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The Public Sector Borrowing Requirement

Volume 413: debated on Monday 13 October 1980

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2.38 p.m.

My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government by what amount they expect the public sector borrowing requirement to increase by the 31st December 1980 as the result of unemployment rising to the total which they envisage as at 30th November 1980.

My Lords, the Government do not publish forecasts of the PSBR, except on an annual basis. A further forecast of the PSBR for the current year will be published in November, under the terms of the Industry Act. According to the Government Actuary's Report of July 1980, a difference of 100,000 in the average level of unemployment alters the surplus on the National Insurance Fund by £180 million. The effect on the PSBR would be greater than this, but the exact figure will depend upon a number of factors, including the nature of the causes leading to the rise in unemployment.

My Lords, is the noble Lord aware that, according to the most reliable estimates, that have not been challenged in any authoritative Government statement, the annual cost of each extra 1,000 unemployed amounts to £2 million, and that on that basis the cost of increased unemployment since the noble Lord and his party have been in office already exceeds £1,000 million, and is now running at an extra rate, after taking into account benefits, redundancy payments and loss of taxation, of about £1,500 million per annum?

My Lords, I would not accept the noble Lord's figures as necessarily correct. The Government are not obliged to comment on every estimate that is produced by an outside source. I have quoted to the noble Lord the figure given by the Government Actuary for the cost of every 100,000 increase in unemployed so far as unemployment benefit and National Insurance contributions are concerned. With regard to the remainder of the noble Lord's supplementary question, the rise in unemployment is due to two factors, neither of which is in the control of the Government. The first one is of course the world recession, and the second one is the exessive level of pay settlements.

My Lords, may I ask the noble Lord whether the House is to understand that the Government have undertaken no serious study of the "disbenefits" which accrue to the Exchequer when an employed person becomes unemployed? I understand of course that there must be a difference between various types of unemployed persons, but would it not be possible to produce to the House an average figure?

My Lords, the noble Lord would be quite wrong in making any such assumption. Of course all Governments make for their own purposes estimates of the effect of all kinds of economic changes, and clearly the effect of unemployment on the economy as a whole is one of the factors that any Government will look at. Nevertheless there is a considerable difference between the Government making estimates of this kind for their own use, and publishing those estimates.

My Lords, could the noble Lord say whether I would be wrong in making the assumption that extra administrators are needed for every 100,000 unemployed, and would I be quite wrong if I said that the extra administrators in fact total 2,000 for each 100,000 unemployed?

My Lords, the noble Lord is now going wide of the Question which appears on the Order Paper.

But, my Lords, is the noble Lord aware that he has gone very wide? Actually, his own Government have deliberately created unemployment. They have done this in the steel industry. They have done this to my native Durham—and I think of Consett. It is no good having an alibi that it is because of the world recession and the level of pay settlements. The noble Lord knows full well what the policy of his own Government is doing.

My Lords, the noble Lord is entirely wrong, both in his diagnosis and in his conclusions. We could, of course, debate the question of the steel industry at great length, but this is a specific issue. I think, however, it is generally agreed that had the problems of the steel industry been tackled at a much earlier stage the present position would not have been as unfortunate as it is now.

My Lords, would the noble Lord deny that the following passage from this publication by the Treasury:

"… there is insufficient adjustment by pay negotiators to announced monetary targets so that earnings rise by more than money supply"—
is a particularly obnoxious, unilateral diktat of a wages policy which is bound to fail?

No, my Lords. It is a simple statement of fact which is widely accepted, not only in this country but elsewhere in the industrialised world.

My Lords, can the noble Lord tell us whether unhappy experience has yet taught the Government that stopping the economy does not stop people from wanting to borrow money, and in fact forces them to do it to a greater extent?

I am sorry, my Lords, but I did not hear the first sentence of the noble Lord's supplementary question. My general comment on it, however, would be that it seems to have little or nothing to do with the Question on the Order Paper.

My Lords, if the Government make these estimates for their own purposes, would it not be right, in this age of open government, for such estimates to be made available to the public?

My Lords, we do make available a very wide range of statistical material. The problem with the PSBR, of course, is that many of the causes are interrelated with one another. There is a clear relationship between the level of output, the level of employment or unemployment and the level of pay settlements, and it is not easy to decide how much of the consequential effects ought to be attributed to one cause rather than to another.

My Lords, would the noble Lord be able to give an answer, possibly not now but if a Question was put down, as to how much lower unemployment would now be if the unions and others had taken the advice of the former Prime Minister?

My Lords, arising from the noble Lord's reply to that last supplementary question, which I presume was in fact relevant to the Question, may I ask whether the noble Lord is aware that the unions are following out precisely the advice which was given to them by his right honourable friend in another place on 13th December 1978? Is he also aware that the nature of his replies here this afternoon give the impression that the Government are perfectly willing to publish figures when it suits them but that if they are inconvenient they do not publish them?

No, my Lords; the noble Lord is not entitled to draw any such conclusion. So far as the first part of his supplementary question (if question is the right description of it) is concerned, it is true that union leaders are showing a greater sense of realism and responsibility than they were 12 months ago.