Mr Major’s Written Parliamentary Answer on Public Expenditure – 26 July 1988

Below is the text of Mr Major’s written Parliamentary Answer on Public Expenditure on 26th July 1988.

Mr. Nicholas Baker To ask the Chancellor of the Exchequer whether he proposes to make changes to the definition of the public expenditure planning total.

Mr. Major The Governments objective for public spending is that it should decline as a proportion of national income. This objective relates to the total spending of central and local government and is expressed in terms of general Government expenditure (excluding privatisation proceeds). The Government seek to achieve this objective by controlling expenditure within the targets for the public expenditure planning total, which are set for three years ahead in the public expenditure survey.

Hitherto the planning total has included not only Government’s spending on their own programmes but also the total spending of local authorities. In a White Paper published today, “A New Public Expenditure Planning Total” Cm. 441, the Government propose that when the new arrangements for local government finance come into operation in England and Wales the coverage of the planning total should be changed. In future, it will include spending on their own programmes, grants paid to local authorities, the credit approvals they issue for local authority borrowing for capital expenditure, the payments to local authorities from the proceeds of the national non-domestic rate, and the external financing limits of public corporations. Thus the new planning total will include those elements for which central Government are responsible and exclude spending which local authorities determine and finance themselves.

Redefining the planning total to include only the expenditure for which central Government are responsible will make it a more effective instrument for planning and control of central Government’s operations. In combination with the disciplines on local authority spending introduced by the reform of local government finance, it will help to achieve the Government’s wider spending objective, which will continue to be directed towards total Government expenditure. Distinguishing the spending for which central Government are responsible from that which results from local authorities’ decisions will also enhance local accountability, thereby reinforcing the changes brought about by the introduction of the community charge.

One feature of the proposals is that plans for grants and credit approvals will be set out for three years ahead rather than one as at present. This will assist local authorities in their expenditure planning.

It is proposed to bring the new planning total into operation from 1 April 1990, the date of introduction of the community charge in England and Wales. This means that the 1989 public expenditure survey, the results of which will be announced in the 1989 Autumn Statement, will be conducted on the new basis.

These changes are designed to improve planning and control of public spending. They do not represent any dilution in the Governments determination to reduce the size of the public sector or to restrict total public spending, whether by central or local government.