Political commentary
Underspending: a new crime
Colin Welch
Mr Robert Adley, Conservative MP for Christchurch and Lymington, does not normally sound or look like a pas- sionate romantic. But mention railways to him, and watch his eyes blaze and revolve. His inner life is passed in the magic realm of King Steam, an Avilion of happy junctions and sweet branch lines, where the Norfolk Coast Express, hauled by 4-6-0 Sandr- ingham, is for ever picking up water at Brentwood, where the Royal Scot, double- headed, is for ever puffing, labouring, groaning and clanking up to Beattock, where the only legitimate facts and figures are those supplied by Bradshaw and where vulgar talk of profit, loss, efficiency and so forth is drowned by the inspiring whistle and opening steam blast of Caerphilly Cas- tle gliding off to Penzance.
Walther's prize song in the Mastersingers was not received with more ever-growing rapture than Mr Adley's contribution was hailed by Labour in last week's railway debate. Private buffet cars, perhaps, but privatise anything else? As well privatise the Royal Navy! Close a branch line? As im- pious as the dissolution of the monasteries! Expect a profit? As well demand one of the Queen! Concrete over the tracks? Think of two vast juggernauts passing each other without rails at 80 mph on a narrow bridge without parapets, and tremble! (Narrow tracks could surely be one-way, couldn't they? But let that pass.) Loud Labour huz- zas cheered the Adley express on its way and David Ennals rose at the end like Hans Sachs to congratulate the driver for having ignored all the narrow-minded conven- tional pedantic signals which give the green light to profit, the red light to loss.
There is in the dreams of the whole Labour Party an economic Avilion, where operate not cause or effect, nor any cost, nor ever wind of reality blows loudly; but it lies deep-subsidised, over-manned, fair with featherbeds, and profitless hollows awash with daft and copious public investment, where we will heal us of the grievous wounds which capitalism has supposedly in- flicted on us. It is called the public sector; and not only Labourites but each one of us has a soft spot for some corner of it, some precious orchard lawn.
We know in general that the public sector is stifling us, weighing us down, clogging our steps, beggaring us, denying us success. Yet every specific proposal to reduce it runs into daunting difficulties as, to the blanket Pavlovian opposition of the Left, are added all those on the Right who cherish some particular service or source of jobs or who are by now genuinely and reasonably frightened of affronting fellow-citizens two in seven or more — who rely on the public sector for their bread and butter. This is why the Government, as the respected economist Arthur Seldon points out in the Journal of Economic Affairs, has failed to cut officialdom down to its essen- tial functions, and will end its first term with a public sector almost as big as that it inherited. It has forced private industry to prune inefficient manpower, investment and output; tut in its fundamental task of disciplining the growth of government and its creatures,' Mr Seldon concludes, 'the first Thatcher Government will be recorded in economic history as a thumping failure'.
Harsh words indeed. They take no ac- count of rising productivity, profits, gross domestic product, output and other hopeful signs. They take no account above all of Sir Geoffrey Howe's heroic, partly successful, all-important yet still incomplete and uncertain efforts to squeeze inflation out of the economy. Yet, if this achieve- ment has been excessively painful and is still in jeopardy, this too is partly because of failure to cut back the public sector. Where does inflation spring from? From printing too much money, say some; from failure to restrain wages and/or prices, say others. But, whatever its origin, it does not appear evenly everywhere. As figures given elsewhere in the Journal confirm, while na- tional inflation last November was 6.3 per cent, it was in the private sector only 4.9 per cent. In the public sector it was nearly dou- ble that — 9.3 per cent!
As an orthodox, correct and honest keeper of the nation's purse, Sir Geoffrey could hardly be faulted. But it must be realised how little of all that is wrong with our economy is solely, directly or indirectly under his control. Let us suppose him ma-• jor domo to a wildly extravagant alcoholic and gambler. He can ensure up to a point that all his master's excesses are correctly financed out of income rather than capital, that no dud cheques are issued, that debts are avoided or paid and proper accounts kept and respected. But, so long as the real source of ruin, his master's wild habits, eludes his control, he can only achieve these desirable results by economising on essen- tials to find money for high life. If we re- gard the private productive sector as es- sential and the public sector as in great part high life, then something of this sort has happened under his admirable stewardship.
As a percentage of national output, ac- falling: 44.5 per cent in 1981-2, 44 per cent in 1982-3, 43.5 per cent expected in 1983-4. Its rate of increase is falling too: from a pre- Thatcher 15.8 per cent, accelerating, down to eight per cent in 1982-3. Good: but good enough? 43.5 per cent is far above what sensible economists like Colin Clark have thought safe. It is far above what even moderate mixed-economy socialists thought safe until recently.
Nor on this matter is the expenditure White Paper wholly reassuring, still less the way in which it has been received in normal- ly responsible quarters. Public expenditure is claimed to be 'under control'. Perhaps, but at a very high level; and, as the Daily Telegraph city editor smartly pointed out, if you note that the contingency reserve, for instance, has been reduced by £2.5 billion, you will find that planned cash spending for 1983-4 is not £1 billion below what was ex- pected last March but £2.5 billion above! By the same token, I might 'cut spending' by putting less aside for a rainy day!
Despite this, or rather contributing to this, significant increases are envisaged in spending on defence, social security, employment schemes and the Coal Board. What the Coal Board has done to deserve further douceurs, I can't think. As for employment schemes, I cannot rid myself of the old-fashioned conviction that a phoney job 'created' here at the taxpayer's expense means a real job destroyed, In danger or aborted somewhere else. As Sir Geoffrey has himself said, it is not govern- ments which create jobs but customers.
What is most extraordinary to me, however, is the general outcry against `underspending' by government depart- ments and local authorities. How on earth can there be any such thing, so loosely described? Of course, if you can point to a sewer collapsed or a road dangerously potholed or the like, here is evidence of money not spent which should have been- But where is the government department or local authority which could not easily find that money by economising elsewhere, notably in local current spending, admitted by the White Paper to be 'higher than desirable'? As for houses and roads, do We really need more? We have a national surplus of housing, scandalously misallocated, I agree. RoadS? I don't know- Mr Adley posed the dramatic question: who ever asked whether the M6 makes a profit or loss? It is indeed pointless to do so. But the introduction of motorway tolls would enable us both to ask the question and get an answer, and might help Mr Adley's precious railways too. Meanwhile, to talk about `underspending', and to urge that It be 'corrected' or, as the White Paper puts it, 'combatted .. in future years', is surely the economics of Avilion!
In his first Budget statement Sir Geoffrey declared that 'finance must determine ex- penditure, not expenditure finance'. What he meant is clear enough and very sound. Is not the war against underspending a perverse parody of it?
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