Mr Major’s Written Parliamentary Answer on Government Expenditure – 13 June 1988

Below is the text of Mr Major’s written Parliamentary Answer on Government Expenditure on 13th June 1988.

Mr. Gordon Brown To ask the Chancellor of the Exchequer if he will give a figure for general Government expenditure in 1988–89 equivalent to that in table 1.4 of Cm. 288–1, recalculated on the assumption that there is a sustained (a) 10 per cent. rise and (b) 10 per cent. fall in the trade-weighted exchange rate over a period of one year from the level used in the formulation of the above table.

Mr. Major The impact of exchange rate changes on the economy would depend on assumptions made about the financial policies being followed at the time. The impact of the subsequent economic effects on public expenditure cannot be determined uniquely either as this depends on the control regime being operated. A large part of the planning total is subject to cash limits where the presumption is that no adjustments are made for variations in prices or costs. Furthermore, the rates of social security benefits are determined in relation to price levels known before the start of the financial year. There is no unique relationship between changes in the exchange rate and debt interest.