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Catalogue Reference:CAB/128/53/22
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C M ( 7 3 ) 61st
Conclusions
COPY NO
0O
CABINET
C O N C L U S I O N S of a M e e t i n g of the Cabinet
held at 10 Downing Street on
T H U R S D A Y 13 D E C E M B E R 1973
at 10. 30 am PRESENT The Rt Hon E d w a r d Heath M P P r i m e Minister The Rt Hon Sir A l e c D o u g l a s - H o m e M P
S e c r e t a r y of State for F o r e i g n and
Commonwealth A f f a i r s
TheRt HonLordHailshamofStMarylebone
L o r d Chancellor
The Rt Hon Anthony B a r b e r M P
Chancellor of the Exchequer
The Rt Hon W i l l i a m Whitelaw M P
S e c r e t a r y of State for Employment
The Rt Hon L o r d Carrington
S e c r e t a r y of State for Defence
The Rt Hon Robert C a r r M P
S e c r e t a r y of State for the Home Department
The Rt Hon James P r i o r M P
L o r d President of the Council
The Rt Hon S i r Keith Joseph M P
S e c r e t a r y of State for Social S e r v i c e s
The Rt Hon Geoffrey Rippon Q C M P
S e c r e t a r y of State for the Environment
The Rt Hon M a r g a r e t Thatcher M P
S e c r e t a r y of State for Education and Science
The Rt Hon Gordon Campbell M P
S e c r e t a r y of State for Scotland
The Rt Hon Peter Walker M P
S e c r e t a r y of State for Trade and Industry
The Rt Hon John Davies M P
Chancellor of the Duchy of Lancaster
The Rt Hon F r a n c i s P y m M P
S e c r e t a r y of State for Northern Ireland
The Rt Hon M a u r i c e M a c m i l l a n M P
Paymaster General
The Rt Hon Joseph Godber M P
M i n i s t e r of A g r i c u l t u r e , F i s h e r i e s and Food
The Rt Hon Sir Geoffrey Howe Q C M P
Minister for T r a d e and Consumer
Affairs
THE F O L L O W I N G WERE A L S O P R E S E N T The R t H o n H u m p h r e y A t k i n s M P
T h e R t H o n S i r John E d e n M P
M i n i s t e r of P o s t s and
Telecommunications (Item 4)
Parliamentary Secretary,
Treasury
SECRETARIAT
Sir
Mr
Mr
Mr
Mr
Mr
Mr
John Hunt
P D Nairne
H F T Smith
P Benner
J A Hamilton
'S A n s o n
D Evans
( I t e m s 2 and 3)
(Items 1 - 3 )
( I t e m 1)
(Items 4 - 6 )
(Items 4 - 6 )
( I t e m s 2 and 3 )
C O N T E N T S
Item
Subject
1.
PARLIAMENTARY
2.
FOREIGN AFFAIRS
AFFAIRS 2
Middle East
2
M r Hawksworth
3
Northern Ireland
3
EUROPEAN COMMUNITY AFFAIRS
4 .
INDUSTRIAL AFFAIRS
6.
1
North Atlantic T r e a t y Organisation
3.
5.
Page
C u r r e n t I n d u s t r i a l Disputes
5
Eligibility for Unemployment Benefit
6
F U E L RESTRICTIONS
D o m e s t i c Space Heating
7
P l a c e s of E n t e r t a i n m e n t
8
P e t r o l and D i e s e l F u e l
8
T e l e v i s i o n P r o g r a m m e Hours
9
THE ECONOMIC S I T U A T I O N
PARLIAMENTARY
AFFAIRS
t 1.
T h e Cabinet w e r e i n f o r m e d of the b u s i n e s s to b e taken
i n the House of C o m m o n s during the f o l l o w i n g w e e k .
T h e Cabinet w e r e i n f o r m e d that no public i n d i c a t i o n had s o far
b e e n g i v e n of the l i k e l y date of the House of C o m m o n s r e t u r n
a f t e r the C h r i s t m a s R e c e s s .
22 January had o r i g i n a l l y b e e n
i n t e n d e d , but this would now b e i n a p p r o p r i a t e h a v i n g r e g a r d to
the s e r i o u s e c o n o m i c situation and to the l i k e l y need f o r
P a r l i a m e n t to b e c a l l e d upon to a p p r o v e R e g u l a t i o n s m a d e
under the E m e r g e n c y P o w e r s A c t 1920 f o l l o w i n g a r e n e w a l
o f the p r e s e n t state of e m e r g e n c y , w h i c h would o t h e r w i s e l a p s e
o n 11 January 1974.
I t w a s t h e r e f o r e p r o p o s e d t o announce
that the M o t i o n f o r the a d j o u r n m e n t would p r o v i d e f o r the
r e t u r n of the House on 15 January, but w i t h the p r o v i s o that
a r r a n g e m e n t s w o u l d b e m a d e f o r e a r H e r r e c a l l should
circumstances warrant it.
T h e Cabinet a g r e e d that i t would b e i n a p p r o p r i a t e and would
i n p r e s e n t c i r c u m s t a n c e s b e m i s u n d e r s t o o d b y the public and
b y m a n y G o v e r n m e n t s u p p o r t e r s i n P a r l i a m e n t if the debate
o n the conduct o f the L o r d C h a n c e l l o r took p l a c e on
17 D e c e m b e r , a s p r o p o s e d by the O p p o s i t i o n .
T h e w e e k ' s b u s i n e s s should if p o s s i b l e b e r e a r r a n g e d so as to
e n a b l e the Opposition M o t i o n to b e debated on 20 D e c e m b e r ,
subsequent to the debate on the e c o n o m i c and e n e r g y situation
and to any s t a t e m e n t m a d e b y the C h a n c e l l o r of the E x c h e q u e r .
But i t w a s u n d e s i r a b l e that such a r e a r r a n g e m e n t should r e s u l t
i n m o r e t i m e b e i n g a v a i l a b l e for the d e b a t e on the P r a y e r to
annul the I m p o r t Duties ( G e n e r a l ) ( N o . 8 ) O r d e r , w h i c h m i g h t
then d e v e l o p i n t o a g e n e r a l attack on our m e m b e r s h i p of the
European Economic Community.
OREIGN
AFFAIRS
North Atlantic
TreatyOrganisation
Middle East
Previous
Reference:
C M ( 7 3 ) 59th
Conclusions,
Minute 2
2.
THE F O R E I G N A N D C O M M O N W E A L T H S E C R E T A R Y
said that the meeting of the North Atlantic Council on 10th and
11th D e c e m b e r had ended w e l l .
The meetings opened against a
background of European discontent with the failure of the United
States Government to engage in proper consultation on matters
affecting European interests, and of A m e r i c a n dislike at the way
in which the European Community conducted its relations with
the United States.
The A m e r i c a n S e c r e t a r y of State, D r K i s s i n g e r ,
had e x p r e s s e d A m e r i c a n concern but had gone on to r e a f f i r m the
importance which the United States attached to the A l l i a n c e and to
repeat P r e s i d e n t Nixon's pledges of continuing support for it.
There had been sharp exchanges between D r K i s s i n g e r and the
F r e n c h F o r e i g n M i n i s t e r , M Jobert, but they had a g r e e d to sink
their differences and the meetings ended on a note of harmony.
T H E F O R E I G N A N D C O M M O N W E A L T H S E C R E T A R Y said that in
private discussion with him, D r K i s s i n g e r had e x p r e s s e d
confidence that the Middle E a s t peace conference would open on
18 D e c e m b e r and that it would be attended by Egypt, Jordan, Syria,
and I s r a e l , together with the United States and the Soviet Union
and the Secretary G e n e r a l of the United Nations, D r Waldheim.
I s r a e l would find it difficult to sit at the conference table with
Syria because the Government of I s r a e l w e r e convinced that a
number of I s r a e l i p r i s o n e r s of war had been killed by the Syrians.
D r K i s s i n g e r thought however that I s r a e l would a g r e e meetings in
plenary session, although it might not b e possible to hold separate
meetings of small negotiating groups until after the I s r a e l i elections
at the end of D e c e m b e r .
D r . K i s s i n g e r hoped that D r Waldheim
would p r e s i d e over the meetings and believed that this could be
a r r a n g e d , although the Russians w e r e still p r e s s i n g for the;
chairmanship to be held jointly by themselves and the A m e r i c a n s .
D r K i s s i n g e r had said that he was convinced that I s r a e l would
have to withdraw f r o m the occupied t e r r i t o r i e s . It would be hard
to persuade them to accept this and his discussions with the P r i m e
Minister of I s r a e l , M r s M e i r , had b e e n extremely difficult; but
he w a s sure that they would have to come to it in the end.
There
would a l s o have to be provision for demilitarised zones and inter­
national policing.
His f i r s t objective, however, would be to
s e c u r e the disengagement of the opposing a r m i e s .
A return to
the lines on which the a r m i e s stood at the time of the c e a s e - f i r e
on 22 October was not relevant and would not be sufficient.
What
was needed w a s a clear and substantial disengagement which
would enable the United Nations troops to establish themselves
between the opposing forces.
D r K i s s i n g e r thought that if this
could be achieved the A r a b s might take it as the occasion for lifting
their oil e m b a r g o .
The F o r e i g n and Commonwealth Secretary
doubted whether this would be so.
JO ;:,o;.;"
In a speech which D r K i s s i n g e r had made the previous evening
he had proposed that the European countries, the United States
and Japan should establish an action group to develop a p r o g r a m m e
of collaboration to solve the energy p r o b l e m .
The oil producing
countries should b e invited to take p a r t in this w o r k .
The F o r e i g n
and Commonwealth S e c r e t a r y thought that if it w a s decided at the
Community Summit, to b e held on 14 and 15 D e c e m b e r , that the
Community should take an initiative with the A r a b countries, the
w a y should be left open for the United States and Japan to join in,
and the Community should invite them to do so.
M r Hawks worth
T H E F O R E I G N A N D C O M M O N W E A L T H S E C R E T A R Y said that we
had learnt that M r G e r a l d Hawksworth, a B r i t i s h subject
employed by the Rhodesian Government, who had been captured
by m e m b e r s of the Z i m b a b w e A f r i c a n National Union in January,
w a s being held i n a Tanzanian p r i s o n .
He had a r r a n g e d for the
P r e s i d e n t of Tanzania, D r N y e r e r e , to be approached in
confidence with a view to M r Hawksworth's r e l e a s e .
Dr Nyerere
had said that he had known nothing of this matter and had ordered
the immediate r e l e a s e of M r Hawksworth, who w a s now back in
this country.
The Cabinet ­
1.
Took note of the statements by the F o r e i g n
and Commonwealth S e c r e t a r y .
Northern
Ireland
Previous
Reference:
C M ( 7 3 ) 59th
Conclusions,
Minute 4
T H E S E C R E T A R Y O F S T A T E F O R N O R T H E R N I R E L A N D said
that although the agreement reached at the tripartite meetings
held at Sunningdale f r o m 6-9 D e c e m b e r had been criticised by
extremists in N o r t h e r n Ireland, extremist reaction had been
relatively subdued.
He intended in the course of the next week
to make a number of speeches i n various parts of Northern
Ireland, in which he would explain the agreements and commend
them to the public.
The general situation was r e l a t i v e l y c a l m
and in accordance with the indications he had a l r e a d y given, he
would be r e l e a s i n g a number of s e l e c t e d detainees before
Christmas.
The Cabinet
2.
Took note of the statement by the S e c r e t a r y
of State for N o r t h e r n Ireland.
3.
THE C H A N C E L L O R OF THE D U C H Y O F L A N C A S T E R said
that important meetings of the Council of Ministers ( F o r e i g n
A f f a i r s ) and the Council of Ministers (Finance) would take place on
17-18 D e c e m b e r .
The most important issue for the United Kingdom
would be the decision on a Regional Development Fund ( R D F ) and it
w a s expected that this would also be discussed at the European
Summit Meeting in Copenhagen on 14-15 D e c e m b e r ,
The F r e n c h
Minister responsible for Regional Development, M Guichardi had
visited London and a formula had been agreed which appeared to
offer reasonable prospects for a satisfactory outcome.
The meeting of the Council of M i n i s t e r s ( A g r i c u l t u r e ) on
10-11 December had considered further proposals for a r e v i e w of
the Common A g r i c u l t u r a l P o l i c y ( C A P ) .
The meeting of the
Budget Council on 10 December had considered proposals for
i m p r o v e d financial control in Community expenditure and this w o r k
w a s progressing satisfactorily.
The Cabinet Took note with approval of the statement by the
Chancellor of the Duchy of L a n c a s t e r .
4
4.
THE S E C R E T A R Y O F S T A T E F O R E M P L O Y M E N T
said that the Executive of the National Union of M i n e w o r k e r s
w a s meeting that d a y ; they w e r e likely to vote in favour of a
continuation of the overtime ban and against a ballot.
The
industrial action taken by the A s s o c i a t e d Society of Locomotive
Engineers and F i r e m e n ( A S L E F ) had produced the expected
r e s u l t s : commuter services into London w e r e s e r i o u s l y affected
but so far there was no great disruption of s e r v i c e s e l s e w h e r e
in the country.
Militant m e m b e r s of A S L E F w e r e known to be
examining means for disrupting the transport of oil and fuel
supplies but as yet with no significant s u c c e s s .
There w e r e
still difficulties with ambulance d r i v e r s , though a number of
agreements had been concluded with individual l o c a l authorities.
On the brighter side, the National Union of Public E m p l o y e e s
had accepted an offer for National Health S e r v i c e employees
within the t e r m s of Stage 3 and there was a good chance that the
other unions concerned would do l i k e w i s e .
The T r a n s p o r t and
G e n e r a l W o r k e r s Union had accepted, subject to endorsement
by their m e m b e r s , a Stage 3 offer to London busmen.
The ban
on out-of-hours working by the E l e c t r i c a l P o w e r E n g i n e e r s '
Association ( E P E A ) continued.
A slightly better offer might
be forthcoming f r o m the P a y B o a r d ' s examination of the E P E A
case.
He would be seeing the Electricity Council that afternoon
to tell them about the Pay B o a r d decision and to ask them to
make a f r e s h offer to the E P E A .
He would then see M r Lyons
of the E P E A the following day and urge him to settle for this
new offer.
The most serious new p r o b l e m for the immediate
future was likely to a r i s e f r o m the pay claim being put f o r w a r d
by the A m a l g a m a t e d Union of Engineering and Foundry W o r k e r s .
The national problems arising f r o m the e n e r g y c r i s i s appeared
so far to have had v e r y little influence on the attitude of the
trade union movement as a whole but there w e r e signs that
individual unions w e r e beginning to get w o r r i e d about the prospect
of a r i s e in unemployment,
1
T H E P R I M E M I N I S T E R , summing up a brief discussion, said
that although the industrial situation remained extremely difficult,
the fact that so far about 350 settlements had been r e g i s t e r e d
within the t e r m s of Stage 3 gave some encouragement for the
prospect that in time even the most difficult trade unions might
b e brought to see the good sense in the G o v e r n m e n t s pay and
p r i c e s policy.
III! Eligibility for
Unemployment
Benefit
T H E S E C R E T A R Y O F S T A T E F O R S O C I A L S E R V I C E S said
that he had examined the rides covering the payment of
unemployment benefit in the light of the prospect that industry
would shortly be obliged to r e s t r i c t production to a 3-day
working week.
A p a r t f r o m those workpeople covered by a
guaranteed pay agreement, employees could, after a waiting
period of 3 days, claim the b a s i c rate of unemployment benefit
for any two days suspension in a working week.
Moreover,
these days could be accumulated.
These arrangements could be
changed by O r d e r but, in his v i e w , it would be highly provocative
to do this at the present time.
T H E P R I M E M I N I S T E R , summing up a brief discussion, said
that although there could be no question of changing the rules
relating to unemployment benefit immediately, the matter
required further examination.
In the meantime, the Secretary
of State for Social Services should provide a l i s t of answers to
any supplementary questions that might a r i s e f r o m the statement
to Parliament that day.
The Cabinet Took note, with approval, of the summing up
of their discussion by the P r i m e Minister.
6
$EGRET
FUEL
RESTRICTIONS
5.
The Cabinet resumed their discussion of restrictions to
conserve fuel supplies.
Previous
Reference:
C M ( 7 3 ) 59th
Conclusions,
Minute 6
T H E L O R D P R E S I D E N T said that in order to reduce the demand
for electricty it had been p r o p o s e d to prohibit by O r d e r the use
of electricity for space heating in the home except in one r o o m .
This would however be harsh, and in practice unenforceable.
Neither the police nor the staff of the electricity b o a r d s would
be satisfactory agents for its enforcement.
A number of people
would seek deliberately to £Lout the regulation.
It would seem
better to start on a voluntary b a s i s , using a m a s s i v e advertising
campaign warning people that if the results of the voluntary
restrictions w e r e not satisfactory, they would face much m o r e
s e v e r e and much l e s s palatable cuts.
Domestic Space
Heating
In discussion, it w a s pointed out that the saving in domestic
heating represented almost 50 per cent of the total saving that
w a s being sought.
Experience with the voluntary 50 mile per
hour limit suggested that although a number of people would be
public spirited enough to o b s e r v e the restriction, many would not.
This would not only mean failure to achieve the r e q u i r e d
20 per cent saving, it would a l s o give r i s e to irritation amongst
those m e m b e r s of the public who had c o - o p e r a t e d .
Moreover,
there w e r e a number of other regulations in existence that could
not be enforced, such a s , for example, the regulations restricting
the storage of petrol in h o m e s .
On the other hand, it was
argued that it was undesirable in principle to make laws that
could not be enforced, since this brought other l a w s into disrepute.
In further discussion it w a s pointed out that should the voluntary
scheme fail to work, and if the b a n on out-of-hours working by
the E l e c t r i c a l P o w e r Engineers Association w e r e lifted, then
it would be p o s s i b l e to apply a we 11-controlled s y s t e m of rota
cuts which would be p r e f e r a b l e to the present p r o p o s a l for an
O r d e r on domestic heating.
T H E P R I M E M I N I S T E R , summing up this p a r t of the discussion,
said that for the time being w e should rely upon a voluntary
campaign for restriction of domestic heating.
The L o r d P r i v y
Seal should make immediate arrangements for television announce­
ments to emphasise the need for voluntary r e s t r i c t i o n and the
risk of more s e v e r e cuts if it w e r e unsuccessful.
P l a c e s of
Entertainment
T H E L O R D P R E S I D E N T OF T H E C O U N C I L said that action was
being taken to ban the use of generators for supplying electricity
for floodlights at football grounds except by special licence.
A
decision was however r e q u i r e d on whether any new restrictions
on the use of electricity should apply to places of entertainment.
T H E P R I M E M I N I S T E R , summing up a b r i e f discussion, said
that the restrictions should not generally be applied to places of
entertainment, but that the exemption of swimming pools
should b e r e - e x a m i n e d .
!
P e t r o l and
D i e s e l Fuel
T H E S E C R E T A R Y OF S T A T E F O R T R A D E A N D I N D U S T R Y ,
reporting on the supplies of petroleum spirit and d i e s e l fuel
said that, for the first time during D e c e m b e r , there had b e e n an
increase in stocks of petrol.
The present stock was 63 days for
petrol and 70 days for d i e s e l fuel.
Major road haulage ,
contractors w e r e now using their own stocks of diesel fuel
and this should help to reduce the difficulties that had a r i s e n
during the past week at filling stations.
He and the S e c r e t a r y
of State for the Environment w e r e examining the whole question
of the supply of diesel fuel.
He considered that with the advent
of a 3 day working week, there should be little p r o b l e m in
maintaining adequate supplies.
He w a s proposing to set in hand
soon the application scheme for a supplementary petrol ration.
In discussion, it was argued that Parliament, having h e a r d the
P r i m e M i n i s t e r ^ statement on electricity restrictions, would
find it difficult to understand why petrol rationing should not be
introduced immediately.
A g a i n s t this, it could be argued that
stocks had been maintained as a result of the cuts imposed so far
and the co-operation of the motoring public; and that, provided
this state of affairs continued, there w a s no need to contemplate
petrol rationing at the present time.
T h e r e was a r i s k that any
announcement seeking applications for supplementary petrol
rations would give r i s e to fears that rationing was imminent and
hence to local shortages.
However, the r i s k could be minimised by
treating the whole process in a d i s c r e e t and gradual manner.
T H E P R I M E M I N I S T E R , summing up a brief discussion, said that
arrangements could proceed for inviting applications for
supplementary petrol and d i e s e l oil allocations.
The announcements
should however be carefully worded so as not to give r i s e to
misapprehensions that rationing was imminent.
Television
Programme
Hours
T H E L O R D P R I V Y S E A L said that arrangements w e r e now
being made with the B r i t i s h Broadcasting Corporation ( B B C )
and the Independent Broadcasting Authority ( I B A ) for television
broadcasting to cease at 10. 30 pm except on Saturdays when the
c l o s e down would be a t 11. 00 pm.
It w a s however possible that
the Saturday p r o g r a m m e s could a l s o end at 10. 30 pm if certain
contractual difficulties could be o v e r c o m e .
T h e r e would a l s o
b e restrictions on morning p r o g r a m m e s .
Special arrangements
would be made for the Christmas holiday and N e w Y e a r * s E v e .
THE P R I M E M I N I S T E R , summing up a brief discussion, said
that the B B C and the I B A should b e asked to close down their
television transmissions at 10. 30 pm on a l l days, including
Saturdays, except over the Christmas holiday and N e w Y e a r ' s
Eve.
The Cabinet Took note, with approval, of the summing up
of their discussion by the P r i m e Minister.
THE ECONOMIC
SITUATION
6.
The Cabinet r e s u m e d their consideration of the economic
situation.
Their discussion and the conclusions reached a r e
r e c o r d e d separately.
Previous
Reference:
C M ( 7 3 ) 60th
Conclusions,
Cabinet Office
13 December 1973
9
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Q
Copy No
CABINET
CONFIDENTIAL ANNEX
C M ( 7 3 ) 61st Conclusions, Minute 6 Thursday 13 D e c e m b e r 1973 at 10.30 am ECONOMIC
SITUATION
Previous
Reference:
C M ( 7 3 ) 60th
Conclusions
T h e Cabinet considered a memorandum by the Chancellor of the
Exchequer ( C P ( 7 3 ) 139) about m e a s u r e s to be taken with r e g a r d
to public expenditure and energy p r i c e s in the light of the changed
economic situation.
T H E C H A N C E L L O R O F THE E X C H E Q U E R said that he had
outlined the proposals in C P ( 7 3 ) 139 to the Cabinet at their
meeting the previous day.
He proposed that, with the exception
of investment i n the energy industries and in housing, there
should be reductions in 1974-75 of 20 per cent on capital
p r o g r a m m e s and 10 per cent on procurement.
In the light of the
d i s c u s s i o n the previous day, he had asked T r e a s u r y officials to
get in touch with Departments about the implications of these
reductions for individual p r o g r a m m e s .
A s it might not be
possible to a r r a n g e a further collective discussion by the Cabinet
b e f o r e an announcement was made, he hoped that the Cabinet
would give him discretion to settle any points of difficulty, in
consultation with the P r i m e Minister as necessary, on the basis
that reductions of at l e a s t £1, 000 million must be found.
Within
the reductions for each Department, Ministers would have as much
flexibility as possible to determine their own p r i o r i t i e s , although
a s a general principle he hoped that priority would be given to the
saving of energy and to the f r e e i n g . of r e s o u r c e s for export.
It
w a s also for consideration whether certain l a r g e projects
should suffer some reduction.
A limitation in the production of
Concorde required p r i o r consultation with the F r e n c h Government,
which could not be done in time for an e a r l y announcement, but it
w a s for consideration whether M a p l i n airport should be further
deferred.
He a l s o proposed that certain energy prices should be
i n c r e a s e d to the maximum permitted under the Pay and P r i c e Code.
This might be associated with some offsetting i n c r e a s e in
supplementary benefit.
1
A t the Cabinet discussion the previous day, the feeling had been
e x p r e s s e d that his proposal for a total reduction in demand of
£1, 500 million was insufficient.
He would continue to examine,
in the light of the v i e w s e x p r e s s e d by the Cabinet, what other
m e a s u r e s might be associated with the public expenditure
reductions in o r d e r to produce a balanced package.
But in view
of the present uncertainties about the economic prospects he did
not favour attempting to take m o r e demand out of the economy now
than the £1, 500 million suggested in C P ( 7 3 ) 139.
In discussion, it was argued that there might still be advantage in
seeking a l a r g e r reduction in demand at this stage, and thus
minimising the r i s k of needing to take further major m e a s u r e s
later on.
The m e a s u r e s taken must be sufficient to prevent a
further fall in the value of the potmd, and it might be d e s i r a b l e to
obtain some r o o m for manoeuvre in case it proved n e c e s s a r y ,
for example, to subsidise food.
The present moment was the
most favourable time for gaining public acceptance of drastic
measures.
On the other hand, there w e r e big uncertainties about
the reduction in oil supplies, which might be l e s s s e v e r e than at
present anticipated.
Even if the supply position improved, the
effect of the i n c r e a s e in oil p r i c e s would still remain, but this
affected all industrialised countries; and if all such countries
w e r e to deal with the p r o b l e m by restrictive m e a s u r e s there w a s a
r i s k of a general r e c e s s i o n .
In our own c a s e , the deficit due to
the increased oil p r i c e s came on top of a l a r g e underlying deficit,
and corrective m e a s u r e s w e r e c l e a r l y needed.
But if the
reduction in demand w a s so drastic as to undermine confidence
of British industry, this could a l s o undermine eonfideace in
sterling.
There would be advantage in including some other
m e a s u r e s in the package for presentational r e a s o n s , even if they
did not make a l a r g e reduction in demand.
But it seemed
preferable at this stage not to reduce demand further than the
Chancellor of the Exchequer was proposing.
In further discussion, it was argued that the proposed reduction
in capital expenditure by the nationalised industries would be
harmful to future expansion.
In spite of the importance of
energy, investment in the steel industry might b e m o r e important
than in the gas industry.
Rather than cut such essential
investment, it might be p r e f e r a b l e to increase indirect taxation,
or to increase energy prices faster than the Code would at present
allow.
On the other hand, some reduction in capital c o m m i t ­
ments was a reasonable reaction to an emergency situation.
The
investment p r o g r a m m e in the steel industry was aimed at cutting
costs m o r e than at increasing capacity.
The m e a s u r e s that w e r e
taken must be compatible with the maintenance of Stage 3, since
if Stage 3 failed the economic and industrial prospects would become
v e r y much w o r s e .
There w a s a good c a s e , in present
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circumstances, for increasing energy prices to the extent
permitted by the Code, provided that additional payments w e r e
made as proposed to recipients of supplementary benefit.
But
it was not realistic to expect that Stage 3 could b e held if the Code
w e r e amended to p e r m i t a still faster i n c r e a s e , or if the
Government w e r e to add i n c r e a s e s in indirect taxation or in
d i r e c t taxes on the lower incomes.
Some increase in taxation
on higher incomes might however be d e s i r a b l e .
In discussion of the proposed reductions in public expenditure, it
w a s suggested that while reductions of the order proposed appeared
n e c e s s a r y , some modifications might need to be discussed between
the Ministers concerned and the T r e a s u r y in o r d e r to deal with
points of particular difficulty.
Some exceptions might have to be
made, for example, to avoid a reduction in the purchase of food
and medicines for hospitals, and to enable the infrastructure
p r o g r a m m e for N c r t h Sea Oil to continue.
It w a s important,
however, that such modifications should only be m a r g i n a l if the
reductions in other p r o g r a m m e s w e r e to be defensible.
It would
a l s o s e e m undesirable to incur additional expenditure on
compensation for b r e a c h of contract, or to stop w o r k on half­
completed capital projects.
A n y such cases would need to be
considered individually.
It should generally be p o s s i b l e , however,
to find the n e c e s s a r y savings by a combination of deferring new
contracts and the shortfall due to shortages to steel and other
materials.
The effect on individual p r o g r a m m e s would be v e r y
s e v e r e , and if the economic prospects improved, consideration
should be given to restoring s o m e of the reductions.
In further discussion the following points were made ­
a.
It would be n e c e s s a r y to discuss the reductions in
local government expenditure with the local authority
associations.
The associations might seek some
concessions, for example on the personal social s e r v i c e s ,
and it would be helpful to have some r o o m for manoeuvre.
H o w e v e r , no cuts w e r e proposed in staff n u m b e r s , and a l l
but £100 million of the reductions falling on local
authorities w e r e enforceable by central government.
It
would be essential in any annoucement about the expenditure
reductions to give f i r m figures if the announcement was to
have the r e q u i r e d effect on confidence.
b.
The bulk of the United K i n g d o m s exports w e r e
achieved by relatively few f i r m s .
T h e r e would be
advantage in arranging discussions with them and the
agencies responsible for the main public sector p r o g r a m m e ,
to ensure that where an export order might otherwise be
frustrated, public sector o r d e r s would b e deferred in order
to allow it to have priority.
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c.
The proposed reductions in defence procurement
could not be achieved without reducing o r d e r s placed in
development a r e a s , eg for ships.
d.
Questions would be asked about the effect of the
reductions on certain major projects.
The Channel
Tunnel had now been settled, and a limitation of the
Concorde p r o g r a m m e could not be imposed without prior
consultation with the F r e n c h .
On Maplin a i r p o r t , a
report had a l r e a d y been p r o m i s e d , and there would be
advantage in saying that the situation would be reviewed
when the r e p o r t w a s produced.
There w a s s o m e scope
for administrative delay in implementing the project,
and in the associated move of the Proof and Experimental
Establishment f r o m Shoeburyness.
e.
Empty office blocks remained a serious irritant of
public opinion.
The Government had a l r e a d y announced
proposals for dealing with the problem, but nothing had
been done.
A new proposal was now under consideration
which would enable such offices to be compulsorily
purchased, with the purchase money calculated on a cost
plus b a s i s , if they had r e m a i n e d empty for at least 2 y e a r s .
This would be a stronger m e a s u r e than the original
suggestion of compulsory management, but there was some
doubt about how quickly the n e c e s s a r y legislation could be
passed.
It was essential that, in one way or another,
action should be taken urgently to deal with the matter.
T H E P R I M E M I N I S T E R , summing up the discussion, said that the
Cabinet a g r e e d that the Chancellor of the Exchequer should announce,
on 17 D e c e m b e r , m e a s u r e s to reduce public expenditure and i n c r e a s e
e n e r g y prices on the lines proposed in C P ( 7 3 ) 139.
Ministers with
particular points of difficulty on the proposed expenditure reductions
should discuss these with the Chancellor of the Exchequer as soon
as possible.
The Cabinet a g r e e d that the Chancellor of the
Exchequer should have discretion to settle these points provided
that reductions of not l e s s than £ 1 , 000 million w e r e secured.
Any
c a s e s which would involve compensation for b r e a c h of contract or
stoppage of w o r k already in p r o g r e s s should be considered
individuaUy by the Chancellor of the Exchequer.
The Chancellor
of the E x c h e q u e r should consider in the light of the Cabinet
discussion at this and the previous meeting what other m e a s u r e s
he should announce on 17 D e c e m b e r to deal with the economic
situation.
The S e c r e t a r y of State for the Environment should
discuss urgently with the Chancellor of the Exchequer his new
proposal for deaHng with empty office b l o c k s , with a view to
taking effective action as soon a s p o s s i b l e .
M e m b e r s of the Cabinet
should continue to b e a r in mind the need for complete discretion
about the matters which had b e e n discussed.
1.
Took note, with approval, of the summing
up of their discussion by the
MINISTER
P R I M E
2.
Subject to the points mentioned in the P r i m e
M i n i s t e r s summing up, invited the Chancellor of
the Exchequer to announce m e a s u r e s on the lines
proposed in C P ( 7 3 ) 139 on 17 D e c e m b e r .
,]
3.
Invited the S e c r e t a r y of State for the
Environment, in consultation with the Chancellor
of the Exchequer,, to p r e s s f o r w a r d action to deal
with the p r o b l e m of empty office blocks.
Cabinet Office
14 D e c e m b e r 1973
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