including our public expenditure plans. The plans that we have published for 1980–81 represent the maximum that the country can afford at present.
Concerning the overall control of public spending, there can be no doubt that this White Paper is the central instrument in the planning of public expenditure. It covers a public spending survey that questions the provision for each spending function, current and capital. Reference was made in the debate on the economy last week by several hon. Members, including my right hon. Friend the Member for Taunton (Mr. du Cann) and my hon. Friend the Member for Bridlington (Mr. Townend) to the importance, within the White Paper discipline, of securing even greater economies. That function of the White Paper and the public expenditure survey will always be the major element in public spending control.
Interest has been shown recently in two other exercises. The first is the Civil Service Department exercise designed to control Civil Service manpower. The second is the exercise now being conducted by Sir Derek Rayner to identify and eliminate waste. My right hon. Friend the Lord President of the Council will be making a statement on Civil Service staff savings shortly. Small further savings wil be made in 1980–81 beyond those already contained in the White Paper. These, and further savings in the later years, will be reflected in the Government's subsequent White Paper.
During last Wednesday's debate, my hon. Friend the Member for Bath (Mr. Patten) made a pertinent point when he said: I hope that no one thinks that we can make all the savings necessary out of waste and out of administration without affecting the services. It is living in cloud-cuckoo-land to take that view."—[Official Report, 28 November 1979;Vol. 974, c. 1349.] That is a healthy corrective. Although I am certain that valuable savings will be achieved by the Civil Service Department, at the end of the day it comes back to consideration of the programmes that will secure savings.
Mr Jack Straw (Blackburn): Surely the right hon. Gentleman's admission that the savings cannot just be made from waste, underlies the fact that savings can be made only by cutting deeply into services.
Mr John Biffen (Oswestry): I thought that I had said that, although I put it in rather more felicitous and dispassionate words of my own. That subject does not lend itself to over-emotional language, because it can cloud the nature of the choice that must be made.
In consultation with Sir Derek Rayner, Government Departments are conducting critical scrutinies of particular services and functions. The purpose of that approach is to question the need for those activities and the way in which they are carried out, with a view to securing lasting improvements in the efficiency and effectiveness of Government. That would be a valuable service, but we should be wise not to dramatise what could be the consequences of such important work.
My hon. Friend the Member for Plymouth, Sutton (Mr. Clark) was interested in the future. I carry with me a constant concern and cheerfulness about the future, clouded only by the prospect of a triumph by the hon. Member for Bolsover within the Labour Party, and the subsequent threat that might represent to my otherwise cheerful view of what the coun- try might achieve. I do not regard the hon. Member for Bolsover as in any sense a caricature but as a serious and wholly legitimate contender for political authority in Britain. He is operating inside a party that is assisting rather than repelling him. Many of those who might fight him have taken flight to Brussels or elsewhere. Therefore, those of us who want to save this country, not merely for the traditional values of Conservatism but also for some of the elements of social democracy, know that the fight remains with us.
Finally, there is the general outlook for the years beyond 1980–81. This is even more uncertain. The Government have reviewed the plans published by the previous Government and will be making substantial reductions in them. Our plans for those years will be published in a subsequent White Paper. I cannot at present give the House a date for that White Paper because it has not been decided. We shall publish it as soon as possible in the new year. But the first priority, for operational reasons, was to publish the plans for 1980–81, which we have done a good deal earlier than previous Governments. The plans for the remainder of the Parliament are an important matter over which it is reasonable to take a little time. As soon as a date for publication has been decided, I shall, of course, inform the House.
Mr Denzil Davies (Llanelli): Can we now take it, then, that the plans for 1980–81 which are in this White Paper are the final plans for that year and that there will not be any further changes?
Mr John Biffen (Oswestry): Very little in this world is final, but certainly the White Paper that has just been presented to the House has been concluded as a consequence of a searching series of bilateral studies. That answer is as far as I am going this afternoon.
For similar reasons, I cannot tell the House today what the content of the next—
Mr Enoch Powell (South Down): I wonder whether it is possible for the right hon. Gentleman and the Government, even at this stage, to reconsider the desirability of publishing five-year forecasts, since the last three years in these forecasts normally bear little relationship to the actual experience and are unhelpful rather than helpful in controlling the expenditure of the first two years. I wonder whether one might reconsider the supposed wisdom of Plowdenism of the early 1960s, which really has done no service to either party when in office.
Mr John Biffen (Oswestry): The right hon. Gentleman makes a very interesting point. Although he refers to the practice as Plowdenism, I think I am right in saying that Lord Plowden did not recommend the publication of forecasts for the later years. I believe that there would be a general reluctance in the House to depart from having these forward surveys, not least because I suspect that, with the development of Select Committees, there would be great concern to be able to discuss and to analyse this kind of information. But I am sure that the right hon. Gentleman will readily understand that there is no settled and dogmatic view on these things.
The experience of the last few years has been such that, if any outside business man were to have made his own forward projections on what the Government said they thought would happen over the next two or three years, he would not have been particularly benefited by it. I hope that as time goes by we shall all have the wit, wisdom and humility to look at these things, to be ever vigilant to see whether we can improve the way in which we proceed, to try to ensure that what we publish is valuable and, if it is not valuable, to question seriously whether it should be published.
Mr Ken Woolmer (Batley and Morley): Could I press the right hon. Gentleman again on the stages of the White Paper that we are discussing today, and ask him whether he intends in the next month or two to bring forward proposals to reduce the amounts of public expenditure involved? It is pointless talking about four or five years hence if the Minister cannot even look two months ahead. Since the White Paper was published, we have already had a crisis 17 per cent. bank rate. If we cannot even today discuss the White Paper as representing the Government's plan, the House is in great difficulty. Will the right hon. Gentleman give an assurance that he does not intend in the next two or three months to bring forward proposals to reduce public spending still further next year?
Mr John Biffen (Oswestry): I can, of course, give no such assurance. It would be very foolish for anyone standing at this Dispatch Box to try to give such an assurance. I will tell the hon. Gentleman why. The answer was contained in his own intervention, when he said that we have had a 17 per cent. minimum lending rate. If we are in a situation in which factors external to public spending are constantly causing us to reconsider our judgment, of course we cannot say that it is as immutable as the law of the Medes and Persians. I ask the hon. Gentleman to look at the sheer commonsense aspect of it. The White Paper has been the product of very considerable and detailed negotiation, and any amendments or adjustments to it will have to be conditioned by these factors and by the proximity of the period under review.
Mr Stuart Holland (Lambeth Vauxhall): If the right hon. Gentleman will not answer the last question put to him—and granted that other Labour Members have not responded to his fearlessly treading on the soft ground of social democracy—will he explain, if he argues that a stable level of spending could be too high if output falls, how private output is likely to recover? Private output in this country depends crucially on public spending. It is the rise in public spending which has generated higher output.
Mr John Biffen (Oswestry): The hon. Gentleman makes, in a slightly immodest fashion, an assertion that the expansion of private output depends upon public spending. I very tentatively suggest that I disagree with that analysis. If I were to extend the argument as to why I disagree with the analysis, I should never reach the end of my speech, and the hon. Gentleman and many other hon. Members who wish to take part in the debate would be deprived of the opportunity to do so. But I will tell the hon. Gentleman that I believe that the recovery in manufacturing and commercial output in this country will not come about until there has been a much more encouraging climate for profitable success. I do not believe that that is something which is induced by politicians. I think it is much more likely to happen if politicians stand back. That, I know, is a posture which does not find favour with Labour Members.
I cannot tell the House today what the content of the next White Paper will be. I envisage that we shall be publishing in the White Paper, or by other means, much of the material which has appeared in previous White Papers, including figures for the full five years up to 1983–84. But I do not think that service has been done to the House or anyone else by some of the details in which figures have been published in previous White Papers about events still some four years ahead. Such events are well beyond the horizon of sensible prediction, except in broadest outline. To publish figures in the minutest detail which are subsequently revised beyond recognition is more like black magic than planning.
Having said that, I emphasis that it is not the Government's intention to deprive the House or those outside it of figures likely to be genuinely useful to them. In the meantime, the plans we have published for 1980–81 form the basis of the cash limits for next year. We have announced cash limits for the rate support grant and external financing limits for the nationalised industries. We shall be announcing the remaining cash limits on the normal timetable. It will be right to be rigorous in containing the cost of the public services within these limits.
One thing must be made plain. The extent to which the volume plans can be fulfilled will depend to a significant extent on the pay and price increases incurred by spending authorities. If these are higher than provided for in the limits, the plans will have to be adjusted. This is as it should be. It would be wrong for the Government to exempt the public services from the sort of discipline that the private sector has to accept.
Throughout these past weeks and months, the Government have sought to pursue a policy that strikes a balance for public spending. Such spending is the hallmark of a developed and civilized society, but always provided it is kept in check. Disciplined public spending fulfils an indispensable protective role. It should be our shield against external aggression and domestic lawlessness. It should enable the collective provision of welfare that cannot appropriately be left to individual circumstance. None the less, such a beneficial role can be ful- filled only if its total burden is well within the taxing and borrowing capacity of Government. Britain has enjoyed a steady rise in living standards over the past generation. That should lead to less rather than more dependence on public spending.
The irony is that we have levels of public spending that now threaten the borrowing and tax strategies of the Government. Public spending on a massive scale has become a destabilising rather than a protective element in the State. The trend of past decades must be arrested. That, as I see it, is the central issue in the debate. If the Opposition will not support, or at least acquiesce in, the Government's policies towards public spending, everybody is entitled to ask "Why?" and to be given an early answer. Do the Government's critics seriously suggest that the public sector borrowing requirement could be higher? Or do they think that taxes should be higher? If so, are they willing to accept an extra 8p or 10p on income tax in the next financial year and more the year after? These are the questions for social democrats, no less than for their opponents within the Labour Party.
One thing, however, is certain. The control of public spending is a major task. If the Government cannot undertake it with at least the acquiescence of even the social democrats on the Opposition Benches, the Government will tackle the task alone.