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Government Expenditure

Volume 526: debated on Tuesday 6 April 1954

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I will take Government expenditure first. The continuing rise in Government expenditure is serious enough in itself. On the income side we must recall that by next year most of the revenue from the Excess Profits Levy will have ceased, and we shall no longer be able to count on a large receipt from the sale of food stocks. We must also face a considerable reduction in U.S. aid which we have got used to appropriating in aid of our defence expenditure—and exceedingly grateful we are for it. The hard truth is that, much as we all want greater relief from taxation, even our present high rates will not save us from a serious threat to the balance of future Budgets if the growth of expenditure is not controlled. Of course, that balance may be disturbed by causes other than a rise in expenditure and an ending of particular receipts. If, for example, trade slackens, owing to a recession either here or overseas, the effects will be reflected in the revenue figures, mainly in the following year. Thus a slackening in economic activity may also lead us to a Budget deficit.

The aim of the Budget must always be to maintain the balance of the economy as a whole, whatever the mathematics above or below the line. Its aim, in short, must be to maintain employment, as indeed we have done, to encourage production, which we have done, while avoiding inflation, which we have done, and ensuring a healthy balance of payments, which we have succeeded in doing. The realities of our situation may therefore call either for a surplus or a deficit on the conventional Budget.

But these general considerations provide no excuse for not adopting a strict and sober attitude towards Government expenditure. The claims of the Government on the national resources leave us far too little freedom of movement for economic health. In the past year we have secured substantial administrative economies, particularly as a result of staff reductions made possible by decontrol. We shall continue to make these economies wherever we can. But they do not, in themselves, suffice to offset the increases hi expenditure which are dictated by considerations of policy. This is strikingly true of the three major heads of expenditure—defence, food and agriculture and the social services.