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Government Expenditure

Volume 463: debated on Wednesday 6 April 1949

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This reduction, or elimination, of the surplus arises primarily from the increase in Government expenditure. The three main ingredients in this increase are Defence, Food and Social services. So far as Defence is concerned, we obviously cannot look for any marked reduction for some years, unless there is a complete change in the international situation. Indeed, we may have to face some increase, as a result of our co-operation in making the defences of Western Europe more effective and efficient. So far as food is concerned, that is a matter of the subsidies, with which I will deal in detail in a moment.

The Social Services are a permanent and continuing obligation, and that obligation is one which automatically increases as those services inevitably develop. Let me remind the Committee of some of the bigger social services Estimates for 1949: The two Education services (England and Wales and Scotland) £208 million; the two Health Services (England and Wales and Scotland) £260 million. National Insurance (the contribution of the Exchequer to the Insurance Fund, and the cost of family allowances) £208 million, and National Assistance £87 million. Here, in four blocks of services alone, we have benefits amounting to £763 million.

A great part of this expenditure relieves the individual, or his or her friends and relations, from charges which would otherwise full upon them. There is a true compensating saving in private and personal expenditure which must be reckoned a real saving to the individual, and this is additional to the benefit of the better services which are made available. But the cost in 1949 is not the end. Education must become more costly as more of the promised reforms come into operation. In addition, the increase in the birth rate, and the lower death rate among young children which all of us delight in mean that there will be one million more children to be educated, and 33,000 more teachers required, for this reason alone.

The same is true of the Health Services—the more and the better the services given, the more must be the cost. If, for instance, the 60,000 beds at present closed for want of staff are brought into operation, as we all hope they will be, then another £15 to £20 million will be added to the cost of the Health Services. The cost of social insurances will increase in the same way, particularly pensions, and the cost of them to the Exchequer will increase proportionately still more.

These Social Service expenditures will, therefore, inevitably increase over the next five or ten years. In 1946, it was actuarially calculated that the cost of National Insurance benefits would rise from £452 million in 1948 to £545 million in 1958, of which the Exchequer share would rise from £118 million to £190 million. Nothing can stop this, except the cutting down of the Social Services themselves, and that I do not believe anyone is prepared to recommend, because we all know their immense value to the people of this country.

We must, therefore, recognise the unpleasant fact that these services must be paid for, and they must be paid for by taxation, direct or indirect. There are, of course, economies that we can make, and are making, in our administration, particularly as regards terminal expenditure from the war, and temporary services arising out of the war. But these economies are, in the main, in terms of fractions of a million, whereas the new expenditure, of which I have been speaking as regards Social Services increases by tens of millions. We have, therefore, to face the fact that as long as the Defence Forces and the Social Services are maintained, whatever Government is in power a very high rate of taxation will continue to be necessary.

When considering this matter, we must bear in mind the very great and highly desirable redistribution of wealth that has already taken place over the last few years within our community. To a large extent, this has resulted from the provision of these extended Social Services—services for the less well to do at the cost of the more well to do—thereby making more equal the shares of the national income enjoyed. This has been a purposeful policy, I think most successfully carried through.

But there is not much further immediate possibility of the redistribution of national income by way of taxation in this country; for the future, we must rely rather upon the creation of more distributable wealth than upon the redistribution of the income that exists. Total taxation, local and national, is now more than 40 per cent. of the national income, and at that level the redistribution of income entailed in the payment for Social Services already falls, to a considerable extent, upon those who are the recipients of these services.

We must, therefore, moderate the speed of our advance in the extended application of the existing Social Services to our progressive ability to pay for them by an increase in our national income. Otherwise, we shall not be able to avoid entrenching, to an intolerable extent, upon the liberty of spending by the private individual for his own purposes. Hon. Members will recall that their traditional role is to be the defenders of the taxpayer against the rapacity of the Executive. Over many years now, the widening of the franchise and the introduction of services of immediate personal benefit to the people have naturally led Members on all sides of the House to take a keen interest in services of such benefit to their constituents and to press for their extension.

The roles of the private Member and the Executive in relation to expenditure have thus tended to become reversed. But do not let us forget that the House of Commons' responsibility for finance still remains, and cannot be abrogated, and that while Members may press for all round increases of expenditure, the time comes, as it has come today, when they have the responsibility of finding that money and meeting their own demands. I would venture to hope that, when demanding future increases for the services in which they are interested, hon. Members will keep fully in their minds the other side of their responsibilities.

Looking at Government expenditure as a whole, I have thought it advisable to issue today a Treasury Circular asking all Departments to review again the expenditure which is likely to flow from the development of existing policies, so that it can be kept within the bounds of what is considered feasible. In particular, I have emphasised that only in special cases, such as, for example, major changes of policy, can any Supplementary Estimates in future be permitted.