Public Expenditure

Part of the debate – in the House of Commons at 4:43 pm on 20 February 1986.

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Photo of Mr John MacGregor Mr John MacGregor The Chief Secretary to the Treasury 4:43, 20 February 1986

I shall be making one or two comments later in my speech about progress on the public expenditure front for expenditure for this year. My hon. Friend will know that the overall statement about the economy is one for my right hon. Friend the Chancellor in his Budget statement, and I am sure that he will not expect me to say anything in advance of that. The principles of responsible budgeting, of careful choices of priorities and of better value for money are the hallmarks of this White Paper.

I move on to the report of the Select Committee on the Treasury and Civil Service, which will also enable me to touch on a number of other important matters in this White Paper. Not long after I entered this House, I became a member of this Committee's predecessor, the general Sub-Committee of the Expenditure Committee, and found it a most rewarding Committee on which to serve. I have always been greatly interested in its work and in the major contributions that it has made to previous expenditure debates and to the improvement of the White Paper itself, and this year is no exception. I know the pressures under which the Committee has to work, although I hope that the fact that we have been able to bring out the White Paper earlier this year than for many years —indeed I am tempted to say almost as early as I think it may now be possible to achieve it—has helped the Committee in its own work.

I am grateful to the Committee for the welcome that it has given to the further presentational improvements in this year's document. Without question, the document has been becoming more informative, easier to follow, and more linked in with the other parts of the public expenditure process over the years. This is in large measure due to the constructive dialogue which my predecessors and my officials have had with the Committee, and I assure the members of the Committee, and the House, that a great deal of effort goes into responding constructively to its helpful suggestions.

This year, apart from straightforward presentational improvements, there are three particular points to which I draw attention. The first is the shift to analysing spending chiefly by Department rather than by programmes. The second is making it easier for the House to relate material in the White Paper to the figures in the Supply Estimates for 1986–87 to be presented on Budget day. The third is the increased emphasis on the description of what public spending is achieving, rather than just setting out the resources being used. So I am grateful to the Committee, and in particular to my right hon. Friend the Member for Worthing, (Mr. Higgins), for its bouquets. The barbs of course I expected, and they too are there. Perhaps I can now respond to them.

The Committee has cast some doubt on the credibility of the aggregate planning totals. This is a crucial point, not just for those who follow these matters in the House, but for many interested bodies outside, and I shall deal directly with it.

The first point of which the House will want to be aware is my estimate that in the current financial year we remain firmly on course for achieving the planning totals set at the time of last year's Budget. There have been substantial upward pressures on spending to absorb, such as the continuing cost of the coal strike, higher local authority expenditure and the cost of the last social security uprating. Although it is still too soon to be certain, all the signs available to me show that we have been able to meet these pressures within the reserve that we have set aside for such unforeseen contingencies, and that the outturn will be within the planning total that we set at the time of the last Budget. That is one point to give credibility.

Next, in 1985–86, considerable amounts have had to be shifted from the reserve to social security, export credit and agricultural programmes to take account of the change in economic factors—the inflation blip in the context of the first, higher interest rates for existing export credit facilities in the second and the big increases in agriculture support intervention costs arising from the operation of the CAP and the record cereal harvest of 1984. In this White Paper, for 1986–87 we have taken account of the effects of these directly in the programmes themselves, and they have involved large additions to them. This means, I hope, that we have already anticipated what last year were adverse movements in economic and other assumptions. Therefore, we should not have to meet such additions from the reserve in the coming year. That is another reason for credibility.

Moreover, the House will note that the reserves for the next three years are higher than in any previous White Paper. That of itself seems to concern the Committee, which says that it involves a significant diminution in the value of the White Paper as a guide to government intentions", by which I suppose that it means that more should have been transferred from reserves into programmes.

It would be so much easier in one sense if we could have a precise planning process unclouded by uncertainties in the three years ahead. But that is not the world in which we live, and the Government are not unique in having to grapple with this problem. Any business in drawing up its corporate plan on the spending side must make sufficient allowances for uncertainties too. I would have thought that the fact that we have larger reserves than before in this White Paper is not a failing, as the Committee seems to imply, but rater a virtue, and. I believe that it lends greater strength to its credibility.