Running Costs

Ways and Means – in the House of Commons at 3:31 pm on 29th November 1994.

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Private finance will play an increasingly important role in financing better infrastructure for public services in coming years. I now turn to the need for firm control of the Government's current, as opposed to their capital, spending.
One of our key objectives this year has been to intensify the search for savings on administrative and running costs. My right hon Friend the Chief Secretary joined the Treasury team from the Ministry of Defence, where he played last year a lead role in preparing the defence costs study. That experience served him well.
The success of the defence costs study is just one example—a very successful one—of how key programme objectives can be protected by bearing down on the administrative costs of delivering them. The outcome has been a substantial benefit for the taxpayer and for the front line.
The defence plans in the Budget fully cover the costs of the important equipment orders that the Secretary of State for Defence announced in his statement to the House in July. Indeed, taking account of the changes in inflation since last year, these plans actually allow a slightly higher real terms level of spending than implied by the plans last Budget, accommodating the costs of military redundancies associated with the defence costs study.
Improvements in the efficiency of delivering services is a policy that must apply throughout the public sector. The plans in this Budget reflect the results of a rigorous scrutiny of the Government's own administrative costs. It must be right for modern government to modernise their own management structures and to get their own overhead costs down.
As last year, we have maintained the policy that the pressure from pay and price increases should be met by greater efficiency or other economies. This has already allowed public services to achieve very reasonable pay settlements that reflect low levels of inflation and allow modest increases in real earnings. It is ridiculous to describe this long overdue and sensible practice as a pay freeze.
But, in total, the plans in this Budget are for central Government running costs not to rise in cash terms over the four-year period from 1993–94 to 1997–98 taken as a whole. That represents a real-terms reduction in those running costs of more than 10 per cent. in the cost of government. It is consistent with the civil service White Paper expectation that total civil service staff numbers will fall significantly below 500,000 over the next four years to their lowest levels since the war.