HM Treasury News Release 26 November 1996
159/96 HMT 2
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NEW PUBLIC SPENDING PLANS - MAIN POINTS
Next year, the Government is set to meet its target of
reducing spending as a share of national income to below 40%.
Despite new pressures on public spending, the Government
has maintained firm control. Budget decisions have saved
7 billion Pounds over the next three years.
This more than meets the remit from Cabinet to keep
within previous cash plans. For 1997-98, Budget decisions
have cut 2 billion Pounds off spending, of which 1 3/4
billion Pounds is from the Control Total. There are greater
reductions in the following two years.
Total cash plans have been cut in every Budget this
Parliament.
The proportion of national income going into Government
spending in the UK is 8 percentage points lower than the
average of other EU countries. If UK spending grew to those
levels the Government would have had to raise over 2,000
Pounds a year in extra tax from every British household, or
borrow an equivalent amount. The Chief Secretary to the
Treasury, William Waldegrave, said, "Britain is now on the way
to joining the most successful modern economies, which are
those which control spending."
The level of public spending next year will be 24 billion
Pounds lower than projected when Kenneth Clarke became
Chancellor in 1993.
Priority Services
While cutting total spending the Government is providing
more for the services people care most about:
- The NHS. The Health Service will have an extra
1.6 billion Pounds for patient services next year.
This provides 3% real growth for current spending on
hospital and community health services.
- Education. Next year there is 875 million Pounds
extra for schools, colleges and universities. Of
this 830 million Pounds is for schools, a 4.4%
increase compared with last year;
- Combatting crime. 450 million Pounds more in
planned public spending for police and prisons in
1997-98. Plans allow for 5,000 extra police
officers by 1998-99 and 8,600 new prison places.
The Government has also provided stability for Defence,
maintaining the real value of last Budget's plans for 1997-98.
Planned spending continues at that real level for 1998-99, and
increases in the following year.
In addition to conventional public spending, the Private
Finance Initiative will continue to deliver high quality
capital projects - for more effective and better value for
money services. Last year 1 1/2 billion Pounds worth of
deals had been agreed. That figure has now risen to over
7 billion Pounds.
Budget Savings
The Budget's savings came from close scrutiny of spending
programmes. Taxpayers' money will be better spent than ever
before:
- The Government has made savings and directed money
to priority areas. For most departments, this
approach means that spending next year will grow
less fast than prices. Like Government as a whole,
departments will therefore have to focus on
priorities, making their programmes more efficient
and effective. For example, the running costs of
departments have been reduced by 8 1/2 % since
1992-93 in real terms, and are planned to fall a
further 7% in the next three years.
- Benefit fraud and abuse are unfair and unacceptable.
So too are tax evasion and avoidance which make
large inroads into tax yields. New measures will
crack down hard on fraud and evasion and increase
compliance. This will secure the tax base, counter
benefit abuse and protect the ordinary taxpayer.
800 million Pounds will be spent by a number of
departments to save an estimated 6.7 billion Pounds
in tax receipts and spending.
- Social security spending has grown much more quickly
than national income since the start of the welfare
state. Average real growth of the programme over
the next three years is expected to be 1 1/2 %, well
within the growth of national income. Benefits will
be better targeted, and the crackdown on fraud and
evasion will save substantial amounts. Alongside
these measures, a 100 million Pounds package will
provide help for the long-term jobless through
expanded Project Work pilots and the new Contract
for Work scheme.
Spending in aggregate
Budget decisions have cut the Control Total and taken
measures to make savings on cyclical social security.
The Control Total and GGE(X) will each grow by an average
of only 1/2 % a year in real terms over the next three years.
Public spending as a share of national income has fallen
from 43 1/2 % in 1992-93 to 41 1/4% this year.
Because spending is growing more slowly than national
income, this share is projected to fall by a further
3 percentage points to 38 1/4% in 1999-2000. The 40% target
will be achieved in 1997-98 - as projected last Budget.
Notes for Editors
1. Further details of the Government's spending plans are
set out in Chapter 5 of the Financial Statement and Budget
Report (the Budget "Red Book").
2. The spending plans of individual departments are set out
in their own press notices.
3. A more detailed account of new measures to crack down on
fraud and evasion and increase compliance are set out in
Budget Day press notice HMT 3.
4. The Government is committed to reduce the share of
national income taken by the main measure of spending - GGE(X)
- to below 40%. It seeks to deliver that by ensuring that
GGE(X) - the total spending of central and local government,
excluding privatisation proceeds, spending from the proceeds
of the National Lottery and net of interest and dividend
receipts - grows less fast than trend growth in the economy.
5. The Government's main tool for controlling public
spending is the Control Total. This includes some 85% of
GGE(X), and it excludes the two elements of spending most
directly related to the economic cycle: cyclical social
security and debt interest payments. The Government's cash
plans set out planned spending within the Control Total.
6. On 18 July, Cabinet discussed the 1996 Public Expenditure
Survey. Cabinet invited the Ministerial Committee on Public
Expenditure - EDX - to conduct under the Chancellor's
chairmanship a rigorous scrutiny of all public spending
programmes. The Committee's remit was to keep spending
"within the tightest possible limits, and certainly within the
cash plans announced in the Budget last year".
7. If you have access to the Internet you can get details of
the Budget at http://www.hm-treasury.gov.uk Other Treasury
material can also be found at this address.