HM Treasury News Release
100/98 11 June 1998
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MAJOR REFORM OF PUBLIC SPENDING RULES
Major changes to tighten the control and to improve the long term planning of public
spending were announced today by the Chancellor, Gordon Brown, in the Economic
and Fiscal Strategy Report.
The Chancellor announced that:
Departments will be given distinct current and capital budgets and will
be expected to manage them separately. This means that investment
plans will no longer be squeezed out by pressure of current spending;
spending plans in total will now be based on all spending across the
public sector, to be known as Total Managed Expenditure (TME);
the Government will end the practice of the annual Public Expenditure
round; instead
departments will be set firm multi-year spending limits for 1999-2000,
2000-01 and 2001-02 when the outcome of the Comprehensive Spending
Review (CSR) is announced;
these departmental limits will be drawn together into a new total, the
Departmental Expenditure Limits (DEL); and
departments will have much extended powers to carry budgets over
from year to year;
resources will be allocated and monitored on the basis of agreed
outcomes and departments will be set new quality standards;
firm multi-year limits are not appropriate for the large demand-led
programmes, which will be brought together in Annually Managed
Expenditure (AME);
AME will be subject to annual scrutiny as part of the Budget process
and taken into account when the Government sets its plans for TME and
DEL.
Notes to Editors
1. The reforms will tighten spending control and lead to a more strategic approach
to public expenditure planning and better prioritisation of resources by
departments. In the past, they have suffered from being able to plan only one
year ahead and have been forced to use up vital resources at the end of one
year when these could have been be better spent in the next.
2. DEL will include spending financed through the Capital Receipts Initiative and
Welfare to Work spending, although the latter will continue to be administered
through an inter-departmental budget. DEL will include the cost of bad debt and
subsidies on student loans.
3. The main elements in AME will be social security expenditure, local authority
self-financed expenditure (LASFE), Scottish Expenditure financed by the
Scottish variable rate of income tax and non-domestic rates, payments under the
Common Agricultural Policy and net payments to EU institutions and public
corporations being allowed additional flexibilities within separately managed
limits.
4. Resource Accounting and Budgeting (RAB), which the Government plans to
introduce in 2000, will bring in further major improvements. It will reinforce the
Government's fiscal strategy by providing a more accurate distinction between
capital and current spending, and will improve the planning and the
management of capital assets.
5. The Government also announced today that:
from 1999-2000 some public corporations which are largely self-financing
will be given greater financial flexibility to put them on a more commercial
footing. Following consultation on the details, it intends to give profitable
local authority airports additional flexibility;
the RAB accounting treatment of student loans will be brought forward
from 1999-2000 to help improve decision-making and the management
of longer term liabilities;
departments may be able to retain more receipts, such as some fines and
levies, where this would lead to greater efficiency and effectiveness.
6. Accompanying the Economic and Fiscal Strategy Report there are six Treasury
Press Releases 96/98 to 101/98.
If you have access to the Internet you can find this news release at
http://www.hm-treasury.gov.uk. Other Treasury material can also be found at this
address.
# = pounds sterling