House of Commons Hansard Debates for 9 Feb 1989

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defence industry. Electronics in Germany are now largely monopolised by Siemens. France is desperately trying to build up some competition for Thomsons--which is nearly a monopoly company- -by getting Matra into a joint venture with a Swedish company, L. M. Eriksson. In this country, if GEC were to be allowed to take over Plessey, even if there was some palliative process of hiving off defence interests, it would be so overwhelming a market presence that those three companies, GEC, Siemens and Thomson stacked up and linked together, would be able to take on the Governments of Europe and ensure that they get their way. We would go back to the bad old days of defence contracting tail-wagging the Government dog.

I profoundly disagree with the comments of my hon. Friend the Member for Horsham about detailed parliamentary scrutiny of individual defence projects. The most interesting study on this subject was the Packard report, commissioned by the President of the United States in 1985. Seventeen experts drawn from a range of different disciplines looked into how they could get better value for money out of the American defence budget. It was a fascinating report. They concluded that the biggest single area of waste in the American defence budget came from congressional interference. The changes in Congress within the lifetime of 15-year projects resulted again and again in a waste of money. The way to get value is to let the projects have good project managers, pay them properly, keep them in their post for a long period and let them get on with it. The fourth aspect of getting better value for money has long been the favourite subject of my right hon. Friend the Chairman of the Select Committee. I refer to introducing a proper concept of modern accounting into Government finance, in particular, getting away from pure cash flow accounting. Nobody thinks that we should value every public lavatory and start writing them off over the years, but the key must be to allow true comparability. Looking at two hospitals side by side, we cannot tell which is more efficient at the moment. If we do that on a cash flow basis alone, there is nothing to compare them with. Unless we can take out capital spending and compare current items, and then get capital spending back in, in a depreciation form so that we have some kind of apples and apples comparison, the exercise becomes hopeless.

The last issue to which I refer is a hobby horse about which I feel particularly strongly. The defence budget has been mentioned three or four times in the debate, and always in an equipment context. We have a good record on defence spending, but, whatever, the level of defence at which we were aiming, it is essential that the men and women of the armed forces should enjoy the increase in the standard of living in the country as a whole, not just the increase in the cost of living. We have a good record on armed forces pay, but, sadly, it is not matched by all the other conditions of service. A rapidly increasing number of people are leaving the armed forces--some of them are desperately expensive people such as Harrier pilots, who cost £3 million to train--because of the deterioration in other conditions of service.

Some years ago, a friend of mine in the Army--it happened under the last Government, but it could just as easily have happened under this one--had his wife go into hospital to have a baby. Such is the shortage of gynaecological services within the Army medical services--they do not have an obvious wartime purpose--that she not only lost the baby but was sufficiently damaged that

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she will never be able to have another one. The health service that is provided for our armed forces, particularly those abroad, is slipping rapidly behind the standards that are required in the NHS. The same applies to education.

Fifteen or 20 years ago, continuity of education was provided for many of the children of people of all ranks who moved every two or three years, as most service men do. It was provided largely through state-run boarding schools, which have almost disappeared. Today, instead, the service man gets an allowance which is supposed to help to send his children to a fee- paying school. The allowances are now so far behind real costs that the position is becoming hopeless. For a sergeant with three or four children, the position is desperate. The third and worst aspect is housing. I referred to this matter in my ten-minute Bill last week, so I shall not dwell on it. Unless we give members of our armed forces an equal chance in the housing market with their counterparts outside, we will not retain the best people when the number of younge people is declining.

9.1 pm

Mr. John Battle (Leeds, West) : I apologise to both Front Benches for not being in the Chamber throughout the whole of the debate. I spent the earlier part of the evening as a member of the Standing Committee which is considering the Social Security Bill. Opposition Members were attempting to get the Government to think again about their proposal to price people into work by forcing them to accept whatever low level of pay a prospective employer might offer an unemployed person. There is a clear link between the Bill and the public expenditure White Paper, in particular chapter 15, which deals with social security.

If, when they talk about tax cuts for the rich, the Government believe that there should be no floor for low wages, that they should abolish wage councils, and refuse to accept that there should be minimum pay levels, people will be asked to work, as they are in my constituency, for rates of pay of £2 an hour and, more recently, £1 an hour. It is absolutely unacceptable to ask people to accept that level of pay when others get high wages.

Ministers may say that no one in Britain will be expected to starve, because families will be expected to take up family credit. As we all know, the take-up level for family credit is 36 per cent. If the Government are prepared to build an economy on low wages, family credit would be a clear but indirect subsidy to employees who are paid low wages.

So much for the Government's argument that there is no intervention in the economy. So much for the argument that free forces should be allowed to play, when the Government will be using social security to underpin the funding of employers who pay low wages. Instead of doing that, and fostering a low wage policy, they might be better off spending money on restoring the regional support grant for proper investment in chapter 9 of the public expenditure White Paper. I should like particularly to confront the Government's view that all are participating in the increasing wealth of our economy. We have heard tonight hon. Gentlemen calling for the continuance of tax cuts. There is a real deception concerning the figures that the Government are presenting to the people of our country. I urge hon. Gentlemen to get hold of and look very carefully indeed at

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"Social Trends 19", which was published recently, because that demonstrates, in the small print, that at the same time as wealth is increasing and more people have switched to mortgages, inequalities in Britain are deepening. Britain, the Government may say, is not divided. I would be tempted to agree in the sense that it is not divided in the past tense, but "to divide" is an active verb and it is dividing into the rich and the poor now.

To take the figures in "Social Trends 19" for gross weekly earnings, the official record supports the Government's assertion that incomes have been increasing. But, as the tables dealing with gross weekly earnings show, those at the top have done much better than those at the bottom. In 1981, the top 10 per cent. of male earners received 168 per cent. of median earnings. By 1987 their share was up 8 per cent. to 176 per cent. But for the bottom 10 per cent. it is a very different story : in 1981 they received just 64 per cent. of median earnings, and their share went down by 5 per cent. to 59 per cent. in 1987.

Then we see what happens after income tax and national insurance are allowed for and benefits are added. In 1976 the top 20 per cent. received 38.1 per cent. of all disposable household income, and the bottom 20 per cent. received just 7 per cent. of the post-tax and benefit income ; yet by 1986 it was down to 5.9 per cent. How do such income inequalities affect daily living? Looking at "Social Trends 19", if we take expenditure on food, housing and fuel as representing spending on the basics, the top 20 per cent. of income earners spent just 36 per cent. of their total expenditure on these items. By contrast, for the bottom 20 per cent., 56 per cent. of their expenditure went on the same items. In other words, the cost of living for them was higher. So the real distribution of wealth under this Government has been among the well-off, not from the well-off to the poor. The top 10 per cent. is still owning 54 per cent. of the total wealth. Any trends to greater economic justice in Britain certainly died with the 1979 election of the present Government.

In 1981, the bottom 50 per cent. owned just 6 per cent. of all marketable wealth, and by 1985 that share had increased to just 7 per cent. So much for the noise from the Government Benches about the increasing property- owning and share-owning democracy.

What is noticeable in "Social Trends 19" is what it does not tell us about inequality. It does not spell out the fact that the poor are being written out of the text and not even left in the margins. That disparity in income and wealth in our society is being hidden by the Government, often behind the myth of the average wage. What this Government, perhaps above all others, realise is that they can hold on to power by manipulating image and presentation. It is government by sound bite and photo call creating the illusion of truth by devising statistical fictions. My hon. Friend the Member for Bradford, North (Mr. Wall) put it well when he said that it was developing into a marketing and PR exercise.

With regard to the chapter dealing with spending on the environment, I should like to give three examples. The Department put out rather illuminating press releases in the wake of the publication of the public expenditure White Paper. I want first to quote from the press release about the package for the inner cities. It states that a £4.3 million urban programme package is approved for Leeds. Run-down areas of Leeds will receive £4.3 million. The Minister comments :

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"The resources we have allocated demonstrate the Government's continuing commitment to the revitalisation of our inner cities." What the Minister did not say in the press release was that that figure is exactly the same as it has been now for four years. Perhaps the word "continuing" in the press release means the same as "as of now" when the Government said that they would continue to pay child benefit "as of now". In other words, it would be frozen as inner city funds are frozen.

Another Government press release refers to continuing the fight against dereliction. It states :

"Resources available for derelict land grant in 1989-90 will be about £67 million. It will be about 50 per cent. higher in real terms than the £23.5 million available in 1979-80."

That press release did not tell us that there is actually a £7.2 million cut in relation to last year's figure for derelict land grant. Let us not hear about continuing the fight or continuing the expenditure in inner cities when the Government are really making cuts.

More recently, the Government issued a press release which welcomed the Audit Commission's report on housing the homeless. The Minister stated :

"It is clear there is considerable scope for local authorities to improve their performance in the use of their stock."

However, the Government's press release did not have the courage to take on board the criticisms in the report about the fact that the Government have prevented local authorities from building houses. Perhaps that is the most significant point in the White Paper. It is demonstrably the case that the number of houses to be built in 1992 will decrease to 6,000. How can the homeless be provided for when the White Paper ensures that homes cannot be built for them? Local authorities cannot tackle homelessness if they cannot build. So much for the Government's view that we will become the best housed nation in Europe which was vaunted in the 1979 Conservative election manifesto. This country is developing the record for having homelessness visible on the streets in 1989 when other societies do not.

Chapter 15 of the White Paper contains a catalogue of cuts in public expenditure. There are cuts in benefits to the poor, cuts in assistance for the inner cities and in housing. No matter how many press releases the Government might issue giving half the story, effectively the poor in economic and housing terms are written out of the text of the White Paper. I urge hon. Members to vote against the White Paper tonight.

9.12 pm

Mr. Nicholas Brown (Newcastle upon Tyne, East) : In his exciting and elegant opening remarks, engaging, as they did, the attention of the whole House, the Chief Secretary to the Treasury introduced the White Paper by telling us about its physical size, the way in which it is sub-divided and the printing costs. He then told an agog House about the importance of the colour of the cover. At that stage, I feared that the Chief Secretary was in danger of becoming what I believe is referred to in the Conservative party as a "future Home Secretary". However, he redeemed himself. He pleasantly welcomed the return of my right hon. and learned Friend the Member for Monklands, East (Mr. Smith). It is a

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substantial tribute to my right hon. and learned Friend that welcoming him back was one of the few things upon which the whole House agreed in the debate tonight.

I do not want to attribute unworthy motives to the Chief Secretary because, in spite of my joke, I have high hopes of him. However, it must have at least crossed his mind that the return of my right hon. and learned Friend would spare him another pounding from my hon. Friend the Member for Dunfermline, East (Mr. Brown). As it turned out, the Chief Secretary got a pounding from my right hon. and learned Friend instead.

The debate brought a mixed response from the Government side. On the one hand, Conservatives are keen to take a firm line on public expenditure ; on the other, they want to encourage the Government to spend more money on things which they consider important, like prisons, or, in the case of the hon. Member for Crawley (Mr. Soames), justices' clerks. They want to believe that inside every Nigel Lawson there is a John Smith trying to get out. My hon. Friends have echoed Lou Reed, urging the Chancellor to take a "Walk on the Supply Side" in fiscal drag. Inevitably, the debate on the Labour side has been dominated by education and the Health Service.

My hon. Friend the Member for Cardiff, West (Mr. Morgan), in an excellent contribution, referred to the state of play in education. He pointed out that, as a proportion of the gross domestic product, Government spending on education has fallen from 5.5 per cent. in 1978-79 to 4.7 per cent. for 1989-90. With primary school rolls increasing, the Government cut the school budget by £45 million. The Government should encourage youngsters to make the most of the opportunities which higher education has to offer. Yet in the short term they find it cheaper to cut investment in universities by £9 million. It has often been said that young people are the country's future. If we neglect them now, there is a heavy price to be paid later. We need a new word for public expenditure foolishly and short-sightedly forgone. In that context I want to attempt to insert into the English language the word "Lamontable".

The same "Lamontable " state of affairs is to be found in the Health Service. An extra £210 million in the White Paper for hospitals and community health has to be set alongside and against a projected fall in the real value of capital investment in the NHS between 1989-90 and 1991- 92. It also has to be set alongside the Government's proposed changes for general practitioner services. What sort of Government place financial penalties on general practitioners for spending too much public money on patients? What sort of Government would devise a system of health care with built-in disincentives for general practitioners to have old or permanently sick clients on their lists? What sort of Government require general practitioners to choose for their patients the hospital that is not necessarily the one with the shortest waiting list, the one with the most skilful treatment available for the ailment or even the one that is nearest, but one that is most definitely, presumably, the cheapest? Only one sort of Government would behave in that way--this Government, who believe that there are only two categories of desirable patients, those who are not ill and those who can afford to pay for private treatment.

What are we supposed to make of the proposal to give tax relief on the cost of pensioners' private health insurance? Tax relief is public expenditure forgone. The proposal is targeted towards those who already have extra

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money to spend. Surely, if money is available, it would be fairer to spend it on health care for all of us, not on incentives for the more affluent. [Interruption.] The Chancellor laughs, but he will be elderly one day, sooner rather than later if he carries on as he is doing now.

Why should elderly people, who have paid taxes and national insurance during their working life, have to pay for private health care at the very time of life when they are most likely to need medical services? It is surely legitimate to ask the cautious, steady--I hesitate to say parsimonious--custodian of the public purse how much the tax relief will cost. The representatives of prudence surely know the answer. The scheme could not have been announced without an estimate of the cost. I shall willingly give way if someone from the Government Benches will tell me what it is [Interruption.] The Chancellor sits there muttering. If he finds it difficult to get to his feet, I will give him a hand. There is no reaction. Silence sometimes tells its own story and may even be the wisest course.

There are those on this side who harbour suspicions about the explanation for the Government's advances. To those of my hon. Friends who have advocated extra public expenditure, I have to give this advice : there seem to be only two ways of securing extra public expenditure. The first and easily the most efficacious way--in spite of what the Chief Secretary said to my hon. Friend the Member for Durham, North-West (Ms Armstrong)--seems to be to lure the Chancellor into an off-the-record press briefing with Sunday newspapers about his real plans for the service in question. Experience shows that the resulting outcry will gain extra money from the Treasury. [Interruption.] I heard what the Chief Secretary said, but I do not wish to get into an argument with him. My hon. Friend the Member for Durham, North-West was right when she said that the public would draw their own conclusions.

The second method of obtaining extra public expenditure is to persuade the hon. Member for Derbyshire, South (Mrs. Currie) to make a speech about the desired area of expenditure, and wait for the Government to use public money to buy their way out of the damage caused. I have to say to my hon. Friends contemplating using that technique that it does not always work. When the hon. Lady described the people of Newcastle as ignorant, we did not get extra money towards the cost of education. It is fairly obvious that we are not the farming lobby.

Recently, the hon. Lady has been saying, "I want to be alone," echoing Greta Garbo--not, as is often thought, the right hon. Member for Plymouth, Devonport (Dr. Owen). She has been alone in the Grand Committee Room. I was told that the hon. Lady wanted to be alone with her memories but we now learn that she wants to be alone with her memoirs instead-- [Interruption.] I thought that was quite good. The Chief Secretary groans. I was not sure about including that, but when I heard his joke about Arthur Daley I felt much better about my own. Far and away the most damaging blow to an area of public expenditure is for the Prime Minister to take a personal interest in it. Last year, we were told that the Prime Minister was intervening personally in the Government's science policy. We learn from the public expenditure White Paper that the science budget is set to fall by 3 per cent. in real terms. Our national commitment to research and development, expressed in terms of national income, is less now than in 1979. The number of

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Government employees in that area has fallen by 12,000 since 1979, and another 700 are due to go by 1991. Even the Confederation of British Industry has complained.

The Prime Minister declares herself an environmentalist but we learn from the White Paper that the budgets of the Countryside Commission, the Rural Development Commission and the Nature Conservancy Council have all been reduced.

The Prime Minister took charge of the interdepartmental committee on women, but child benefit has been frozen. The Government say that they want to help working women, yet they have taxed the provision of workplace nurseries as a benefit. Even the Treasury--if we are to believe last week's Evening Standard --says that senior civil servants are being charged £5 a day for the use of the Treasury creche. I am not making a dig at the Box, but I am talking about a facility that, I understand, is provided inside the Treasury--at what strikes me as quite a reasonable rate. We may be able to explore that further when we debate the Finance Bill.

The Prime Minister intervened to attack football hooliganism, but the Government provide a solution to the problem that attacks football rather than hooliganism. The climate of fear, once ascribed to inner city areas alone, has now spread. Rural and surburban communities are overshadowed by acts of hooliganism, which are regarded by those communities as a new phenomenon, and certainly have nothing to do with football.

It is no good for the Government to point to extra provision in this year's public expenditure round for more prisons and more police officers. The party that proclaims itself the party of law and order has allowed problems to develop over the past nine years. Policing the result is no substitute for dealing with the cause.

The Prime Minister decides that there is too much litter lying around, so there is a well-publicised photo opportunity, giving the clear yet obviously misleading impression that she is going to pick up a fair bit of it personally. Once the stunt is over, the Prime Minister sweeps on ; the litter remains.

Perhaps the cruellest stunt of all was the Prime Minister's assertion after the 1987 general election that something would be done for the inner cities. The public expenditure White Paper shows that the overall value of Government programmes dedicated to inner-city areas is to be reduced by £17 million, and reduced again by £30 million by 1992. Alongside that is the drop in rate support grant of about £100 million for those local authorities that have to cope with the problems of inner cities. The total fall in rate support grant to those local authorities is £318 million since June 1981. Alongside that we must set the reduction in regional development grants. Indeed, the entire budget of the Department of Trade and Industry is due to fall by 30 per cent. over the next three years.

The Government believe that it is not what-- [Interruption.] Share what? This could be a very damaging allegation from the Chancellor-- [Interruption.] Thank God, it is just a research assistant we shared. The Government believe that it is not what they do but what they tell people that counts, which is why I was so worried about that intervention.

In line with this philosophy, expenditure on Government advertising has dramatically increased. The advertising is insulting. The employment training advertisement, which invites the unemployed to dig a

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round hole and knock the corners off a square piece of concrete to get it in, seems like an ill-conceived Keynesian joke, which might appeal to the Chancellor.

In my constituency, youngsters ask me how they can get a job that offers them a manual skill or a chance to serve their country in the armed forces or the police ; a chance to go into nursing or, for the ambitious, a chance to go on to higher education ; or even to get an office job. In better times these were sensible, worthy and realistic ambitions. They cannot be fulfilled, because the opportunities are not there.

There is no point in telling such communities that the economy is overheating. The only time that the economy overheated in my constituency was when somebody burned down the Department of Employment offices off Shields road. Labour MPs will understand me when I say what a bitter and painful thing it is to have visited local schools five years ago and seen youngsters with vigour and enthusiasm, personality and energy, having had all of that knocked out of them after a year on the labour market. It offers them nothing but unemployment or a patronising Government scheme. It is a hurt that carries a price tag that cannot be expressed in money alone. The problems that are created feed upon themselves, and get harder and harder to resolve.

It is certain that more policemen and prison places are not the answer. The Government, with their slogan, "Go for greed", have brought us higher interest rates and inflation, and an unacceptable balance of payments deficit. The White Paper says little about economic efficiency and nothing at all about social injustice or the quality of life.

Training, research, skill shortages and overcrowding, congestion and pollution are all issues that are as important to the efficiency of the British economy as the need to encourage private investment--I should have thought the Chancellor would agree with that.

Mr. David Shaw : Will the hon. Gentleman give way?

Mr. Brown : Yes, if the hon. Gentleman is quick and amusing.

Mr. Shaw : I shall try to be as amusing as I can, but the hon. Gentleman has made some serious accusations. Can the hon. Gentleman reconcile what he said with my understanding, that we have in this country one of the highest growth rates in any of the OECD countries over the past five years? We also have the greatest fall in unemployment and the creation of most jobs of anywhere in Europe.

Mr. Brown : It will take more than the six or seven minutes left to me to reconcile my understanding of the situation with that of the hon. Gentleman--and I also regret his lack of humour in his intervention. His points might apply to parts of the economy, but certainly not to the whole economy.

It is the Labour party's case that public expenditure underpins the fabric of our society. I shall give an example that the hon. Member for Dover (Mr. Shaw) would do well to heed concerning an injustice that arises from the Government's revised social security regulations. A single person on income support who is in hospital for more than six weeks has his income reduced to £8.25p--which is probably less than the hon. Member for Crawley (Mr.

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Soames) spends on cartridges for one weekend. That £8.25p is supposed to cover all that claimant's outgoings, including any accumulated debt, fixed costs on his home--such as 20 per cent. of his rates--water rates, and any other standing charges. If the same individual is in receipt not of income support but of housing benefit, a six-week hospital stay will wipe out that benefit, leaving rent unpaid and the prospect for that patient of no home to return to, or substantially enhanced rent arrears.

How can a society as wealthy as ours bring such pressure to bear on people when they are poor, ill and at their most vulnerable? The savings to the Treasury from that meanness are not large, but the pain inflicted on the people affected is considerable. It does not make any sense to tell such a person that the economy is overheating. It is surely legitimate to ask what kind of society the Government are trying to shape. Their public expenditure plans, set alongside their taxation policy, produce a vision of tax cuts for the wealthy, service cuts for the poor ; public squalor and private affluence ; tax relief for private health care, fear and uncertainty for the public health sector.

Above all, there is the widening of social divisions by region and by class. To tell the people of this country that the quality of their lives is about nothing more than what they personally can consume insults their intelligence. That insult is a strategic mistake, and it will be the Government's downfall.

9.31 pm

The Financial Secretary to the Treasury (Mr. Norman Lamont) : First, I join other right hon. and hon. Members who have spoken in this debate in welcoming back to the House the right hon. and learned Member for Monklands, East (Mr. Smith). Although we disagree strongly with what he had to say, we are delighted to see him fully recovered and in sparkling form.

There seems to have been confusion between the official channels as to whether the hon. Member for Dunfermline, East (Mr. Brown) or the hon. Member for Newcastle upon Tyne, East (Mr. Brown) was to wind up the debate. The fact that I spent the entire weekend reading the biography of Maxton by the hon. Member for Dunfermline, East is entirely coincidental ; I did it for my own edification and education. Much as I enjoyed reading that autobiography, I am not sure that it profited me very much. I was astonished to discover that not one opinion was expressed in its 300 pages.

Today, we have heard not facts but what I call factoids paraded by the Opposition--factoids about investment, about living standards, and about the public expenditure White Paper. That has been combined with the complete absence of any proposals from Opposition Members. At the start of the debate, my right hon. Friend the Chief Secretary to the Treasury took up comments made in recent articles by the hon. Member for Dunfermline, East concerning central Government investment and public expenditure, and about gross domestic fixed capital formation. My right hon. Friend clearly demonstrated that whatever measures one takes--gross domestic fixed capital formation, general Government expenditure net of privatisation receipts, or the total for public sector capital expenditure--the fact remains that Government investment under the present Administration has sharply increased, whereas it sharply fell when Labour was in power.

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It was all the more surprising that after my right hon. Friend the Chief Secretary had explained this very carefully, the right hon. and learned Member for Monklands, East repeated the error. He claimed that the public expenditure White Paper showed that public sector capital would not increase in real terms next year compared with this year. But my right hon. Friend the Chief Secretary had carefully explained that, in fact, the figures for last year included provision for capital expenditure by the Rover Group and that, once that was taken out, there would clearly be a real increase in public sector capital next year compared with this year.

The right hon. and learned Member gave expenditure on transport as a particular example of the savage cuts that he thought were embodied in this White Paper. He talked about departmental spending coming down from £5.4 billion to £4.8 billion. But that merely represents the privatisation of various public transport industries and the improved performance of British Rail. Once those factors are taken into consideration, it is clear that there has actually been a 38 per cent. real increase in the Department of Transport budget since 1978. Furthermore, the White Paper provides for a further increase of some 21 per cent. over the plan period.

My hon. Friend the Member for Crawley (Mr. Soames) also pointed out that expenditure on roads had gone up. We have heard that there has been a decline in expenditure on maintenance and that most of the money has gone on capital works. It is not surprising that we have had to allocate large sums for capital expenditure on roads when capital spending by the last Administration was cut by some 41 per cent. between 1973-74 and 1978-79. That is why capital spending has had priority. That is why it is given priority in the White Paper.

Mr. John Smith : Can the Minister kindly tell us whether we are to believe the chart--I suppose one might call it a "chartoid"--that appears in the White Paper. It shows quite clearly, in graphic terms, that the roads were always better under Labour and have always been worse under the Tories. What is the point in publishing a chart like this for our edification if the Minister does not support it? Will he admit that this is a correct statement?

Mr. Lamont : The right hon. and learned Gentleman should also believe the gross figures that I have given him--for public sector capital, for the increased provision for spending on roads, and the increased provision for spending on transport generally.

My hon. Friend the Member for Horsham (Sir P. Hordern) mentioned the need for increased investment in railways. Of course, he is quite right to say that we ought to look at the return that can be had from railways in terms of reduced congestion. That is precisely what the Government and the Department of Transport do. I am sure my hon. Friend will welcome the fact that there is to be a very considerable increase in investment in the railways, as the plans referred to in the White Paper imply. He may know that there is going to be a real increase of something like 35 per cent. in rail investment over the period of the White Paper. That is the biggest railways renewal programme that this country has seen since the 1950s.

The hon. Member for Newcastle upon Tyne, East put forward the doctrine that tax relief given is public expenditure forgone. That certainly enables us to

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understand the attitude of the Labour party towards tax cuts : it just regards them as public expenditure forgone. The hon. Gentleman asked about the tax relief for private health care. That relief will, of course, be provided for in the Finance Bill. It will be legislated for in the normal way. The cost will be contained in the normal way in the FSBR and will not be announced now. This debate and this White Paper are about public expenditure, and the cost of the tax relief will be revealed in the usual way.

Mr. John Smith : Is the Minister serious? He has announced a scheme of tax concessions but will not tell Parliament what the consequences will be. Is it because he does not know, or is he refusing to answer reasonable questions in Parliament?

Mr. Lamont : Parliament will be told at the right time and the measure will appear in the Finance Bill. That is the normal way in which the cost of tax reliefs is announced to the House of Commons. The hon. Member for Newcastle upon Tyne, East claimed that rate support grant in the inner cities would fall next year. That is a surprising claim. If we allow for the transfer of responsibility for the polytechnics away from local authorities, we find that all the inner London boroughs will receive more grant next year--they will all do well--except for the City and Westminster. Moreover, with the exception of Solihull, all the metropolitan districts will receive more. I am surprised that the hon. Member for Newcastle upon Tyne, East should look upon the City and Westminster as hard -hit inner city areas.

A remarkable feature of this year's White Paper is that general Government expenditure has been reduced as a proportion of GDP--from more than 46 per cent. in 1982-83 to less than 40 per cent. That is the longest and most sustained fall since the wartime economy was unwound.

The right hon. and learned Member for Monklands, East suggested that the figure of 40 per cent. was an arbitrary and dogmatic figure and that it made no sense to go on reducing public expenditure as a proportion of GDP. In one sense, of course, any public expenditure figure is an arbitrary figure but the right hon. and learned Gentleman seems to have forgotten the warnings given by Lord Jenkins--if I am allowed to mention his name--when he was a Labour Chancellor. Lord Jenkins said that if public expenditure went on increasing indefinitely and became too high a proportion of GDP, it would become a threat to the values of a plural society and to freedom of choice. The right hon. and learned Member for Monklands, East also ignores the fact that in recent years many previously state-owned industries have been transferred to the private sector and that more are to be transferred. It therefore seems appropriate that the proportion of GDP taken up by Government expenditure should be very different from the proportion that pertained in the days when the Government owned and operated vast state industries.

We also believe that our policy is better and will allow more freedom of choice. Better decisions are likely to be made if more decisions are made by individual citizens and by the private sector. As this year's White Paper clearly shows, limiting the role of the state is not inconsistent with substantial increases in the main social services and on infrastructure. Of course there are things which only the state can do, and which only the state ought to do, but the

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state should not over-extend itself. It is most likely to do things properly if it confines itself to doing what it is essential for it to do.

One reason why the right hon. and learned Member for Monklands, East wants to increase public expenditure is that he believes that it can be used to remedy the defects of the private sector. [ Hon. Members :-- "Hear, hear."] Hon. Members say "Hear, hear". I suppose that that is the meaning of the strange phrase that emerged from Labour's weekend at the Rottingdean retirement home, when we were told for the first time about supply-side Socialism--a curious paradox, like democratic Socialism or boiling ice. For most of us supply side measures mean free markets and stimulate competition and measures to remove burdens, restrictions and bureaucracy. It is not surprising that supply-side Socialism, in the newspeak of the Labour party, means precisely the opposite--more intervention, more spending, more taxes and more bureaucracy. When applied to training it presumably means Government-controlled and Government- financed training on the model of the 1960s. That is not the way to achieve training related to the needs of markets and the needs of industry. It means investment financed by regional development agencies and national enterprise boards. It means state direction and state subsidy. That is hardly a recipe for profitable or efficient investment. Of course there is another way to remedy the defects of the private sector and that is directly to encourage the private sector and instead of taking over the functions of the private sector giving it the opportunity and wealth to carry them out. That is what the Government have done and that is why the profitability of industry is at the highest level for decades. That is never mentioned by the Opposition because it proves that we have a real, genuine, supply side revolution in Britain.

Opposition Members seem to suffer from a misapprehension. They believe that unless the Government do something, it cannot and will not happen. They talk about cuts in the budget of the Department of Trade and Industry. There have been some cuts. We have removed support from many nationalised industries which are much more profitable as a result. We have cut certain grants to industry, and industry is doing far better without the crutches that it needed when the Opposition were in power. Opposition Members go on about investment, presumably implying that investment needs Government stimulus. But although we have cut Government grants for investment, private investment is at a record level and the highest ever proportion of GDP.

The right hon. and learned Member for Monklands, East goes on about the ending of automatic regional development grants, which were a wasteful misuse of resources. But that has not for a moment prevented investment rising, and output in the regions rising, and unemployment falling in every region over the past year. Unemployment has fallen fastest in the west midlands, the north-west and Wales and by more than two percentage points in each case. In every region long-term unemployment has fallen faster than unemployment as a whole, demonstrating that such things can happen without grants and without Government intervention, given the space, freedom and incentive. That is what our policies are designed to do.

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The right hon. and learned Member for Monklands, East said that the Government are not giving training a high enough priority, but nothing could be further from the truth. The White Paper provides for Department of Employment Training Agency expenditure of £2.9 billion in 1989-90--a doubling in real terms over 1983-84. There are more people on the Department's employment training schemes than ever before. The employment training programme, launched last September, will raise the skill level of the adult work force by giving longer-term unemployed people the skills that they need to compete for jobs. The plans in the White Paper provide £1.4 billion a year for that--enough for up to 560,000 trainees. That is the evidence that the Government take training seriously and have provided the resources for it to happen.

We should not lose sight of what employers are doing. A recent study shows that in 1986-87 employers were spending some £18 billion on training. Employers and employees are getting the message. The most recent figures show that half a million more people are in job-related training than two years ago--a 25 per cent. increase. That is a considerable and welcome development.

Opposition Members have given us a long list of factoids--misleading facts. But certain facts have been increasingly and significantly absent from their speeches--the facts relating to living standards. Opposition Members go on about interest rates and investment, but they seem to forget that the object of economic policy is improved living standards. Those are the most appropriate criteria on which to judge it. Investment is not the object of economic policy ; it is the return from that investment and the impact on living standards. Under this Government, living standards have risen dramatically. On television the other day, the Leader of the Opposition dismissed living standards by saying that they had increased in every decade and had done so automatically. I am not sure why we have debates on the economy year after year, week after week if living standards increase automatically. It is a curious view that one need argue only about the distribution of wealth because the creation of it can be taken for granted.

The Leader of the Opposition was right. Living standards have increased in every decade, largely because in every decade there have been a few years of Conservative government. The rise in living standards under Conservative and Labour Governments is dramatic and instructive. Since the war, the Labour party has held office for 17 years, in which time living standards increased 13 per cent. The Conservative party has been in power for 27 years--one and a half times as long--in which time living standards increased 72 per cent. There is nothing coincidental about that ; it occurred because of our public expenditure policies and realistic control of them. The right hon. and learned Member for Monklands, East was coy about the Labour party's policies. We know that it believes in massive increases in expenditure. In his 35-minute-speech, sparkling and welcome though it was, the right hon. and learned Gentleman spent the Government's entire surplus. He prefers to call it public investment because it is a better contrast with private consumption. He and the Labour party are determined to increase public expenditure whatever the economic circumstances. That is the fatal mistake that the last Labour Government-- and the Labour Government before that--made. Labour Governments begin by

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increasing public expenditure massively. They push it to the limit in the first few years, but cuts follow--the big dipper effect. As my right hon. Friend the Chief Secretary said, in their first year, the last Labour Government increased public spending by 12 per cent. in real terms, but then the misery began. After that, cuts followed in capital spending on hospitals, on roads--about which Labour Members have been grumbling today--and on schools and education. My hon. Friends may wonder where all the money went. While they were making these cuts, public expenditure continued to increase. The money was spent on current expenditure. It was spent on wages, but it did recipients no good because it was accompanied by massive inflation, which lowered their living standards.

The other day, the hon. Member for Dunfermline, East said that what the last Labour Government did was not relevant. It is relevant as long as Labour Members are prepared to make the same mistakes as their predecessors. All the signs show that they are on the same road.

My right hon. Friend the Chief Secretary referred to the pledges that the Labour party has made on science, health charges and overseas aid. The right hon. and learned Member for Monklands, East added pensions to the list. The hon. Member for Bootle (Mr. Roberts), who is an Opposition Front Bench spokesman, told the Standing Committee considering the Water Bill that when the Labour party is returned to office there will be no external financing limits on capital spending by trading organisations in the public sector. That could be an expensive pledge. The hon. Gentleman also told the Committee that the last Labour Government had lost the election because they had not spent enough money. That certainly is a speech to distribute to the markets.

There could not be a greater contrast between the White Paper and the one published by the Labour party in 1978. The 1978 White Paper admitted that for four years there had been no increases in output and that real national disposable income had fallen by 2 per cent. That 1978 White Paper pointed out that public and private consumption had grown at the same rate for a decade, but had diverged since the Labour Government had come to power. It pointed out :

"Personal consumption actually fell between 1973 and 1977 while public authorities' consumption rose at an average annual rate of 2.5 per cent. The fall in real take-home pay was even sharper than the fall in personal consumption."

Those are the consequences of excessive growth in public expenditure and they are consequences that fall on ordinary people through increased taxes and falls in living standards.

We know that we cannot expect the Labour party ever to understand that. We cannot expect it to understand the dangers of the public sector crowding out the private sector. We cannot expect it to understand the wealth- creating role of the private sector. The Labour party's problem was revealed last year in a report by its co-ordinating committee, of which the hon. Member for Dagenham (Mr. Gould) was a part author. I understand that another member of the co-ordinating committee was the hon. Member for Islington, North (Mr. Corbyn). Some people might think that another co- ordinating committee would be needed to co-ordinate those two hon. Gentlemen. The committee's report said :

"Many party activists are positively hostile to the idea that the party should have something to say about productivity,

competitiveness, efficiency or enterprise."

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The report, part of which appeared in The Guardian, then went on to make the most astonishing admission of all. It said :

"it often comes as a shock to party members that public sector employment is not the norm in society."

If that is the Labour party's attitude, how can we expect it to have a realistic attitude to public expenditure? We do not expect that.

This White Paper is the fruit borne from a decade of successful economic management and prudent budgeting. To listen to the right hon. and learned Member for Monklands, East one would think that nothing had changed since 1979. Year after year, Labour Members pray in aid economic ruin and social collapse. Year after year, they predict rising unemployment and industrial decline. Year after year, the British economy continues to expand, its finances are in better shape and its provision for priority services increasingly improved. The right hon. and learned Gentleman has described the growth of the economy in recent years as a short-term boom. It is a short-term boom that has continued for eight years and that is the longest period of growth on record since the second world war. The right hon. and learned Gentleman calls for an investment boom. He is apparently unaware of the 18 per cent. rise in manufacturing investment over the past year.

Yet the firm management of public spending has not prevented an extraordinary and unprecedented investment in priority programmes. The Government have managed to reduce public spending as a proportion of national income and, at the same time, they have increased health spending massively with the largest increase ever given. They have increased considerably spending on science in this year's White Paper, despite what Opposition Members have said. Everyone but Opposition Members can see that those increases are the product of an economy that is expanding. Everyone but Opposition Members realises that the growth in the economy has been facilitated and accelerated by the reduction in overall Government borrowing. Yet Opposition Members cling to the nostrums and policies of yesterday--policies that would produce not a dash for growth, but a race to ruin. It is ironic that Opposition Members today have criticised high mortgage rates and have exploited the concerns of those paying them, for they are the country's true mortgagors. It was their reckless economic management that mortgaged this country up to the hilt.

The one thing that we might have expected Opposition Members to remember was the ruinous effects of their own policies, such as punitive taxation that drove businesses and management abroad and lowered living standards in this country.

Opposition Members' belief that only public money can get things done is false and destructive--false because it ignores the significant changes that can be brought by private spending ; destructive because it crowds out private investment and enterprise. The plans put forward in the White Paper are realistic and will underpin the stability, the financial security and the Government's tremendous economic achievements, and I commend them to the House. Question put, That the amendment be made :--

The House divided : Ayes 165, Noes 256.

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