Below is the text of Mr Major’s response on Government Expenditure, made on 23rd February 1989 in the House of Commons.
Mr. Arbuthnot To ask the Chancellor of the Exchequer if he will make a statement on the path of general Government expenditure over the period 1982–83 to the latest available date.
Mr. Wells To ask the Chancellor of the Exchequer if he will make a statement on the path of general Government expenditure over the period 1982–83 to the latest available date.
Mr. Major Excluding privatisation proceeds, the ratio of general Government expenditure to GDP has declined from nearly 47 per cent. in 1982–83 to just under 40 per cent. in 1988–89, the lowest it has been for over 20 years.
Mr. Arbuthnot As the Government have increased public spending and at the same time reduced it as a proportion of gross domestic product, and reduced our rates of taxation as well the national debt, does my right hon. Friend share my hope that this Government will stay in power for a very long time?
Mr. Major I share not only my hon. Friend’s hope but his expectation that that will be the case.
Mr. Wells Why is it that ever since my right hon. Friend took office in the Government there has been an annual decline in Government spending as a proportion of GDP? Why did that not happen earlier and when will my right hon. Friend be able to reduce that ratio to the 33 per cent. which obtains in Japan?
Mr. Major I am grateful to my hon. Friend for his kind remarks. I hope that what he suggests will become a convention. We hope and expect to achieve further reductions.
Mr. Beith Will the Chief Secretary confirm that capital spending is declining consistently as a proportion of Government expenditure, and does he agree that that is bad news for any organisation? Will he recognise that one of the less inflationary things that the Chancellor could do in the Budget would be to invest more on the supply side of the economy on those things that will make our nation more capable of competing, rather than giving money away in tax cuts?
Mr. Major The hon. Gentleman should be aware that capital expenditure in the public sector as a whole, and not the more selective measures sometimes quoted, increased by £2¾ billion in the Autumn Statement, and that is the largest cash or real terms increase that we have seen for many years.
Mr. Neil Hamilton Does my right hon. Friend accept that sensible people look forward to further reductions in the proportion of the GDP taken by public spending, and that one of the best ways to achieve that is to carry on repaying Government debt? Can he confirm that £10 billion or £11 billion of the £17 billion a year that we pay in debt interest is on the borrowings carried out by the previous Labour Government?
Mr. Major I can certainly confirm that. I can also confirm that if the Government were borrowing at the same ratio to GDP that we inherited from the previous Labour Government we could abolish income tax.