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THIS DOCUMENT IS THE PROPERTY OF HER BRITANNIC MAJESTY'S GOVERNMENT
C(83) VJk
23
COPY NO
31
18 J u l y 1983 CABINET
£0^£TIVES FOR PUBLIC EXPENDITURE - THE LONGER TERM AND THE 1983 SURVEY
Memorandum by t h e C h i e f S e c r e t a r y , T r e a s u r y
INTRODUCTION^
I n our M a n i f e s t o f o r t h e General E l e c t i o n we promised f i r m c o n t r o l over
p u b l i c spending and b o r r o w i n g , because " l e s s spending by Government leaves
more room v ^ P ^ taxes on f a m i l i e s and b u s i n e s s e s " . On t a x a t i o n we said
that " f u r t h e r ftrwements i n allowances and lower r a t e s o f income t a x
remain a h i g h p r i o r i t y , t o g e t h e r w i t h measures t o reduce t h e p o v e r t y and
unemployment t r a p y j j j ^
t o
This continues autonomic s t r a t e g y on which we embarked i n 1979 , aimed t o promote s o u n c T ^ ^ f c t h i n t h e p r i v a t e s e c t o r . We have achieved a major and s u s t a i n a b l e f r o u c t i o n i n i n f l a t i o n . Reductions i n t h e P u b l i c Sector B o r r o w i n g Requirement (PSBR) have p l a y e d a major p a r t i n t h i s . But we have n o t been s u c c e s s f u l i n a c h i e v i n g our t a x a t i o n o b j e c t i v e s . Rather than f a l l i n g , t a x as a percentage o f Gross Domestic Product (GDP) has r i s e n from some 34 p e r cent i n 1978-79 t o 4 0 ^ t e r cent i n 1983-84. I f we are t o achieve more growth and a s u s t a n V A r e d u c t i o n i n unemployment, we must reduce t h i s burden. ^fi^W The main o b s t a c l e t o t h e a c h i e % a ^ p ! ^ o f o u r t a x o b j e c t i v e s i s t h e
c o n t i n u i n g h i g h l e v e l o f p u b l i c e x p e i m ^ ™ ^ , which - c o n t r a r y t o p o p u l a r
mythology - a c t u a l l y rose as a p r o p o r t i o n o f GDP d u r i n g t h e l a s t
P a r l i a m e n t . I f we wish t o reduce taxes T j f t i u s t f i r s t reduce t h e
Programmes o f e x p e n d i t u r e which t a x a t i o n ^ i d ^ ^ t h e r w i s e have t o f i n a n c e .
I n c r e a s e d b o r r o w i n g i s n o t t h e answer: i t I f c ^ ^ i m p l y push up i n t e r e s t
r a t e s and r e v i v e the i n f l a t i o n a r y p r e s s u r e i m u d v e have fought so hard t o
get down. Lower i n t e r e s t r a t e s and lower t a x f f i o n are e s s e n t i a l f o r t h e
soundly based and s u s t a i n e d growth which the c o u n t r y w i l l now expect t o
see.
LONGER-TERM OBJECTIVES
Hence we must r e l a t e our p u b l i c e x p e n d i t u r e p l a n n % M ^ L our t a x
°bjectives. I n p a r t i c u l a r we need t o c o n s i d e r now wli : of taxation
e should aim t o achieve by 1988-89 - the l a s t p o s s i b l e B % J 0 % > f t h i s
Parliament. t / ! * ,
w
I n t h e l o n g t e r m i t would be a r e a s o n a b l e o b j e c t i v e t o b r a j ^ j j e
P P o r t i o n of t a x t o GDP back a t l e a s t t o the l e v e l we i n h e r i t e ^ J ^ L
978-79 - t h a t i s , back from around 40 p e r cent now t o some 34 p o ^ ^ e ^ t .
u i s should b r o a d l y enable us t o reduce the b a s i c r a t e o f income rax^J^
, P c e n t , and t o b r i n g p e r s o n a l allowances up t o the l e v e l s o f t ^ T 1960s
r e l a t i o n t o e a r n i n g s . Because i n d i r e c t taxes and n a t i o n a l i n s u r a n c e
r o
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l n
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c o n t r i b u t i o n s would s t i l l be l a r g e r than i n the 1960s the r a t i o o f t a x t o GDP would s t i l l be h i g h by h i s t o r i c s t a n d a r d s .
•^•^ 6. How f a r we can go towards t h a t o b j e c t i v e by 1988-89 depends W • e s s e n t i a l l y on two t h i n g s : the r a t e o f growth of GDP and the path of p u b l i c \^^expenditure. I f the PSBR c o n t i n u e s at i t s planned 1985-86 l e v e l (2 per cent ^ ^ ^ f GDP) and we achieve annual growth a v e r a g i n g 24 per cent which would be ^ W g e o o d performance in c u r r e n t w o r l d c o n d i t i o n s - we c o u l d hope t o reduce the tax:GDP r a t i o t o about 36J per cent by 1988-89. But even t h a t would be • ^pss^ble o n l y i f we c o n t i n u e t o h o l d p u b l i c e x p e n d i t u r e t o i t s p r e s e n t l e v e l ^ ^ ^ terms t h r o u g h o u t the p e r i o d . I f economic growth f a l l s s h o r t of 2j per cent on average t h e n p u b l i c e x p e n d i t u r e would have t o be c o n t a i n e d at n even lower l e v e l or taxes would have t o be h i g h e r . l T 1
a
I do n o t t h i n k we can reasonably aim f o r l e s s than t h a t on the t a x front. I p r j i ^ s e t h e r e f o r e as a l o n g e r - t e r m e x p e n d i t u r e t a r g e t up t o 1988-89, to h o l d the t o t a l of p u b l i c e x p e n d i t u r e , i n c o s t terms, a t t h e l e v e l of about £103 b i l l i o n (1980-81 p r i c e s ) which i t reached i n 1982-83, and w h i c h t h ^ B | ^ 2 n t White Paper p r o j e c t s f o r 1985-86. I have to say t h a t achieve t h i % ^ B ^ e t w i l l r e q u i r e d e t e r m i n a t i o n . The p r o j e c t i o n s of e x i s t i n g p l a n s fl^^^Lend of the decade w h i c h were c a r r i e d out by o f f i c i a l s l a s t summer i m p l i e d f i g u r e s s u b s t a n t i a l l y h i g h e r t h a n t h i s , because t h e y allowed f o r s u b s t a n ' t j f ^ c o n t i n u i n g r e a l growth i n s e v e r a l programmes. Such growth does not show up i n the aggregate White Paper f i g u r e s f o r 1984-85 and 1985-86, because we a M ^ t ^ l l f e e l i n g the benefits o f the h a r d d e c i s i o n s taken i n 1979 and 1 9 8 0 T J ^ ^ i t c o u l d b e g i n t o appear i n 1986-87 the final year of the new Survey, TOT which t h e r e are a l r e a d y s u b s t a n t i a l a d d i t i o n a l bids. i f achieve the p r o g r e s s towards our t a x o b j e c t i v e proposed above f o r the end of t h i s P a r l i a m e n t , we need t o get on the r i g h t path by t a k i n g now t h e necessary d e c i s i o n s r e l a t i n g t o 1986-87. That i s why c o n s i d e r a t i o n of t h e Survey, c o v e r i | ^ the medium term, cannot be separated o m these l o n g e r - t e r m c o n s i d e r a m j j j ^ t o
w e
a r e
t 0
fr
^' I f my c o l l e a g u e s are w i l l i n g ^ R ^ L n c i p l e t o work inwards t h i s e x p e n d i t u r e t a r g e t , I w i l l aim t o c i r o ^ R f c e p r o j e c t i o n : , i n September, t t i n g out a p o s s i b l e path up t o 198£ »^^U t h f o r the total of e x p e n d i t u r e d i n broad terms f o r the main programmes. Since t h i s w i l l i n v o l v e d i f f i c u l t d e c i s i o n s about p r i o r i t i e s i t w i ^ f t f t q u i r e c o n s i d e r a b l e d i s c u s s i o n . Cabinet may want t o a l l o c a t e more r e s o u r c e s t o one programme y r e d u c i n g o t h e r s . Once agreed i n broad t e ^ ^ , ^ L h e s e p r o j e c t i o n s would Provide a s t a r t i n g p o i n t f o r d i s c u s s i o n w i t h ctif/^gues i n the b i l a t e r a l s . would hope f i n a l agreement c o u l d be reached n i Cabinet i n the l a t e autumn. i t w i l l be f o r c o n s i d e r a t i o n whether they should be p u b l i s h e d ; but °ey would s e t broad p o l i c y g u i d e l i n e s w i t h i n w h i c h l o n g e r - t e r m Departmental P l a n n i n g c o u l d proceed and would a l s o p r o v i d e a framework f o r f u t u r e P u b l i c E x p e n d i t u r e Surveys. s e
a n
THE
SURVEY PERIOD
I n the meantime, we need t o set more s p e c i f i c obj ectT^^^^kr t h i s B-^ B L, s e x p e n d i t u r e Survey. I t is clear from the C h a n c e l l o r ^L.^A. Exchequer's memorandum (C(83) 2 6 ) , which s e t s the b a c k g r o u n d ^ d f t j j h e Prospect f o r next year i s much t i g h t e r than we thought at B u d g e T B ^ ^ . I t t h e r e f o r e e s s e n t i a l a t the v e r y l e a s t t o h o l d t o the expenditvB^Bktals P u b l i s h e d i n the l a s t White Paper. Vea
T
s
0
j; .
Given the u n c e r t a i n t i e s t h i s i s a modest, perhaps too modest, «Trget. i t w i l l r e q u i r e r e s t r a i n t by spending Departments. The figures i n e x A show t h a t f o r 1984-85 Departments have proposed i n c r e a s e s i n
V e n
n n
s o
2
^
J
^
^
^
^
^
^
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SECRET ~|
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% . |«m M V #PL
1
SECRET
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programmes t o t a l l i n g some £6.1 b i l l i o n over t h e e x i s t i n g p l a n s . For
1985-86 they t o t a l £6.8 b i l l i o n ; and f o r 1986-87 £7.0 b i l l i o n . Some o f
t h e s e , based on s t a t u t o r y e n t i t l e m e n t s and f i r m commitments, w i l l have t o
be accommodated. For 1984-85, approved l e v e l s o f s o c i a l s e c u r i t y b e n e f i t s
w i l l r e q u i r e an e x t r a £0.25 b i l l i o n . A g r i c u l t u r a l p r i c e s u p p o r t needs
£0.A2 b i l l i o n more. I e s t i m a t e t h a t a t l e a s t £0.5 b i l l i o n e x t r a w i l l be
^ ^ ^ l e e d e d f o r l o c a l a u t h o r i t y current expenditure.
11. Moreover I b e l i e v e i t i s c r u c i a l t h a t we s h o u l d keep i n t a c t f o r
^3^8^85 t h e £3 b i l l i o n r e s e r v e which appeared i n t h e l a s t White Paper. T M ^ i o u l d be l a r g e r than we had f o r 1983-84, b u t i s r o u g h l y t h e same s i z e , a f a p r o p o r t i o n o f p u b l i c e x p e n d i t u r e , as t h e r e s e r v e s f o r 1981-82 and 1982-83. A l t h o u g h a s m a l l e r f i g u r e might be s u f f i c i e n t t o accommodate t h e c o s t s o f p o l i c y changes, we have l e a r n t t o o u r c o s t t h i s year t h a t i t i s necessary a l s o t o a l l o w a w i d e r margin f o r changes i n programmes l i k e s o c i a l s e c u f l ^ y and a g r i c u l t u r a l i n t e r v e n t i o n which a r e demand-determined. I n a d d i t i ^ U need t o a l l o w n e x t year f o r t h e e f f e c t s o f i n t r o d u c i n g end year f l e x i b i l i t y , and t h e u n c e r t a i n t y over European budget r e f u n d s and t h e cost o f t h e Common A g r i c u l t u r a l P o l i c y .
^ ^ ^ ^ ^ ^
12. I t w i l l h ^ n i ^ s i b l e t o accept t h e f u l l £6.1 b i l l i o n o f b i d s . But w i t h i n t h a t , t h e most p r e s s i n g demands t o t a l some £2£ b i l l i o n . ^ We t h e r e f o r e need t o ^ H ^ a v i n g s elsewhere o f that o r d e r ( i n c l u d i n g the savings we hope t o secure on t h e n a t i o n a l i s e d i n d u s t r i e s ) s i m p l y t o s t a y w i t h i n t h e p u b l i s h e d ^ H O W f or 1984-85. Reductions o f at Least t h e same o r d e r w i l l be needed tti^J^r t o stay w i t h i n the published t o t a l f o r ^ 1985- 86, and t o keep t h ^ t o t a l a t a p p r o x i m a t e l y t h e same r e a l l e v e l i n 1986- 87, i n c l u d i n g adequate p l a n n i n g r e s e r v e s f o r these y e a r s . 13. The e x i s t i n g b a s e l i n e f i g u r e s make no e x p l i c i t assumption about pay
i n c r e a s e s n e x t y e a r . I s h a l l be * t i n g p r o p o s a l s t o d e a l w i t h t h i s i n
September.
CONCLUSION
14-
1 i n v i t e my c o l l e a g u e s t o agree ^ g i l ^ o r e ,
that:
a. We s h o u l d work towards t h e l o f i 3 A « r m o b j e c t i v e : ; f o r t a x a t i o n , and e x p e n d i t u r e d e s c r i b e d i n p a r a g r a f M B ^ above. b. I should i n September b r i n g f o r w a r t l ^ ^ e c t i o n s f o r t h e t o t a l
and f o r programmes up t o 1988-89, which f b u l d be c o n s i s t e n t w i t h
a c h i e v i n g these o b j e c t i v e s .
C We should aim i n t h e 1983 Survey t o h o l d t o t h e p u b l i s h e d t o t a l s
f o r 1984-85 and 1985-86, i n c l u d i n g adequate r e s e r v m which means
f i n d i n g savings o f some £2* b i l l i o n i n 1984-85 a A j J f a t l e a s t t h e
same o r d e r i n 1985-86 t o o f f s e t u n a v o i d a b l e i n c r e a s e s .
We s h o u l d s i m i l a r l y seek savings o f a t l e a s t t h % ^ ^ s i z e i n
d. 1986-87 i n o r d e r t o h o l d t o t a l spending c o n s t a n t i n ^ L w h ^ s .
r
e. I should discuss b i l a t e r a l l y w i t h colleagues a f t e r FhjjA^ess
how these savings might best be achieved. I would r e p o r t ^ 5 p R ^
Cabinet towards t h e end o f October.
P R Treasury
^
Chambers
18 J u l y 1983
3
|
SECRET
|
C9
H
"
SECRET
•
ANNEX A
I
SUMMARY OF P E S RETURNS
1.
Planning
Total
I cmnd
126,370.0
1985-86
132,260.0
721.0
1,097.0
127,091.0
133,357.0
1986-87
87Q9 I
<-. A q r e e d a d d i t i o n s 111
3.Bane1 1 n e
137,500.0
Baseline 1986-87
'i.Proposed a d j u s t m e n t s to proqrammes
.0
362.5
eg e
73-
1,0.5
'37.0
67.0
150 0
13.1
210.0
17<5
Ministry FCO
FCO
1,338.8
of Defence
- O v e r s e a s Development
Administration
9
128. «•
- Other
E u r o p e a n C o m m u n i t y
Intervention Board f o r A g r i c u l t u r a l
h.or\.n0
*2°
P r o d u c e
30.2
•
MAFF
•
-2.5
Forestry
Commission
Department
of Trade a n d I n d u s t r y
„ ||
ECGD
Department
o f [ .nerqy
Department
of Employment
Department
of Transport
-133.1
39.6
:
3
99.6
01'
58.0
58.0
5i,0
0
3
5'tO.O
K
5
62.0
5'tO.O
DOE •• Housing
DOE
- PS A
DOE
- OTHER
Home
84.5
96.5
"58-0
130 8
151.7
15'..7
49.5
70.9
-1.6
-0-3
mm
98.3
Office
l-ord C h a n c e l l o r s
Department
320 0
Department
of E d u c a t i o n
of A r t s
DHSS - H e a l t h DHSS • S o c i a l HM T r e a s u r y
and Libraries
and Personal S e c u r i t y
- Civil
Social
r7n I BC7IUL..3
2
-
27 0
S e r v i c e s
S
I
c
S u p e r a n n u a t i o n
H
C
•
Vnancellors'
'I 1°
e x p e n d i t u r e
, f .
e x t e r n a l f i n a n c e
Departments
1
19.8
87 '» 5
648.9
Sfi' 1
i 374 • 7
1,067.0 - •' !
:,0
,
m m
o ,
Scotland
Wa 1 e B
Northern Ireland
. • i
T e r r i t o r i a l d e p a r t m e n t s : f o r m u l a c o n s e q u e n t i a l
Local Authority current NationallR«d I n d u s t r i e s
11
390 . 0
and Science
12 'i Office
' •
n
J o b . 0
1 138 8
*•*" ^6" 0
^° •
51.4
459.6
1,355.6
.165.0
61.2
585.8 1,928.3 -970.0 59.7
•
1
rw.i
r D e p a r t m e n t s
i; , O t h eadjustments °-'Otql t o proqrammes
I n e t l
't
o. .-d -w< ol.J
o
l^H
8
11
oc i7 5 9
i
7 1045.8
mm
0
6-Net
changes
in Special
Sales
'*&B|
o f A s s e t s
TOTAL NET A D D I T I O N S 10 CMND 8789
AGREED. OR PROPOSED BY DEPARTMENTS. '/^t.dqel c h a n q o i a n d r e v i s e d e c o n o m i c
, noo T
6,082.3
Wirt
1
7,045.8
121
assumptions
n ^ T
^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^
... i V».30
1'
Defence
Tbe most i m p o r t a n t poiicy
U whether the U K ^
^
^ e n c e spending by 3 per cent per annum i n r e a l terms a f t e r «mp
l y w l t h
t Nh
e
A
T
T
o
•
• ^ M
r e a l g r o w t h t a r g e t that was r e c e n t l y extended t o
O
c
°stly (some E600 m i l l i o n i n 1986-87).
-
other MOD
bids , «
,1,300 m i l l i o n , are intended t
•Wence programme b y compensating f o r t h e e f f e c t s of 1983 A r m e d p r e c a s t i n f l a t i o n up to ,986-37.
Tbe MOD
•
P H
figures aiso inciude some S 7 5 m E
1986-87 Falklands costs.
Overseas A i d v
^ecially -
given
t o t
h
o
l
e
„
u
m
e
o f
aid stemming , o m past c o m m i t m e n t s t o muUUateral agencies
« H
EC i n s t i t u t i o n s and the World Bank Group) means that, on
d l r e c t l y
t o
n
g
countr.es
- U^ n e
P-iod, having already f a l l e n by at least a t h i r d since 1979
-
—
. e r ^ ^
80.
c
o
m
m
B i
t
m
e
n
t
s
S t a n c e to maintaining substantial b i l a t e r a l country programmes. Existing ca
» °e accommodated w i t h i n present plans. The additions proposed would: i
1QR2-8 maintain aid d i r e c t to countries at> ii tt.s 1982 833 l e v e l i n cost t e r m s (including , an F A A m at at nresent increase in the A i d Trade Provision fr r o m E66m present t o E80m m 1986-8 n,
»•
maintain the aid programme at about 0.38 per cent of GNP.
iH.
allow
a iarger U K
c o n t r i b u t i o n t o t h e of seventh
I D A replenishment
H than
»
c u r r e n t l y provided f o r .
Foreign and C o m m o n w e a l t h O f f i c e T h
e main proposals for adjustment to the programme are:-
H
Provision t o m a i n t a i n or increase the levei of a c t i v i t y of .be B r i t i s b Councii; -
additionai provision for tbe BBC Externa, Services t o cover i n ^ * - f f e c . s
,
M
of tbis yea's BBC pay increase, .be modernisation of tbe mon.tonng se, the purchase of Bush House; Ui.
c e r t a i n increases in FCO a d m i n i s t r a t i v e expenditure including an allowance for p r e d i c t e d increases i n overseas i n f l a t i o n i n excess o f PES f a c t o r s and c e r t a i n
j
capital improvements (including the purchase of Hanslope Park); lv
-
an allowance
i,o «tPrline for p r e d i c t e d increasses i• n the s t e r l i n g costs o f i n t e r n a t i o n a l t
subscriptions i n excess of PES factors.
111 WS^^^
SECRET
IH J
4.
Net payments t o European C o m m u n i t y Institutions
Projections of UK net payments to the C o m m u n i t y Budget are subject t o a wide margin
forecasting error since t h e Government has only an i n d i r e c t influence on the size of
Budget. The major f a c t o r a f f e c t i n g payments during the survey period w i l l be the decisi t The taken f o l l o w i n g t h e major review agreed by t h e European Council i n Stuttgart. f t h a l
European Council w i l l meet i n Athens on 6 December t o consider the outcome o
review.
5. The
IBAP
C L u t u r
Department's programme covers market regulation under the Common
Policy, almost a l l mandatory under EC Regulations.
Agri
A large p a r t is 1 0 0 % funded from
EC Budget, w i t h receipts c r e d i t e d t o the EC programme.
Programme expenditure is unpredictable, and dependent on a g r i c u l t u r a l market conditio ^
sll
F o l l o w i n g recent large increases i n production, p a r t i c u l a r l y f o r m i l k products, PP
expenditure is now expected
t o be substantially higher than the baseline.
For i v
^
c u r r e n t estimates point t o expenditure o f some £1230m compared to baseline provisio
some £800m.
About t w o thirds o f the increase represents e x t r a i n t e r v e n t i o n purcha
^
e
financed i n i t i a l l y by the Exchequer. EC r e c e i p t s i n respect o f financing and other i n c i d ade whe"
costs are received while the goods are i n store and reimbursement f o r losses is ma
d. fry
u n
stocks are sold. The remainder o f the increase is i n respect o f expenditure p r e - f
the EC. Smaller additional bids are also l i k e l y f o r the later years.
The revised forecasts are prepared i n conjunction w i t h estimates of t o t a l expenditure u ,b1ect to the
EC budget, and t h e U K n e t c o n t r i b u t i o n towards
it.
The estimates are
SUDJ
substantial v a r i a t i o n as that broader exercise proceeds. 6.
MAFF/DAFS/WQAD
This combined programme covers expenditure by the A g r i c u l t u r e and Fisheries ^ ^ ^ " ^ p p
n
in England, Wales and Scotland (including expenditure i n N o r t h e r n Ireland resting °
votes).
The t o t a l baseline, including some expenditure prefunded
f r o m the EC budg
£1030m i n 1984-85 rising t o £1088m i n 1986-87.
, de &
agreed i n the 1982 survey, adjustments t o the baseline are
, deman lT
Following a procedure
a
a
respect o f prefunded
EC expenditure and estimated changes i n take up unae
determined a g r i c u l t u r a l support schemes. Latest estimates, subject t o review in
point t o net additions o f £40m i n 1984-85, £29m i n 1985-86 and £29m i n 1986-87.
f
%
SECRET
of h
^ a r t n i e n t s propose a number o f self balancing changes w i t h i n the adjusted baseline,
e
v
°lving reduced requirements, e s t i m a t i n g increases and policy changes. The Treasury has
n S
served its position on these various adjustments.
he a t
a d (
i i t i o n , Departments have proposed f u r t h e r additional bids t o t a l l i n g £24m i n 1984-85
n
8 to £29m i n 1986-87. Some E22m per annum relates t o assistance t o farmers i n
Sinal
areas, E l m per annum f o r increased superannuation charges f o r commissioned
r c h and E l m rising t o £4.2m for the e f f e c t s of the cash squeeze on volume provision.
tllar
e a
a
l
^ i o n a l manpower provision o f 45-55 f o r M A F F i s sought a f t e r taking account o f
ef fi •
°y v i n g s . The Treasury has reserved its position on the policy changes concerned
sa
ie
does not accept the case f o r additions t o t o t a l provision i n respect o f any o f them; and
°nsiders tv,
<-nat net manpower savings could be achieved through increased e f f i c i e n c y .
c
* rt
7.
D
HgPjgtrnent of Energy
uding support f o r the nationalised industries no major new items o f expenditure are
a
s
• A reassessment o f requirements under existing energy conservation programmes ^ d the O f f
^ ^ o n s h o r e Supplies Interest R e l i e f grants Scheme, and Ministers' decision t o reduce
e
* p e n d i t u r e on t h e fast reactor results i n reduced requirements compared t o t h e
feline.
ifl iy
8.
D
- ^ g j l l m e n t of Trade and Industry
^ |
>r
largest i t
s in the t o t a l proposals for adjustment are an additional bid for Launch A i d
fa
+
l t e m
' 0If!
-p,
+£7 r
"-'Jin, +£80m), increases i n R and D and additional a d m i n i s t r a t i v e expenditure,
increase
e s
(
proposed are p a r t l y o f f s e t by a r e d u c t i o n on Regional Development Grants
Million, -E69 m i l l i o n , -£83 million) 9. s
E j {
—£H£j_Credits Guarantee D e p a r t m e n t
Net * .
Ur ° expected t o cease during 1983-84 u n t i l a f t e r the end of the
So P i o d . This is mainly because transfers o f outstanding refinance t o the p r i v a t e
"-tor
Q
F is
s
r e f i n a n c e
V
t
e
6
bou.t
co
°een
^ents.
e
a
t
r
e
er
C o
d
a
v
S l 0 C : e
a r st
^
e t
completed
while
ECGD
are s t i l l
making
advances
on existing
Forecasts f o r t h e interest support and cost escalation programmes are
a
r
*^ey
e
demand responsive and highly sensitive t o changes in assumptions
interest rates and cost increases. On current assumptions, interest support
ex
titn
P e c t e d to f a l l s i g n i f i c a n t l y during the survey period and by 1986-87, for the f i r s t > net Tp°sib *P o f i n t e r e s t equalisation f r o m t h e banks are expected, even allowing f o r shoty i o n i n Consensus interest rates. The forecast for cost escalation guarantees s
r e c e
t s
r e d u c t
n
, harp £ u j 1985,85 1986-87 due t o lower i n f l a t i o n assumptions and a reduced 6er j gfeements. The mixed credit matching f a c i l i t y has yet to be utilised.
s
aih n
a
0
n
10.
Department of Employment
The
p r i n c i p a l increases proposed are for an extension to the Enterprise Allowance,
m a i n t a i n levels of service i n the general careers service and to meet the expected hig
costs of p r o v i d i n g sheltered employment.
The increases are p a r t l y offset by estimat
reductions i n expenditure on demand led measures and redundancy payments.
11.
Department of Transport
Three quarters of the increase proposed are for the motorway and trunk roads program
e als°
a r
to maintain recent levels of new
c o n s t r u c t i o n and s t r u c t u r a l maintenance.
There
major additional bids f o r a d m i n i s t r a t i o n , and f o r re-equipping the DVLC; and minor
shipping and c i v i l a v i a t i o n . There are additional bids f o r 98 s t a f f i n 1984; 441 i n 1985; 556 1986.
12.
Department of the Environment - Housing
s l l T l 1
The Department has made additional bids f o r 1984-85 t o t a l l i n g £540 m i l l i o n and for level oi
sums for the later years of the survey, p r i m a r i l y to maintian the current increase , wit"
d
l i n g
expenditure on home improvement grants and t o meet the additional costs o i aea
d e f e c t i v e public sector housing.
13.
Department of the Enviroment - Property Services Agency
The main increases proposed are: purchase of accommodation
i n the Millbank area
to enable
^
savings i n the r e n t a l b i l l i n later years (£25m i n 1984-85, E40 m i l l i o n i n 1985-86
o v a t i o n an«
£7 m i l l i o n i n 1986-87); expenditure on cost saving measures such as energy conser estate r a t i o n a l i s a t i o n (£10m
^
i n each year); and additional expenditure on maintenance
c i v i l estate (£35 m i l l i o n i n each year).
14.
Department of the Environment - Other
The o t h
e r
The major increase proposed is £63 m i l l i o n f o r the urban Programme and UDCs. i o f hazard " 0
r e l a t i v e l y small individual bids r e l a t e t o refuse disposal investment, c o n t r o l o
developments, d e r e l i c t land grant, h i s t o r i c buildings, and additional grant i n aid
Sports Council and other environmental bodies.
15.
Home O f f i c e
u
7 0
p e r
cent of
Proposals for increased provision for police and prisons account for more than tv r the bids i n 1984-85. Of the p o l i c e bid, some £30m a year is required f o r the addition of
the 1983 pay award, expected t o be 8 per cent.
^ ^
There is no b i d f o r addition
manpower but some provision (£4.4m) is sought i n the f i n a l year of the survey
SECRET
k
%
%
SECRET
H -eng.h „
t h e l e v e
,
"1.8. r
„ „
. „ n is sough.. This is ,0 enable s.reng.h t o r,se by 5, 7
iai
et
V „ 1,87, L
,
E 8 2
m e
a s s u r o e d i n
e.
Cmnd 878, (U ,500,. For prisons,
*
2
„ w c o m m i t m e n t arising mainly e
« - opening o
«able .he i n t r o d u c t i o n o t t h e common w o o i n g agreement, and to > >-* ac
•
, ^
=
»
_ •
ot overtime, provision i . also sough, for an increase, mainly m 1086-87 .0 allow
_
c e l e r a t i o n of the building programme.
Glance „
°
to
•
.he proposals amounts .o tt*. i n " 8 4 - 8 5 .
t
This includes some s m a l l
•
C l o n a l provision tor m a g n a t e s ' cour.s and .he p r o b a t i o n service .0 mee. increased
*»Moads. C r i m i n a l Injuries Compensation expenditure is also expected t o mcrease.
1 6 ,
Lord Chancellors D e p a r t m e n t
^
.he baseline i n 1,86-87 maRes no provision.
The reduced
ot slippage ,n .he Cour. B u i l d i n g Programme. |
-T^~£
addi.iona, h i d i n 1,86-87 re.lec.s .he con.inuing grow.h i n L e g a l A i d
"M-M
t o cope U
™
Manpower .. expected
to
»
r se
.he con.inuing increase i n worhload and s.ar. .0 t a l l m 1,86-87
- O H ot various changes (eg. e f f i c i e n c y , computerisation, c o n t r a c t i n g out e.cl.
17
Department of Education and Science
-
^ ^ J ^ L
.
*• *
„
•**•««. tor ,he f u t u r e , greater than those assumed In Cmnd 878,, an -"-U:
designed i n general t o o f f s e . .he e f f e c . of
provision t o r c u r r e n . e x p e n s e , p a r . i c u l a r l y spending hy local au.hor, e
n
—
to numbers o i .eachers and lec.urers and . a n g accoun. ot .he grow.ng numbers
_
W
th
0 S e
0 v
e r 16 w i t h i n f u r t h e r education.
^ « » « . . are also sough, i n .he l e v e l o f cer.ain services, including e
-tio„
»0c.
a l i s a t i o n a
n
d
i m p t o v e m
t i o n a l s u p p o r t s t a [ [
|
e n . s o t school, college and universi.y premises; .he 1 e l
r e l a t i o n t o p u p i l
—
numbers; and support f o r scientific research.
is
'I
l8
'
Q ^ i c e of A r t s and L i b r a r i e s
^ s . m e n , ro osed P
P
are designed^ .o minimise
^
^
^ " t i e s by r e s t o r i n g i n l a t e r years t h e cuts unavoidably unposed m 1,83 "*
^
^ P
- s e n m s and galleries building and maintenance, and for heri.age
-~-.moda.ing .he Increasing love! of e*pe„di.ure envisaged ^tog, e u i t l s
and
b
y
a
„
•
on .he new B r i t i s h L i b r a r y
n g l o c a l au.hori.ies to sa.isfy a broadly cons.an. demand fo.
o w i
and libraries services.
in
|^^^
•
SECRET
_ H
19.
H e a l t h and Personal Social Services
The proposed increases are due t o : 1.
"realism" on pay and prices,
. :
real
n
the Deparment considers that the Cmnd 8789 provision implies a cut
2.
resources in the light of Government assumptions on i n f l a t i o n ;
demographic change,
nr
oV6 f
the rising numbers of old and very old people which are expected to occu
the p e r i o d places increasing demands on the h e a l t h and social services;
3.
Government
commitments
on
services for old, m e n t a l l y i l l ,
and
rnenta
of Ntf s
handicapped people; and on the c o n t i n u i n g geographical r e - d i s t r i b u t i o n
resources;
r d i t of
4.
revised forecast of expenditure on the f a m i l y p r a c t i t i o n e r services in the
B
the o u t - t u r n in 1982-83.
n
In additon there are bids f o r a number of specific
a
p a r t i c u l a r to the v o l u n t a r y sector and c o m m u n i t y care, accute t r e a t m e n t shortag- »
c a p i t a l investment.
The major issue of policy is how
far the Government is c o m m i t t e d
to provide real g r o *
the resourcs f o r h e a l t h i n the face of increasing demand.
20.
Social Security
Two
thirds of the increases proposed are f o r demand d e t e r m i n d
•marily ° services prim
n
19°
r e t i r e m e n t pensions - the result of a changed view of l i f e expectancy
following
^ ,,niber
census, and on housing b e n e f i t , the result of an earlier underestimate of the
beneficiaries and of average payments of this new
1 ting ' service improvements reia
es °
benefit.
SECRET
1984-85
1985-86
1986-87
•
The most significant bids f o r b e n e f i t improvements are:
i.
New b e n e f i t s t o replace H N C I P
2
6
and the "household duties test"
- - c o n t r i b u t o r , i n v a l i d i t y person B Com , m
„.
t l e e
t o
ss
< H s c u
s b
or,l
t o remove the d.scr.m.na.i J a paper b
y
A l i n i n g a number o f options.
y
_
the
w
o
u
l
d
•
r e q u i r e
That p r e f e r r e d by the Secretary
additional expenditure as shown and
cost 50 s t a f f .
Invalid Care allowance for ly
4
married women caring t o r
12
"
IS
•
elderly relatives.
* -»»».
unsuccessful, bid i n l a s , y e a r , Survey proposing a wider extension o
w
o
„
l
e
n
w
o
u
l
d
h
a
v
e
c o s t a r o u
„ d E60 m i l l i o n i n a t u i i year and 2 0 s t a . Re
.CA «o
t
ct .
irlprlv r « Proposal t o those m a r r i e d women caring f o oeider re l a t i v e reduces the ^ cost
•v
• _
_
101*1
sh
-own. But would mean m a r r i e d women caring f o r others
n d
w
°uld not benefit. The proposal costs 50 s t a f f .
"i-
Restore 5 % abatement of
, .
20
1
61
°*
Invalidity benefit T
^
bating
— b e r „„
1 9 8
0
|
„,
n e « t , „he unemployment b e n e f i t , was reduced b y 5 % i n
tovalidity
p a r t l y
a
•I
b e
a p r o . for ,a* and p a r , , as a -
s
;
;
* «
;
:
- --
. A c t i o n . There is a c o m m i t m e n t t o t h e abatement once t h e benef.t bas
b
e
e
n
p
o
s
t
p
o
n
e
d
i n d e f i
*
—
^
H
.
•
br «
n i , e , y . No simiiar c o m m i t m e n t was g.ven
•
M
" - n , bu, ,„at is t o be r e s t o r e d f r o m November, f o l l o w i n g t a a a t i o n f r o m M y 19S2. Posts.
1 6
lv
«
Increase income disregards f o r
Supplementary b e n e f i t and Housing
^
^
g
benefit
T h
=
Propose, is to increase
^P.em 4 i s
"Sard
e n t a r y
b
e
n
o l h a l ( e
a
„
e
i
[
n
u
g
a
s
n
b
e
d
h
o
u
s
i
t
w
e
e
„
income n
u
g
b e
disregarded
when
calculating
„ e „ , fron, ,4 a weeK t o U
a weeh
-
'
"
^
•
A sepa
and MO for one parent famil.es would be .ncreased
—
« and £30. Costs 62 s t a f f .
SECRET
i
-
r, a I
SECRET
21.
Scotland
The bulk of the expenditure is, as i n recent surveys, t r e a t e d as a block. Aggregate provisi°
is adjusted p r o p o r t i o n a t e l y by reference to changes agreed for comparable English ana
programmes.
Normally, additional bids on block expenditure are not submitted. But
for ^
A
year, increases are proposed to meet the "knock-on" e f f e c t s in c i v i l service pay, ana
shortfall
following
the introduction
o f Property
Repayment
Services.
On nonj:—-—
expenditure, there is an additional bid for asistance to industry.
H M Treasury - C i v i l Superannuation
22. The
additonal bid for 1984-85 relates t o transfer payments t o other pension schemes
respect of
s t a f f who are being transferred out of the C i v i l Service w i t h t h e i r work as P
aft
the h i v i n g - o f f and p r i v a t i s a t i o n programme. The additional requirement for 1986-87 d e r i from
t h e expected
v
1 0
rise i n t h e number o f pensioners, a f a c t o r n o t allowed
for
s t r a i g h t f o r w a r d percentage increase method used to construct the baseline for that year
23.
Wales
ck
bl° '
As
i n previous surveys, most o f the Welsh O f f i c e prgorammes are t r e a t e d as a
e£
Aggregate provision is adjusted p r o p o r t i o n a t e l y by reference t o t h e changes agre *
comparable English programmes.
r
A d d i t i o n a l bids are not generally made for the block because o f the formula apP ... cervix described i n paragraph
1.
The only exception
5
consists o f t h e Other Public
programme, where c e n t r a l i n i t i a t i v e s apply to pay and general a d m i n i s t r a t i v e expend
^
e r
^
The am
^
On account o f t h e inadequate provision made f o r t h e "knock-on" e f f e c t s o f e a r h awards, an additional bid is necessary t o m a i n t a i n agreed s t a f f i n g levels.
involved are £0.8 m i l l i o n , £1.2 m i l l i o n and £1.7 m i l l i o n f o r t h e years 1984-85 through
1986-87.
24.
Northern Ireland
b e
will As i n recent Surveys, t h e block arrangements w i l l apply whereby t o t a l provisio
adjusted by reference t o changes on comparable programmes i n Great Britain
.
,
e
to °
application of the c o m p a r a b i l i t y formula. A l l o c a t i o n s w i t h i n the block w i l l continu
e
^
the Secretary of State's discretion according to local p r i o r i t i e s . There are no additon
i i
this year.
SECRET
f
1
%
SECRET i5>
Local A u t h o r i t y C u r r e n t Expenditure
i°cal authorities account L
G
for over
a fr**v, i f t h of total
public puDii
expenditure b u t C e n t r a l
°vernment has no d i r e c t c o n t r o l .
lsh C
' >
«3,
,oca, a u t h o r i t y r d e v a r t , current expenditure i n .983-84 to Orea,.Britain i . .
5 5 7 m i l l i o n
<° " hillion. e
L
o
c
l
a u t h o r i t y
b u
d e , s suggest t h a t .his provision may he„
«
8
^
M
P
L o c a l a u t h o r i t y overspending against t h e i r " t a r g e t " (framed ,n te, ,„s
MM
*Penditure) w i l l be penalised by loss of grant.
Whit, P »
a p e
r
million.
»'
a
MM
« M P
c
„„„i„s provision
tor reievan.
That f i g u r e did no, ,.,he
insurance surcharge i r o n , H
« P « provision is
i n ,984-85 »|
•
account ., the Budge, d e c s i o n ,o reduce ,h
_
t o 1 per cent.
current
expenditure
Adjusted t o r t h a , change, ,he
MM
m i l l i o n . 0.6 per cen, g r o w t h over „ „ - » * P « " " « *
•
be
»•
^ c r e t a r y „, s t a t e tor the Environment put p r o p o s e s Cor ,he appropriate provision f o r
— a n t
_
H
current expenditure i n Bngiand i n 1984-85 i n his l e t t e r o f IS July t o the
Resident for discussion i n E(LA) on 19 July.
2 6 >
or
Nationalised I n d u s t r i e " E x t e r n a l Finance
*
nationalised industries are discuss,,, in de,ai, in the annua, Lnves,
— / t h e
" » - • tog Review (IFR), w h i c h has heen suhmi.ted t o Ministers separately ^ i e s ' -
h,s cover
"--.as, M
«
—
-
—
«
investment programmes and a l l components o f nationalised mdust r y externa,
included i n D e p a r t m e n t a l programu.es. The coverage of this y e a r , ,FR
*
MM
mt and
y
ear
except
that
Department
o f Energy
expenditure
—
— WM
e
on t h e R dun an
Payment Scheme RMPS> is hrough, w i t h i n the scope of the I r R t o r (
MM MM
he f,r
M
»•". the Welsh Water A u t h o r i t y is included in the section on the Water industry. *«•
I
*°"> d r e
16
Industry is now t r e a t e d as a nationalised i n d u s t r y f o r a l l p r a c t i c a l purposes.
H
P-posed changes t o na.iona.ised industries' EFLs are as shown i n the tah.e. Details given i n this year's IFR.
' S i a n c e l l o r o f the Exchequer's D e p a r t m e n t s
\ ^ 4
l
*
1
and
E 5
4 m i l l i o n i n 1986-87 to cover the cos, o, pay awards, additions t o . , . « . .
|
« t h increases i n the number of taxpayers and slippage i n achievement of sav.ngs
SECRET
\\.J
|
•
For Customs and Excise additional bids of E3.7 m i l l i o n i n 1984-85, E3.5 m i l l i o n in 1985-8°'
and E4.5 m i l l i o n i n 1986-87 arise mainly as a result o f proposed additional manpower. Other
c o n t r i b u t o r y items are t h e continuing cost o f absorbing the 1983 pay settlement, addition computer requirements, and a more cautious view t h e department receipts f r o m merchants' charges.
t
' . '
'
3 1
u r e
has taken of f u t