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SECRET
O C U M E N T IS T H E P R O P E R T Y O F H E R B R I T A N N I C
MAJESTY'S
(79) 2 5 t h
GOVERNMENT
COPY
nclu s i o n s
NO
CABINET
CONCLUSIONS
o f a M e e t i n g of the
Cabinet
h e l d a t 10 D o w n i n g S t r e e t o n THURSDAY
13 D E C E M B E R at 1 0 . 1 5
1979
am
PRESENT The Rt Hon Margaret Thatcher Prime e Rt H o n W i l l i a m W h i t e l a w
Department
e Rt H o n S i r G e o f f r e y H o w e Q C a n c e l l o r o f the
The Rt Hon L o r d Hail sham
MP
cretary of State f o r the H o m e
MP
e Rt H o n F r a n c i s P y m
Chancellor
The Rt Hon Sir Keith Joseph
S e c r e t a r y of State f o r
MP
MP
Employment
The Rt Hon Peter Walker
rd P r i v y S e a l
MP
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
e Rt H o n M i c h a e l H e s e l t i n e
Food
The Rt Hon George Younger
MP
MP
cretary o f State f o r the E n v i r o n m e n t
S e c r e t a r y of State f o r
e Rt H o n N i c h o l a s E d w a r d s
The Rt H o n H u m p h r e y Atkins
cretary of State f o r
MP
Industry
The Rt Hon James P r i o r
MP
Defence
e Rt H o n S i r Ian G i l m o u r
Lord
S e c r e t a r y of State for
Exchequer
cretary o f State f o r
MP
Minister
MP
e Rt H o n P a t r i c k J e n k i n
MP
Ireland
T h e R t H o n N o r m a n St J o h n - S t e v a s
Services
C h a n c e l l o r of the D u c h y of
e Rt H o n J o h n N o t t
MP
The Rt Hon David Howell
cretary of State f o r
Trade
S e c r e t a r y of State f o r
e Rt H o n M a r k C a r l i s l e Q C
MP
S e c r e t a r y of State for N o r t h e r n
Wales
cretary of State f o r S o c i a l
Scotland
MP
The Rt Hon John Biffen
cretary of State f o r E d u c a t i o n a n d S c i e n c e
Chief Secretary,
The Rt Hon Angus Maude Paymaster
MP
Lancaster MP
Energy MP
Treasury
MP
General
SECRET
309
SECRET
THE RtHon N o r m a n F o w l e r
FOLLOWING
WERE ALSO PRESENT
M P
The Rt Hon Michael Jopling M P
rter o f T r a n s p o r t
Parliamentary Secretary, Mr
Treasury
Paul Channon M P
M i n i s t e r of State,
Civil Service
Department
( I t e m s 6 a n d 7) SECRETARIAT Sir Robert Mr Mr Mr
Armstrong
M D M F r a n k l i n ( I t e m s 3 a n d 4) L e C h e m i n a n t (Items
5-7)
P J H a r r o p ( I t e m s 1 a n d 2)
M r R L W a d e - G e r y ( I t e m s 3 a n d 4) Mr
P M o u n t f i e l d ( I t e m s 6 a n d 7)
Mr
W N H y d e (Items 1 a n d 2)
M r G D M i l e s (Item C
5)
O N T E N T S Subject
PARLIAMENTARY
Page
AFFAIRS
B u s i n e s s i n the H o u s e of C o m m o n s
1
Local Government,
1
Planning and L a n d Bill
Parliamentary Building
3
BRITISH L E Y L A N D FOREIGN
AFFAIRS
Iran
4
Rhode sia
4
Defence
4
COMMUNITY AIRPORT THE
3
AFFAIRS
6
D E V E L O P M E N T POLICY
ECONOMIC
OUTLOOK AND PUBLIC
6 EXPENDITURE
P A Y A N D P R I C E P R O V I S I O N S F O R T H E 1980-81 C A S H L I M I T S
SECRET
9 10
310
CONFIDENTIAL
LIAMENTARY
1.
AIRS
the H o u s e of C o m m o n s d u r i n g the f o l l o w i n g
T h e C a b i n e t w e r e i n f o r m e d of the b u s i n e s s
out that,
i f t h e M o t i o n s to a p p r o v e
(Increase) O r d e r s liness i n t h e ! of C o m m o n s
to be t a k e n i n
week.
It w a s
pointed
the R a t e S u p p o r t G r a n t
w e r e n o t p a s s e d b e f o r e the r e c e s s ,
r
it was
t h a t s o m e l o c a l a u t h o r i t i e s w o u l d h a v e to b o r r o w a t t h e h i g h p r e v a i l i n g r a t e s of i n t e r e s t i n o r d e r i n the p r e s e n t f i n a n c i a l y e a r .
to m e e t t h e i r
These Orders,
commitments
u n l i k e the
Orders
setting the R a t e S u p p o r t G r a n t f o r the n e x t f i n a n c i a l y e a r , be t a k e n a f t e r House
1 0 . 00 p m .
week,
probably
The Cabinet
tig a n d
Land
SECRETARY
further
OF STATE
I
of C o m m o n s
and r e p r e s e n t a t i v e s
about the L o c a l
T h e C h a i r m a n of the C o n s e r v a t i v e
of R a t e S u p p o r t G r a n t a n d f o r a n e w
some
transferring
for a new
s y s t e m of c o n t r o l f o r
He was p r e p a r e d
60 c l a u s e s .
to s h o r t e n t h e B i l l b y
There could, however,
Bill, through
dropping
be no q u e s t i o n of a
a l t e r a t i o n of p o l i c y on b l o c k grant o r c a p i t a l c o n t r o l s .
b e l i e v e d that m a n y l o c a l a u t h o r i t i e s w o u l d w e l c o m e to c h a n g e
from a project-based
capital expenditure. however,
It w a s
to a c e i l i n g - b a s e d
n o t c l e a r o n the f a c e
the
of the
Bill,
how i t s p r o v i s i o n s w o u l d a c h i e v e that r e s u l t .
h a d n o t y e t h a d a n o p p o r t u n i t y to e x p l a i n t h i s to l o c a l
That and he
authorities.
O n c e h e h a d a g r e e d w i t h the C h a n c e l l o r of the E x c h e q u e r t h e s e c o n t r o l s w e r e to o p e r a t e
in practice,
a n d e x p l a i n to t h e T o r y g r o u p l e a d e r s
he p r o p o s e d
how to
capital
expenditure,
a u t h o r i t i e s w o u l d b e n e f i t g r e a t l y f r o m the r e l a x a t i o n o f the colleagues
In d i s c u s s i o n ,
H e would,
however,
argued
present
n e e d the f i r m b a c k i n g of
f o r the e s s e n t i a l p r o v i s i o n s of the it was
meet
of l o c a l a u t h o r i t i e s that,
d e s p i t e the i m p o s i t i o n of o v e r a l l c e i l i n g s f o r detailed controls.
He
proposal
c o n t r o l of
w o u l d d e p e n d o n h o w the p r o v i s i o n s w o u l d be o p e r a t e d ;
his
form
local
I n v i e w o f the l e n g t h o f t h e
a l s o c o n c e r n about the t i m e t a b l e f o r i t s p a s s a g e
Parliament.
Party
had
o p p o s i t i o n to t h e p r o v i s i o n s i n t h e B i l l f o r
authority capital expenditure.
major
s a i d that
Government,
o f the l o c a l a u t h o r i t y a s s o c i a t i o n s
p l a n n i n g p o w e r s f r o m C o u n t y to D i s t r i c t C o u n c i l s ,
there was
the
December.
FOR THE ENVIRONMENT
concern had been expressed
expressed
20
P l a n n i n g and L a n d B i l l .
nous irence: 24th Illusions, lite 2
on T h u r s d a y ,
T o o k note.
1.
THE
could
T h e y d i d n o t h a v e to be a p p r o v e d b y the
of L o r d s and s h o u l d be d e b a t e d i n the H o u s e
following
Ill G o v e r n m e n t ,
likely
that p r o b l e m s
of
Bill.
Parliamentary
h a n d l i n g w o u l d a r i s e b o t h f r o m the l e n g t h a n d c o m p l e x i t y o f the B i l l a n d f r o m the n u m b e r debated.
T h e r e was
of c o n t r o v e r s i a l i s s u e s that h a d to be
strong opposition in P a r l i a m e n t and
C o n s e r v a t i v e l o c a l a u t h o r i t i e s to s o m e
among
of i t s f i n a n c i a l p r o v i s i o n s ,
CONFIDENTIAL
311
CONFIDENTIAL
a n d t h e C o u n t y C o u n c i l s o b j e c t e d to t h e p r o p o s e d c h a n g e s i n t h e d i s t r i b u t i o n of p l a n n i n g p o w e r s .
If t h e f i n a n c i a l p r o v i s i o n s
to r e m a i n a t t h e c o r e o f t h e B i l l ,
as m a n y c l a u s e s as
should be d e f e r r e d
to a l a t e r s e s s i o n ;
G o v e r n m e n t s legislative programme further d i s c u s s i o n there was
otherwise
were
possible
the w h o l e of the
w o u l d be p u t at r i s k .
In
s t r o n g s u p p o r t f o r the e a r l y i m p l e m e n t a
t i o n o f the m a i n e l e m e n t s o f t h e B i l l to e s t a b l i s h e f f e c t i v e over public expenditure by l o c a l authorities.
control
The provisions
r e l a t i n g to the e f f i c i e n c y o f l o c a l a u t h o r i t i e s ,
the g r e a t e r a c c o u n t a
b i l i t y o f d i r e c t l a b o u r o r g a n i s a t i o n s a n d the r e p e a l o f t h e C o m m u n i t y L a n d A c t would command support among backbenchers.
T h e c o n s e q u e n t i a l r e - e n a c t m e n t o f the p o w e r s of
the L a n d A u t h o r i t y f o r W a l e s , much Parliamentary time. guillotine,
Government
If,
though lengthy, i n the e v e n t ,
should not occupy there had to be
i t s e e m e d u n n e c e s s a r y to c o n t e m p l a t e d r o p p i n g
p r o v i s i o n s o f the B i l l .
D e t a i l e d a m e n d m e n t s to m e e t
a
major
legitimate
p o i n t s r a i s e d b y l o c a l a u t h o r i t i e s c o u l d be m a d e i n C o m m i t t e e . THE
PRIME MINISTER,
s u m m i n g u p the d i s c u s s i o n ,
s a i d that the
a b o l i t i o n of d e t a i l e d c o n t r o l s a n d the s o r t i n g out of p l a n n i n g f u n c t i o n s w o u l d e n a b l e s t a f f to b e government.
saved i n both c e n t r a l and l o c a l
T h e C a b i n e t h a d r e a f f i r m e d the n e e d to i n t r o d u c e
the n e w f o r m of R a t e S u p p o r t G r a n t a n d a n e w
s y s t e m of c a p i t a l
c o n t r o l s i n o r d e r to p r e v e n t f u t u r e o v e r - s p e n d i n g b y l o c a l authorities.
T h e S e c r e t a r y of State f o r the E n v i r o n m e n t s h o u l d
d i s c u s s t h e o p e r a t i o n o f the n e w c o n t r o l s w i t h r e p r e s e n t a t i v e s local authorities,
s t r e s s i n g the b e n e f i t s o f the n e w
b u t a l s o o f f e r i n g to c o n s i d e r a n y a l t e r n a t i v e h a v e f o r a c h i e v i n g the G o v e r n m e n t s
suggestions
objectives.
they m i g h t
The presentation
o f the p r o v i s i o n s i n t h e B i l l f o r t h e c o n t r o l o f c a p i t a l should be r e v i s e d .
of
procedures,
expenditure
T h e C a b i n e t h a d n o t e d the o f f e r o f the
S e c r e t a r y o f S t a t e f o r t h e E n v i r o n m e n t to o m i t 60 c l a u s e s f r o m t h e Bill.
He
should c o n s i d e r w h e t h e r a n y f u r t h e r r e d u c t i o n s c o u l d be
m a d e i n the e l s e o f the B i l l w i t h o u t j e o p a r d i s i n g e s s e n t i a l p r o v i s i o n s . H e should r e p o r t on all these m a t t e r s , New
Year,
to a s m a l l g r o u p o f M i n i s t e r s t o b e
c h a i r m a n s h i p o f the H o m e S e c r e t a r y . amended, as possible
a s e a r l y a s p o s s i b l e i n the set up u n d e r
The Bill,
s h o u l d b e i n t r o d u c e d i n t o the H o u s e o f C o m m o n s , a f t e r the r e c e s s .
E v e r y effort
s e c u r e the p a s s a g e of the B i l l t h i s s e s s i o n :
the
as shortened and as
an extended
session
might well b e c o m e n e c e s s a r y for both H o u s e s . The 2.
Cabinet
T o o k note,
with approval,
s u m m i n g up of t h e i r d i s c u s s i o n .
2
CONFIDENTIAL
soon
s h o u l d b e m a d e to
o f the P r i m e
Minister's
CONFIDENTIAL
3.
Invited the S e c r e t a r y o f State f o r
the
E n v i r o n m e n t t o a g r e e t h e d e t a i l e d w o r k i n g o f the controls over local authority capital
expenditure
w i t h the C h a n c e l l o r of the E x c h e q u e r ; of l o c a l a u t h o r i t i e s ;
to d i s c u s s
to the g r o u p
w i t h a n d e x p l a i n the p r o p o s a l s
a n d to s e e k a n
leaders
amended
p r e s e n t a t i o n o f the r e l e v a n t p r o v i s i o n s i n the 4.
I n v i t e d the S e c r e t a r y of State f o r
E n v i r o n m e n t to c o n s i d e r w h e t h e r further
Bill.
the
the B i l l c o u l d be
shortened by dropping provisions which
were
not essential. 5.
I n v i t e d the S e c r e t a r y of State f o r
the
E n v i r o n m e n t to r e p o r t o n the p r o g r e s s h e h a d
made
a n d c o n c l u s i o n s r e a c h e d t o a n a d h o c g r o u p to b e u p u n d e r the c h a i r m a n s h i p of the H o m e
liamentary ding
THE
PRIME MINISTER,
there was
set
Secretary.
s u m m i n g up a b r i e f d i s c u s s i o n ,
s a i d that
no q u e s t i o n of the G o v e r n m e n t g o i n g a h e a d w i t h the
b u i l d i n g of new
offices
public expenditure
for M e m b e r s
of P a r l i a m e n t at a t i m e w h e n
o n i m p o r t a n t s o c i a l s e r v i c e s h a d to be
She w o u l d be p r e p a r e d
reduced.
t o a n s w e r a P a r l i a m e n t a r y Q u e s t i o n t o thalj
effect. The Cabinet 6.
T o o k note,
with approval,
o f the
Prime
M i n i s t e r ' s s u m m i n g up of t h e i r d i s c u s s i o n .
nsH
2.
THE SECRETARY
OF STATE
FOR INDUSTRY
s a i d that the
fLAND
C h a i r m a n o f B r i t i s h L e y l a n d h a d b e e n d u e to v i s i t J a p a n b e f o r e C h r i s t m a s to s i g n t h e c o n t r a c t w i t h H o n d a f o r t h e j o i n t p r o d u c t i o n
ious frence:
of a new m o d e l at C o w l e y .
It w o u l d b e
impossible for
J?9) 2 3 r d
request for additional G o v e r n m e n t funding before
(elusions,
Sir Michael Edwardes
pte 4
the
G o v e r n m e n t to r e a c h a d e c i s i o n o n t h e B r i t i s h L e y l a n d p l a n a n d
It w a s
then.
therefore,
to postpone h i s v i s i t .
h o p e d that H o n d a w o u l d be p r e p a r e d
to p o s t p o n e a d e c i s i o n
o n the d e a l ;
if,
intended,
however,
H o n d a d e c i d e d i n the c i r c u m s t a n c e s
to p r o c e e d w i t h the j o i n t v e n t u r e ,
r a t h e r t h a n to w a i t f o r
not
a
p o s t p o n e d v i s i t , B r i t i s h L e y l a n d m i g h t f e e l o b l i g e d to w i t h d r a w their plan for The
reconsideration.
Cabinet
T o o k note.
CONFIDENTIAL Q1
Q
SECRET
N
3.
S
10 D e c e m b e r
T H E LORD PRIVY
SEAL
s a i d that d u r i n g h i s v i s i t on
the U n i t e d S t a t e s S e c r e t a r y o f S t a t e ,
c o n t e x t o f the A m e r i c a n h o s t a g e s t a k e a c t i o n to f r e e z e
M r Vance,
Iranian assets in London.
to a g r e e to t h i s p r o p o s a l b e c a u s e
it was
was
but i t h a d
not c l e a r
ice:
the G o v e r n m e n t h a d the n e c e s s a r y l e g a l p o w e r s a n d b e c a u s e
any
role as a financial
24th
a c t i o n c o u l d d o l a s t i n g d a m a g e to L o n d o n ' s
a n d t o t h e o i l - p r o d u c i n g c o u n t r i e s ' c o n f i d e n c e i n the i n t e r n a t i o n a l
3
monetary system.
The F o r e i g n and Commonwealth
centre
S e c r e t a r y was
a n d i n t o u c h w i t h M r V a n c e a n d the F r e n c h a n d G e r m a n
Ministers.
The Americans
International Council.
representatives opinion.
Ambassador
and other
Security
r e s o r t to m o r e
drastic
B u t i t w o u l d not be e a s y to s a t i s f y A m e r i c a n
Given Iranian disregard
for international law,
of B r i t a i n a n d o t h e r E u r o p e a n c o u n t r i e s w i t h d r a w i n g
the
their
THE
at
possibility
L O R D P R I V Y
SEAL
suit,
s a i d that B r i t i s h s a n c t i o n s a g a i n s t
with little adverse
b e a b o u t to d o s o .
24th
w o u l d l i f t s a n c t i o n s i n the n e a r f u t u r e ,
sions,
attitude of t h e i r r e p r e s e n t a t i v e Lancaster the l a t e s t Act
It w a a
was
Zealand
thought to Government
i n s p i t e of the i n i t i a l l y
at the U n i t e d N a t i o n s .
unhelpful
Meanwhile
at
H o u s e the S a l i s b u r y d e l e g a t i o n a p p e a r e d w i l l i n g to a c c e p t b o t h o n the c e a s e f i r e
arrangements
a n d the
T h e i n t e n t i o n s o f the P a t r i o t i c F r o n t
r e m a i n e d u n c e r t a i n , but t h e r e was
a reasonable
Final
delegation
p r o s p e c t that t h e y too
accept. The Cabinet 1.
THE
Rhodesia
New
a l s o h o p e d that the U n i t e d S t a t e s
British proposals
o f the C o n f e r e n c e .
would
r e a c t i o n so far.
a n d the F e d e r a l R e p u b l i c of G e r m a n y
ice:
3
seem
present.
had now been lifted, had followed
public
Ambassadors
f r o m T e h r a n m i g h t have to be c o n s i d e r e d but d i d not o n b a l a n c e desirable
the
diplomatic
in T e h r a n were advising against
a c t i o n at p r e s e n t .
in
Foreign
w e r e l i k e l y to p u r s u e t h e i r c a s e b e f o r e
C o u r t of J u s t i c e a n d with the U n i t e d N a t i o n s
Her Majenty's
that
such
sions,
Brussels
to
The Government
a n x i o u s to s u p p o r t t h e U n i t e d S t a t e s G o v e r n m e n t i f i t c o u l d ; not b e e n p o s s i b l e
h a d i n the
i n T e h r a n a s k e d the G o v e r n m e n t
T o o k n o t e .
SECRETARY
Commonwealth
OF STATE
FOR DEFENCE
s a i d t h a t the F o r e i g n
S e c r e t a r y and he w e r e on b a l a n c e
decisions on long-range
theatre nuclear forces
t a k e n at the M i n i s t e r i a l
M e e t i n g of the N o r t h A t l a n t i c T r e a t y O r g a n i s a t i o n i n B r u s s e l s
on
17th
12 D e c e m b e r .
to be
sions,
forward
2
heads f r o m Europe),
As
well as
s e t t l i n g the a r m s
( i n c l u d i n g the A m e r i c a n offer
and
w e l l s a t i s f i e d w i t h the
control proposals
to w i t h d r a w
1, 0 0 0 n u c l e a r
put
war
t h e A l l i a n c e h a d a g r e e d to t h e d e p l o y m e n t i n E u r o p e 4 SECRET
314
SECRET
o f a l l t h e 572 n e w A m e r i c a n m i s s i l e s e n v i s a g e d . B e l g i u m a n d the N e t h e r l a n d s seemed likely.
had proved less
Reservations
by
s e r i o u s t h a n at one t i m e
T h e B e l g i a n G o v e r n m e n t h a d a g r e e d to a c c e p t t h e i r
s h a r e o f the m i s s i l e s ,
subject o n l y to r e c o n s i d e r a t i o n a f t e r
i n t h e l i g h t o f the p r o g r e s s
of a r m s
control negotiations;
G o v e r n m e n t h a d a c c e p t e d the p r o p o s a l s
as a whole,
six months,
and the D u t c h
but h a d p o s t p o n e d
a
d e c i s i o n o n t a k i n g a s h a r e o f t h e m i s s i l e s i n H o l l a n d u n t i l t h e e n d o f 1981. E v e n the l a t t e r date w a s
a t l e a s t a y e a r e a r l i e r t h a n the
deployment could in practice THE
PRIME MINISTER
proposed
begin.
s a i d that,
w h e n she a n d 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 v i s i t e d t h e U n i t e d S t a t e s o n 17-18
December,
s h e w o u l d h a v e a p r e l i m i n a r y d i s c u s s i o n w i t h P r e s i d e n t C a r t e r o n the r e p l a c e m e n t of the B r i t i s h s t r a t e g i c n u c l e a r d e t e r r e n t f o r c e , on e c o n o m i c grounds alone T h e P r e s i d e n t was at this stage,
A m e r i c a n assistance
several months before agreement
reached.
2.
for
which
necessary.
u n l i k e l y to w a n t to t a k e f i r m d e c i s i o n s o n the m a t t e r
a n d i t m i g h t be
The Cabinet
w o u l d be
T o o k note.
5
SECRET
was
CONFIDENTIAL
f
[QNITY S
4.
T H E L O R D PRIVY
SEAL
s a i d that d i s c u s s i o n s b e t w e e n the
b u d g e t M i n i s t e r s of the E u r o p e a n E c o n o m i c C o m m u n i t y a n d the E u r o p e a n P a r l i a m e n t h a d so f a r f a i l e d to r e a c h a g r e e m e n t ,
and it could
w e l l be t h a t t h e E u r o p e a n P a r l i a m e n t w o u l d v o t e t o r e j e c t the dices
C o m m u n i t y b u d g e t f o r 1980,
It w a s
draft
a r g u a b l e that this would c r e a t e
)24th
s i t u a t i o n i n w h i c h we
sions,
a n d t h e r e h a d b e e n i n d i c a t i o n s that the G e r m a n s
c o u l d h o p e to c h a n g e t h e b u d g e t t o o u r
s 4 and 5
the p r o b l e m of o u r net c o n t r i b u t i o n .
a
advantage,
saw a connection with
O n the o t h e r h a n d , the
confusion
c r e a t e d b y P a r l i a m e n t s f a i l u r e to v o t e t h e b u d g e t m i g h t d e t r a c t attention f r o m our i m m e d i a t e p r o b l e m .
On balance,
failure
to d e c i d e
o n t h e 1980 b u d g e t w o u l d p r o b a b l y n o t b e h e l p f u l t o u s . In a b r i e f d i s c u s s i o n i t w a s wherever
s t r e s s e d that the G o v e r n m e n t s h o u l d
seek
p o s s i b l e t o a v o i d g e t t i n g i n t o the p o s i t i o n w h i c h i t h a d f o u n d
i t s e l f on this i s s u e ,
o f b e i n g u n a b l e to s u p p o r t C o n s e r v a t i v e M e m b e r s
of
the E u r o p e a n P a r l i a m e n t who w e r e t r y i n g to be h e l p f u l to B r i t i s h interests. THE
MINISTER
OF AGRICULTURE,
F I S H E R I E S A N D F O O D said that,
at the C o u n c i l of M i n i s t e r s ( A g r i c u l t u r e ) representatives
o n 10-11 D e c e m b e r ,
h a d s o u g h t to b l o c k the p r o p o s a l s
the G r e e n P o u n d a n d the I t a l i a n G r e e n L i r a , c o n c e s s i o n s o n wine and sheepmeat. negotiations,
including a powerful
M i n i s t e r of State ( M r a package
i n o r d e r to e x t r a c t
After long and difficult
and effective intervention by his
Buchanan-Smith),
of s t r u c t u r a l m e a s u r e s
a g r e e m e n t had been r e a c h e d on
i n the wine s e c t o r w h i c h i n v o l v e d l e s s
C o m m u n i t y e x p e n d i t u r e t h a n the C o m m i s s i o n ^ p r o p o s a l s . Kingdom representatives
The
on sheepmeat
s h o u l d be
T h e F r e n c h h a d f i n a l l y a g r e e d to l i f t t h e i r r e s e r v e
Green currencies
United
a n d t h e C o m m i s s i o n h a d r e f u s e d t o a g r e e to a
F r e n c h p l e a that f u r t h e r l e g a l p r o c e e d i n g s abandoned.
the F r e n c h
f o r a d e v a l u a t i o n of
o n the
devaluations.
The Cabinet
-
T o o k note.
RT
5.
L O P M E N T
P r i v a t e S e c r e t a r y to the S e c r e t a r y of State f o r T r a d e to the
T h e C a b i n e t c o n s i d e r e d a l e t t e r d a t e d 10 D e c e m b e r
S e c r e t a r y to the P r i m e M i n i s t e r ,
f r o m the
a n d a note p r e p a r e d b y the
Private Secretary
of State f o r T r a d e f o r the M i n i s t e r i a l C o m m i t t e e o n E c o n o m i c S t r a t e g y ( E ( 7 9 ) 69), THE
both about a i r p o r t d e v e l o p m e n t p o l i c y .
SECRETARY OF STATE
FOR TRADE
G o v e r n m e n t h a d set up two C o m m i t t e e s ,
s a i d that the
previous
an A d v i s o r y C o m m i t t e e on
A i r p o r t s P o l i c y a n d a S t u d y G r o u p o n S o u t h - E a s t A i r p o r t s , to c o n s i d e r
6
CONFIDENTIAL
316
CONFIDENTIAL
the l o n g e r - t e r m East.
These
options for handling growth
Committees,
interests concerned, him,
i n c l u d i n g the l o c a l a u t h o r i t i e s ,
a n d he p r o p o s e d that the r e p o r t s
desirable
of a i r t r a f f i c i n t h e S o u t h -
which included membership
that the G o v e r n m e n t
surrounding airport policy,
s h o u l d be p u b l i s h e d .
conclusions.
p r e l i m i n a r y decisions had been reached, both on substance
s h o u l d be no m a j o r
Stansted; Heathrow;
that there
but not a fifth,
s h o u l d be a f o u r t h ,
that t h e r e
s h o u l d be n o s e c o n d r u n w a y
facilities;
at a l l ,
s h o u l d be
e a r l y next week,
at S t a n s t e d w o u l d not e m e r g e ,
of t h e i r p r o p e r t i e s
He p r o p o s e d
i f it
area
(about
to d o s o t o t h e
that the a n n o u n c e m e n t
s h o u l d be
a n d t h a t he s h o u l d h o l d o u t t h e p r o s p e c t o f a
m a i n points were made
In h a n d l i n g the p l a n n i n g a s p e c t s
were a number
that t h e r e
y e t f o r the G o v e r n m e n t to d e c i d e
Parliamentary
arrangements.
u n t i l a f t e r the p r o p o s e d
be
debate.
but t h e r e w a s
o n the m o s t
l i k e that
should
of w a y s i n w h i c h both o b j e c t i v e s
A l l involved a public inquiry,
announcement as a
Year.
of d e v e l o p m e n t s
desirable
opportunities both for public and for
Parliamentary
An
but the g r a n t of o u t l i n e p l a n n i n g
e n v i s a g e d for Stansted it was
achieved.
use should
at that s i t e .
a n y p r o p e r t y o w n e r s i n the a f f e c t e d
In d i s c u s s i o n the f o l l o w i n g
There
that the
forward
so as to m a k e m a x i m u m
P a r l i a m e n t a r y d e b a t e o n the p o l i c y e a r l y i n the N e w
a.
t e r m i n a l at
at G a t w i c k ;
of a second runway
2, 000 a c r e s ) who w i s h e d to d i s p o s e B A A at u n b l i g h t e d v a l u e s .
the
and
and that outline planning consent
b e f o r e the 1990s,
p e r m i s s i o n would enable
b.
by
Gatwick
s h o u l d be i n v i t e d to b r i n g
f o r a n e w t e r m i n a l at S t a n s t e d ,
actual need for a second runway
made
of
T h e s e w e r e that there
at the e x i s t i n g a i r p o r t s of H e a t h r o w ,
sought f o r the d e v e l o p m e n t
emerged
and a number
that the f u l l e s t u s e of r e g i o n a l a i r p o r t s
of the e x i s t i n g r u n w a y a l s o be
a
s u b j e c t to e n d o r s e m e n t
and presentation.
British Airports Authority (BAA) proposals
to m a k e
a n n o u n c i n g the
that a d d i t i o n a l a i r p o r t c a p a c i t y s h o u l d be p r o v i d e d as
traffic developed,
to
was
n e w a i r p o r t f o r L o n d o n o n the l i n e s e n v i s a g e d b y the
Roskill Commission; encouraged;
It
T h e i s s u e s h a d b e e n e x a m i n e d i n the
M i n i s t e r i a l C o m m i t t e e on E c o n o m i c Strategy, Cabinet,
major
s h o u l d put a n e n d to the u n c e r t a i n t y
a n d he p r o p o s e d t h e r e f o r e
s t a t e m e n t o n the d a y o f p u b l i c a t i o n o f the r e p o r t s Governments
of a l l the
had now r e p o r t e d
c o u l d be no n e e d
appropriate
A decision here
c o u l d be
deferred
d e b a t e a n d p u b l i c r e a c t i o n to the
whole.
It w o u l d b e i m p o r t a n t to a v o i d c o m p r o m i s i n g the
quasi
j u d i c i a l f u n c t i o n o f t h e S e c r e t a r y o f S t a t e f o r the E n v i r o n m e n t i n r e s p e c t of planning a p p l i c a t i o n s . n e e d to be w o r d e d
The proposed
statement
would
with this in m i n d .
7
CONFIDENTIAL
317
CONFIDENTIAL
c.
It w o u l d b e i m p o r t a n t f o r t h e s t a t e m e n t to g o a s f a r
as
p o s s i b l e i n r e l i e v i n g the a n x i e t i e s o f t h o s e w h o w e r e o p p o s e d to the d e v e l o p m e n t o f a n e w a i r p o r t at M a p l i n o r a t i n l a n d field" d.
"green
sites. A n e n l a r g e d t r a f f i c f l o w to S t a n s t e d w o u l d
require
i m p r o v e m e n t s i n a c c e s s both by r a i l and by r o a d , r o a d l i n k s b e t w e e n c e n t r a l L o n d o n a n d the M i l .
i n c l u d i n g the T h e p r o v i s i o n of
t h e s e l i n k s , w i t h due r e g a r d to the i n t e r e s t s a n d f e e l i n g of t h o s e t h r o u g h w h o s e c o m m u n i t i e s the n e w l i n k s w o u l d p a s s ,
would
v e r y i m p o r t a n t to p u b l i c a t t i t u d e s t o t h e p r o p o s a l s f o r
developing
Stansted.
T h e s e would require additional public money,
e x t r a s u m s n e e d e d to p r o v i d e f o r i m p r o v e d s u r f a c e be l o w e r i n the c a s e for
"green field" development.
line
r e q u i r e the p a s s a g e t h r o u g h P a r l i a m e n t of a P r i v a t e PRIME MINISTER,
s u m m i n g u p the d i s c u s s i o n ,
w e r e a g r e e d that the p r o v i s i o n of a n e w m a j o r be r u l e d out,
as
would
canvassed
T h e p r o v i s i o n of a n e w r a i l
f r o m S t a n s t e d to the L i v e r p o o l S t r e e t to C a m b r i d g e
THE
but the
links
of S t a n s t e d t h a n i n a n y of the s i t e s
t h e B A A to b r i n g f o r w a r d
would
Bill.
s a i d t h a t the
Cabinet
a i r p o r t for L o n d o n should
The Government were prepared
detailed proposals
u s e m a d e of the e x i s t i n g r u n w a y ,
w o u l d t h e n be e x a m i n e d b y a n a p p r o p r i a t e taken.
at
the
together with outline p r o p o s a l s for
p o s s i b l e l o n g e r - t e r m d e v e l o p m e n t of a s e c o n d r u n w a y . any f i n a l d e c i s i o n was
for
for further development
S t a n s t e d , i n c l u d i n g a n e w t e r m i n a l a n d o t h e r f a c i l i t i e s to i n c r e a s e These
planning procedure,
the
proposals before
E a r l y n e x t w e e k the S e c r e t a r y of State
for
s h o u l d m a k e a n a n n o u n c e m e n t a l o n g the l i n e s h e h a d i n d i c a t e d ,
t a k i n g i n t o a c c o u n t the p o i n t s m a d e i n d i s c u s s i o n , reports
link
s h o u l d the p o s s i b i l i t y of a s e c o n d r u n w a y at G a t w i c k ,
a n d a f i f t h t e r m i n a l at H e a t h r o w .
Trade
be
o f the s t u d y g r o u p s
colleagues
as appropriate
at the s a m e t i m e .
a n d s h o u l d p u b l i s h the
He should consult
about the p r e c i s e t e r m s of the
T h e C a b i n e t w e r e a l s o a g r e e d t h a t he s h o u l d o f f e r P a r l i a m e n t a r y debate e a r l y i n the N e w
Year,
and that d e c i s i o n s
the p l a n n i n g p r o c e d u r e s f o r d e a l i n g w i t h t h i s c a s e u n t i l the d e b a t e h a d t a k e n p l a c e .
statement.
the p r o s p e c t o f a s h o u l d be
about
deferred
T h e C a b i n e t thus e n d o r s e d a l l the
r e c o m m e n d a t i o n s c o n t a i n e d i n p a r a g r a p h 16 o f E ( 7 9 ) d e c i s i o n o n the p l a n n i n g p r o c e d u r e s
69, e x c e p t that the
s h o u l d be h e l d o v e r f o r the t i m e
being.
*
The Cabinet 1.
T o o k note,
Minister's
with approval,
of the
Prime
s u m m i n g u p of t h e i r d i s c u s s i o n .
8
CONFIDENTIAL
318
CONFIDENTIAL
2.
I n v i t e d t h e S e c r e t a r y of S t a t e f o r
Trade,
c o n s u l t a t i o n w i t h the S e c r e t a r y of State f o r Environment,
to m a k e a P a r l i a m e n t a r y
the l i n e s i n d i c a t e d i n the P r i m e up,
after
the
statement
Minister's
on
summing
a n d to a r r a n g e f o r the p u b l i c a t i o n o f the
reports
o f the A d v i s o r y C o m m i t t e e o n A i r p o r t s P o l i c y a n d same
the S t u d y G r o u p o n S o u t h - E a s t A i r p o r t s at the time.
6.
The Cabinet considered a m e m o r a n d u m
OMIC
C h a n c e l l o r of the E x c h e q u e r ,
OOK
outlook and m a k i n g r e c o m m e n d a t i o n s
UBLIC
( C ( 7 9 ) 61) b y t h e
r e p o r t i n g h i s p r e s e n t v i e w of the for further
economic
reductions in public
expenditure.
NDITURE The Cabinet s discussion is separately 1
recorded.
ous
ence:
The Cabinet
)21st usions, 4
1.
A g r e e d u p o n the n e c e s s i t y to m a k e the
r e d u c t i o n s i n the t o t a l of p u b l i c
expenditure
r e c o m m e n d e d b y the C h a n c e l l o r o f the 2.
further
Exchequer.
I n v i t e d the C h a n c e l l o r of the E x c h e q u e r a n d the
Chief Secretary,
Treasury,
to d i s c u s s w i t h t h e
Departmental Ministers concerned
programme
r e d u c t i o n s to a c h i e v e the a g r e e d r e d u c t i o n s i n the totals. 3.
I n v i t e d the C h a n c e l l o r of the E x c h e q u e r
circulate a further background 4.
memorandum
and on m o n e t a r y
A g r e e d to r e s u m e
o n the
to
economic
policy.
their discussion before
the
e n d of J a n u a r y .
CONFIDENTIAL
319
CONFIDENTIAL
(I
iND
7.
The Cabinet considered a m e m o r a n d u m
Exchequer
( C ( 7 9 ) 60) p r o p o s i n g
ISIONS
i n setting c a s h l i m i t s for
IHE
c o r r e s p o n d w i t h the C a b i n e t
1
b y t h e C h a n c e l l o r o f the
the p a y a n d p r i c e a d j u s t m e n t s
central Government expenditure 1
s earlier
to be
used
i n 1980-81 to
d e c i s i o n s o n the v o l u m e
of
expenditure.
S
THE CHANCELLOR OF T H E EXCHEQUER
ous
authorities and nationalised industries.
ince:
l i m i t s f o r the r e m a i n d e r
]) 19th
the N a t i o n a l H e a l t h S e r v i c e (NHS)
usions,
t h e p a y o f the C i v i l S e r v i c e ,
5
s a i d that M i n i s t e r s
had
a g r e e d to the c a s h l i m i t s a n d e x t e r n a l f i n a n c i n g l i m i t s f o r
already
later.
T h e next step was
of c e n t r a l G o v e r n m e n t e x p e n d i t u r e ,
He p r o p o s e d a single
pay and p r i c e m o v e m e n t s ,
a n d the d e f e n c e
for which separate combined figuie
year upon year.
budget,
adjusted
but
excluding
p r o v i s i o n w o u l d be
o f 14 p e r
cent for
T h i s figure
higher,
the v o l u m e
was
s e t s o l o w a s to r i s k the b r e a k d o w n r e c o g n i s e d that t h e s e p r o p o s a l s automatic indexation, but this was
i n line
with
If i n t h e
s h o u l d n o t be
of the c a s h l i m i t s s y s t e m .
He
c o u l d be thought to i n v o l v e a m e a s u r e
in a system where expenditure
inevitable,
made
expected
w o u l d h a v e t o be
The figures
of a k i n d w h i c h C a b i n e t r e g a r d e d
taken in volume t e r m s
as
of
undesirable;
decisions
were
a n d h a d to be t r a n s l a t e d i n t o c a s h f i g u r e s .
h o p e d i t w o u l d be p o s s i b l e later
of e x p e n d i t u r e
so a s to s t a y w i t h i n the c a s h l i m i t s .
cash
including
t h e f o r e c a s t p u b l i s h e d u n d e r the p r o v i s i o n s o f the I n d u s t r y A c t . e v e n t the o u t t u r n w a s
local
to set
He
to u s e m u c h s m a l l e r a d j u s t m e n t f a c t o r s
in
years.
In d i s c u s s i o n the f o l l o w i n g a.
There
was
misunderstood,
and i f separately It w a s
published,
another example
for movements
surreptitious,
construed
automatic
problem.
Against this it
movements
It w o u l d b e w r o n g ,
t o s e e k to i m p o s e
way of c a s h l i m i t s .
A
at
was
a further volume
and i n a
sense
reduction by
single p r o v i s i o n for pay and p r i c e
c o m b i n e d c o u l d be p r e s e n t e d a s c o v e r i n g a wide
r a n g e of i n d i v i d u a l c h a n g e s .
T h e r e was,
however,
a v o i d i n g p u b l i c a t i o n of i n d i v i d u a l c a s h l i m i t
figure
be
t h a t M i n i s t e r s h a d a l r e a d y a g r e e d t h e i r a p p r o a c h to the
v o l u m e of p u b l i c e x p e n d i t u r e -
b.
m i g h t be
o f the
would
i n the R e t a i l P r i c e Index w h i c h l a y
the r o o t o f t h e p u b l i c e x p e n d i t u r e argued
a r i s k that a n y b u i l t - i n i n f l a t i o n f a c t o r
as a pay n o r m . adjustment
points were made
It w a s
suggested
o f 13 p e r
cent,
t h a t i t w o u l d be p r e f e r a b l e
A g a i n s t this i t was
was justified because
a n d i n p a r t i c u l a r t o the
of
a
for
argued
local authorities
a l t e r n a t i v e m e t h o d s of f i n a n c i n g not a v a i l a b l e Government,
to adopt
to c o r r e s p o n d w i t h t h e f i g u r e u s e d
Rate Support Grant expenditure. that the d i f f e r e n c e
no way
figures.
had
to c e n t r a l
NHS.
10
CONFIDENTIAL
320
CONFIDENTIAL
c.
S p e c i a l p r o v i s i o n w o u l d be m a d e f o r those g r o u p s f o r
the S t a n d i n g C o m m i s s i o n o n C o m p a r a b i l i t y h a d y e t to T h e e x a c t a m o u n t to be a l l o w e d f o r t h i s p u r p o s e ,
for
s h o u l d be c o n s i d e r e d
d.
suggested would present problems
M i n i s t r y of D e f e n c e , its own Manifesto expenditure.
w h e r e the G o v e r n m e n t was
A particular problem might arise
Armed Forces,
s i n c e the G o v e r n m e n t was
Review Body ( A F P R B ) in April, higher figure.
It w a s
s o u g h t f r o m the d e f e n c e merits,
further.
c o m m i t t e d to
of the A r m e d F o r c e s
s u c h c u t s s h o u l d be d i s c u s s e d
s u m m i n g u p the d i s c u s s i o n ,
e n d o r s e d the a d j u s t m e n t f a c t o r s
paper.
precise
on
s a i d that the Exchequer,
set out i n A n n e x A to h i s
a l l o w a n c e to b e m a d e f o r i n d i v i d u a l g r o u p s
be d i s c u s s e d f u r t h e r w i t h the M i n i s t e r s c o n c e r n e d .
The
g i v e n the G o v e r n m e n t s
special
c o m m i t m e n t t o i m p l e m e n t the
o n e p o s s i b i l i t y m i g h t be a s e p a r a t e l i m i t f o r C i v i l Service pay.
as for
f o r the C h a n c e l l o r o f the E x c h e q u e r
State f o r D e f e n c e
The Cabinet
content,
a n d the S e c r e t a r y
to s e e k to r e a c h a g r e e m e n t o n a n y s p e c i a l
w h i c h m i g h t be n e c e s s a r y i n t h i s
findings
Armed
T h e C a b i n e t w o u l d be
F o r c e s pay, accordingly,
should
Cabinet
r e c o g n i s e d that the p a y of the A r m e d F o r c e s m i g h t p r e s e n t
1.
a
i f s i g n i f i c a n t c u t s w e r e to be
and generally
of the A F P R B :
Pay
not i m p o s e d as a b y - p r o d u c t of c a s h l i m i t s .
PRIME MINISTER,
problems,
defence
o n the p a y of the
and these might well indicate
a r g u e d that, budget,
the
bound not only by
C a b i n e t a p p r o v e d the p r o p o s a l m a d e b y the C h a n c e l l o r of the The
for
but b y i n t e r n a t i o n a l c o m m i t m e n t s o n
i m p l e m e n t i n g the r e c o m m e n d a t i o n s
THE
eg
u n i v e r s i t y t e a c h e r s, The measures
whom
report.
of
treatment
case.
T o o k note,
with approval,
of the
Prime
M i n i s t e r ' s s u m m i n g up of t h e i r d i s c u s s i o n .
2.
I n v i t e d the C h a n c e l l o r o f the E x c h e q u e r
d i s c u s s w i t h the S e c r e t a r y
to
of State f o r E d u c a t i o n a n d
S c i e n c e a n d the 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
Services
the c a s h l i m i t s to be a d o p t e d f o r the p a y o f t h o s e groups for whom there were outstanding
comparability
awards. 3.
I n v i t e d the C h a n c e l l o r of the E x c h e q u e r
to
c o n s i d e r w i t h the S e c r e t a r y of State f o r D e f e n c e , the l i g h t o f t h e p o i n t s m a d e i n d i s c u s s i o n ,
a p p l i c a t i o n of the C a b i n e t ' s d e c i s i o n s i n the a r e a the d e f e n c e
budget,
Government's
in
the of
h a v i n g r e g a r d i n p a r t i c u l a r to t h e
c o m m i t m e n t on A r m e d F o r c e s
pay.
11
CONFIDENTIAL
321
CONFIDENTIAL
4.
S u b j e c t to the o u t c o m e o f t h e s e d i s c u s s i o n s ,
a p p r o v e d the p r o p o s a l s f o r c a s h l i m i t s f o r 1980-81 set out i n A n n e x A to C(79) 60.
Cabinet
Office
13 D e c e m b e r 1979
12 CONFIDENTIAL
SECRET
(
D O C U M E N T IS T H E P R O P E R T Y O F H E R B R I T A N N I C
MAjESTY'S GOVERNMENT
COPY
NO
CABINET
LIMITED CIRCULATION
ANNEX
C C ( 7 9 ) 25th C o n c l u s i o n s , M i n u t e 6 T h u r s d a y 13 D e c e m b e r
1979 a t 10.15
am
T h e C a b i n e t c o n s i d e r e d a m e m o r a n d u m ( C ( 7 9 ) 61) b y t h e C h a n c e l l o r o f OMIC
the E x c h e q u e r ,
0OK
r e c o m m e n d i n g f u r t h e r r e d u c t i o n s o f £1, 0 0 0 m i l l i o n i n p u b l i c
PUBLIC
e x p e n d i t u r e i n 1 9 8 0 - 8 1 a n d o f £ 2 , 0 0 0 m i l l i o n i n e a c h o f the
NDITURE
r e p o r t i n g h i s p r e s e n t v i e w of the e c o n o m i c o u t l o o k a n d
ous
T H E CHANCELLOR OF T H E EXCHEQUER
ence:
accepted,
)21st
p o s s i b i l i t y t h a t f u r t h e r c u t s i n p u b l i c e x p e n d i t u r e m i g h t be
iisions,
beyond those a l r e a d y a g r e e d .
4
subsequent
years. s a i d that C a b i n e t h a d
i n i t s d i s c u s s i o n of the N o v e m b e r e c o n o m i c m e a s u r e s , The present economic strategy,
o n tight c o n t r o l of the g r o w t h of m o n e y s u p p l y , to the G o v e r n m e n t .
T o achieve it without
was
the
necessary, based
the o n l y one
intolerably
high
open
interest
r a t e s o r i n c r e a s e s i n t a x a t i o n - w h i c h w o u l d t h e m s e l v e s be i n c o n s i s t e n t w i t h the s t r a t e g y
- required further reductions in public
S i n c e the B u d g e t i n J u n e t h e r e h a d b e e n a n u m b e r developments.
O i l p r i c e s had i n c r e a s e d faster than expected.
pay settlements, indications.
expenditure.
of a d v e r s e
though r e c e n t l y there had been some m o r e
So h a d
favourable
T h e p r o b l e m o f o u r c o n t r i b u t i o n s to t h e E u r o p e a n b u d g e t
h a d not yet been s a t i s f a c t o r i l y r e s o l v e d .
The Cabinet's
earlier
d e c i s i o n s on r e d u c t i o n s i n p u b l i c expenditure had not been as r e a c h i n g a s he h a d h o p e d o r r e c o m m e n d e d .
Without further
far cuts,
it
w o u l d b e n e c e s s a r y to i n c r e a s e t a x e s i n t h e 1980 B u d g e t i f c o n t i n u e d high,
and perhaps
even higher,
i n t e r e s t r a t e s w e r e to b e
M o s t o u t s i d e c o m m e n t a t o r s h a d r e c o g n i s e d the n e e d f o r reductions in expenditure, 1980-81,
and p r e s s u r e
for
g o i n g b e y o n d the p u b l i s h e d f i g u r e s such cuts was
mounting.
a n d to r e d u c e t h e p l a n s f o r l a t e r y e a r s
£ 2 , 000 m i l l i o n i n e a c h y e a r .
for
He b e l i e v e d
i t w a s n e c e s s a r y to r e d u c e e x p e n d i t u r e i n 1 9 8 0 - 8 1 b y a £1,000 m i l l i o n ,
avoided. further that
further by
W i t h o u t e a r l y d e c i s i o n s of t h i s k i n d ,
the C a b i n e t c o u l d e a s i l y be f o r c e d i n t o a s e r i e s o f i m p r o v i s e d emergency economic measures.
S u c h d e c i s i o n s w o u l d e n t a i l the
p o s t p o n e m e n t of p u b l i c a t i o n of the W h i t e
P a p e r on P u b l i c
Expenditure
f r o m 1981-82 to 1 9 8 3 - 8 4 . 1
SECRET
323
SECRET
In d i s c u s s i o n the f o l l o w i n g a.
m a i n points were made
The published figures
been regarded
f o r p u b l i c e x p e n d i t u r e i n 1980-81 h a d
as disappointing,
which had made
and this was
n e c e s s a r y an increase
one of the
h a d the C a b i n e t a c c e p t e d the C h a n c e l l o r o f the e a r l i e r advice on expenditure
factors
in interest rates.
c u t s t h e 17 p e r
L e n d i n g R a t e a n d t h e 15 p e r c e n t m o r t g a g e
Indeed,
Exchequer's
cent M i n i m u m
rate might have
been
avoided. b.
If a n y t h i n g ,
the C h a n c e l l o r o f the E x c h e q u e r s
were over-optimistic. deteriorating.
O i l p r i c e s w e r e l i k e l y to r i s e
the n e a r f u t u r e . number offset
The expenditure
of p o s s i b l e
forecasts
The prospects for world trade plans made
additional burdens,
were
sharply again i n no p r o v i s i o n for
including measures
the r u n d o w n of the s t e e l i n d u s t r y ,
a n d the n e e d s
a
to
of B r i t i s h
Leyland. c.
Too much reliance
s h o u l d n o t be p l a c e d u p o n f o r e c a s t s
the P u b l i c S e c t o r B o r r o w i n g r e c e s s i o n the m o n e y c o m e down,
response.
the P S B R to r i s e
was
r e c e s s i o n o n l y i f the P S B R was
d. was
in Government
r i s k s to
quite outside this c o u n t r y ' s c o n t r o l ,
of p u b l i c
for
s e c u r i t y benefits
as world o i l p r i c e s
T h i s m e a n t that i t was
and public sector pensions
e n s u r i n g that an adequate
now
such.
- t h o u g h i n the
f r u i t f u l l y be c o n c e n t r a t e d o n
c o n t r i b u t i o n was It w a s
should realise
i n c r e a s e d to c o m p e n s a t e
made
by
remove
that p a y c o u l d not a u t o m a t i c a l l y
f o r m o v e m e n t s i n the
T h e r e w o u l d be m u c h to be
a c h i e v e the n e c e s s a r y
employees
e s s e n t i a l that p u b l i c s e c t o r
Other elements in public expenditure
curtailed.
insulated
desirable
including social
to the c o s t o f t h e i r p e n s i o n r a t h e r t h a n by s e e k i n g to index-linking as
Index
reasons
T h e U n i t e d K i n g d o m e c o n o m y c o u l d n o t be
latter case action might m o r e
e.
expenditure
i n the R e t a i l P r i c e
to l o o k a g a i n at a l l i n d e x - l i n k e d e x p e n d i t u r e s ,
negotiators
further
increased directly or
r i s e i n any case next year,
f r o m these m o v e m e n t s .
savings
The gross
confidence.
i n d i r e c t l y i n p r o p o r t i o n to m o v e m e n t s
increased.
to a
too h i g h i n r e l a t i o n to the
T h e m a i n d y n a m i c f a c t o r i n the g r o w t h
The R P I would
argued
the c o r r e c t r e s p o n s e
the w a y i n w h i c h so m a n y p r o g r a m m e s
(RPI).
borrowing
A g a i n s t this it was
a n d i t c o u l d n o t be a l l o w e d to r i s e
without unacceptable
of
In a
at a l o w l e v e l to b e g i n w i t h .
P S B R i n the U n i t e d K i n g d o m w a s domestic product,
(PSBR).
s u p p l y a n d d e m a n d f o r c r e d i t w o u l d t e n d to
and a t e m p o r a r y i n c r e a s e
m i g h t be the a p p r o p r i a t e that a l l o w i n g
Requirement
by m e a n s
pay be
RPI.
w o u l d a l s o n e e d to be
said for
seeking
of a r e l a t i v e l y
to small
2
SECRET
324
SECRET
number
of l a r g e r e d u c t i o n s ,
concentrating on m a j o r
h o w e v e r painful these m i g h t be. p a r t i c u l a r be n e e d e d services, share, some
It w a s
b u r d e n w o u l d h a v e to f a l l on
spenders.
undesirable
that the i n c i d e n c e of f u r t h e r
a s i t h a d t e n d e d to d o i n t h e p a s t ,
and there was following
It w a s
p r o b a b l y little scope for further
should
reductions
The prime
be c u r r e n t r a t h e r t h a n c a p i t a l
target
spending.
s u g g e s t e d t h a t the C h a n c e l l o r of the
s t r a t e g y was
cuts
on capital expenditure,
the c u t s m a d e i n p r e v i o u s y e a r s .
should therefore g.
social
B u t n o a r e a c o u l d be
o t h e r D e p a r t m e n t s w o u l d have to m e e t t h e i r
a l t h o u g h i n e v i t a b l y the m a j o r of the l a r g e s t
f. fall,
i n social security and i n other
and on public sector rents.
wholly exempt:
decisions,
Difficult decisions would i n
Exchequer's
s e e n b y m a n y a s r e l y i n g too m u c h o n i n f l u e n c i n g the
p r i c e of m o n e y a n d not s u f f i c i e n t l y o n c o n t r o l s o f the q u a n t i t i e s of credit.
It m i g h t w e l l b e t h a t a n e x p l o s i o n o f f i n a n c i a l t e c h n o l o g y
had made
quantity controls ineffective,
but i t w o u l d
help
M i n i s t e r s i n the p u b l i c e x p o s i t i o n of the G o v e r n m e n t s t h e y c o u l d be g i v e n a f u l l e r a c c o u n t t h a n was
case
at p r e s e n t
if
available
of the C h a n c e l l o r of the E x c h e q u e r ' s m o n e t a r y s t r a t e g y a n d of the i n s t r u m e n t s b y w h i c h i t w a s
being pursued,
to e n a b l e
t h e m to
a n s w e r p u b l i c c r i t i c i s m of t h i s k i n d . THE
PRIME MINISTER,
s u m m i n g u p the d i s c u s s i o n ,
s a i d that the
C a b i n e t a g r e e d t o a i m at r e d u c t i o n s o f p u b l i c e x p e n d i t u r e
of
£1, 000 m i l l i o n i n 1980-81 a n d o f £ 2 , 000 m i l l i o n i n e a c h of the subsequent
years.
It w o u l d b e l e s s d i f f i c u l t t o m a k e t h e s e
now than to take f u r t h e r offsetting a c t i o n l a t e r . themselves
r e v i e w their own p r o g r a m m e s ,
c o u l d be m a d e . Secretary,
Ministers
to see w h e r e
should
reductions
T h e C h a n c e l l o r of the E x c h e q u e r a n d the C h i e f
Treasury,
should discuss proposals
Departmental Ministers.
If n e c e s s a r y ,
for reductions with
a s m a l l g r o u p of M i n i s t e r s
c o u l d be e s t a b l i s h e d t o c o n s i d e r a n y p o i n t s w h i c h c o u l d n o t be in bilateral discussion.
The results
b e f o r e the e n d of J a n u a r y . E x p e n d i t u r e White P a p e r , be p o s t p o n e d ,
three
decisions
s h o u l d be r e p o r t e d to
Meanwhile,
resolved
Cabinet
p u b l i c a t i o n o f the s e c o n d
c o v e r i n g t h e y e a r s 1 9 8 1 - 8 2 to 1 9 8 3 - 8 4 ,
a n d a n a n n o u n c e m e n t a b o u t t h i s s h o u l d be
i m m e d i a t e l y before or just after
Christmas.
Public should
made
T h e C h a n c e l l o r of the
E x c h e q u e r w o u l d c i r c u l a t e a f u r t h e r p a p e r to the C a b i n e t o n the e c o n o m i c b a c k g r o u n d to the p u b l i c e x p e n d i t u r e p r o b l e m , t e c h n i q u e s of m o n e t a r y c o n t r o l a v a i l a b l e g r o w t h of the m o n e y
supply.
3 SECRET
to h i m f o r
a n d o n the
c o n t r o l l i n g the
SECRET
The Cabinet 1.
A g r e e d u p o n t h e n e c e s s i t y to r e d u c e
public
e x p e n d i t u r e b y £1, 000 m i l l i o n i n 1980-81 a n d b y £ 2 , 000 m i l l i o n i n e a c h of the s u b s e q u e n t 2.
years.
I n v i t e d the C h a n c e l l o r of the E x c h e q u e r a n d the
Chief Secretary,
Treasury,
to d i s c u s s w i t h t h e
Departmental Ministers concerned
programme
r e d u c t i o n s to a c h i e v e t h e a g r e e d r e d u c t i o n s i n t h e totals. 3.
I n v i t e d 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
to
c i r c u l a t e a f u r t h e r m e m o r a n d u m o n the e c o n o m i c b a c k g r o u n d and on m o n e t a r y p o l i c y . 4.
A g r e e d to r e s u m e
their discussion before
the
e n d of J a n u a r y .
Cabinet
Office
14 D e c e m b e r
1979
SECRET
326
