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THIS OOCHMENT I S THE PROPERTY OF HER BRITANNIC MAJESTY • S GOVERNMENT

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COPY NO

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CABINET

CONCLUSIONS of a Meeting of the Cabinet

^

h e l d a t 10 Downing S t r e e t on

THURSDAY 7 JULY 1983

a t 10.00 am

> V % e ^ ^ • L

Rt Hon Margaret Thatcher MP prime M i n i s t e r



• ^ ^VJL The p u W d ^ V ^ ^ ^ ^ r i l President of the C o u n c i l

The Rt Hon Lord Hailsham

Lord C h a n c e l l o r

^ Hon S i r Geoffrey Howe QC MP ^ J m a r y of S t a t e f o r F o r e i gn and ^onwealth Affairs

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The D Rt t a rHon y fNicholas S t a t e f oEdwards r Wales MP

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The T>. Rt Hon Michael H e s e l t i n e MP '-tetary of S t a t e f o r Defence

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FOLLOWING WERE ALSO PRESENT

•Spfce S i r Michael Havers QC MP ° Wy g e n e r a l (Item 4)

The Rt Hon John Wakehara MP

P a r l i a m e n t a r y S e c r e t a r y , Treasury

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SECRETARIAT

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• S i r Robert Armstrong

Mr P L Gregson (Items 5 and 6)

Mr A D S Goodall (Items 2 and 3)

Mr D F Williamson (Items 2 and 3) .

Mr D H J H i l a r y (Items 1 and 4)

Mr M S Buckley (Items 5 and 6)

Mr R Watson (Items 1 and 4)

•

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Subject

Page

PARLIAMENTARY S j J ^

1

Debate on C a p i t a l Punishment

1

FOREIGN AFFAIRS

Middle E a s t

1

Conference on S e c u r i t y and Co-operation G i b r a l t a r

i n Europe

1



2

i C t

O k

2

Hong Kong

East/West R e l a t i o n s

M

COMMUNITY AFFAIRS

2 .



v \

2

H e r r i n g F i s h e r y

Steel:

United S t a t e s Measures

2

LEGISLATIVE PROGRAMME 1983-84

3

5.

; ECONOMIC AFFAIRS TOP

6

SALARIES REVIEW BODY REPORTS

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i• The Cabinet were informed of the b u s i n e s s Commons d u r i n g the f o l l o w i n g week.

to be taken

i n the House of

•

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" -tal v L / / SECRETARY s a i d t h a t i n h i s speech i n the debate on the motion f o r

^ishm r e i n t r o d u c t i o n of the death p e n a l t y f o r murder he would give the

7 \ 0 ^ a p £ u a l background, make i t c l e a r t h a t the Government as such d i d not have

^svi * i s P a l p o s i t i o n , which was t h a t c a p i t a ^ter , P J ^ ^ W e n t should be r e i n t r o d u c e d f o r t e r r o r i s t murders o n l y . The

i^83) ? n ' ^%^>^BY °f S t a t e f o r Northern I r e l a n d would make c l e a r h i s own views

"°'^usi °e£«rre/£>ie debate, probably i n a l e t t e r to h i s c o n s t i t u e n t s . N e i t h e r

^tiut ] _ ° ' ttinii^S^ffpuld d i s c u s s h i s p e r s o n a l views w i t h the media b e f o r e the debate05%f^sthe House approved the r e i n t r o d u c t i o n of c a p i t a l punishment, the G o v « 4 ^ a e n t would d r a f t a B i l l f o r a P r i v a t e Member and would make time availableAfor i t . There would be a f r e e vote on a l l s t a g e s o f the B i l l . ateQ

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THE LORD PRESIDENT OF THE COUNCIL s a i d t h a t the House of Lords would not

debate the m a t t e ^ v f the motion i n the Commons was d e f e a t e d by a

r e a s o n a b l e majq-Vit^) I f the v o t e s were v e r y c l o s e , t h e r e would have to be

a debate i n theNDwrtSNbefore the Summer Adjournment.

The

Cabinet ^ - ^ 7

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THE FOREIGN AND COMMONWJM^jk SECRETARY s a i d t h a t r e c e n t developments

had not improved the p r o s p e c * ^ ^ ^ a P a l e s t i n i a n s e t t l e m e n t . The e x p u l ­ s i o n of Mr A r a f a t , the l e a d e r ^ ^ t h e P a l e s t i n e L i b e r a t i o n O r g a n i s a t i o n ,

from Damascus had strengthened t h e / S W i a n s ' hold over the o r g a n i s a t i o n .

P a r t i a l I s r a e l i w i t h d r a w a l from t h e / ^ b a n o n now looked i n e v i t a b l e ; and

i s i t to Middle E a s t c a p i t a l s % y £ £ e U n i t e d S t a t e s S e c r e t a r y of S t a t e ,

^ S n u l t z , which had ended i n D a m a $ 6 £ s < i 2 p p eared to have r e v e a l e d no

« i b i l i t y i n the S y r i a n p o s i t i o n . ) v V >

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^ COMMONWEALTH SECRETARY s a i d th^/tfSeXMadrid Conference was

drawing to a c o n c l u s i o n on the b a s i s of a comprom^eAproposed by the

Spanish Prime M i n i s t e r , Senor G o n z a l e s , on 17 J u n e ^ r % l r t r e g a r d to human

f i g h t s i t would mark a modest advance on the H e l s i n k y / F ^ p a l A c t . But i t

would be important to ensure t h a t S o v i e t attempts t o W ^ d T ^ t h e c o n c l u d i n g

document were r e s i s t e d and t h a t the f i r m commitment to a f f ^ ^ p e r t s '

meeting on human c o n t a c t s was r e t a i n e d . . vv^rl

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[ C O N F I D E N T I A L !



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THE FOREIGN AND COMMONWEALTH SECRETARY s a i d chat che Par L i amen t a r y Under

S e c r e c a r y of S c a t e f o r Defence Procuremenc, Mr I a n S t e w a r t , had v i s i c e d

Xsf i^/^\ G i b r a l C a r foLLowing Che p r e v i o u s week's d i s c u s s i o n s i n London wich Che

C(83)2 V C h i e f M i n i s t e r of G i b r a i c a r , S i r Joshua Hassan-. Mr SCewarc had e x p l a i n e d

* lu i ^ CounciL the terms of Che generous o f f e r which Che

Government

Hin had made i n r e s p e c t of Che G i b r a i c a r Dockyard. The G i b r a L c a r

\ ^ > / j 3 o u n c i l were noc persuaded, buc che p o s i t i o n was open f o r f u r t h e r d i s c u s ­ <^x-^%n. The matcer wouid r e q u i r e f u r t h e r c o n s i d e r a t i o n on the b a s i s of

XN^^kewarc ' s detailed report.

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THE F O R E I G N AND COMMONWEALTH SECRETARY s a i d Chat, as had been announced,

^ phase of C a i k s w i c h Che Chinese Government about che fuCure of

Hong KooaA/j&Ld s C a r t i n Peking on 11 J u l y . The Prime M i n i s c e r and he had

d i s c u s s e d ^ h e h a n d i i n g of Che c a i k s wich members of Che Hong Kong

E x e c u t i v e N & o u n c i i i n London che p r e v i o u s week and had reached agreemenc

w i t h chem on how to proceed. I t was c i e a r thaC Che CaLks wich Che C h i n e s e

wouid be d i f f i c u i c . I t wouLd be e s s e n t i a i Co mainCain c o n f i d e n t i a i i c y .

C

ions

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FOREIGN AND CCk^MGjmaALTH SECRETARY s a i d Chac Che CaLks which Che

F e d e r a i German ChancgWarp^ Dr K o h i , had had wich S o v i e c Leaders i n Moscow

on 4 and 5 JuLy had shayj^fchat the heaLch of Mr Andropov, che S o v i e c

P r e s i d e n t , was g i v i n g ( t ^ c e e ^ o t c o n c e r n . C h a n c e i L o r KohL had g i v e n Che

R u s s i a n s a f i r m scatement -erf/>che Western p o s i t i o n on i n t e r m e d i a c e range

nucLear f o r c e s . There haq/b^era no g i v e on Che S o v i e t s i d e and Che

R u s s i a n s had emphasised Ch^b^wieX wouLd respond Co North A t i a n t i c - T r e a t y

O r g a n i s a t i o n depLoyments w i c f r ^ a d o ^ t i o n a i measures to s t r e n g t h e n t h e i r own

s e c u r i t y . He wouid be r e c e i v i ^ g / J a / f i r s t - h a n d account o f che C a i k s from

the F e d e r a i German F o r e i g n M i n f * ^ 7 ^ H e r r Genscher, i n B r u s s e i s chac

evening. J y ^ >

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* THE MINISTER OF AGRICULTURE, FISHERIES AND EQOD reporCed ChaC aC che

meeting of the C o u n c i l of M i n i s t e r s on 30 June/rfine\ member s t a t e s had been

Prepared to a c c e p t i n t e r i m measures on f i s h i n g k ^ & e - s x i n g i n Che North Sea. I

The Danes, however, d i d not agree and invoked Che/^LuMambourg compromise.

As a r e s u i c no d e c i s i o n was Caken. A soLuCion sac433?£ftory f o r Che

United Kingdom mighc be reached aC Che meeting of cl^eyvp^nciL of M i n i s c e r s

( F i s h e r i e s ) on LL-L2 JuLy buC Chis depended on Che D a Q ^ K ^ o s i t i o n .

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STATE FOR TRADE AND INDUSTRY reporCed c h a b ^ ^ ^ V n i t e d

S t a t e s had now imposed s p e c i a i t a r i f f s on a range of s p e c i a L y ^ ^ & l s . The

U n i t e d Kingdom export t r a d e a f f e c t e d was not v e r y Large but rhjd&s/af s i g n i f i c a n t importance f o r some companies. The Community wouLa AsrJ^have

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Co respond. There would be an urgent meeting of o f f i c i a l s of the member

s t a t e s the f o l l o w i n g day. The F o r e i g n and Commonwealth S e c r e t a r y would

a l s o be r a i s i n g the i s s u e i n B r u s s e l s the f o l l o w i n g day when the s p e c i a l

C o u n c i l of M i n i s t e r s would be meeting. I t would a l s o be d e s i r a b l e f o r some d i r e c t c o n t a c t to be made w i t h Mr 3rock, the United S t a t e s S p e c i a l Trade R e p r e s e n t a t i v e .

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Took note.

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' ^^/ c o n s i d e r e d a memorandum (C(83) 19) and a note (C(83) 20) by theVjip^5 P r e s i d e n t of the C o u n c i l s e t t i n g out the recommendations o f , the Speeches and F u t u r e L e g i s l a t i o n Committee (QL) on the l e g i s l a t i v e programme f o r 1983-84. THE LORD PRESIDENT OF THE COUNCIL s a i d t h a t to a l a r g e e x t e n t the Programme was x ^ r ^ t m i n e d by the need to e n a c t e s s e n t i a l B i l l s , B i l l s which

^ d f a l l e n a t l i n e ^ D i s s o l u t i o n and B i l l s which had been promised i n

The Queen's S p e e ^ T ^ V h e s e alone provided a programme which was a l r e a d y

too heavy f o r c o m ^ r z ^ To them had to be added the L o c a l Government

( G r e a t e r London and^Sfficrapolitan C o u n t i e s ) B i l l and the P u b l i c S e r v i c e s

T r a n s f e r of Functioni/^Bx£k. QL a l s o recommended four S c o t t i s h B i l l s and

nine B i l l s whose i n t r d # u ^ £ Y o n would be c o n d i t i o n a l on the Opposition's

agreement to t h e i r beins^aicesn under the Second Reading Committee

procedure i n the House ot^oramons . The B i l l s recommended by QL were s e t

°ut i n the Annex to C(83) NtSxa^H, t h e i r proposed c o n t e n t s were summarised

i n C(83) 20. No o t h e r B i l l s ^ ^ ^ d be added i f t h e r e was to be any hope of

completing the programme withou^ytfhe need f o r a s p i l l o v e r i n the autumn of

1984. I t was important to avm^/t^e i f the B i l l to a b o l i s h the G r e a t e r

London C o u n c i l and the MetropolMfar>/£hunty C o u n c i l s was to be g i v e n an

e a r l y s t a r t i n the next S e s s i o n . *^/^/

Queers

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I n d i s c u s s i o n the f o l l o w i n g main p o ^ T ^ ^ e j r e

made ­

a. A Government-sponsored B i l l c c K c o n t r o l o f f e n s i v e video tapes

("video n a s t i e s " ) was l i k e l y to be taken up by Mr Graham B r i g h t MP,

who had drawn f i r s t p l a c e i n ' t h e b a l l o t f o r P r i v a t e Members' B i l l s .

b. The p o s s i b i l i t y of expanding the Co-/Vpe^tive Development Agency

B i l l to i n c l u d e changes i n the l e g i s l a t i o S f a c ^ K & g i o n a l Development

Grants (RDGs) should be c o n s i d e r e d when thefp^oLicy ort RDGs had been

a g r e e d . The changes could save up to £150 mtH^flvt a year and would

r e l a t e payment of grant to the number of j o b s c y $ i ^ d .

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c. Although the Dock Work R e g u l a t i o n B i l l had n o t ^ b ^ n i n c l u d e d i n

QL's recommendations, i t might be n e c e s s a r y to legKM^^aXon the docks

i n t h i s S e s s i o n , f o r example to d e a l w i t h the f inanc^JVap-s i t ion of

the Port of London A u t h o r i t y . T h i s l e g i s l a t i o n might p^v^Y^o be more

e x t e n s i v e than the Dock Work R e g u l a t i o n B i l l as p r e v i o u w y \ e f ) v i s a g e d .

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The

P o l l u t i o n ( P r o t e c t i o n of Food and Marine Environment) t 3 i 1 1 1

i - the recommended programme. I t s purpose was to provide c o n t r o l powers which might be n e c e s s a r y i n the event of an a c c i d e n t such as t h a t at Three Mile I s l a n d i n the U n i t e d S t a t e s . The i s s u e might be r a i s e d at the S i z a w e l l i n q u i r y . I t was suggested t h a t , i n e event of such an a c c i d e n t , i t might w e l l be p o s s i b l e to invoke the powers of the Emergency Powers Act; but there might be a need f o r new l e g i s l a t i o n i n due c o u r s e . w a s

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There was a danger t h a t the A g r i c u l t u r a l Holdings (Amendment)

which was due to be i n t r o d u c e d i n the House of L o r d s , would be

{ ^ s u b s t a n t i a l l y amended t h e r e , but the o v e r a l l management of the

^^Vj-amme made i t n e c e s s a r y f o r t h i s B i l l to s t a r t i n the House of I


•

1^/? f. V \ I t was s t i l l hoped to persuade a P r i v a t e Member to take up the

Crowir Land ( P l a n n i n g P e r m i s s i o n ) B i l l . Otherwise the B i l l might be

c o n s i d e r e d f o r the Second Reading Committee procedure i n the House

of Commons; l i n t i t was v e r y u n c e r t a i n whether the O p p o s i t i o n would

be prepare^pToAagree to t h a t .

g. The l e g i s l a t i o n r e q u i r e d to permit the t r a n s f e r of the N a t i o n a l

Bus Company c q ^ ^ « > p r i v a t e s e c t o r and to enable the c a p i t a l r e c o n ­

s t r u c t i o n of Br<£cLs>r>Airways to take p l a c e p r i o r to p r i v a t i s a t i o n had

not been r e c o m m e i ^ « ^ 3 W QL f o r i n c l u s i o n i n the programme. The s a l e

of the N a t i o n a l BiisXjp^kany would produce up to £150 m i l l i o n i n the

y e a r of s a l e , but t h e ^ ^ a s not room f o r t h i s l e g i s l a t i o n i n the

programme f o r the cuir«mt)JSession.

h. There might be neeei^rxy^a B i l l to prevent p e r s o n a t i o n i n

e l e c t i o n s i n Northern I r e b t f j A I I t had been r e p o r t e d t h a t up to

Changes 25 per cent of the S i n n Feirr^^CT? had come from p e r s o n a t i o n . i n e l e c t i o n procedures i n the Ufl>^£d Kingdom as a whole were being

c o n s i d e r e d but would not be r s ^ d y / £ o r i n t r o d u c t i o n i n t h i s S e s s i o n .

i. The Tourism (Overseas P r o m o x i w j ^ S c o t l a n d ) B i l l had not been

recommended by QL. I t would be a vahpfft measure a r i s i n g from a

commitment i n the S c o t t i s h ManifestNX and would be g e n e r a l l y welcomed.

The p o s s i b i l i t y of adding t h i s B i l l to the programme might be l e f t

open, although i t ' m i g h t be decided to l e g i s l a t e on a Great B r i t a i n

basis i n a future Session.

The

Cabinet -

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1. Agreed t h a t the p o s s i b i l i t y of combining^-tp^/

C o - o p e r a t i v e Development Agency B i l l w i t h proviai/M^-.

on R e g i o n a l Development Grants should be c o n s i d e r e ^ f N ^

f u r t h e r when f u t u r e p o l i c y on the g r a n t s had been ///\

,

2. Took note of the p o s s i b l e need f o r a Docks B i l l , a B i l l on e l e c t i o n s i n Northern I r e l a n d and a Tourism

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3. Agreed t h a t , i f no P r i v a t e Member cook up the

Crown Land ( P l a n n i n g P e r m i s s i o n ) B i l l , c o n s i d e r a t i o n

should be given to the p o s s i b i l i t y of u s i n g the

Second Reading Committee l i s t f o r i t .

Coly\

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I n v i t e d the 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 to c o n s i d e r whether, i n the event of an a c c i d e n t a t a n u c l e a r power s t a t i o n , the Emergency lowers Act could be used to a c h i e v e the o b j e c t i v e s of the P o l l u t i o n ( P r o t e c t i o n of Food and Marine Environment)

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5^^" S u b j e c t to 1-3 above, approved the recommendations

^£"?£fte Queen's Speeches and F u t u r e L e g i s l a t i o n Committee

^\Jo^> in C(83) 19.

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^ Cabinet considered a memorandum by the C h a n c e l l o r of the Exchequer (C(83) 21) on p u b l i c expenditure i n 1983-84.

THE CHANCELLOR OF THE EXCHEQUER s a i d that public expenditure

was running w e l l ahead of the f i g u r e s p u b l i s h e d i n the White Paper

^ R ^ ^ t h e Government's Expenditure Plans (Cmnd 8789). Demand-related

programmes - p a r t i c u l a r l y a g r i c u l t u r a l support and s o c i a l s e c u r i t y

^ K w i t s - were growing r a p i d l y . L o c a l a u t h o r i t y c u r r e n t

expenditure and borrowing by the n a t i o n a l i s e d i n d u s t r i e s were

l i k e l y to be h i g h e r than envisaged. Expenditure on c a s h - l i m i t e d

programmes was running ahead of p r o f i l e ; although the l i m i t s were

not expected to be exceeded, i t was now estimated that s h o r t f a l l

was l i k e l ] ^ % D be only about £600 m i l l i o n i n s t e a d of the £1,200 m i l l i o n

assumed ^ J r a a d 8789. These developments were r e f l e c t e d i n high

r a t e s of p u b l i c borrowing. The c e n t r a l Government borrowing

r e q u i r e m e n l f c ^ ^ ^ h e f i r s t q u a r t e r of 1983-84 would be p u b l i s h e d on

11 J u l y . I t T j ^ ^ ^ i k e l y to be about £5,400 m i l l i o n , n e a r l y one h a l f

of the amount^^yjg^ged a t the time of the Budget f o r the whole y e a r .

The p u b l i c s e c t ^ ^ j r r o w i n g requirement was running i n a s i m i l a r

way. The m a r k e t s J ^ j ^ l r e a c t a d v e r s e l y to the p u b l i c a t i o n of these

s t a t i s t i c s , and ^^^fc r a t e s would r i s e , u n l e s s the Government

took e a r l y c o r r e c t i ^ p a^^.on. An i n c r e a s e i n i n t e r e s t r a t e s would

have s e r i o u s i m p l i c a t i ^ l ^ ^ f o r economic recovery and the Government's

s t r a t e g y . A c t i o n was t h e r e f o r e r e q u i r e d to b r i n g p u b l i c expenditure

back w i t h i n the planned t o t a l . The M i n i s t e r s r e s p o n s i b l e f o r demand­ determined programmes should c o n s i d e r what a c t i o n they c o u l d take

to c o r r e c t the i n c r e a s e s now emerging. I t would be n e c e s s a r y to

supplement t h i s by a c t i o n on ^ ^ ^ l i m i t s . He proposed that the

non-pay element of a l l centramA^Mrnment cash l i m i t s should be

reduced by 2 per cent and the elements f o r pay and g e n e r a l

a d m i n i s t r a t i v e expenditure by 1 W ^ ^ t . A c t i o n on the pay elements

was n e c e s s a r y i n order to ensure t^^c^wie whole burden of the

n e c e s s a r y adjustments d i d not f a l l ^ f c f l j k p r o v i s ion of s e r v i c e s and

p r i v a t e s e c t o r s u p p l i e r s ; but i t was n e c e s s a r y to take account of

the p r e s s u r e s on the pay s i d e from the Government's previous d e c i s i o n

to f i n a n c e the n o n - i n d u s t r i a l C i v i l S e r ^ R ^ % a y i n c r e a s e from the

o r i g i n a l p r o v i s i o n . The e x t e r n a l f i n a n c i n g A m i t s ( E F L s ) of the

n a t i o n a l i s e d i n d u s t r i e s should be reduced j ^ ^ f f e r e g a t e by 2 per cent;

the r e d u c t i o n should be a l l o c a t e d i n p r o p o r t i o n to turnover. The

Rate Support Grant should be excluded, as should l o c a l a u t h o r i t y

c a p i t a l expenditure. To h e l p Departments manage t h e i r programmes

more e f f i c i e n t l y , and to reduce the customary surge i n expenditure

at the end of the f i n a n c i a l y e a r , which had probably J f c a t r i b u t e d to

the p r e s e n t problem, he proposed that a scheme of d B A ^ a r f l e x i b i l i t y ,

broadly on the l i n e s d e s c r i b e d i n the note by of f i c ^ f f i M L r c u l a t e d to

the Cabinet by the previous C h i e f S e c r e t a r y , T r e a s u r y ^ J ^ ^ T cover

of C(82) 29, should be i n t r o d u c e d . I t should apply o n l y ^ j ^ ^ k r r y

forward of underspending, and to c e n t r a l Government c a p i ^ j ^ ^ j d

e q u i v a l e n t programmes.

L r J

As an a l t e r n a t i v e to these proposals he had considered usin^; the

r e g u l a t o r " to i n c r e a s e i n d i r e c t t a x a t i o n . I n h i s view, t h i s ^ p l A b e

mistaken. The markets would be concerned i f overruns i n p u b l i c

expenditure were accepted. Higher t a x a t i o n would i m p e r i l economic

recovery.

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The proposed reductions i n cash l i m i t s and EFLs should save about

£500 m i l l i o n i n the c u r r e n t year. The scheme of end-year f l e x i b i l i t y

should save a f u r t h e r £100 m i l l i o n , though i t would tend to i n c r e a s e

M expenditure i n l a t e r y e a r s . He a l s o intended to i n c r e a s e the

^^^^L programme of d i s p o s a l s of p u b l i c s e c t o r a s s e t s with a view to

r a i s i n g a f u r t h e r £500 m i l l i o n . T h i s would produce a package of

| ^ o v e r £1 b i l l i o n , apart from any savings t h a t could be found i n

^^^memand-determined programmes. I n h i s judgment, the markets would

• ^Jteard t h i s as adequate. I t would be presented, not as a r e d u c t i o n

^ K i ' p u b l i c expenditure, but as evidence of the Government's

d e t e r m i n a t i o n to hold to the expenditure f i g u r e s which they had

previously published. He proposed to announce the Government's d e c i s i o n s

i n general terms t h a t afternoon; i t would be important to f o l l o w

them up as soon as p o s s i b l e w i t h a more d e t a i l e d statement of the

c h a n g e s ^ ^ ^ . n d i v i d u a l cash l i m i t s .

The present problem arose i n part because of u n r e l i a b i l i t y i n

f o r e c a s t s ^ ^ ^ ^ e s of spending, e s p e c i a l l y towards the end of the

f i n a n c i a l y e J ^ r ^ ^ D e t a i l e d proposals would be put forward a t o f f i c i a l

l e v e l f o r imp^fcyjifce the flow of f i n a n c i a l i n f o r m a t i o n from departments

to the T r e a s u r ^ ^ V ^ k hoped h i s c o l l e a g u e s would give those proposals

t h e i r support, f

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I n d i s c u s s i o n , s o m e ^ t i n j ^ e r s queried the case f o r a c t i o n on the l i n e s

proposed i n C(83) 2 1 ^ ^ T T the l o s s of c o n t r o l of p u b l i c expenditure

was s e r i o u s , the savings proposed might be inadequate to r e s t o r e

c o n f i d e n c e . I f i t was not s e r i o u s , the f i n a n c i a l gains from the

proposals might be outweighed by the p o l i t i c a l p e n a l t i e s . Against that

there was a wide measure of agreement that i t was v i t a l to do

e v e r y t h i n g p o s s i b l e to prevengj^Mgher i n t e r e s t r a t e s , which would

j e o p a r d i s e economic recovery. The Government's c r e d i b i l i t y depended

on i t s m a i n t a i n i n g f i r m c o n t r o l o f p u b l i c expenditura. Although the

C h a n c e l l o r of the Exchequer's pr^ra0|Ls would c r e a t e d i f f i c u l t i e s

i n some a r e a s , the a l t e r n a t i v e s * e a r l y worse: i n p a r t i c u l a r ,

i t would be wrong to i n c r e a s e t a x a W k n ^ ^

I n f u r t h e r d i s c u s s i o n , the f o l l o w i n g

p ^ ^ M ^ w e r e made:

a. I t was r e g r e t t a b l e that the CaWne^jhad been asked

to take d e c i s i o n s a t such short n o t i c ^ ^ r h e Cabinet had

been put i n a very d i f f i c u l t p o s i t i o n by the r e p o r t s i n

the newspapers that morning, which would have created

e x p e c t a t i o n s t h a t i t would be dangerous to d i s a p p o i n t .

Whatever the source, the unauthorised d i s c l o s u r e ^ o n which

those r e p o r t s were based were much to be d e p l c j ^ B m None­

t h e l e s s , even i f those r e p o r t s had not appeared,

imminent p u b l i c a t i o n of unfavourable borrowing ^ d t v ^ ? would

have made some a c t i o n n e c e s s a r y . ^ 2 ^ ^

A •

b. Although the need f o r speedy a c t i o n was undenia%kg^^Lt

was u n s a t i s f a c t o r y that C(83) 21 d i d not i n c l u d e important items of i n f o r m a t i o n which were r e l e v a n t to the C a b i n e ^ ^ ^ W d i s c u s s i o n . Much of t h i s i n f o r m a t i o n had presumably bee^^m^k

a v a i l a b l e to the Treasury f o r some time. M i n i s t e r s ^^JW c o l l e c t i v e l y should be kept informed of the economic s i t u a t ^ R T

as i t developed.

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c. I t would be important i n p u b l i c p r e s e n t a t i o n

of the Government's d e c i s i o n s to avoid any impression

t h a t there was a c r i s i s . The a p p r o p r i a t e stance was

that the Government was t a k i n g c o r r e c t i v e a c t i o n i n

good time i n order to make savings to prevent a

threatened overrun i n p u b l i c expenditure and so adhere

I t s p r e v i o u s l y published f i g u r e s .

^^^[L ^0^^ ^ # ^^flfl^

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d. I t would be important f o r the management of

expenditure programmes to have some f l e x i b i l i t y to

a l l o c a t e the t o t a l savings r e q u i r e d between cash l i m i t s

w i t h i n programmes. There might a l s o be a case f o r

a l l o w i n g some l i m i t e d f l e x i b i l i t y as between c a s h - l i m i t e d

and n o n - c a s h - l i m i t e d expenditure."

e . ^ J ^ ^ ^ o u l d be important to avoid any suggestion that

c e r t a i n programmes were being s i n g l e d out f o r l a r g e r

r e d u c % y r o « ^ h a n o t h e r s : the r e d u c t i o n s should apply on

a s i m i Y i ^ r t r a i s , as proposed i n C(83) 21, to a l l c a s h ­ l i m i t ed^^oa^kmmes .

THE PRIME M I N I S T ^ B i k m m i n g up the d i s c u s s i o n , s a i d that the

opinion i n the Cabinet was i n overwhelming agreement w i t h the

C h a n c e l l o r of the B ^ c h c J ^ e r ' s p r o p o s a l s . I t was a matter f o r the

g r a v e s t concern t h a t ^ K t m s i v e i n d i c a t i o n s of those proposals had

appeared i n the p r e s s : i t was v i t a l to m a i n t a i n the c o n f i d e n t i a l i t y

of the C a b i n e t ' s d i s c u s s i o n s and to observe i n s t r u c t i o n s regarding

the h a n d l i n g of Cabinet documents. The C h a n c e l l o r of the Exchequer

should announce the Government " ^ . d e c i s i o n s , i n g e n e r a l terms, by a

P a r l i a m e n t a r y statement that | A f n o o n . T h i s should i n c l u d e an

i n d i c a t i o n , a l s o i n g e n e r a l terms, of the Government's i n t e n t i o n to

i n c r e a s e the d i s p o s a l programme by some £500 m i l l i o n : the o v e r a l l

package would then be of a s u f f i ^ a g | ^ i z e to r e a s s u r e the markets.

I t should not be presented as a p a K a g B of c u t s i n expenditure but

as a package of s a v i n g s to c o n t a i n ^ f c o ^ ^ p e c t i v e overrun of p u b l i c

expenditure i n order to remain w i t h i ! ^ m * p r e v i o u s l y published

expenditure t o t a l s . M i n i s t e r s r e s p o n s ^ K ^ l t p r spending programmes

should now agree d e t a i l e d r e d u c t i o n s w i ^ ^ % U % k C h i e f S e c r e t a r y ,

T r e a s u r y : the r e s u l t i n g f i g u r e s should W j J J L i s h e d as soon as

possible. So long as the g e n e r a l p a t t e r n d^^reductions w i t h i n each

programme conformed to the approach d e s c r i b e d i n C(83) 21, some

measure of f l e x i b i l i t y between i n d i v i d u a l cash l i m i t s and between

pay and non-pay elements would be a c c e p t a b l e . The p o s s i b i l i t y of

r e d u c t i o n s i n n o n - c a s h - l i m i t e d expenditure to r e p l a c e ^ r e d u c t i o n s i n

cash l i m i t s was not wholly excluded; but there w e i j | V v i o u s

d i f f i c u l t i e s i n s u b s t i t u t i o n s of t h i s s o r t ; and th^Jpy^for each

would need to be f u l l y made out. I n no circumstances any

proposed r e d u c t i o n r e q u i r e new primary l e g i s l a t i o n . ^^^1^

shoved

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The Cabinet - 1.

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Approved the proposals i n C(83) 21, s u b j e c t to t h e ^ & f l k s

made by the Prime M i n i s t e r i n her summing

up.

2. I n v i t e d the C h a n c e l l o r of the Exchequer to make a

statement i n Parliament that afternoon of the Government's

d e c i s i o n s on the l i n e s i n d i c a t e d by the Prime M i n i s t e r .

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JJV^^- I2S 6. THE LORD PRIVY SEAL s a i d t h a t , f o l l o w i n g the C a b i n e t ' s d i s c u s s i o n

' '^Cftf0^\ ^ P i° k , he had conducted soundings of a l l p a r t i e s about

v^A\ Report No 20 of the Top S a l a r i e s Review Body (TSRB) on P a r l i a m e n t a r y

?ra i sO * ii° 5 che C h i e f Whip had a l s o c a r r i e d out e x t e n s i v e

&8f soundings among the Government's backbench s u p p o r t e r s . I t was

fc(83) d e s i r a b l e to d e v i s e a response to the Report which would be c o n s i s t e n t COHM . ^ - - ^ x ^ w i t h the Prime M i n i s t e r ' s statement to the House of Commons on ^ucg 'YO^^s ^ ^ i n d i c a t i n g chat the s a l a r y i n c r e a s e s proposed by the X^^SSRB were f a r too h i g h , but which would a l s o command s u f f i c i e n t support aj^che House of Commons. To meet these requirements the response ^hojA^in h i s view c o n t a i n the f o l l o w i n g elements: acceptance of the TSBS's^recommendations on a l l o w a n c e s ; acceptance of the p r o p o s a l for<£^£d5^:er a c c r u a l r a t e f o r P a r l i a m e n t a r y pensions- but w i t h an i n c r e ^ 2 / i n the c o n t r i b u t i o n from 6 per cent to 9 per cent r a t h e r than 8vp^!r cent as proposed by the TSRB; and a s a l a r y i n c r e a s e of 10 per aant compared w i t h the i n c r e a s e of 31 per cent recommended by the TSRB. I f the same 10 per cent i n c r e a s e a p p l i e d to the s a l a r i e s of M i n i s t e r s and o t h e r o f f i c e h o l d e r s , i t c o u l d be demonstrated t h a t Cabinet Minis t e ^ N h a d foregone 4/5ths of the i n c r e a s e of 47 per c e n t which the TSRB[/nad)jrecommended f o r them. There was a good p r o s p e c t t h a t p r o p o s a l s X J a v ^ S ^ s e l i n e s - c o u l d be c a r r i e d i n the House of Commons. The C h i e f Whip'sf^oundings suggested t h a t i t would be much l e s s l i k e l y t h a t the Govexfment would be able to c a r r y a motion f o r a s a l a r y i n c r e a s e of m w ^ . per c e n t . Y

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I n d i s c u s s i o n the f o i r a w £ W > n a i n p o i n t s were made ­ a. The soundings I r e q C a k ^ n p l a c e b e f o r e che'sCacement on

p u b l i c e x p e n d i t u r e wh^r^^hNa C h a n c e l l o r of the Exchequer would be

making t h a t af ternoon. \\Itv>^he l i g h t of t h a t statement t h e r e might

be a g r e a t e r r e a d i n e s s o n ^ ^ l e / o a r t of the Government's backbench

s u p p o r t e r s to a c c e p t an inzt^e-a^. of 4 per c e n t .

b. I t might be b e t t e r f o r tne/yovernment to a c c e p t d e f e a t on

a motion f o r a 4 per cent i n c n ^ $ 5 £ ^ r a t h e r than to be i d e n t i f i e d

w i t h a p r o p o s a l f o r an i n c r e a s e ^ a V h ^ g h as 10 per c e n t ; on the

o t h e r hand, i f implementation o f f u l l TSRB recommendations

was s e c u r e d through the votes of Ch# Government's own backbench

s u p p o r t e r s , i t would-be d i f f i c u l t f o r the Government Co d i s c a n c e

i c s e l f from Chis ouccome.

c. I c was l i k e l y chat t h e r e would be ailuof s o c i a l Labour P a r t y

amendment c a l l i n g f o r f u l l implement at ion r r ^ f ? t e TSRB's

recommendations. I t was not c l e a r what woulu_^ajroen i f both t h i s

amendment and the Government's s u b s t a n t i v e m o t i a V y a r e d e f e a t e d .

Much would depend on what o t h e r amendments were/gu^down and the

arrangements f o r v o t i n g on them. >-\

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d. Acceptance of the proposed 4 per cent s a l a r y w x £ r l f ^ e might

be made e a s i e r i f Che Government accepted the TSRB r^&eraj^ndation

f o r an i n c r e a s e i n pension c o n t r i b u t i o n s of only 2 per<^s*ic^

t h i s would however have u n d e s i r a b l e r e p e r c u s s i o n s on tn^fcavprnment' s

e f f o r t s Co s e c u r e more r e a l i s c i c pension c o n C r i b u t i o n s i n ^ t f j ^ X

public sector.

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CONFIDENTIAL

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[ C O N F I D E N T I A L !

Col/\ (//\ Co^o //y\ \S^J\



e. J u n i o r M i n i s t e r s i n the House of Lords had to make

considerable f i n a n c i a l s a c r i f i c e s i n accepting M i n i s t e r i a l

o f f i c e because they d i d not, u n l i k e t h e i r Commons c o l l e a g u e s ,

i t might

r e c e i v e 58 per cent of the P a r l i a m e n t a r y s a l a r y ; t h e r e f o r e be d e s i r a b l e to f i n d a way of i n c r e a s i n g t h e i r s a l a r i e s

ky more than 4 per c e n t .

^/^WTHE PRIME M I N I S T E R , summing up the d i s c u s s i o n , s a i d t h a t i t was agreed

\\ Y x ^ i a t the Government should a c c e p t a l l the recommendations i n

< X / % ^ B Report No 20 except those r e l a t i n g to s a l a r y i n c r e a s e s . I n

(j>a'r£lcular the i n c r e a s e i n the pension c o n t r i b u t i o n should be 2 per cent

a^aC^e^ommended by the TSRB. The i n c r e a s e i n s a l a r y f o r Members of

P a r ^ k m e n t and f o r M i n i s t e r s and o t h e r o f f i c e h o l d e r s should be

4 p^jf^&nt. She would however c o n s i d e r f u r t h e r , i n c o n s u l t a t i o n w i t h

the LoTTU^resident of the C o u n c i l , the C h a n c e l l o r of the Exchequer and

the L o r < ^ j ? r i v y S e a l , whether a somewhat h i g h e r i n c r e a s e might be

p o s s i b l e ^ - f o r j u n i o r M i n i s t e r s i n the L o r d s , perhaps by g i v i n g them the

same a b s o l u t e i n c r e a s e i n s a l a r y as a Commons j u n i o r M i n i s t e r . A l l

members of the C a b i n e t should a s s i s t the C h i e f Whip i n t r y i n g to s e c u r e

the maximum pzfaVrole support among Government backbenchers f o r the

Government's p^ropjis-als i n the debate, which was l i k e l y to be on

Tuesday 19 J u l y . / o T M Lord P r i v y S e a l and t h e C h i e f Whip would

c o n s i d e r further\^ew^b-£st the v a r i o u s amendments might be handled.

Report No 19 by th^/T/SRA on the Top S a l a r i e s Groups would be c o n s i d e r e d

when the outcome of A ^ i ^ J e b a t e on the pay of Members of P a r l i a m e n t was

known.
The C a b i n e t -

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Agreed t h a t t h e G o v e r n ^ ^ c ^ response to Report No 20 of the Top S a l a r i e s Rev^v^tfody on P a r l i a m e n t a r y Pay and Allowances should be^opl^^& l i n e s s e t out i n the Prime M i n i s t e r ' s summing lifr Dfohheir d i s c u s s i o n .

C a b i n e t O f f i c e 7 July

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1983

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I C O N F I D E N T I A L !

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