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Commons Chamber

Volume 964: debated on Monday 19 March 1979

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House Of Commons

Monday 19 March 1979

The House met at half-past Two o'clock


[Mr. SPEAKER in the Chair]

Oral Answers To Questions


Central Electricity Generating Board (Oil Supplies)


asked the Secretary of State for Energy what he estimates the percentage cut in United Kingdom oil demand would be if the Central Electricity Generating Board replaced oil with coal.

It is not possible for the CEGB to replace all its oil with coal, but it will make a substantial contribution towards our International Energy Agency undertaking to reduce oil demand by 5 per cent.

It is intended, instead of using oil, to burn as much coal as possible? If so, is my hon. Friend satisfied that there is sufficient rolling stock on the railways to deal with the extra coal? There have been reports of a shortage.

The intention is to burn more coal, but that will depend on a number of factors. The aim would be about 5½ million tonnes, which would give a burn of about 80 million tonnes. There is a problem of rolling stock on the railways, and a meeting is taking place between those concerned to try to resolve that.

How much extra cost will be involved in subsidies to the CEGB if the switch to coalburn is achieved?

Energy Policy


asked the Secretary of State for Energy whether, in the light of recent adverse developments on the international scene concerning oil supplies, he will make a statement on changes in national energy policy.


asked the Secretary of State for Energy if he will make a statement on the recent discussions in the International Energy Agency.

I refer the House to the answer I gave on 8 March to my hon. Friend the Member for Birmingham, Ladywood (Mr. Sever). The Green Paper on energy policy proposed a flexible strategy based on the assumption that oil would become increasingly scarce and expensive. Recent events in Iran, and the resultant effects on oil supplies, have reinforced the Government's belief in the merit of this strategy, which permits a flexible response.

How soon do the Government expect to reach the 5 per cent. reduction target agreed by the International Energy Agency? What steps are they taking to prevent the abuse of the situation by the oil companies?

Our aim is to reach the target as soon as possible. As my hon. Friend has just stated, that will involve a shift to coalburn, which is now being discussed. On the question of the oil companies, we have for some months been monitoring the movement of oil. I have sought and am receiving specific and categoric assurances from the chairmen of the major oil companies to guard against the danger to which my hon. Friend has referred.

How far did the International Energy Agency discuss renewable energy resources and their possible application to help deal with the problem of oil?

The pressure to build up capability in alternative energy sources and improve conservation will clearly be accelerated by recent events. It is not possible to look to those sources to meet energy needs in the current year, but work on them has become more urgent.

How will the Government increase coalburn in power stations without reducing the thermal efficiency of electricity production, which is already the lowest in Europe?

We must deal first with the deficiency of 2 million to 2½ million barrels of oil a day as a result of the situation in Iran. We can make a positive and immediate contribution to meet that deficiency through our coal policy.

Is the Minister aware that certain oil distribution companies in Scotland have had their supplies cut back by about 15 per cent.? It is disgraceful that that should happen in Scotland, which is producing from the North Sea six times its annual consumption.

I am aware of these problems. One difficulty is that brokers come into the market when the spot price is low and build up a market of their own. When the spot price rises, the broker disconnects the telephone and the oil is not available. The major oil companies, some of which are faced with force majeure cuts, cannot therefore take on the additional demands on them. That is one of the most powerful cases for Government control of oil policy, and it is that which lies at the heart of the policies that we developed.

How do the Government intend in the near future to tackle the massive waste of energy caused by heat loss?

Generally, on the question of thermal efficiency and heat loss, in the long and mid-term we propose a more rapid move on combined heat and power. But we must shift to coalburn to reduce the importation of oil, and in the short-term that may appear to be counter to the longer-term aim.

How quickly does the Secretary of State expect these economy contributions from the United Kingdom to be reflected in our oil consumption figures? Secondly, is it really any saving at all to save the heaviest fraction of the barrel, where there is not the shortage that there is at the lighter end?

Certainly, because the object is to reduce the pressure of demand on world oil supplies. We can make a contribution because we have a powerful coal policy. Our refineries will have to try to split the barrel in a way which deals with the problem to which the hon. Member has referred. This may take some time. Certainly it confirms our wisdom of maintaining the coal industry and resisting the demands from the EEC to cut back our refinery capacity.

National Coal Board

asked the Secretary of State for Energy when he expects to meet the chairman of the National Coal Board.


asked the Secretary of State for Energy when he expects to meet the chairman of the National Coal Board.


asked the Secretary of State for Energy when he intends to meet the chairman of the National Coal Board.

When the Secretary of State next meets the chairman of the National Coal Board, will he commend him, and through him the NUM executive, on the pay deal that has been reached? Will he tell the chairman that he would have preferred differentials to have been maintained, but that nevertheless, he hopes the miners will vote for the deal in next week's ballot?

No, I shall do none of those things, for the simple reason that the negotiations that have taken place between the Coal Board and the NUM have followed a joint examination of the prospects for the industry under the planning agreement signed with the NCB. Parliamentary comments about the way in which an agreed overall settlement is divided between different groups are not appropriate or helpful. It is better to leave it to the bargaining that takes place within the industry.

In view of recent confirmation of an estimated 300 million to 400 million tons of coal reserves in the Hirst seam of the Stirlingshire-Clackmannan coal basin, will my right hon. Friend arrange joint discussions between the National Coal Board and the Electricity Board with a view to using these reserves for a refurbished coal-fired power station at Kincardine, which would mean a reliable supply of energy as well as improved employment prospects for workers in the electricity and coal industries, such as the miners at Polmaise colliery?

My hon. Friend the Under-Secretary of State was there when the new pit was begun on Friday, and there is a programme of exploratory drilling. I gather that 10 boreholes have been drilled and another four are to be drilled. It is difficult at present to know exactly what reserves will be revealed. This whole issue is the subject of discussion between the Coal Board and the South of Scotland Electricity Board, for which my right hon. Friend the Secretary of State for Scotland is responsible.

In his discussions with the chairman, has the Secretary of State been given any forecasts of the time when the coal industry is likely to return to profitability, in view of the rising price of energy? If such a forecast has been discussed, will the Secretary of State indicate it to the House?

There have been detailed discussions, but events like those in Iran will knock all our forecasts awry. It is not possible to give a specific forecast to which one can adhere on such matters. I hope the House will remember that in the current year the degree of Government support to the mining industry has been £174 million, compared with almost £3 billion given by the German taxpayers in support of their mining industry. We have the cheapest coal production in the EEC. We are overwhelmingly the large contributor. It is a source of strength to the EEC that that coal is available and that we have a massive investment and development programme in coal.

Will the Secretary of State discuss with the chairman of the NCB the question of the Common Market in much more detail, especially now that even Ministers are revealing the real truth about this lousy market? Will my right hon. Friend ask Sir Derek Ezra why, since the referendum—

The 1975 referendum—that is the one that really matters, not that tin-pot thing we had the other day. Will my right hon. Friend tell Sir Derek Ezra that we now sell less coal to the Common Market than we were selling at the time of the referendum despite the fact that Sir Derek and others like him jump on the gravy train to the EEC every now and again? Will my right hon. Friend tell him to do something about it, especially now that we have 35 million tons of coal at the pit top?

The coal stocks at the end of the winter are just over 29 million tons. We are debating this matter in the House tomorrow. I share my hon. Friend's concern that, despite all that has been said at energy councils in the EEC about greater self-sufficiency in Europe, there has been no support whatever for the EEC's major coal producer to have its coal burnt in the power stations of the Community. This is despite the enormous subsidies given by other member States to their own coal industries.

Will the right hon. Gentleman encourage the chairman of the NCB to be more forthcoming in providing figures to enable intelligent comparisons to be made between the long and short-term costs of opencast versus deep mined coal? Will he also give us the figures of reserves and marginal costs?

I shall look at that and see whether the figures are available. If so, I shall consider making them available to the House. However, there is a far greater degree of disclosure by the Coal Board about its own costs than by the private oil companies with which we have to deal, and therefore the House is far better informed about the position.

Are not the figures that the Secretary of State frequently quotes on European support for the coal industry the clearest evidence of the strength of our case for the coalburn contribution to European markets? Is it not a measure of his failure in negotiation that we still have absolutely nothing to show for that? In fact he admitted the failure in an interview in the Financial Times.

These are EEC figures. Only a few months ago the hon. Member was asking me to concede on refinery policy in order to get support for the coal policy. In the event, all that we said about refinery policy has been proved up to the hilt to be absolutely correct. Perhaps the hon. Member will look in Hansard and see whether my memory is correct, and that at earlier Question Times all the Opposition Front Bench did was to suggest that we capitulate, either to the oil companies or the Common Market Commission.

European Community (Energy Ministers)


asked the Secretary of State for Energy when he proposes next to meet with the EEC Council of Energy Ministers.


asked the Secretary of State for Energy when he intends next to meet his EEC colleagues.

I expect to meet other EEC Energy Ministers at the next meeting of the Energy Council on 27 March.

Following the Secretary of State's reply to the hon. Member for Bolsover (Mr. Skinner) just now, is it not a fact that the right hon. Gentleman himself has been the largest single stumbling block to the emergence of a credible EEC energy policy—

—which could mean large subsidies for our power station coal? How can such a policy emerge when the Secretary of State himself is, in his own Minister of State's words,"a most dedicated anti-Marketeer? "

The hon. Member's question confirms what the Government know, namely, that the Opposition's policy is one of total capitulation to the demands of the Commission. We are overwhelmingly the largest energy producer in Europe. The fact is that 51 per cent. of all the oil investment in the EEC, 33 per cent. of all the coal investment and 27 per cent. of all energy investment is British. We have co-operated in the Euratom loans and in the coking coal schemes in every possible way. That is different from transferring the control of our own energy from the House of Commons to the Commission. I am absolutely opposed to that, and on this matter I have enjoyed support from many members from the Conservative Party as well as from my own colleagues.

Did the right hon. Gentleman notice that last Thursday, in the Standing Committee on the Merchant Shipping Bill, Back Benchers on both sides of the Committee voted by 10 to two to make the owner of the oil, rather than the carriers, responsible for pollution? As this could have implications for the right hon. Gentleman's Department, will he discuss the matter with his EEC colleagues and try to report back to the House on the implications before the Report stage of the Merchant Shipping Bill?

My Department followed the exchanges in that Committee on 15 February. My hon. Friend the Under-Secretary of State for Trade is now investigating the point made in that Committee and will be informing the hon. Gentleman, who has raised a matter of considerable substance.

When my right hon. Friend meets his EEC colleagues, will he tell them in no uncertain terms that, although the Conservative Party is prepared to subvert the best interests of this country to foreign-dominated bodies, the Labour Party is not? Will he also tell them that we in the Labour Party intend to keep control of all our energy sources, including North Sea oil and uranium, and that in due course we shall make arrangements on uranium with Commonwealth countries, such as Australia, no matter what the EEC says?

Our position in the Energy Council is not seen by our ministerial colleagues as a destructive one. It is only the Conservative Party whose members continually urge us to hand over to the Commission control of our oil, of our atomic policy and of our refineries. In arguing our case there we find that there is support from other colleagues, notably the French Government, who have no more intention than we have of seeing the control of nuclear policy transferred from member States to the Commission. We have no intention whatever of transferring responsibility for oil policy and control of the continental shelf from the British Parliament to the Commission in Brussels.

Will the Secretary of State leave aside some of the party bickering that he is trying to further and when he next meets his ministerial colleagues turn his mind to the problem of the Bantry Bay explosion, with the difficulties that that kind of event could cause to British and European ports? Will Her Majesty's Government urge the Europeans to join us in ensuring that all oil delivered by tanker is delivered only by tankers with an inert gas re-injection system, so that such explosion can be minimised? That would be a major step forward for this Government, irrespective of politics, and would benefit the whole of Europe.

The case cited by the hon. Gentleman does not fall within my responsibility, because it relates to pollution at sea, but it is a perfect example of the harmonisation and co-operation which is possible and which the British Government are encouraging in every way with the EEC.

However, the point on which I was being challenged was different, namely whether it follows that if there is common interest in a subject the power of decision should be transferred to the Commission. That was the only point with which I was dealing. Harmonisation, co-operation and joint research are going ahead with our full support, and I shall see that the hon. Gentleman's suggestion is raised with my colleagues who have responsibility in these spheres.

Coalmining (Productivity)


asked the Secretary of State for Energy what has been the increase in labour productivity in the coalmining industry over the most recent 12-month period for which figures are available.

Comparing the 48 weeks of the current financial year with the corresponding period in the previous year, productivity overall is 2·8 per cent. up, and productivity at the face 9 per cent. up.

To what does the Minister attribute this improvement, is it still continuing, and by how much does he expect labour productivity in the coal industry to rise this year?

I am advised by the National Coal Board that it is expected to continue. I must emphasise that this figure was achieved with 7,000 fewer men.

Will the Minister accept that reservations have been expressed about the productivity scheme, on the ground of safety in mines? Is it not true that there has been an increase in the number of deaths in mines in the past 12 months? Will he draw this factor to the attention of the Health and Safety Commission, because clearly we want to make every effort to ensure that coal production is not increased at the expense of the health and lives of miners?

Obviously we do not want coal production to be increased at the expense of miners. We shall want to analyse the figures to see the circumstances in which these things occurred and to see whether they are associated with work at the coalface, haulage and other considerations. I shall accede to my hon. Friend's request and ask the Health and Safety Commission to write to him on this matter.

North Sea Oil


asked the Secretary of State for Energy what prospects he sees for increasing North Sea oil production through new discoveries going beyond existing estimates to meet any shortfalls in supply from other parts of the world.

Because of the time it takes to appraise and develop oil finds, new discoveries could not increase North Sea production in the short term.

I thank the Minister of State for that answer. What effect will the proposed changes in PRT have on exploration and development in future in the light of the report by UKOOA—the United Kingdom Offshore Operators Association—to the Energy Commission?

We are still discussing this matter with UKOOA, but since the changes were announced on 2 August we have approved four new fields. Even if there were discoveries, it would take between five and 10 years to appraise them. In the 1978 Brown Book, 600 million tonnes were assessed for possible further discoveries under present licences and about 1,000 million tonnes for further discoveries. This will be revised in the 1979 Brown Book, which will be published shortly.

Is the Minister aware that a firm in my constituency wrote to the Secretary of State on 22 February claiming that the Conoco Oil Company was restricting supplies to it? Does not that bear out the wider allegations which were made about Conoco diverting oil from Britain to more profitable markets overseas? What further assurances has he received from the industry, to which the Secretary of State for Energy referred earlier, and what is being done to ensure that oil supplies are not being switched and that this matter is not being pushed under the carpet of commercial secrecy?

My right hon. Friend and I were disturbed at the report to which my hon. Friend referred. My right hon. Friend invited the company to explain the position. It was not a high-level company report. The company has completely explained its position and given definite assurances to my right hon. Friend that the practice to which my hon. Friend referred will not recur.

Does the Minister agree that it is important that the Government devise methods of increasing exploration in new discoveries? Is it not a condemnation of Government policy that at the height of the drilling season in 1978 there was less exploration and drilling than there had been for nearly a decade?

I do not think that that is so. However, the hon. Gentleman, who knows a great deal about these matters, also knows that there was a great surge of activity as a result of concluding the fourth round of arrangements in March 1978. We take these matters seriously and I hope that we shall shortly be able to announce the sixth round. I hope that after that drilling will increase.

Park Colliery, Staffordshire


asked the Secretary of State for Energy what estimate he has made of the number of jobs which will be produced, the total coal resources available, and the economic contribution which will be made by the proposed Park colliery in Staffordshire; and by what date coal will be drawn from this pit.

The National Coal Board expects Park colliery to reach the full target of 2·2 million tonnes annually about eight years after planning approval is granted; with an employment of 1,300 men and life expectancy of at least half a century.

I thank my hon. Friend for his efforts in this matter. Does he accept that the rapid development of Park colliery is vital to employment prospects and, indeed, to the economic future of the neighbouring Cannock Chase district, which has a high level of unemployment?

I agree that this colliery is vital to the economic prosperity of the area. It is also vital to the miners who are employed in the area to have prospects for continued employment so that their skills can be employed in this great new project. The project will be a very good investment for the nation because productivity will increase by probably three times the national average.

I thank the hon. Member for Cannock (Mr. Roberts) for the unsolicited solicitude that he expressed for my constituents. Will the Minister make clear that there will have to be a public inquiry before the mine is started, bearing in mind the high chlorine content of the coal subsidence in the area and whether the investment of £140 million against the national investment is worthwhile or not?

The hon. Gentleman is correct. There will probably need to be a public inquiry. The evidence of that inquiry will show whether it is in the interests of the nation that the investment takes place. I do not believe that those for or against investment will be shy in arguing their case. The hon. Gentleman is aware that an investigation is taking place into the chlorine content of the coal. That investigation will be the subject of debate in due course.

Energy Commission


asked the Secretary of State for Energy when he expects to chair a meeting of the Energy Commission.

I hope to chair a meeting of the Energy Commission during May. We are at present exploring possible dates with members.

Will the Secretary of State review the work of the Energy Commission? Is he satisfied that its role has not been much more than a squabbling shop between the vested interests of the nationalised industries? Does it not have a much more important role to play as an independent advisory body which can help the nation to decide on the priorities of research and development, conservation, supply and demand and pricing policies?

The Commission is very much in its first stages. I agree with the hon. Gentleman that the development of a planned energy policy over a long period, taking all those and other factors into account, is essential. Market forces are no guide to long-term energy policy for any nation in the world. I am glad to have the hon. Gentleman's confirmation of the wisdom of that view.

With regard to the Energy Commission carrying out the survey in relation to a planned approach, will my right hon. Friend indicate whether it is prepared to look into the question of the relationship to energy in the Common Market? What benefits, if any, has Britain gained in its energy policy from being in the Common Market?

A debate on EEC energy policy is to be held in the House tomorrow. It is not the function of the Energy Commission in the United Kingdom to conduct negotiations with the Common Market countries. That function is carried out by Ministers. I would need much more notice to think of any advantage that we have received in the energy sector from our Common Market membership.

In view of the possible shortfall in oil, will the Secretary of State bring the House up to date on the EEC proposal for the storing of oil reserves and the distribution thereof?

Britain is moving rapidly towards self-sufficiency. We are now the thirteenth largest oil producer in the world, ahead of some OPEC countries. We are the third largest producer in the IEA and, overwhelmingly, the largest and the only serious producer in the EEC. The storage and emergency provisions arrangements within the EEC, and the sharing in the event of a crisis, will appear in their final form before the Energy Council on 27 March. Tomorrow's debate will provide an opportunity for some of these matters to be aired and perhaps it might be better to deal with them at that time.

Coal Industry (Financial Support)


asked the Secretary of State for Energy what extra finance will be made available to the National Coal Board as a result of the recent miners' pay settlement.

The extent of the Government's financial support to the industry next year will depend on a range of factors, not all of which can yet be identified.

Does the Secretary of State think that it is the right way to conduct a wage claim for the union to negotiate with the Prime Minister about how much money he would make available and then for the union to split up that money among its members in the way that it saw fit? What is the place of management in these negotiations? Is it not normal for management to carry out the negotiations?

There was no negotiation with the Prime Minister about the wage claim. I was present on that occasion, and it was a discussion about the future of the industry. Negotiations took place between the Coal Board and the NUM. There were two meetings of the tripartite committee with Treasury Ministers, myself, the Coal Board and the mining unions to look at"Plan for Coal ". Against that background the negotiations took place.

The hon. Gentleman is five or six years out of date with Government handling of the mining industry. I hope that he will not remind himself of his own contribution at that time, which was not altogether without its difficulties.

Will my right hon. Friend confirm that whatever contribution the Government make towards the miners will be amply repaid by extra productivity? Will he also confirm that, no matter which Government have been in power, the miners' contribution towards the wealth of the country has been overwhelming and will continue to be so?

I confirm everything that my hon. Friend says. Productivity has risen sharply over the last year. Miners have—at some cost in life, as we know from yesterday's disaster—maintained our supplies. Any Government of any political party would be mad not to develop the mining industry, upon which we know we can rely for security of supply for the next 300 years. That cannot be said of oil or gas—or even, for that matter, of nuclear power.

Coal Prices


asked the Secretary of State for Energy what movements in real coal prices over the next five years are anticipated by his Department.

Coal prices depend on a number of factors, including those of alternative fuels and costs in the industry. Although the Department expects increases in productivity, operating costs will, nevertheless, rise somewhat in real terms.

I thank the Minister for his reply. Does he agree that it is in the interests of the industry for it to retain its competitive position in the short and medium-term? What steps is he taking to ensure that that is realised by all involved in the industry?

I endorse what the hon. Gentleman says, and he knows that I have said the same on many occasions. The way for the industry to keep its competitive position is to carry out"Plan for Coal ", the £4,000 million investment, which, incidentally, the NUM executive discussed with the Prime Minister at 10 Downing Street. To achieve more productivity in the mining industry requires more investment—new mines and new machinery.

Is my hon. Friend aware of the enormous subsidies being paid to coal industries in the prinicipal competitor nations in the EEC? That puts the British coal industry at a financial disadvantage. Would the Government be prepared to review their financial support rather more favourably than Conservative Members would?

I understand my hon. Friend's question. He gave us an illustration of the financial help being given, particularly in the EEC, to the coal industry. I hope my hon. Friend agrees with me that the significant point is that, whatever subsidy or financial help we give to our coal industry, it is much less than that given to many others. However, it is staggering that those industries are contracting, while ours is expanding. Britain is becoming more productive and economic. To become more economic, competitive and productive we should invest in the mining industry and make sure that"Plan for Coal"is realised.

National Nuclear Corporation


asked the Secretary of State for Energy what is the current position about the shareholding of the National Nuclear Corporation.

The shares of the National Nuclear Corporation are currently held in the proportions: Atomic Energy Authority—35 per cent.; General Electric Company—30 per cent.: and British Nuclear Associates—35 per cent. I am continuing to discuss the future organisation of the industry with the parties involved.

Is the Secretary of State aware that that situation has continued for the past 12 months without any agreement? Does he recollect that only a week or so ago he recommended the nationalisation of the National Nuclear Corporation? Is he further aware that the only way to get the nuclear industry right is by a partnership with private enterprise? Why does he not pursue that course?

The hon. Gentleman has got the matter substantially wrong. I have had discussions with the AEA, the CEGB, the National Nuclear Corporation, General Electric, the unions and the industry. It is possible to proceed only by consent, because the previous Government organised matters so that it was not possible for a Secretary of State for Energy to carry through his policy other than with the consent of GEC.

The hon. Gentleman should be patient for a moment. I took the views of those in the industry, and there was an overwhelming majority for public ownership among the employees of the NNC. The view has been expressed by both sides at Risley and Whetstone. I asked the unions concerned to take advice on the matter.

The negotiations that are taking place concern the immediate position, so as not to endanger the present nuclear programme, and, more generally, the future of the NNC, which depends entirely for its business upon sums paid by public authorities.

Is it not also a fact that employees of the NNC have made it clear that they would find any idea of private shareholdings highly objectionable?

I thought it right, when we were considering the matter, to talk not only to the public authorities but to the industries concerned—British Nuclear Associates as well as GEC—and that it was right also to seek the views of those working in the industry. As the NNC is a design organisation, those views must carry some weight. However, it is not possible to provide a resolution without consent, notably from GEC, which was put in a powerful position by the previous Government when the present arrangements were entered into.

The Secretary of State will recall that this matter came up at the last Energy Question Time. Is he aware that since then I have had correspondence alleging that he has seriously misled the House—as he has again today—about the attitude of NNC employees to the proposals for public ownership? Will he give the House the evidence on which his claim is based? Can he also give us an indication whether he has support from the National Enterprise Board or the CEGB for his proposals for public ownership?

The information about the views of those working in the industry was conveyed to me by the unions. They had taken the view of their members—and it was right for them to do so—and I shall consult them about whether the figures given to me at that time can be made public. I should be perfectly happy to make the information available to the House. I think that the hon. Member would be surprised if he saw the figures.

I have had negotiations with the CEGB, but one of the problems that will have to be solved sooner or later is the interrelationship between the NCC and the CEGB at Barnwood, where there is some overlapping. Those who are seriously interested in the matter will realise that that is one reason why it is taking some time.

Heating Discount Scheme


asked the Secretary of State for Energy if he will make a statement on the respective benefits to consumers of his Department's domestic heating discount scheme and those given to members of the city of Birmingham's heating and rent payments scheme.

The electricity discount scheme enables those eligible to claim a £5 payment, or a discount on one winter electricity bill over £20 received from an electricity board—or in some cases both. Under Birmingham's heating and rent payments scheme, tenants' electricity board bills are sent to the council for payment out of fixed charges paid weekly by the tenant. Special arrangements have been agreed to enable those eligible among about 2,000 tenants to claim the discount on their bills. A proposal to enable the remainder to do so is under discussion with the council.

I am most grateful for that answer. Can the Minister confirm that he and his civil servants have been in discussion and negotiations with the Birmingham city council on this matter since October or November? Can he also confirm that there are considerable administrative difficulties, both at the council end and the Department's end, in the way of marrying up the respective benefits and demands of the two schemes? Can he give the House and Birmingham's pensioners an assurance that, one way or another, the money that should be made available to pensioners for this purpose, through the discount scheme, will ultimately be made available to them?

I certainly assure my hon. Friend that my civil servants and I will do everything that we can to facilitate a solution to the problems in order that his elderly and lame constituents can, if possible, benefit from the discount scheme. I assure him that we shall continue to work to that end with officials of the Birmingham city council, as we have been doing since the autumn. I take this opportunity to regret and reject the accusations of the leader of the city council about the part played by the Department in this matter.

Can the Minister also explain to consumers the reasons behind his Department's recent decision to allow the Price Commission to investigate the electricity industry's application to increase charges? Is that not a further crude attempt to slow down the rise in inflation before the election and is it not bound, as Sir Francis Tombs has already said, to lead to higher electricity prices immediately after the election?

I suggest that the hon. Gentleman should put down a question on that matter.

Overseas Development

Aid Budget


asked the Minister of Overseas Development what estimate she has made of the extent to which the aid budget will be underspent or overspent in the current financial year.

My present expectation is that this year's aid programme will be fully spent. However, final accounts will not be available until the end of July.

Is my right hon. Friend aware that that is a very welcome reply? Can she say briefly what are the main constraints on ensuring that the aid budget is fully spent year by year and whether any techniques are being adopted to ensure that that happens in future years, as, apparently, it will this year?

There are major constraints beyond our control. For example, the IDA drawings and those on European Community aid have sometimes been much less than we had expected. If the drawings for which we had budgeted are less than we had supposed, the position sometimes becomes rather difficult. We have increased bilateral expenditure which we expect to offset such shortfalls on our multilateral programmes.

Will the Minister explain why the latest figure for firm commitment under the aid programme has risen suddenly to £756 million, which is nearly £300 million higher than the average figure for the previous three years? Is she deliberately committing as much as possible in anticipation of losing the next election, or is there another explanation?

The hon. Gentleman misunderstands—perhaps deliberately—the way in which the aid programme is planned. The commitments do not relate to expenditure in the next financial year. They can relate to expenditure two, three or four years in advance. We have been making certain that we offset the lower drawings on multilateral programmes and we have made certain that the money voted to us by Parliament was, as Parliament wished, fully spent.

Does my right hon. Friend agree that underspending is sometimes caused by the fact that the Government are rightly concentrating their attention on giving more help to the poorest and that, in order that projects may be identified, we need more people in the villages and local communities to identify the most worthwhile projects? What steps is she taking within her Department to ensure that there is sufficient specialist staff in the countries concerned?

I am sure that the result of some of the discussions that I had recently with the Select Committee of which my hon. Friend is a member will emerge in due course. It is generally known that we wish to have on the ground in countries for which we have substantial bilateral programmes enough people who can identify, administer and monitor projects and make sure that all is going well. There was, necessarily, a period following the new strategy of aid to the poorest in which there was a certain difficulty in identifying the sort of projects that would fulfil the aims of the strategy. I think that we have now overcome that difficulty.

Does the Minister agree that there are certain items in the aid programme that, on any judgment, should not appear in a British aid programme? I cite, for example, the hidden employment subsidies, amounting to £60 million, in the provision of ships to Vietnam and India and the provision of money to countries such as Mozambique which are not pursuing policies in regard to Rhodesia which are in accordance with British policies.

It depends how one identifies British policies. There may be a difference between us on that. There is a later question about Mozambique. On the first point raised by the hon. Gentleman, I can see no problem. Indeed, we are fulfilling the aid strategy that Parliament has agreed. We are concentrating our aid upon those who need it most. I do not see what the criticism is, unless the hon. Gentleman is affected by hon. Gentlemen behind him who would wish that there were no aid programme at all.



asked the Minister for Overseas Development if she will make a statement on Her Majesty's Government's proposed aid programme to Angola.

The question of an aid programme to Angola is at present under consideration.

For how much longer can the right hon. Lady fail to tell the House what is happening to taxpayers' money? If there is information in her Department to the effect that taxpayers' money will be spent on Angola, is it not about time she told the House, one way or the other?

I refer the hon. Gentleman to his question to me in January, when I told him in reply that we were considering assistance to Angola for the Benguela railway and that a study of British consultants had been commissioned for that purpose. We have not yet received the report. Perhaps the hon. Gentleman has more information on the matter than I have.

Will our aid to Angola include any help to the victims of the massacre at Cassinga carried out by the South African Air Force?

Does the Minister agree that it is high time the House again debated the entire issue of overseas aid and the Government's involvement in it? Is it not intolerable that although there are differing views about the subject 18 months have elapsed since the House last had an opportunity of debating this programme?

I entirely agree with the hon. Gentleman. When I was Shadow spokesman for the Opposition I succeeded in getting half a Supply day for an overseas aid debate. Perhaps the hon. Gentleman, who I know has tried, will succeed in his efforts in that respect.

East Caribbean Associated States


asked the Minister of Overseas Development whether she has had discussions with the United States Government on the size and origin of international aid to East Caribbean Associated States including those newly independent countries in that region.

The Parliamentary Secretary to the Ministry of Overseas Development
(Mr. John Tomlinson)

My right hon. Friend is in regular contact with the United States and other donors on the framework of the Caribbean Group for Co-operation in Economic Development, which takes into account the aid needs of the Eastern Caribbean.

I thank the Minister for that reply. Does he agree that the United States has expressed interest and could make a major contribution to the development of the East Caribbean; that, in view of the increasing number of Associated States receiving their independence from Britain, there is a continuing need, even in the vacuum of decolonisation, for such assistance; and that we have a responsibility to encourage the Americans to play their part?

I entirely agree. In the post-independence period we are not ignoring our responsibilities. For example we have already committed £10 million each to Dominica, St. Lucia and St. Vincent for project aid after independence.

With regard to what the hon. Gentleman said about the role of the United States, there has been a preparatory meeting in Washington at which my right hon. Friend was represented. We hope that a further meeting of the consultative group will take place in June, in which no doubt the United States will play its full part.

European Community (Ministerial Meetings)


asked the Minister of Overseas Development when she expects to meet her EEC counterparts.

I expect to meet other Community Development Ministers at the next meeting of the Development Council. A date far this has not yet been settled.

When the right hon. Lady meets her EEC counterparts, will she discuss with them the progress, if any, that has been made towards charging the next European development fund to the Community budget, and whether this will end the absurd anomaly that the poorest members of the Community pay a larger proportion of their gross national product towards the fund than do the richer members?

I fully appreciate the hon. Gentleman's general point about our contribution to the Community budget, but it works a little differently in relation to the European development fund. As I said in answer to an earlier question, the drawings on the fund relate very much to the commitments and progress of spending on the fund.

Certainly it is a question that one is continually concerned about, in that as we have an inescapable obligation to contribute towards the fund from our own aid programme it is a matter of some concern to us that that money should be spent effectively, efficiently and well.

Will my right hon. Friend draw to the attention of her EEC colleagues the fact that the new accounting procedure for the food aid programme is likely to be very deleterious from the point of view of the British budget for overseas aid, because refunds will be counted and the figures will be fudged in such a way that the true effect of aid will be lost?

The whole question of food aid, and the programme for it, is likely to have been settled at official level before our next Development Council meeting, but I think it very likely that at working level we shall be discussing a new programme for managing it. I entirely take my hon. Friend's point. It is one that concerns me very much.

Will the Minister answer two questions? First, will she consider making available to the EEC Ministers a report on her very successful—on behalf of Britain, not on behalf of any party in the House—visit to West Africa about five weeks ago? Will she also make a report available to the House, perhaps placing it in the Library? That would be very useful.

Secondly, in dealing with aid from this country and the EEC, will the right hon. Lady try to ensure that where, particularly in Commonwealth countries, there is a shortfall because at the end of the year certain schemes are not paid in full, steps are taken to have standby schemes available? There is always a great bottleneck, and money could be paid to help some of the developing Commonwealth countries receive the greatest possible benefit.

One could consider the hon. Gentleman's second point, but the problem is essentially that the European development fund seeks to identify projects. It tends to be not as fast a process as one would wish. One is always concerned to see that the money is spent correctly. If one tried to do things rapidly, at the end of the year the money might be wrongly spent, and that would not be good. However, it is a matter that could be considered.

I was glad to hear what the hon. Gentleman said about my visit to West Africa. I shall certainly put a report on that visit in the Library. There are plenty of opportunities at Development Council meetings to have the sort of informal discussions with one's colleagues in which one can report on such matters, and I have already reported to some of them.



asked the Minister of Overseas Development over how many years the current aid programme to Vietnam will continue.

I expect present commitments to end by about the middle of next year, other than any requirements for disaster and humanitarian aid.

The Minister recently announced in a written answer to a question of mine that £7·4 million-worth of British taxpayers' money was to be spent to enable Vietnam to purchase from Britain cargo ships and gas turbines. How can she possibly justify a decision to spend taxpayers' money on supporting a satellite of the Soviet Union, a country which pursues anti-Western policies, which has recently invaded Cambodia and which shows a gross abuse of human rights?

The hon. Gentleman is being a little unfair. My answer two or three weeks ago was that we expected present commitments to end in about the middle of next year and that we did not propose to begin any new bilateral aid other than to meet requirements for disaster and humanitarian aid, as I have just said.

The commitments on the contracts for the cargo vessels and gas turbines were, as I have already explained, long-standing, dating back to July 1977 and February 1978 respectively. I do not know whether the hon. Gentleman believes that in relations with companies and workers in this country the British Government should renege on commitments. We do not.

Does my right hon. Friend agree that the invasion of Vietnam by China is a disaster which should warrant the consideration of this country's aid policy towards Vietnam and the continuation of the aid?

That aspect of the matter is one on which my hon. Friend needs to put a question to my right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs. There are genuine causes for concern about human rights, particularly in the southern part of Vietnam. Having studied all the evidence, I think that, unfortunately, there is a very difficult situation there.



asked the Minister of Overseas Development what role her Department intends to play in the forthcoming United Nations Conference on Trade and Development conference.

My right hon. Friend the Secretary of State for Trade has the main responsibility, but my Department will be closely involved over issues relating to development policy and will be represented in the United Kingdom delegation.

Is the right hon. Lady aware that there seems to be total confusion between her Department, the Department of Trade and the Department of Industry as to which is responsible for answering questions, for example, about the common fund? Following the preparatory meeting and the proposals made by the United States of America delegation, will her Department be presenting any initiatives about the common fund at UNCTAD?

I am sorry if there appears to have been any confusion. Subject to whatever problems the hon. Gentleman has met, questions on the common fund should be addressed to my right hon. Friend the Secretary of State for Trade. Indeed, his is the lead Department on these matters. It may be that there has been a little confusion.

Goldborne Colliery (Accident)

With permission, Mr. Speaker, I wish to make a statement on the mine accident at Goldborne colliery.

It is with the greatest regret that I have to report to the House on the accident that took place yesterday at Goldborne colliery in Lancashire in the National Coal Board's western area.

A maintenance team was in the colliery yesterday morning. At about 11.25 a.m. there was an explosion. Three men were killed and eight others were injured. The injured are in Withington hospital, Manchester, and the latest information from the hospital is that all have extensive burns and lung injuries and are critically ill. Two are in the burns unit and the remaining six are in the intensive care unit.

The precise cause of the explosion is not at present known. Her Majesty's deputy chief inspector of mines is already at the colliery, with other mines inspectors and personnel of the Safety in Mines Research Establishment. A preliminary investigation is being carried out into the causes and circumstances of the accident. The Health and Safety Commission will consider what further action is necessary. There will be a thorough investigation into the causes and circumstances of the accident.

My hon. Friend the Member for Newton (Mr. Evans) and I visited the colliery yesterday, as soon as we heard the news, to meet the colliery manager, National Coal Board and trade union officials, members of the Mines Inspectorate, and the mine rescue team.

I am sure that the House will wish to join me and my hon. Friend, who is precluded by his office from raising this matter, in expressing our sincere sympathy with those who were injured and the relatives of those who were killed, our deep concern for the recovery of the injured men, and our gratitude to the rescue teams, ambulance and hospital staff and all those concerned with the rescue operation who responded so magnificently.

I should like to associate my right hon. and hon. Friends with the expressions of sympathy conveyed by the Secretary of State to the relatives and victims of this tragic accident. We should also like to be associated with his expressions of concern for the injured in hospital. We note with deep concern the gravity of their injuries, as indicated in the statement, and certainly hope that they will make a satisfactory recovery.

We note that the circumstances of the accident are not yet fully known. Therefore, it would obviously be sensible to await the outcome of the thorough investigation that the Secretary of State has indicated will be made. We shall be interested in the outcome of that investigation to see what lessons can be learned, so that, as far as humanly possible, such tragic accidents may be avoided in future.

I am grateful to the hon. Gentleman, as will be those concerned, for associating the Opposition with the statement that I made.

We must await the outcome of the inquiry. In view of the terrible injuries suffered by those concerned, clearly there must be the fullest possible investigation. This is a reminder of the price that is still paid in human life for the coal used by this country.

Will my right hon. Friend convey to the relatives of the deceased and of those who were seriously injured the serious and heartfelt condolences of the mining group in this House in the face of this tragic accident?

This is the third occasion during his period as Secretary of State for Energy on which my right hon. Friend has had to make statements about serious accidents in the mining industry: one in Hemsworth—my constituency—one within the constituency of my hon. Friend the Member for Don Valley (Mr. Kelley) and now one within the constituency of my hon. Friend the Member for Newton (Mr. Evans). Will he convey our most heartfelt thanks to the mine rescue team for its efforts in these tragic circumstances? Will he also convey to the National Coal Board our feeling that a thorough and intensive investigation should be undertaken into the causes of the incident and that all possible measures to eradicate further incidents of this nature should be implemented?

Yes, I shall certainly do that. This is indeed the third mining disaster—Houghton le Main, Bentley and now Goldborne—which I have attended as Secretary of State. I shall certainly convey the views of the mining group to those concerned. I had the opportunity of seeing Sid Vincent when he returned to the surface yesterday. I am sure that the points made by my hon. Friend, with his knowledge of the mining industry, will be widely appreciated and understood.

Is my right hon. Friend aware that there is understandable sadness today in the tightly-knit coal mining community of south-east Lancashire? I am sure that my hon. Friend the Member for Newton (Mr. Evans), together with myself and my hon. Friends the Members for Wigan (Mr. Fitch), for Ince (Mr. McGuire) and for Leigh (Mr. Boardman), would wish to be associated with the expressions of sympathy and condolences to the families of our constituents who were involved in this tragic accident. We also express our deep gratitude to the mines rescue service, together with the ambulance men from Wigan who came to the scene very promptly.

When the inquiry into this tragedy is completed, will my right hon Friend ensure that its findings are made public, in order to assist us in our broader understanding of the hazards of the coal mining industry?

The latter point made by my hon. Friend is the responsibility of the Health and Safety Executive. The inquiry will follow the normal practice in such matters. I understand the reason why my hon. Friend put that question.

Apart from my hon. Friend the Member for Newton, who was at the colliery with me, having come immediately he heard the news, I was able to contact my hon. Friend the Member for Wigan (Mr. Fitch), but others were not available. However, I am sure that those concerned appreciate that Members with an interest in the coal mining industry and in the colliery have expressed their feelings.

Will my right hon. Friend convey to those who have been bereaved in this tragic affair and to those who played such a magnificent part in the rescue operations how much we in Don Valley, who have recently been involved in a similar situation, appreciate their efforts and sympathise with the relatives and victims of this sad event?

Will my right hon. Friend also convey to those who are likely to be required to conduct the inquiry into this affair the fact that miners generally, not only the mining group in the House, would be very much obliged if they would investigate the circumstances that led to an accumulation of methane gas and the means of ignition at the point where the explosion took place? We should also appreciate that report being supplied to Members of the House.

The presence of methane gas and the ignition that brought about the explosion, which I believe was very severe, must be a matter of concern to everyone in the industry. In view of all that has been said on both sides of the House following my statement, I think that it would be appropriate if I were to send copies of today's Hansard to those concerned, so that they may know the deep feelings behind the points made by hon. Members in response to my statement.

Is the Minister aware that miners everywhere would wish to be associated with the tribute that he has paid this afternoon to all the families involved and to the rescue people concerned? Will he also direct the inquiry, when it takes place, to look at this matter not merely specifically in relation to the way in which the incident occurred at Goldborne colliery but also against the disturbing background of the new productivity agreement? Does the Secretary of State accept that, based on the figures of 1978 as opposed to 1970—a full year of the productivity agreement—deaths in the mining industry have risen by more than 50 per cent. and that other accident rates have shown a disturbing upward trend? It would be helpful if this inquiry looked into this matter remembering that general background, apart from any specific incident.

I am aware of the separate and parallel points made by my hon. Friend the Member for Bolsover (Mr. Skinner). He mentioned the relationship that there may be, or may be thought to be, between pay arrangements and safety. The figures that I have do not entirely bear out the argument that there has been a general increase in accidents. My hon. Friend the Member for Bolsover will accept that an explosion when a maintenance team was at work on a Sunday would not, of itself, bear on that aspect one way or the other.

Standing Order No 9

Before I call the hon. Member for Belfast, West (Mr. Fitt) in relation to his application under Standing Order No. 9, I should say that in view of recent experience in the House I believe that the time has come when it is necessary to remind the House that applications of this kind must be directed solely to seeking to prove that an issue is sufficiently important, specific and urgent for me to take the serious step of changing the business of the House to allow an emergency debate. It is not an occasion to debate the issue itself, as there is, of course, no opportunity for anyone to answer statements made.

Dr Robert Irwin

I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,

" the attempt to smear Dr. Robert Irwin by Goverment sources in Northern Ireland."
I trust that I shall be able to abide by the limitations and strictures which you have applied to this request under Standing Order No. 9, Mr. Speaker. You will recall that on Friday last week I intervened on a point of order to draw the attention of the House to a report in The Daily Telegraph, which I referred to as a vicious smear on the character of Dr. Robert Irwin. I said then, and I repeat now, that Dr. Irwin had appeared on television and had given evidence to certain committees in Northern Ireland—to the effect that he had examined people whom he regarded as having suffered ill treatment at the hands of the police.

That television programme took place on the Sunday before last, and the following day a number of rumours began to circulate in Northern Ireland—rumours which, I contend, were calculated to do the maximum amount of damage to Dr. Robert Irwin.

On Friday there was only the one newspaper report in The Daily Telegraph. Since then I am quite certain that most hon. Members will have read the virtually unanimous condemnation that has taken place in all our national newspapers, in relation to this scurrilous and evil campaign that has been carried on against Dr. Irwin. We find that this campaign continues even in today's newspapers and that there has been no let-up. Besides drawing the attention of the world to the fact that Dr. Robert Irwin's wife had suffered a rape, the newspapers are now calling into question his professional qualifications, stating that he has been intimidated by the IRA in an absolutely disgraceful attempt to undermine his credibility.

I very briefly draw the attention of the House to one of our national newspapers, which stated that this whole campaign is deeply disturbing and that rape victims are very rarely identified in this country. It added:
" Whoever ordered the leak should be named, brought before an inquiry and made to explain why he did so."
One of our most respected national newspapers, The Guardian, stated:
" Somebody started an ugly smear campaign against Dr. Irwin, to the distress of his wife, and this is a thoroughly evil aspect of the whole episode."
The article went on to support the demand for a public inquiry.

Yesterday's Sunday Mirror named its own reporter, who stated that he had been approached with the intention of disseminating this evil propaganda. The Sunday Mirror went on to say:
" No doubt internal inquiries are necessary, but only an impartial investigation with the fullest possible powers can give a convincing answer to these shaming allegations."
I believe that Dr. Irwin has suffered grievously because of this slanderous, vicious campaign. I ask you, Mr. Speaker, under Standing Order No. 9, to permit a debate in the House so that every aspect of this rumour and innuendo campaign can be examined. I believe that this has been orchestrated by Government sources in Northern Ireland, the Northern Ireland Office and the RUG There is only one way that this matter can be cleared up. I hope Mr. Speaker, that you will permit a debate, with the resultant inquiry that will take place, and so clear the name of Dr. Irwin and condemn those who were responsible for initiating this campaign.

The hon. Gentleman gave me written notice before 12 o'clock this morning that he would seek leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he believed should have urgent consideration, namely,

" the attempt to smear Dr. Robert Irwin by Government sources in Northern Ireland ".
I listened with great care to what the hon. Gentleman said, as I did to the exchanges in the House on Friday last on this subject. I have given very careful consideration to what the hon. Gentleman has said—he knows that the House has instructed me to give no reason for my decision—but I have to rule that the hon. Gentleman's submission does not fail within the provisions of the Standing Order, and therefore I cannot submit his application to the House.

Statutory Instruments, &C

By leave of the House, I shall put together the five motions relating to statutory instruments.


That the Firearms (Variation of Fees) Order (Northern Ireland) 1979 (S.R. & O. (N.I.), 1979, No. 36) be referred to a Standing Committee on Statutory Instruments, &c.

That the Mobility Allowance Amendment Regulations 1979 (S.I., 1979, No. 172) be referred to a Standing Committee on Statutory Instruments, &c.

That the Family Income Supplements (General) Amendment Regulations 1979 (S.I., 1979, No. 160) be referred to a Standing Committee on Statutory Instruments, &c.

That the Social Security Pensions Act 1975 (Commencement No. 13) Order 1979 (S.I., 1979, No. 171) be referred to a Standing Committee on Statutory Instruments, &c.

That the Eggs Authority (Rates of Levy) Order 1979 (S.I., 1979, No. 257) be referred to a Standing Committee on Statutory Instruments, &c.—[ Mr. Joseph Dean.]

Public Expenditure

I have selected the amendment in the name of the right hon. Lady the Leader of the Opposition.

3.47 p.m.

I beg to move,

That this House takes note of"The Government's expenditure plans, 1979–80 to 1982–83"(Command Paper No. 7439); and approves the Government's policy of planning for improvement of public services in line with what the economy can sustain.
Perhaps I can give the House the apologies of my right hon. Friend the Chancellor of the Exchequer, who has to be at the European ministerial Council in Brussels today.

Perhaps I can start the debate at the same point at which I started the last one and note that in last year's debate the right hon. and learned Member for Surrey, East (Sir G. Howe) made one incredibly bad forecast when he said that last year I was introducing the last public expenditure White Paper I should have the opportunity of introducing. I now have the pleasure of introducing another one. I want to begin now, as I did last year, with the subject of the growth of public expenditure and the actual figures relating to that growth.

Last year, I began on what I thought was a reasonably non-controversial note when I said that I did not know what the precise figure of growth was between 1977–78 and 1978–79. To my astonishment, the right hon. and learned Member for Surrey, East took that statement amiss and wanted me to give a precise figure. As both he and the House must know, the whole question of shortfall tends to distort the picture of growth, particularly when shortfall in one year is exceptionally large, for special reasons about which I shall say a brief word.

I am sorry that the right hon. and learned Member for Surrey, East appeared to be so shocked when I told the precise truth and said that I did not know exactly what the growth would be. The hon. Member for Blaby (Mr. Lawson) told us that his guess was that it would be about 5 per cent. On 17 January this year, he said in a radio or television broadcast that the growth figure was now between 7 per cent. and 8½ per cent.

I am not complaining about that, and I am sorry to see the hon. Member for Blaby shaking his head, because the whole question of shortfall is a serious matter. As I have said, it inevitably distorts the picture. If we exclude general shortfall, and nationalised industries shortfall, in one year, such as 1978–79, one can arrive at a figure for growth of about 8·2 per cent. That is possible. I hope that the hon. Gentleman will agree, because he told us in last year's debate that he always liked to be fair as he saw himself as being a fair man. I see him nodding in agreement. That is not something that personally I have always taken as being strictly a fact, at least in the debates in this House, but let us start from that viewpoint. If that is so, I am sure that he will recognise that it is unreasonable to take shortfall into account in one year, not to take it into account in another and then come to a figure for growth which is abnormally high.

Of course, one can make the figure for growth almost anything, particularly in a year such as 1977–78, when there were exceptional reasons for what I loosely call shortfall but which, as the White Paper brings out in paragraph 14, show very clearly that there were substantial financial changes in relation to nationalised industry borrowing, the sale of BP shares and a change in the method of borrowing money for export credit and shipbuilding refinance. Indeed, if one excludes those special factors—and they are special factors—the actual growth in public expenditure between 1977–78 and 1978–79 was between 2½ per cent. and 3 per cent. I leave it at that. What the figures show is that the 1978–79 plans for public expenditure did not change between the two years. What changed, and led to the distortion about the actual growth figure, was what happened in 1977–78 and the figures that I have outlined to the House.

The right hon. Gentleman will be aware from one of the appendices of the report of the Expenditure Committee that if a full £2 billion shortfall is allowed for this year—which has not yet been fully identified—and outturn is compared with outturn, even taking away the BP share sale and special factors of that kind, the increase comes out at 4·1 per cent. It does not do for him to mislead the House in the way that he is attempting to do.

I do not know why the hon. Gentleman goes on about this. I have conceded that shortfall, particularly when there are special factors, distorts the figures. If we want to have a sensible argument about public expenditure, we should do so on the best basis that we can—or the basis of the facts. That is all that I am seeking to do.

With respect, the hon. Gentleman is trying very hard to distort the statement he made last year about being fair. I said that there were very special factors in relation to financial changes in 1977–78, with which he does not disagree. If one excludes those and takes shortfall on a comparable basis between the two years—and there was no change in plans for 1978–79—the real growth of plans was between 2½ per cent. and 3 per cent. I mentioned that not to try to make a cheap debating point but to try to get right the facts on which we base our discussions. That is all I seek to do.

The plans that I honestly outlined to the House last year showed that between 1977–78 and 1978–79 the growth in public expenditure was approximately 2¼ per cent. The shortfall for 1978–79 is lower than that of 1977–78. If one takes the same assumptions about shortfall for 1979–80, the growth is about 2 per cent. a year from here on. As the motion says, I believe that this is
" in line with what the economy can sustain."
Of course, I make absolutely clear that if the assumptions are wrong—and there are many assumptions underlying all these plans—action will have to be taken to ensure that public expenditure growth will be within what we believe the country can sustain. I shall come to the possible effects on the 2 per cent. growth of public expenditure plans of the changes that have happened since the publication of the White Paper.

At the outset, I want to plead guilty in respect of wanting to see higher growth of public expenditure, certainly in selected areas, than we were able to provide for in this White Paper. I wish that we could sustain more. Goodness knows, there is a desperate need for greater expenditure on the Health Service, education and social services. But, despite the economic situation over the past four or five years, we have managed to achieve substantial real increases in areas such as pensions, help for the disabled and child benefit. Therefore, we have not altogether failed to increase public expenditure in areas about which Labour Members feel strongly.

But we cannot ignore the fact that the economic situation both at home and abroad is such that, in my view, it would be foolish to plan to spend more in public expenditure than the 2 per cent. growth for which we have provided. However, I note the Conservative amendment, which argues that we should be spending less on public expenditure.

I now turn to the White Paper itself, which, as has been recognised, provides more information than has ever been provided in the past. This year, there are 255 pages, whereas the last expenditure White Paper of our predecessors—in December 1973—included 160 pages of which the last page was totally blank; I cannot imagine why. But a great deal more information has now been provided at the behest and constant request of the Expenditure Sub-Committee. I note that the Sub-Committee, under the chairmanship of my hon. Friend the Member for Nottingham, West (Mr. English) welcomed the White Paper generally, although not without criticism. I shall come back to that, because it seems that the Sub-Committee and my hon. Friend have an insatiable appetite for yet more information.

The first request for more information related to tax expenditures. That is the jargon for tax allowances and reliefs which are given in the same sorts of areas where public expenditure also bites—for example, child benefit and child tax allowances. While welcoming what I have done in this White Paper, in providing a great deal of additional information, the Sub-Committee asks me to consider a request for further extending the information. I can tell my hon. Friend the Member for Nottingham, West that in next year's White Paper either I or one of my hon. Friends who might be introducing it will give serious consideration to the request for further information.

Equally, I am asked for more information on output achieved and planned in programmes. My hon. Friend and the Sub-Committee recognise that, here again, we have provided a great deal of information. But they want more. I shall again carefully consider whether I can meet that request.

The planning totals for 1979–80 and next year are, on revalued figures, in line with last year's White Paper. But within the total the financial provision for the nationalised industries has been reduced, and the headroom has been used for extra expenditure on health, education, employment measures, child benefit and benefits for the disabled.

At this stage I turn to the other more important and major criticism of the Expenditure Sub-Committee. Judging from the press, I was savagely attacked by the Sub-Committee. My hon. Friend the Member for Nottingham, West shakes his head. In line with the headlines that I read, I read the report with very great care. I notice that the Sub-Committee was actually expressing dissatisfaction about me personally. In the kindest possible manner, I must tell my hon. Friend that I am somewhat dissatisfied and disappointed with those aspects of the report, and I should like to say why.

The main point, which not surprisingly has been taken up by the Opposition, is that the White Paper has been overtaken by events. Indeed, the Conservative amendment would refuse to approve the White Paper because it has"been overtaken by events ". If that notion were acceptable to the House, very few White Papers would ever be approved. Between the time when the White Paper plans are prepared and the date of our debate, many changes occur at home and abroad. That was not, however, the point of my hon. Friend the Member for Nottingham, West and the Sub-Committee. They said that the matter had been overtaken by events and that much depended on the pace of pay rises in the public sector in relation to the private sector.

That is what is known in the jargon as the relative price effect. Clearly, this is an important factor, but the pace of changing views on the likely outturn of the pay round in the public and private sectors is so fast that if we had provided the Expenditure Committee twice daily with revised information that would still have been inadequate. At the time, as hon. Members will recall, the lorry drivers' settlement was such that the pessimists were assuming that the growth in the current pay round would be about 20 per cent. or more. As my hon. Friend the Member for Nottingham, West will know, the assumptions fluctuated widely at that time and have done so ever since.

The situation is very different now. There is, therefore, only one clear point. Whatever additional new assessments I would have provided for the Committee, or my officials would have given on 31 January in giving evidence, would have been out of date long before the Committee got round to publishing its report, let alone our holding this debate.

We seemed to have a further assessment from the Chancellor of the Exchequer in a speech.

My hon. Friend knows perfectly well that the Chancellor, in a speech, gave a very rough and ready set of figures on the basis of a hypothesis which he by no means accepted as being the likely outturn. What my right hon. Friend said was nothing like what my hon. Friend and the Committee were asking us to do, namely, to provide much more detailed and constantly updated assessments. I believe that to have been an unreasonable request.

Perhaps before I give way I may finish my remarks about the Committee. I know that the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) is a member of that Committee, but I have a great deal more to say about it When I have finished those remarks I shall be happy to give way to the hon. Gentleman. The Committee is important and I take its remarks most seriously.

The position on the pay front today is much calmer than it was when my hon. Friend and his Committee were putting together their report and asking for further information. The situation, as my hon Friend knows, was being much exaggerated at the time, and in all the circumstances I believe that I was right, for the reasons I stated in my letter, not to provide additional information. I am grateful to my hon. Friend for publishing my letter. It is there for all to see precisely why I felt it unnecessary to provide that additional information.

The Committee's other major criticism was about the projections that I published in the White Paper. On this the Committee described itself as being"disappointed ". It wanted a wide range that would cover all likely eventualities. I very much doubt whether the Committee's report would ever have been published if we had sought to cover all likely eventualities. I have, however, noted the observation that three likely eventualities is an inadequate number.

The projections do not cover the year 1978–79 or the year 1979–80. They cover the years from 1977 to 1982, and they do not pretend to cover all eventualities. They are intended to meet the requests of the Committee for more quantified economic background information, and within the inevitable limitations they provide just that. In particular, they bring out that inflation is the main enemy of growth, so the main constraint on the volume of increased expenditure is made clear by those figures, and they show that the economy can sustain a higher rate of economic growth only if we can obtain lower rates of inflation.

The Chief Secretary has addressed himself to the hon. Member for Nottingham, West (Mr. English) as though the hon. Member were a one-man committee. I am grateful for this opportunity to intervene in that dialogue. Is the right hon. Gentleman aware that the three wage projections that he gave for the years 1977 to 1981 were 5 per cent., 7 per cent. and 11 per cent.? There is a slight qualification upon the first. As the growth in earnings last year was 14½ per cent. and is this year likely to be well over 11 per cent., has the right hon. Gentleman yet seized the point that all of his projections are unlikely and that the Committee is calling for a more likely bracket within which to view the possible consequences for public expenditure?

The hon. Member for Cirencester and Tewkesbury would be astonished if I were not aware that that is what he is asking for. I hope that he understood what I was saying. The period we are discussing covers 1977 to 1982, and in seeking to cover that whole period I would not accept that the likely outturn or pay in later years will be such as to invalidate every figure within those three projections.

I do not know why the hon. Member for Blaby wants to intervene in this row between me and the Committee.

It is a very important Committee, as the Chief Secretary said. The right hon. Gentleman is also on a very important point. The Chief Secretary is quite entitled to make his own assumption now and to say that he thinks that earnings over the next year will be less than someone else might think they would be. But what he cannot with validity say is what he was saying to the hon. Member for Nottingham, West (Mr. English) a moment ago, that it is quite impossible to make an estimate of earnings over the coming year and therefore of the relative price effect. The Chief Secretary knows as well as I do that that estimate has to be made for the calculation of the borrowing requirement which will be announced to the House on Budget day in a few days. Why cannot he tell the House what that estimate is?

Because I would prefer the hon. Gentleman to wait for Budget day, when he will see that forecast. But in these projections we are talking not about what will happen next year but what will happen over the years to 1982. I gave three projections that were intended to meet requests from the Committee for more quantified economic background information. To have gone much wider and to have provided for all eventualities, even the possibility, remote though it may seem, of the hon. Member for Blaby being in office, is asking for too much.

I am sorry to intervene a second time, but my right hon. Friend seems to be assuming that we cannot be told his anticipation over several years ahead because it is more difficult to make than an anticipation for one year ahead. We all appreciate that, but why does not my right hon. Friend assume that the rate of inflation over several years ahead will be at least as great as the rate over one year ahead? Why does not my right hon. Friend assume that if, for example, there were a Conservative Government the rate of increase in the money supply might be greater than this Government have permitted?

I am sure that my hon. Friend does not wish to misinterpret what I have said. I was not giving assumptions. I was giving three illustrative projections. I am not forecasting what will happen to inflation over the years up to 1982. That is not what this is all about. Those three projections provide the underlying background economic information for which the Committee asked. I am therefore somewhat disappointed at my hon. Friend's disappointment. I am ever ready to accept criticism—if it is merited. In this case it is not merited, and I can only regret the dissatisfaction and disappointment of the Committee. I hope that when it has had another opportunity to reconsider what I have said it might even contemplate withdrawing its dissatisfaction and disappointment. That would give me much greater pleasure and satisfaction than what it has said so far.

Surely the simple point is this. The three projections which have been given are not considered by many people to be likely to span the actual outturn. Is the Chief Secretary saying that he expects that the outturn will be within the span of those three projections? If he is not, why could not a series of projections be given which would be likely to cover the expected result?

I am trying hard to have a serious discussion on a serious matter. As I pointed out to my hon. Friend the hon. Member for Nottingham, West, I have never said that I was making either assumptions or forecasts. We were giving projections in order to provide economic background in certain illustrative circumstances. The hon. Member for Blaby laughs, but I cannot imagine why. Perhaps he can give forecasts. He is ever ready to give forecasts of all kinds, most of them wrong, but I cannot imagine that he is likely to be able to give me a relevant forecast here. He gave an example a few moments ago. Last year, he talked about 5 per cent. growth in public expenditure; in January this year he said that it would be 8½ per cent.; and a few moments ago he spoke of 4·1 per cent. I do not know which of his forecasts to take. All three cannot be right.

They can? The hon. Gentleman can make just about anything seem right. But there is a serious matter here. I am not attempting to forecast what will happen up to 1982. I am sorry that the hon. Gentleman was not listening when I answered my hon. Friend the Member for Nottingham, West.

Perhaps I may now turn to the effect on planned growth—as set out in the White Paper—of the pay settlements at present going on, which is related to the point in the minds of all hon. Members who have questioned me in the past few moments. There is likely to be—I do not dispute it—an excess over what we had originally hoped for in the pay outturn in the current round. No one will dispute that. Certainly I do not, although I would say that the excess is not likely to be as large as the exaggerated fears expressed at one time suggested that it was likely to be.

When the White Paper was published on 17 January, I said that the plans were conditional on the level of inflation. That is correct, because, unlike the situation that prevailed prior to this Government's introducing the cash limits system, we are not prepared simply to increase the amount of cash available to meet whatever needs to be added to the volume of expenditure for whatever pay and price increases there are, and precisely because we did not want a reduction in real expenditure on public services we wanted to see moderation in pay settlements.

I must make clear that the public purse is not bottomless. If the prices of goods and services rise, and rise faster than we can afford, clearly we shall be able to afford fewer of them. That is a straightforward statement of fact, which most housewives thoroughly understand.

Therefore, the policy of cash limits—[Interruption.] I am glad to see the hon. Member for Knutsford (Mr. BruceGardyne) back, muttering in his place. I am sure that he will have recognised that the real world is rather different from Knutsford.

The policy for cash limits is as announced by me on 23 February and reflects the situation that I have just described, namely, that public expenditure plans are based on many assumptions, including pay and prices, and if the assumptions turn out to be incorrect the plans will have to be adjusted. The size of the adjustment will depend on the extent of any change, but inevitably growth will be lower if inflation is higher. I would not wish to dispute that.

It has been suggested that the way in which the cash limits will work, or, rather, the way that I described in my statement of 23 February, is somewhat uncertain, particularly in relation to pay, and I want to say a word about that.

The effect of cash limits is inevitably uncertain, since we live in an uncertain world and we do not at this stage know the pay outturn. The options available to us in setting cash limits in a period of free collective bargaining are somewhat difficult. On the one hand, one could finance all public expenditure in respect of all pay increases. At the other extreme, one could finance none of the increased public expenditure coming from additional pay increases.

Between those, there is more than one course open. But one that is generally taken by those who are total unbelievers in any kind of incomes policy would fix the cash limit on a new pay assumption which, they argue, would be more credible, and then provide no more cash and cut public expenditure in order to meet the difference.

With respect, I find that proposition somewhat naive and unrealistic. I believe it to be naive because it assumes that any new figure that one would have stated would not be taken as a new guideline to be broken. My view is that in current circumstances it would have been taken as a new guideline and once more sought to be broken. It is unrealistic because it assumes that one can make sufficient public expenditure cuts in the short term—a matter to which I shall return when I come to the Opposition amendment.

We chose instead a case-by-case approach, making clear in advance that a substantial proportion of central Government pay increases will have to be absorbed. In the case of local authority staff—other than manual workers—the same case-by-case approach will be adopted. In the case of manual workers we shall finance our 61 per cent. share and no more, but as the local authorities have to finance the other 39 per cent. there could, I fear, be some squeeze there, too.

The cash limit on prices is a different matter again, and I hope that it is clearer. It is based on the Industry Act forecast of 8½ per cent., and any outturn above that will have to be absorbed.

Do I understand the Chief Secretary to say that the pay increases determine the cash limits, not the cash limits the pay increases? Can he say whether paragraph 3 of his White Paper, which says that the basis of cash limits of individual programmes will be the White Paper figures, is still valid?

With respect, that is not what I said. I did not say that cash limits would be determined by the pay outturn. I said precisely that they would not be. I said that a substantial proportion would have to be absorbed. Unlike what happened when the hon. Gentleman was Financial Secretary and there were no cash limits, the position today is very different. We are using cash limits to ensure that there will be some inevitable squeeze on public expenditure.

The hon. Gentleman caught me in midstream, and I hope that he will allow me to develop the point regarding cash limits on prices. I said that I hoped that this matter was rather clearer, in the sense that the cash limit will be fixed on a straight 8½ per cent. forecast and beyond that any price increase would need to be absorbed. It will apply to central Government expenditure and local authorities' expenditure—that is, in respect of their capital expenditure—and it will also apply to the price element in the rate support grant.

Clearly, the impact of cash limits will depend in large part on the level of pay settlements and the direct and indirect effect which they have on prices. I do not propose today to make any new forecasts—they will be published in the normal way in the Budget. But, to give some indication of the magnitude of the squeeze in respect of the price element, for each 1 per cent. extra on prices—in other words, for each 1 per cent. that they exceed the provision in the cash limits—the volume of central Government expenditure, excluding rate support grant but including the volume of local authority capital expeniture, will be squeezed by approximately £125 million at 1978 survey prices.

It gives me no pleasure to say that, but it would be foolish to imagine that without cash limits one could just carry on as though large pay settlements had never happened. They have, and are likely to happen, and they will affect prices and therefore will affect the amount of cash available for public expenditure. If one spends more on one thing, there is less available for the purchase of other goods and services, as I said.

I turn now to the Opposition's alternative. I wish to examine this alternative since it raises a serious argument whether one should cut public expenditure substantially in order to ensure that one has substantial cuts in personal taxation.

I hope that it is clear that the Opposition may now accept that the first part of their amendment is just a little foolish—to say that one would not approve the White Paper because it is overtaken by events. As I said, we do not live in a static world. We are affected by world events—the Iranian oil situation, the increased price of oil and other factors will affect what happens to White Paper plans—and to suggest that one should not approve such plans because things have changed over a few months, or even a few weeks, is rather foolish.

I shall proceed to my examination of the second part of the Opposition's amendment.

If the right hon. Gentleman suggests that the House should approve the White Paper, why does the Government's motion ask the House only to take note of it?

I am astonished that the hon. Gentleman has not read the motion. It asks the House to approve the Government's policy of

" planning for improvement of public services in line with what the economy can sustain ".

As the right hon. Gentleman appears to be entering a new phase of his speech, will he state whether I have correctly apprehended the argument that he has completed to the effect that in so far as wage increases in money terms and price increases in money terms are higher in the next 12 months than is assumed for the purposes of his calculation, public expenditure will be, though not necessarily to that degree, less than the projection in the White Paper?

I hoped that I had made that reasonably clear. I am obliged to the right hon. Gentleman for asking me to repeat it. If there is a higher growth of pay and prices, inevitably there will be consequences for the volume of public expenditure. That is one of the major reasons why I regret that we are not likely to achieve as great a moderation in pay settlements as I had thought.

I was about to examine the implicit and explicit proposition in the second part of the Opposition's amendment. To put it in the kindest possible way, I find the assumptions somewhat nonsensical.

Explicitly, the idea would be substantially to cut public expenditure and to provide scope to cut personal taxation. If a cut in public expenditure were offset by a cut in personal taxation, there would not, at least initially, be a great effect on either the borrowing requirement or interest rates. On the other hand, implicit in the second part of the amendment is the intention to cut the borrowing requirement to achieve lower interest rates. It does not necessarily follow that a lower borrowing requirement will automatically mean lower interest rates, but let us assume for the purpose of the second part of the argument, which is a serious one, that the borrowing requirement is cut and that from that simple cut lower interest rates are achieved.

I have examined the proposition seriously. I want to see cuts in personal taxation. However, to pretend that that can be done on the substantial scale needed to cut substantially both personal income tax and the borrowing requirement, regardless and in advance of improving Britain's industrial performance, is to present a fraudulent prospectus to the nation. It is to perpetrate on the public a great hoax, which is bound to backfire when the hoax is exposed, as it certainly would be. I hear murmurs from the Opposition Benches. It seems to be assumed that by cutting personal taxation there will be a result sufficient to reduce the borrowing requirement.

Public expenditure could be cut. I have never said that it is impossible to cut it. I argue that some public expenditure can and should be cut. I have a little more experience in that direction than those on the Opposition Front Bench. However, I did not cut public expenditure with the same gleeful anticipation that those on the Opposition Front Bench seem to have. To pretend that public expenditure can be cut on the scale that the Opposition imply in the second part of their amendment to achieve both a lower borrowing requirement and huge income tax cuts is, first, to delude themselves—which has obviously happened—and, secondly and much worse, to seek to delude the public.

I wish to examine seriously whether it is possible to do what the Opposition imply. I do so on the basis of my little experience of cutting public expenditure. First, I wish to demonstrate why a cut on the scale proposed by the Opposition is not possible. As a background I give four reasons. The first is that to make cuts on such a scale it is necessary to take account of the consequences on others of so doing. The second is the sheer impracticability of the exercise. The third is the economic consequences in the short and long terms. The fourth is the time scale. Against that background, I examined seriously the proposition that is implicit and explicit in the second part of the amendment.

I share the desire to make personal income tax cuts, if not to make them in the manner proposed by the Opposition Front Bench. I shall put forward certain ways in which personal income tax cuts might conceivably be achieved. I have tried in the past, without avail, to put these ways in the form of questions to the Opposition Front Bench. On this occasion I hope that I shall be forgiven for stating the possible ways as facts. If I am wrong, no doubt the Opposition will tell me.

We are now privileged to have much greater access to the thinking, if that is the right word, of the Opposition Front Bench. We find that the hon. Member for Blaby is writing articles in FinancialWeekly. We have a better idea of its thinking because we know that the hon. Gentleman's voice on these matters is clearly that of the right hon. and learned Member for Surrey, East, the Shadow Chancellor—at least, we assume so. I see from a smile of the hon. Member for St. Ives (Mr. Nott) that possibly it is the other way round.

The White Paper figure for general assistance to industry is over £500 million. Being a large figure, it has clearly caught the attention of the hon. Member for Blaby and other members on the Opposition Front Bench. A large part of that sum is already committed. The National Enterprise Board has committed the largest part of it to British Leyland and Rolls-Royce. For the purposes of my argument I assume that the Opposition Front Bench does not propose—at least not in 1979–80—to close down British Leyland or Rolls-Royce. I do not see any movement of heads, so I assume that that is correct.

The next area is future industrial support. It will not surprise the Opposition Front Bench when I say that I have examined that support with a fine-tooth comb. The savings that could be made would not start until 1980–81. Even then there would be some existing commitment. Some provisions would be needed for contingencies. However, I do not dispute that some savings could be made. I estimate that about £70 million a year could be saved for the next two years if all new NEB investment were curtailed.

Given the substantial queue of small businesses, especially, at the door of the NEB, it seems that if the Opposition were in Government they would have to leave some contingency funds available. I note from the smile on the lace of the hon. Member for Blaby that small business men had better not think along those lines if ever they are unfortunate enough to operate under a Conservative Government.

If future industrial support on a selective assistance basis were restricted to contingencies only, some savings could be made, but they would be small. There would be only a small saving, if any, in 1979–80. I reckon that in 1980–81 there could be a saving of about £10 million, with rather more saved in 1981–82. There would be some once-and-for-all savings by selling off some NEB assets. That might achieve savings of between £70 million and £100 million, but not a great deal altogether.

The other large item to which the Opposition have had their eyes attracted is the functioning of the labour market and the figure of £1,243 million in 1979–80—a growth, from 1973–74. of £269 million. That growth has been largely in industrial training, from £116 million to £511 million, and in special employment measures, where expenditure has risen from nil to £446 million.

I do not argue that cuts are not possible in these areas, but do Opposition Front Bench Members argue that they propose, despite everything that the Opposition pressed on the Government about industrial training, to cut expenditure on industrial training? I see that there are no nods or winks, or anything else. I assume that the Opposition do not propose to cut expenditure on industrial training.

I see the Shadow spokesman for employment sitting below the Gangway. I hope that nothing serious has happened. I assume that he would not want to see a cut in industrial training. I understand that when I look at some of his hon. Friends.

The second area would be special employment measures. Do the Opposition have in mind to cut the whole of the expenditure on the special temporary employment measures, youth opportunities, the job release scheme, the small firms employment subsidy and the rest? Do they have in mind to cut those schemes? I suppose they might. If they started with a 25 per cent. cut they might achieve a saving of £60 million in 1980–81. They might attain a more considerable saving if the schemes were cut entirely. However, in last year's debate the right hon. and learned Member for Surrey, East raised this matter.

The hon. Member for St. Ives should not nod, or he will cause me to think that the Opposition plan immediate cuts. Before the hon. Gentleman says what he would do, I remind him that on 16 March 1978 the Shadow Chancellor said that he would taper out these expenditures.

I realise that the Treasury is understaffed and that the Chief Secretary changes his speech on these subjects only once in every four years. However, this is precisely the same speech as he made a few months before the Chancellor of the Exchequer cut public expenditure by £4 billion. That happened a few years ago.

With great respect, if the hon. Gentleman cannot do better than that he had better not intervene. I am trying seriously to examine whether it is possible to cut public expenditure. I outlined where expenditure may be cut. I do not say that it cannot be cut. If the Opposition deny that expenditure can be cut in this way, no doubt they will say so. The hon. Gentleman did not say that.

The Opposition should recognise that we are discussing a Government amendment to an Opposition motion. Perhaps I am making the mistake of treating the matter seriously. If the Opposition cut public expenditure on unemployment measures in this way, it would have consequences for the numbers employed in some areas, if only on a temporary basis. On that temporary basis, it would have an effect on 200,000 jobs, at least initially. Even if, ultimately, the money freed from this expenditure went into productive manufacturing industry to provide additional jobs, in the transitional period there would inevitably be some growth in public expenditure. I do not think that that can be disputed.

The hon. Member for Blaby and others suggested that the other major public expenditure programme available for substantial cuts was the area of housing subsidies. Again, that is not surprising, as the figure in that area is over £1,600 million. The Government already plan rent increases in line with earnings from 1980–81. To make further cuts in those subsidies, rents would need to rise faster than earnings. That is fairly self-evident. Local authorities, as they are autonomous, may decide not to increase council house rents faster than earnings. They may decide to take the amount from balances, or from the rates. Power would need to be taken over local authorities to force them to do this, as was done before. That is what would happen. We could not do so under existing legislation.

If that legislation were pushed through, expenditure in this area might be affected in 1980–81, or 1981–82, but there would be nothing in 1979–80. [Interruption.] The Opposition should not be so sensitive. Let me finish. If rents were pushed up £1 a week faster than earnings were rising, we should attain about £250 million—that is to say, if rents rose by £1 a week faster than they are already rising, in line with earnings, there would be a saving of about £250 million a year.

The Minister mentioned the article that I wrote. I did not refer exclusively to housing subsidies. I also referred to the sale of council houses and the shift of the building programme from the public to the private sector. If it is impossible for the Government, without legislation, to make assumptions about the level of rents, how is the Minister able to make his assumption about the level of rents rising in line with earnings?

The hon. Member for Blaby is a sensitive soul. I read his article. I have not finished with it. I shall answer it in my own time. I was coming to the question of council house sales. First, I shall deal with the questions constantly put to me by the hon. Gentleman. I realise that he does not like being criticised, even remotely, but I was not criticising him.

The assumption that we made was that council house rents would rise in line with earnings from 1980–81. My point was that if subsidies were cut by a substantial amount, rents must rise substantially faster than earnings. That is a simple point. I am sorry that the hon. Gentleman was so obsessed with his own article that he was not able to take my point on board.

I come immediately to the sale of council houses. I know that this is not only what the hon. Gentleman writes and talks about; it is part of Opposition policy.

I do not dispute that a great many things happened in Nottingham. No doubt my hon. Friend will tell me. No doubt the Expenditure Committee's report was discussed in great detail. I envy hon. Members their pleasure.

I do not dispute that council houses may be sold. After a few years, with larger discounts and a sustained campaign, it would be possible to sell more council houses in some areas. However, not much would be achieved in the first year. [Interruption.] If the hon. Member for Blaby aspires seriously to higher office, he must be a little less sensitive than at present. He must listen occasionally.

It might help Opposition Back Benchers to know how much in the way of public expenditure cuts they may hope for, so that they may include the information in their speeches around the country or in their constituencies and when they say that they will cut income tax, public expenditure and the borrowing requirement by massive amounts. Let me tell the Opposition what would be the result if there were a sustained campaign to sell council houses. If they sold 50,000 more council houses, the long-term savings—certainly not in the first year—would be about £200 million. In the longer period still, with mortgage relief and the possible replacements that would be needed, that might well produce a net loss on the borrowing requirement. However, that ignores the growing need for about 75,000 houses a year to meet the special problems of the elderly, the disabled and the homeless. Presumably even a Conservative Government would not be able to ignore those problems.

I now come to the other expenditure savings, and administrative savings on social security and tax. There have been some increases in the staffs of the Revenue services. The biggest increase was 10,000 in the staff of Customs and Excise. That number rose when the Conservative Government changed from purchase tax to VAT. That was the biggest influence. The Opposition know that any major reduction in staff in that area depends on the simplification of the tax system, which simply cannot be done quickly, especially when they stopped the expenditure on computers, which would have helped us to improve the simplification.

I now come to a subject that is often mentioned by the Opposition—the waste of resources. I note that the Opposition have been quiet about a document that was leaked recently. It is right that the areas covered in that document should be scrutinised very carefully. That is why two of the seven items were not proceeded with. I should be very interested to know whether the Opposition Front Bench would cancel any of the other five. I shall list them.

Would the Opposition cancel the British Aerospace 146—the old HS146? Would they cancel the Rolls-Royce RB 211–535? This is the company that the Opposition rescued from liquidation, having first put it unnecessarily into liquidation. Would they cancel entry into Airbus Industrie? Would they cancel the Sidewinder, or the Milan anti-tank missile, so that we would be utterly dependent on the United States and not produce them here? Which of those would they cancel? I can begin to see why the Opposition have not sought a debate on the subject.

I am bound to say that casting stones in this area of waste of resources is a dangerous business. One thinks of Concorde, the Rolls-Royce rescue, the TSR2 and Blue Streak. Which Government were responsible for more waste than the Conservatives?

Where else would the Opposition make these huge savings? Would they make them in the coal industry, the steel industry, the shipbuilding industry or in the National Health Service? Perhaps we would get from the Opposition some savings in the Health Service. It is possible, for the right hon. Member for Leeds, North-East (Sir K. Joseph), who has some experience in this area, was reported in The Times of 17 April 1978 as saying:
" Have a health service by all means, maybe one that will have a monopoly of some sorts of care, perhaps the handicapped, the geriatric or mental illness."
That is the kind of Health Service envisaged by the right hon. Gentleman. It would have a monopoly of those items and everything else would be divided elsewhere. Is that really the kind of proposition that would enable the Opposition now to argue that they would obtain major cuts in public expenditure? Even if the Opposition planned to provide a National Health Service for the poor, the geriatric, the mentally sick and the disabled, it would take, according to what the right hon. Gentleman is further quoted as saying,
" up to four consecutive Parliaments ".
There would not be much scope there for cutting public expenditure.

All in all, then, the minimum savings that the Opposition would be able to make would be such as would be available only for 1980–81. They would by no means enable major cuts to be made in public expenditure or a major cut in the borrowing requirement—particularly when, offset against even these minimum cuts, there would have to be increases in expenditure on defence, the prison service, law and order and housing for first-time buyers.

One would gather that a substantial increase in public expenditure is to be the policy of the Opposition Front Bench. Tonight they will vote to ensure that there will have to be an increase in public expenditure to allow for the abolition of the earnings rule in relation to pensions. That would involve expenditure up to £100 million over a given short period. This is from the party that claims to be able to cut public expenditure on a substantial scale.

My comments on the Opposition amendment have been extremely moderate, and I have no doubt whatever that the Opposition case really does add up to the fraudulent prospectus that I described. The House has a better prospect before it, as has the country. The House has the Government motion and the plan to increase public expenditure in line with what we can sustain. That plan depends on economic growth, which in turn depends upon containing inflation. Within economic growth, we can achieve what we need by a balance between personal consumption—including income tax cuts—and public consumption.

I do not apologise for wanting to see a society that is governed by a party that cares for something more than public expenditure cuts regardless of the consequences. I do not like the kind of society envisaged by the right hon. Member for Leeds, North-East, in which the poor, the geriatric, the mentally ill and the disabled would be the main people to be served by the Health Service. We need more, not less, public expenditure on health, education, social services, housing and the environment. The Government motion and Government policies provide the opportunity for those better balanced policies in a caring society, and I commend them to the House.

4.45 p.m.

I beg to move, to leave out from"House"to the end of the Question and to add instead thereof:

declines to approve"The Government's expenditure plans 1979–80 to 1982–83"(Command Paper No. 7439) which has already been overtaken by events and which in any case leaves inadequate scope for the cuts in personal taxation and interest rates essential to the creation of a prosperous economy.
The Chief Secretary's speech had a curious quality of déjà vu about it. We have heard it all before. Not long after he made that speech on a previous occasion, he had to take action to disprove the value of his own speech by doing exactly the converse of what he had advocated. He had to make reductions in public spending on a scale which he had denounced as impossible only a week or two before.

The amendment that we have tabled today underlines one point, and the Chief Secretary has attempted to address himself to it from time to time. It is the extent to which these debates on public spending far too often take place in isolation from the much more important question of how the spending planned by the Government is to be paid for.

The General Sub-Committee of the Expenditure Committee, under the chairmanship of the hon. Member for Nottingham, West (Mr. English)—to whom, collectively and individually, I gladly pay tribute—has argued for some time that we ought to do more to bring together for consideration in the House the two sides of the Budget, so that they could be looked at simultaneously. That is surely the direction in which we ought to go.

The Chief Secretary, in table 7 of the White Paper, has moved to some extent in that direction. As I shall have one or two less-than-friendly things to say later about the Chief Secretary, I am glad to pay tribute to him now—this must be the last occasion on which I shall have the opportunity of doing so—for some of the constructive work that he has done in this field. He has played an important part in advancing the concept of cash limits and he is entitled to take credit for that. He is a little less entitled to take credit for the way in which he welcomed back to these Benches, for a public expenditure debate, my hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne). We are delighted that he is here with us again. He has now left the Chamber, I gather, but he will be back.

The hon. Gentleman left when the right hon. and learned Gentleman started to speak.

My hon. Friend and I are so close in our thinking, and we understand each other so well, that he no doubt felt that he needed to proselytise another audience.

The Chief Secretary managed to demystify and devalue the White Paper almost to the point of extinction, and there may be some credit that he can take for that as well.

The General Sub-Committee of the Expenditure Committee, in paragraph 11 of its report, may have given an apt verdict on the Chief Secretary when it said:
" There is no explicit statement to show whether the Government regards any of the projections as either desirable or acceptable, although the clear implication is that the Government cannot determine the rate of economic expansion…This seems to reflect a pessimistic view about the effects of the Government's economic policy upon the rate of economic growth and indeed no indication is given, apart from urging trade unions to restrain wage demands, of the measures that might be taken to influence developments, let alone of their likely effect."
The decisions that are being debated today and the plans that the Chief Secretary has brought before the House will be far more significant for the Government's room for manoeuvre on the tax front, and a great deal more should be done to bring them together.

Happily, the Prime Minister gave us an opportunity to consider these matters alongside each other. Addressing an audience in Paris last Monday, he said:
" We are misusing taxpayers' money and the day is fast coming when our taxpayers will refuse to authorise any more."
The newspapers produced headlines the following day such as"Taxpayers revolt"and"A bottomless pit ". The Prime Minister went on, in other flowing phrases, to say that it was high time that this rake's progress was brought to an end. We applaud those sentiments. It is a marvellous thing for the Prime Minister to say, but we have doubts about his choice of audience and of target.

The net contribution to the EEC this year, taking account of the European Investment Bank, is £722 million. That contribution should certainly be examined criticially, but how far is the Prime Minister entitled to do that in such strident terms? The contribution was arrived at in accordance with the procedures and calculations established after a painful, prolonged renegotiation by the Prime Minister of the Treaty of Accession, so he has no right to complain of the result.

The Chief Secretary is sitting there looking fairly content, but he has little right to question the contribution. Towards the end of last year the European Assembly raised the Community budget by some £300 million. That was considered by the Council of Ministers, and the Chief Secretary represented this Government. He did not slap his veto on the table to overrule that increase; he allowed it to go through. Only months back he, the Italians and the Irish conspired to promote a further increase in the Community budget. He is no better placed than is the Prime Minister to pose as a friend of the taxpayer.

That is a prudent judgment on the quality of the contribution that the Chief Secretary has made to the debate this afternoon. He has not taken far enough the alignment of each side of the Budget together. In a few weeks' time—if the Chancellor of the Exchequer is still in office—the Budget will still be seen by the public as the lonely centrepiece of our economic debates.

Before the right hon. and learned Gentleman distorts the picture any further, I should say that the £300 million related to the regional development fund, from which we get a net benefit.

We fully appreciate that. Even so, the Chief Secretary was contributing to an overall growth in the Community budget, and by that means was hoping to readjust its shape. If it stands as that, it will lead to an overall growth in the budget. Neither the Prime Minister nor the Chief Secretary is entitled to take that point.

The right hon. and learned Gentleman must get his facts right. Is he arguing that we should not be seeking an increase in the EEC budget that provides a net benefit for this country?

If it operates simply as an addition with other adjustments that may take place, it is likely to lead to an increase in the total contribution. Neither the Chief Secretary nor the Prime Minister is entitled to challenge that kind of thing.

It is grotesque for the Prime Minister to talk of a taxpayers' revolt against a total contribution of £722 million if one considers what has happened under this Government. One can take a number of different tables from the White Paper to make comparisons and put that in a wider perspective.

Table 1, line 7, shows that in 1973–74, which was the last year for which my right hon. Friends were responsible, the total public spending was £58·8 billion. Two years later, in 1975–76, it had risen to £65 billion. Two years after the Chief Secretary first made his speech saying that reductions in public expenditure were quite impossible and the most cruel things that could happen, it had fallen to £60 billion. In the year that is about to end, it has gone back to £65·2 billion, and on the Government's plans for the year ahead it is likely to go up to £68·2 billion. That is from the constant line of figures in the table.

Under this Government from 1973–74 and during the next two years, the figures rose by £7 billion. They came back by £5 billion in the two years after that. In the two years from 1977–78 onwards, the aggregate increase will be £8 billion-plus.

Two things follow from those figures. First, in total contrast to the tenor of the Chief Secretary's speech, public spending can be reduced. By his past actions he has not merely demonstrated that that can be achieved; he has also demonstrated the hollowness of his speech this afternoon. Up until 1976, year after year, we were denounced for arguing for a reduction in public expenditure. It was said that it would be cruel folly to do that. But under pressure from the International Monetary Fund the present Government reduced public spending by £5,000 million. The Chief Secretary said that that was impossible and counterproductive, but even that has been disproved by his experience. At the same time as public spending was reduced, we saw interest rates coming down and unemployment beginning to fall. What the Chief Secretary is warning against was disproved by his experience after he made those public spending cuts. The tragedy is that within two years of taking those steps the Government and the Chief Secretary have all too quickly forgotten the lessons that they should have learnt.

Last week the Prime Minister talked about a taxpyayers' revolt against the European Community. Between 1977–78 and the year ahead public spending is likely to rise by £8,000 million. That is a 14 per cent. increase from its previous low. Gross domestic product will rise by probably less than one-third of that. For the Prime Minister to inveigh against less than £800 million total spending by the European Economic Community, while presiding over a growth in his Government's total spending that is 10 times as large, is a shameless attempt to throw dust in the eyes of the electorate. He has shown himself willing to strain at a gnat and swallow a camel.

It is ludicrous for the Prime Minister to seek to put himself at the head of a taxpayers' revolt. If there should ever be such a revolt, the Labour Party would be clearly and firmly on the other side of the barricade. The Chief Secretary would be dishing out the riot shields to his colleagues in the Cabinet. The tear gas and the hosepipes would be wielded by the members of the Tribune group below the Gangway. So much for a taxpayers' revolt led by the Prime Minister.

We decline to accept the White Paper. Its plans for public spending are an insuperable road block to any prospect of the tax reductions that are necessary to begin restoring the health of our economy. The increases in public spending that are planned, in addition to those that have taken place over the past 12 months, are positively damaging and counter-productive. The Chief Secretary, as he so often does, sought to present it as a calm, considered judgment, helping to steer our economy and our people to ever more prosperous heights. We must bring him back to the reality of the economy over which he helps to preside.

The White Paper paints a pretty sombre picture. The General Sub-Committee says that not only does the White Paper have an air of unreality—and it is certainly right about that—and not merely that it is out of date, but that it is too optimistic. The Chief Secretary sought to explain that it contains mere illustrations. But our complaint and that of the General Sub-Committee is that not one of the illustrations that he is at such pains to discount is within sight of reality.

The oft-repeated forecasts of balance of payments surpluses for the current year of £2 billion or £3 billion turn out to be represented by a modest surplus of less than £250 million. Unemployment is back on an upward trend. Price inflation is within sight of double figures and going beyond that. The Bank of England Quarterly Bulletin published last week shows that the growth outlook for the year ahead, excluding North Sea oil, is probably 1 per cent.

If we look at manufacturing output—the heart of the economy in terms of"The industrial strategy "—we find that it was actually 4½ per cent. lower last year than it was in 1973. As a result of the industrial stoppages and other factors at the beginning of the year, the slump between the last quarter of 1978 and the first quarter of this year was more than 8 per cent. That was significantly larger than that which occurred as a result of the three-day working week.

Again looking at the Bank of England analysis, we take the question of productivity. Up to 1973 it was growing at an average rate of 3½ per cent. a year. In the last five years it has fallen sharply behind—far below that of any of our competitors—so that it is now growing at about half a per cent. a year. The Bank of England says—and this is hot from the presses last week:
" The consequences of failing to arrest this country's industrial decline are likely to become more pressing and obvious as time goes on Now condemned to very slow growth, we might later even have to accept, if present trends continue, declines in real living standards.… The need, then, is not simply to arrest inflation, necessary though that is, but radically to improve both efficiency and thus also real wages."
Our complaint about the White Paper is that it makes no contribution whatever to that end. On the contrary, is will destroy any hope of our ever achieving the kind of improvements that are necessary.

What the right hon. and learned Member for Surrey, East (Sir G. Howe) has just referred to looks suspiciously like a recession. Does he believe that a recession, or the beginning of one, is the right time to slash public spending, particularly as a proportion of GNP?

The two factors are unconnected, as the hon. Member for Cornwall, North (Mr. Pardoe) should know. Year after year we have been through contractions and expansions in the concertina of public spending. At one time the present Government argued that it was wrong to contract public spending in the heart of a recession, so they resisted it for two years. In fact, they finally reduced public spending under pressure, and the consequence of that was a reduction in interest rates, a turn-round in the economy and the beginning of growth and employment. The argument that follows in the analysis that I have made is that we should give far less attention to manipulating the demand side of the economy in that sense and concentrate on improving the supply side so as to make it more worth while for the economy and for people to work.

Clearly, we are in need of an alternative strategy. There is no hope of that from this Government, who have come full circle round and ended up far worse off than when they started. Increasingly, one finds that Members of the Government are beginning to recognise the need for an alternative strategy. I noted that in the debate on public expenditure 10 days ago the Financial Secretary made a number of despairing comments on the way his policies had gone. He said:
" we have seen a transfer from manufacturing industry into service industry—largely Government service industry. We have seen an increase in local authority staff and, at the same time, decline in our industrial strength. That is a matter of regret to us all. We had hoped to see greater efficiency in the public service and in industry."
He went on to say:
" The idea of people pricing themselves out of jobs is, unfortunately, valid. I wish it were not, because then the solution to our problems would be so much easier. I should be able to embrace the ideas of my hon. Friend "—
that is, his hon. Friend the Member for Salford, East (Mr. Allaun)—
" with acclamation, delight and joy. Unfortunately, the realities tell against us…Times have changed. Our reactions must change with them."—[Official Report, 9 March, 1979; Vol. 963, c. 1688–9.]
That was a confession of abject despair from the Treasury Bench if ever there was one.

There was rather more candour from the Chancellor of the Duchy of Lancaster who said, in Birmingham, on St. David's Day:
" One of the lessons the people of the left in all countries have learned "—
he might have said"all countries save our own "—
" is the value of the decentralised energies of the private sector in both economic and human performance. We have to acknowledge that the decentralised private sector has out-performed the old-fashioned concepts of centralised planning…For all these reasons, we come to see that there is enormous merit in the motivation of the private sector."
What a pity he is still a lone voice in the Government, because by now the alternative strategy should be clearly defined.

The Chancellor of the Exchequer accepts the first point—that the control of the money supply is crucial and targets for the growth of the money supply should be set, declining year on year until they are in line with the growth of the productive resources of the economy. But that is of no value in itself unless fiscal policy is consistent with it. The fluctuation of interest rates in the last 12 months—to the high of 14 per cent.—shows that the Government have been trying to borrow too much, consistent with that money supply target.

Alongside declining money supply targets, the real and money size of the public sector borrowing requirement should also be planned to reduce year on year. One cannot repeat too often that excessive borrowing operates just as much as a tax on the productive sector of the economy as excessive taxation, either through inflation or through interest rates. Therefore, that must be brought in line as well.

For all these reasons, it is necessary to reduce the total of public spending and to hold it below a figure for a number of years as a plain signal of the fresh approach that has been made to the balance of the economy. Last year I said from this Dispatch Box that the Government should have been trying to hold the figure at the outturn for last year. For some years before that the CBI had been saying that they should have been trying to hold it at the outturn for the year before. The crucial thing is to move in that direction as quickly as possible.

This is important, because it is the only way, beyond controlling the balance of the economy, of giving us the room for manoeuvre to make the substantial reductions in personal taxation that are so necessary. That is one of the two halves of what must be done to begin improving productivity and the supply side of the economy. The Chief Secretary knows that perfectly well; the tragedy is that he is never in a position to do anything about it. He comes here today, as he has in the past, and says that there is nothing that he would like better than to be able to cut taxation. The Chancellor of the Duchy of Lancaster often says the same thing. The trouble is that the Government never have the determination or the understanding to control their public spending in order to make that possible. That is why the country remains stuck in the same box after five years of this Government.

The marginal tax rate of 39½p in the pound, including national insurance, paid by most people in this country, is profoundly disincentive. In other countries around the world one does not pay that amount until one is on a much higher income level. In France, Germany, the United States and Canada the level at which one starts paying 39½p in the pound is between £16,000 and £40,000 a year. In Britain, one starts paying at that level at £50 a week. If that does not overwhelmingly prove the case for reductions in personal taxation, I do not know what does.

The other aspect of what demotivates our economy is the extent to which many of the subsidies actually have the effect of discouraging productivity and mobility by their sheer addition to the tax burden, which impedes the improvement of the economy. The outlook on this out-of-date White Paper is profoundly gloomy, even if one brings the figures up to date. Is it clear that the public sector borrowing requirement will be at or above the limits set by the Chancellor for himself. Even that will be possible only on two assumptions—that personal allowances are indexed and that excise duties are valorised as well.

If one looks more closely at the balance of the White Paper, one finds the Bank of England producing this judgment:
" Given the need both to contain the size of the public sector borrowing requirement and to reduce the necessity for adding to the tax burden, there appears to be a clear case for containing more strictly the rise in public spending."
We expected to hear some answer to that judgment from the Chief Secretary this afternoon. Do the Government intend to stick to the spending programmes set out in the White Paper or do they intend to reduce them as the Bank of England advises and considers necessary?

If press reports are to be believed, the Chancellor of the Exchequer told the Parliamentary Labour Party last week that he had in mind a neutral Budget. If that means doing as little as possible, maintaining the spending plans set out in this White Paper and doing nothing whatever to alter the shape and size of the tax burden on people, it is a prescription for continued decline of our economy and our society.

I must warn the Government against doing two things that would make the position worse. There is, of course, a case for an increase in indirect taxes if it is used to finance cuts in personal taxation. But if the present Government approach their Budget—if they are there that long—with the intention of increasing indirect taxes simply to pay for higher spending, that would be unacceptable. Particularly unacceptable would be any plans by the present Government to increase still further the national insurance surcharge on employers. That figure has risen in the last two years from 8¾ per cent. to 13½ per cent. It has had an effect on either prices or unemployment and jobs, or on both. It has certainly had an effect on the profitability and the cash flow of companies.

The Governor of the Bank of England, speaking in Birmingham the other day, gave a clear warning which the Government would do well to heed. He said that
" there is little future for this country…unless priority is given to encouraging business and industry. Profit margins have fallen to disturbingly low levels in recent years, and seem even more vulnerable in the present context. In framing the detail of fiscal policy, this needs to be kept constantly in mind."
In other words, translating those courteous words by the Governor, it would be an act of grotesque folly for the Government at this stage to increase the burden of taxation on industry by increasing the national insurance surcharge.

The Chancellor of the Exchequer may remember an interview in The Guardian, when he was asked what was his biggest mistake. He said that the biggest mistake he made happened in his first Budget, when he underestimated the tightness of industry's cash position. He went on to say that he had made many mistakes since then but that that was the biggest one. He certainly should not repeat that mistake by once again increasing the burden on industry's cash flow by a change of that kind.

I wish to offer advice on where economies should be found. I very much hope that the Government will not go on finding economies in public borrowing by taking advantage of those who are adversely affected by the present strike in governmental computer services. There are many reports of people who are hard-pressed and badly affected by the strike. I refer, for example, to pensioners, whose income is tightly budgeted and who are in a position of great hardship as a result of the failure of the Government to honour the obligations to pay interest on investment in Government securities. I also refer to small savers, who are required to cash their savings to buy houses for their retirement. They are required to borrow money from the bank, on which they pay interest of 17 or 18 per cent., because of the failure of the Government to pay out money due to them.

Furthermore, exporters are not receiving rebates of VAT for two or three months at a time and are suffering considerable hardship. This sequence of hardship on citizens as a result of industrial strikes in the Civil Service is the unattractive first fruit of the concordat of which the Prime Minister made so much the other day.

I hope that the Government will consider special arrangements to meet hardship faced by people, whether in a private or commercial context, as a result of the present position. Will the Government confirm that a citizen who is not receiving VAT rebate will be entitled to offset that rebate against his liability to pay PAYE the other way? We should like to have answers to those questions, because there has been an agreement to such effect in at least one case. Can such a step be taken? A Government who are prepared to dishonour debts due to pensioners and others will not command much confidence in the House or in the country.

Let me offer some other advice on where economies could be found. The Government have wholly overlooked the cost in the long term to the taxpayer of the huge borrowing programme which the Government have financed over the last five years. The net real burden of interest at the end of five years of this Government is twice as high as it was when they came into office. The net real burden has risen from just over £1 billion to £2·3 billion. In the last five years the Labour Government have borrowed £40,000 million at an average interest rate of 13 per cent. If the proper rate of interest were to come down to 8 per cent., if inflation were to come under control, the taxpayer would be paying about £1,000 million a year too much as a result of the excessive borrowing at excessive interest rates by the present Government. That in itself is a good reason for reducing the Government's overall borrowing programme.

Let me offer some other suggestions. The fact that short-term benefits, indexed to prices but untaxed, continue to be planned for in the Government's programme means that if the tax pattern were to be changed so that short-term benefits came within the tax net, there would be room for a saving of £300 million or £400 million a year. At the same time the Government would have succeeded in removing a direct disincentive to work—one of the many items that are lowering productivity in our economy.

The Chief Secretary spoke of scope for reducing public expenditure on housing as though this were a sacrosanct area in which progress could be made only in a modest way. He forgets that under his own supervision public spending on housing was running at £6·2 billion in 1974–75 and was reduced, after the ministrations of the IMF, to £4·9 billion three years later. It is undoubtedly possible over a period of time to make substantial reductions in the burden of expenditure on local authority housing and local authority subsidies.

Some years ago the Chief Secretary was suggesting that he would do just that —that he intended to raise the proportion of the cost of housing paid by the average tenant from 42 to 50 per cent. But that has not happened. He has been denouncing us for having plans in that direction, although The Guardian on Wednesday last week contained this interesting report on its back page:
" New powers to claw back the cost of large wage increases by substantially raising rents for six million council tenants are to be put before Parliament before Easter. These changes have been foreshadowed since 1977. They have taken on a new significance since wage rises increased this winter and local authorities face large rate rises in the coming year to pay for large comparability studies for low-paid workers."
We should like to have confirmation from the Government whether that report is correct. If the Government are bringing forward plans for higher rents, as reported in that newspaper last week, why should it be so beyond contemplation for us to say that that is the way in which public spending could be saved? Will the Government bring forward plans of that kind, or will they leave that aspect to us? If this is a report of the Chief Secretary's intentions, he is being unusually diffident. We must assume that his intentions, which he is unwilling to admit, are a true insight into what the Government intend to do. It shows what a hollow nonsense it is for him to denounce us for having plans to save public spending by seeking reductions in that direction.

Let me deal with his dismissal of savings to be made by council house sales. That comes as no surprise to the Opposition. The idea of selling council houses on a substantial scale embodies principles that are anathema to members of the Labour Party. The idea that they should want to achieve economies in the public sector programme and that they should do so by giving citizens more choice is the last thing in the world they would want to do.

The Chief Secretary mentioned room for economies in trade, industry, employment and energy. Why should these areas be so beyond the pale of legitimate thought? The right hon. Gentleman lives in a kind of world that I do not recognise. He suggests that expenditure of up to £500 million on the National Enterprise Board is sacrosanct because small business men are clamouring for that expenditure in order that they may themselves be saved. They are apparently queueing up in tumultuous crowds for assistance from Sir Leslie Murphy and his colleagues. That is not the real world in which people live. There is undoubted scope for reducing the figure in excess of the £·billion which goes to selective assistance for industry, including the NEB.

The right hon. Gentleman said that we had not questioned the wisdom of the scale of expenditure recorded so interestingly the other day in a letter from Sir Douglas Wass to Sir Peter Carey. It is for the Government to question this matter. We certainly do. That document read as follows—I quote from The Guardian of 28 February:
" Over the four months to last December the Government initiated seven job-saving projects which will involve the country in losses of up to £800 million."
Sir Douglas wrote:
" The startling and disturbing conclusion is that we have been accumulating prospective losses of real resources at a rate faster than the growth of national income."
That is intolerable. I notice that the Chief Secretary failed to mention one of the items in the list of seven—namely, that of Polish ships. We are told that losses on this order for British shipbuilding would be £30 million, and that the subsidy of 70 per cent. of the selling price amounts more than £6,800 for each man year of employment. It is absurd for the Chief Secretary to pretend that there is no room for reduction in public spending in that sector. It is as a result of that kind of open-ended subsidisation that reports about State shipyards, such as the one in the newspapers last week, have been published. My hon. Friend the Member for Tynemouth (Mr. Trotter) drew attention to that report. Each British shipbuilding yard loses an average of more than three hours' production a day through late starts, early finishes, waiting time and other factors. That is the consequence of open-ended subsidisation being shelled out under the Budget for trade, industry and energy.

The Chief Secretary defended the large sums of money that are being spent on the functioning of the labour market. It is difficult to see how those large sums have produced dramatic success. The figure has risen from less than £300 million five years ago to more than £1,300 million now. In many cases, the take-up of the suggested training measures is very low. I noticed one example in the White Paper where 68 per cent. of the places were left vacant. There has been little improvement in efficiency, because all these services to improve the functioning of the labour market have led to a reduction in our productivity improvement from 3½ per cent. to ½ per cent. per year. In many cases, the availablility of the services has had an adverse effect on productivity. Therefore, to believe that there is no room for reduction in these expenditures is totally absurd.

We are concerned by the way in which the Chief Secretary is handling cash limits. His speech does not give us much confidence that cash limits will be upheld in a way that will keep public spending properly within bounds. We feel real anxiety that the terms of the comparability study which has been announced by the Government will put far too much pressure on the cash limits, in terms of the awards or judgments that may be made to public sector employees. We should like to know whether the terms of reference of the comparability studies will make proper provision for account to be taken of supply and demand for different kinds of labour that are to be considered by the comparability Commission. Will the job security of those employed in the public sector, alongside those employed in the private sector, be taken into account? Will proper account be taken of the differential pension rights available in the public sector? Above all, will a comparison be made on the basis that equal work of equal efficiency is being done in the private and public sectors?

Mr. Frank Chappie—a man of great candour—uttered some great truths recently. He said:
" The brutal truth won't go away by ignoring it. The Government have no money for inflated pay increases. What cash it has is got through taxation—the same taxation we all complain about and accuse of killing incentive because it is pitched too high."
How will his conclusion—that it is no good paying five men more for doing three men's work—be reflected in the comparability studies?

We are not encouraged by the limited extent to which the Chief Secretary is prepared to give real substance and effect to the cash limits when they are placed alongside the comparability studies. These studies are of value as a means of determining the going price for a particular kind of work in the private market outside only when put alongside the real discipline of cash limits.

In his latest speech to the House, the Chancellor of the Exchequer made clear that cash limits would not be increased to take account of increases in public sector pay that might emerge from the pay bargaining process. However, in his answer on 23 February and in his statement today, the Chief Secretary appeared to be making the cash limits a great deal more elastic, diminishing them as a credible form of discipline and turning them more into a form of propaganda. That would diminish the role of Parliament. If cash limits are to be for real—contained, as they will be, in the Estimates that come before the House—it is important that they should be upheld as being for real. The House is required and entitled to make decisions as to whether or not they should be increased. We are disturbed by the apparent flexibility with which the Chief Secretary has sought to defend the reality of cash limits this afternoon.

The Governor of the Bank of England, speaking in Birmingham, put his finger on the real point. He said:
" If the coming year is a hard one, as I expect it to be, there will be some who would seek to represent it as the result of a collision between excessive pay settlements and the maintenance of firm…monetary and fiscal limits. But the real collision is between the level of those settlements and the level of growth of productivity in our economy."
That is the reality which the Chief Secretary and the Government have to realise. Cash limits represent the limit of what the Government, the taxpayer and the ratepayer are prepared to pay. Negotiation has to take place against that background, and within that framework, far more firmly than the Chief Secretary has sought to suggest.

There was some justice contained in a comment in The Accountant, which, no doubt, the Chief Secretary reads avidly. The article, under the headline"Standing Firm or Opting Out ", says:
" We confess ourselves frankly less than certain of how much the Right Honourable Joel Barnett, politician and Privy Councillor, Chief Secretary to the Treasury, remembers of what Mr. Joel Barnett, certified accountant, was presumably taught at some stage of his career about reporting in clear and unambiguous language, and the presentation of a true and fair view…It might perhaps be helpful if Mr. Joel Barnett, FCCA, were to explain in terms not too difficult for the Right Hon. Joel Barnett, PC, MP, to understand, that ' standing firm' involves something a little more than taking money out of one pocket rather than another…saddest of all is to find a member of the accountancy profession, trained to precision in the presentation of factual information, associated with the debasement of language that seems to equate standing firm with opting out."
That is—unhappily—a fair judgment on the rather pallid defence that the Chief Secretary has made of cash limits.

Was the right hon. and learned Gentleman quoting from the accountancy institute, the majority of whose members are trained outside private industry for which they then practise, or was he referring to one of the accountancy institutes that seems incapable of agreeing on standards of accounting in the profession?

That is a complex and sophisticated question. However, the one thing that they appear to have no difficulty in agreeing on is that it is the duty of an accountant—in or out of Government—to report in clear and unambiguous language and present a true and fair view.

It is that duty of which they regard the Chief Secretary as having fallen short.

There is a serious point among the points that the right hon. and learned Gentleman has made. The phrase"true and fair view"in the accountancy certificate was used because it could not be precise about figures in a balance sheet. If the right hon. and learned Gentleman thinks about that, I am sure that he will appreciate it. It is impossible to be arithmetically accurate when providing a certificate on a set of accounts.

Is the right hon. Gentleman arguing that if he set a cash limit in respect of pay at a particular level for a particular current year, and then allowed free collective bargaining, which results in, for example, 5 per cent. to 8 per cent. more than that cash limit, he would or could cut expenditure in order to keep within that cash limit?

That is the kind of question that has to be faced frequently by pay bargainers in private industry. In the real world, the cash limits of many organisations of the private sector are determined by that which is available. We have been encouraging the Chief Secretary to try to introduce and establish in the public sector a parallel to that concept.

In his answer on 23 February, the Chief Secretary said:
" In respect of pay…the Government will review each case as settlements are reached…the general principle will be that a substantial proportion of any excess cost above the provision already made will have to be absorbed within the existing cash limits…Whether the Government make any further contribution in respect of other settlements will depend upon the circumstances of each case."—[Official Report, 23 February 1979; Vol. 963, c. 335].
For some years, the Chief Secretary has been trying to assert the importance of the reality of cash limits, but the first time that they come to be tested he qualifies them to such an extent that he does grave disservice to the concept that he has been doing so much to erect. Cash limits have to be upheld with determination and conviction. In the private sector there are circumstances when they cannot be held at à l' outrance in every situation. To undermine them to the extent that the Chief Secretary has done on the first occasion that they have been brought under pressure and test is to do grave disservice to the important concept that he has been trying to establish.

The verdict on the White Paper and the Government is that if we go ahead on these public spending plans, in the context of what the Chancellor of the Exchequer has told us will be a neutral Budget, we shall be going ahead on the basis of no change and no hope. If we leave Britain on the course set out in the White Paper, we shall be on course for further, even more rapid, decline. That is the conclusion of our five years' experience under this Government.

The House must recognise, as I am sure that it does, that only a fresh Government, with a fresh mandate and fresh strategy, can begin reversing that decline. For those reasons, I invite the House to reject the White Paper, to regard it as a feckless and dismal document and to vote instead for our amendment.

5.31 p.m.

The right hon. and learned Member for Surrey, East (Sir G. Howe) raised probably the most central question of the British economy. He ended by saying that only another Government—we take it that he meant a Government of his party—could reverse the trend of decline in the British economy. He also quoted from the Bank of England Quarterly Bulletin, which said:

" The consequences of failing to arrest this country's industrial decline are likely to become more pressing and obvious as time goes on."
However, the right hon. and learned Gentleman did not refer to the earlier sentence in the same paragraph:
" The United Kingdom has long been a country where productivity grew relatively slowly;…"
The same paragraph refers to an earlier page of the bulletin.

I did not want to have too long a quotation, but the sentence that the hon. Gentleman has just quoted is followed by:

" but…the United Kingdom's performance has in the last five years become even poorer."
That is the substance of the matter.

I was going back from that section to the earlier page referred to in the middle of that quotation. Let me quote it in full. It says:

" The Unilted Kingdom has long been a country where productivity grew relatively slowly; but, as figures quoted earlier in this commentary show (see page 7), the United Kingdom's performance has in the last five years become even poorer."
I hope that the right hon. and learned Gentleman accepts that I was about to refer to the reference in the middle portion of that quotation. If we go back to page 7, we find these words:
" The slow growth of manufacturing output in recent years has been accompanied by some further worsening in the United Kingdom's already poor productivity performance. From the immediate post-war period until 1973, manufacturing output rose at an average rate of 3 per cent. a year and productivity at an average of some 3½ per cent. a year."
The Bulletin goes on to outline what has happened since then, and adds:
" A weakening in productivity growth since 1973 is common to most other industrial countries "
—it then refers to a table in the document—
" but the United Kingdom started from a lower base.
The reasons for the unusually slow response of employment to the recent depressed level of activity are not wholly clear."
In the end, the quotation of the right hon. and learned Gentleman leads us to a simple statement from the Bank of England that the reasons for it all"are not wholly clear."

The immediate post-war period until 1973 involves periods under Governments of both parties, and the Bank failed to point out that when the Bulletin says that the United Kingdom's performance has"long"been poor, the"long"is very long indeed. Everyone who has studied this country's economic performance is aware that its economy, standard of living and productivity have improved over the past century, but have done so much more slowly than in other industrial countries. We are still among the more prosperous countries of the world. We have improved in that time, but under successive Governments of all parties we have not done so as quickly as have other countries.

The short-term arguments of the right hon. and learned Member for Surrey, East will not solve or reverse a secular trend of more than a century. It is necessary to think of something more radical than anything proposed by his Front Bench or, if he wishes to say it, perhaps by my Government or even by the Liberal Party, the members of which have suddenly vanished from the Chamber.

In our debates, we tend sometimes to concentrate on short-term things—presumably because we have elections every four years—without considering the possibility that there may be some things that are so deeply wrong that they cannot be altered by simple, short-term activities.

The Chief Secretary said that the Expenditure Committee had two main criticisms. He said that we recognised that the White Paper is an improvement on some of its predecessors. Instead of a blanket refusal on everything for which we had asked, we have had a large number of the things that we requested done or substantially done. My right hon. Friend the Chief Secretary said that we had two main criticisms, but he did not mention what I regard as one of our main criticisms, namely, that by example the Government wish to discourage capital investment. My right hon. Friend did not mention paragraph 10 of our report, in which we said:
" As we said last year some of the recent cuts seem to be false economies and the damaging impact on the construction industry is neither sensible nor just."
We said, earlier in the same paragraph:
" It has been calculated that construction by or on behalf of central and local government as a proportion of total public expenditure has fallen from 11 per cent. in 1973–74 to 8 per cent. in the current year and will, on the White Paper plans, have fallen to 7.2 per cent. by 1982–83."
It is perhaps regrettable that the Opposition, who were quite keen on that point a year or so ago, seem to have dropped it. It is certainly not mentioned in their amendment.

I accept that there is likely to be less need to build schools if there is, for example, a decline in the school population, but unfortunately the allowances available for school building have so declined that the basic needs allowance is merely keeping pace with the natural movement of populations out of the centres of cities into the suburbs.

In the centre of Nottingham, for example, there are still whole areas where houses have been cleared and replaced by modern corporation houses. The children there will be going to schools that are, in some cases, 140 years old. I am not suggesting that the automatic replacement of elderly schools somehow raises the productivity of the teaching profession, though teachers often think that it does. However, we cannot say that a 140-year-old school is necessarily up to the standard of schools in our modern, prosperous suburbs. If a modern, prosperous corporation estate is in the centre of a city and not on a green field site, it has to put up with elderly schools. Private or local authority housing on a green field site gets a brand new school. There is enough public expenditure for the latter but not for the former.

My right hon. Friend said that he wanted capital expenditure on the environment. He does not seem to have thought of the implications of the recent history of the citizens of Manchester and the surrounding area. The people who maintain the sewers of Manchester went on unofficial strike recently. That should not have mattered for a week or two, but it mattered immediately. The relevant authorities had immediately to tell the public"You must be careful about drinking the water ", because the sewers were so bad that they might pollute the water supply.

In the Expenditure Committee report, we quote from the civil engineering contractors, who pointed out to us that:
" each of the Water Authorities faces a common problem—the accelerating deterioration of sewers laid down many years ago to serve populations very much smaller than those presently existing."
In paragraph 53 of part 1, the White Paper justifies lower capital expenditure on the grounds of demographic and other changes. The change since those sewers were built is that there has been a vast increase in population and in the amount of material—I shall not use the four-letter word I used at a press conference—flowing through those sewers. There is a need for that capital expenditure. All that we are promised in the White Paper is that there may be a study on how far there is a need for it.

We cannot rely on the efficiency of Victorian engineers for ever. They were remarkably efficient. Indeed, their capital expenditure as a proportion of the total of capital and current expenditure was far higher than the proportions that we are talking about. We are still relying on their ability and on the capital investment of Queen Victoria's reign. We cannot do it for ever.

The worst thing of all is the example given to the country. I am sure that my right hon. Friend will readily tell me that our tax provisions for encouraging private investment are generous compared with those of almost every other country. There is free depreciation and so on. We have very generous provisions in an endeavour to encourage the private sector to invest. But there is something about Government and leading by example. The example that we give to people in the country is"Always concern yourself about current expenditure. Do not bother about investment."

There is another aspect which is even more immoral. Over the past two or three years, the Government have given the impression that they are reluctant to share the burdens of the economy equally. When the International Monetary Fund and others wished us to indulge in public expenditure cuts, many of my hon. Friends were deeply concerned. Yet if external factors impose upon the Government the necessity in turn to impose, in effect, cuts in the standard of living upon the rest of the country, they must surely do the same for the public sector as for the private sector. I am not suggesting that they should do better for the private sector or better for the public sector. The burden must be spread equally.

If one cuts capital expenditure alone, there is a difference. If one cuts capital expenditure differentially, one is saying"All our millions of people in the public sector will remain in employment ", because generally speaking they are not engaged in construction and allied capital industries."We shall export all the unemployment that the country is forced to go in for not merely to the private sector but to a particular portion of it—primarily to the construction industry and similar capital goods industries." That must be unfair.

The same applies not merely to employment but to the question of profits, bankruptcies and so on. If there was a necessity to do something on behalf of the country as a whole—let us assume for the moment that there was—the burden should be spread equally. It should not be directed to a particular sector. That is what the General Sub-Committee of the Expenditure Committee unanimously believed last year and this year. We were not in that context arguing about the principle behind cuts as a whole. We were arguing about the unfairness of directing cuts predominantly against a particular sector relative to others. Apart from the examples given, that must be wrong.

I should like to end with a simple question or two to the right hon. and learned Member for Surrey, East. I found some of his statements hard to bear. For example, he quoted the chartered accountants. British industry is not like German industry, where the predominant profession on the executive boards, not the superior boards, is that of the engineers. British industry is not even like other industries where the predominant, most highly paid, profession is that of accountants. The best way to earn money as an accountant in Britain is to be a senior partner in a good firm of accountants, not in industry but in the service industries, the very thing that the right hon. and learned Gentleman was criticising.

Unlike some bodies, for example, the Institute of Cost and Management Accountants, the accountancy institute that the right hon. and learned Gentleman mentioned, requires, generally speaking, that in order to join it people must join an accountancy firm practising outside industry. It may be working for industry, but it is not an industrial firm. They must go through the period of training outside industry, being sent to look at industry from the outside on behalf of their firm.

Other accountancy institutes take a different view and accept into their organisation people who are trained in the service of local authorities or in employment by industrial companies. But large numbers of chartered accountants will practise in industry, where they were not trained. It seems a very odd way of running a profession and of running industry. However, that is the institution that the right hon. and learned Gentleman chose to quote.

The right hon. and learned Gentleman also made some criticism of the fact that in Britain we had moved from employment in industry to employment in"service industries ", as he put it. It might be simpler to say"in services ". What he criticised is something that has long since happened in the United States. It is a general trend in all countries to move first from a predominantly agricultural economy to a predominantly industrial economy and then to a predominantly service economy.

But heaven help us! Where did his comment come from? It came from a party that has long been dominated by a great set of service industries, the service industries of the City—banking and insurance—which have often advised British Governments. As the right hon. and learned Gentleman pointed out, the Bank of England is advising the present Government. It has often advised British Governments, in ways that have not necessarily been to their benefit.

A previous Labour Government were advised not to devalue the pound, until perhaps a few years after they should have done so. It may be that the pound is over-valued now compared with what it should be from the point of view of British industry. It might be better for British industry if the pound had not gone up relative to other European currencies, as recently it has.

In one sense it is a tribute to the Government that the pound has risen, compared with its trend to decline. That can be lauded in the City, and indeed it is, but is it wholly desirable for industry that, as a result of the increasing value of the pound, our exporting should be a little more difficult? Is it wholly desirable that importing should be made much easier? I do not think that that is necessarily desirable, but I can see why the great service industries of this country might think so.

The right hon. and learned Member for Surrey, East said that it was bad for things to have gone on in that way. I hope that he was saying that, if he were in office, he would be desirous of reducing the trend always to listen to the City and instead would occasionally listen to British industry. He did not seem to be saying that. He did not say that the pound was over-valued and that it should be less over-valued than it is in relation to other currencies. He did not say that we should make exports easier and imports more difficult. But he should think about that if he has the interests of British industry at heart.

The right hon. and learned Gentleman was kind enough to say that the Expenditure Committee had always favoured a closer amalgamation of the consideration of revenue and expenditure. It does. I think that is fairly general from the extreme Left to the extreme Right in both parties on the Committee. What slightly puzzles me personally is that the Opposition have no direct proposals in this regard.

For example, the right hon. and learned Gentleman said that the effect of an over-massive public sector and high taxation was a reduction of incentives. I do not wholly agree with that argument. Money is not all. Some people these days still seem to want to go into the House of Lords. There are other incentives than money. If they do, in the society in which we live, they will find themselves still far behind the hereditary peerage which is already there and will always take precedence over anyone else, however talented and able, because that is the law of this country.

The right hon. and learned Gentleman said that some people need greater incentives as regards their earnings. We all agree with that. We would all love the maximum rate of taxation to be 50 per cent. Labour Members might also wish people who sell off their castles or Canalettos, even if non-resident, to be taxed at at least 50 per cent. There seems to be a discrepancy in the views of the Conservative Party. It says"Yes, we should have a lower rate of taxation."

I should slightly differ from that and say that all those who earn money should have a lower rate of taxation and that it might be more interesting and better for the country if those who did not earn money had a higher rate of taxation, especially those who choose to migrate, leaving behind assets which they propose to sell for their own personal gain, having contributed little or nothing to the country in which they live. It would be much easier to persuade people of the generosity and virtue of the Conservative Party's desire to increase incentives if it wished to increase disincentives to people who do not contribute to the economy of the country.

5.54 p.m.