I would like to turn now to the Government's new plans for public spending.
Last year's Budget set a new milestone in the control of public spending. We managed to reduce the control totals that had been set in the previous spending round, by £8 billion over three years, and we reduced general Government expenditure by £15 billion over the same period.
That was a measure of the success of the new system of public expenditure control that we first introduced in 1992. Last year saw the first fruits of the programme of fundamental reviews of all Departments.
The reaction to that new approach was predictable. A welcome from the Government side of the House, criticism and alarmist nonsense from the Labour party and scepticism from the so-called experts who doubted whether those plans could be delivered in practice. In fact, for the current year, 1994–95, the first year after last year's announcement, we expect to do better than the plans that were set and we expect to underspend by more than £1 billion.
At the start of this year's survey, the Cabinet decided that we should also keep within last year's planned totals for 1995–96 and 1996–97 and allow no more than 1 per cent. real growth for 1997–98.
The plans I am about to announce deliver that remit. But it has not been easy. Last year's settlement was extremely tight. I am grateful to my right hon. Friend the Chief Secretary for his skilful handling of what has been a difficult spending round.
We have been guided by four basic principles this year. First, we have taken advantage of the welcome fall in inflation since the last Budget. Thanks to lower inflation, the price levels that we will be facing in 1995–96 will be 2½ per cent. lower than we expected when we decided on spending plans last year.
We have not let that feed through into a higher level of real resources for Government Departments. We have reduced our cash plans for almost all programmes. Lower inflation needs to be matched in the public sector by lower cash spending.
The second principle is that we have built on the increasingly important role played by private finance. All Government Departments are now looking actively at private finance options for their capital expenditure.
Thirdly, we have focused our search for savings on administrative and running costs, cutting the back office and protecting the front-line delivery of our key public services. Our aim has been to provide a better output of public services, for fewer inputs.
Fourthly, we have taken a close look at the Government's own spending priorities. We have looked for savings on some programmes so that resources can be channelled into the services and policies to which the Government attach most importance.