SECRET
FO
2. THESE FORECASTS COVER THE FINANCING OF ALL PROGRAMMES IN
ACCORDANCE WITH THE TIME-SCALE AGREE BETWEEN US: THEY ALSO LEAVE
SOME ROOM FOR ADDITIONAL POLICIES NOT YET DEFINED OR APPROVED
INSTANCE THE OUTCOME OF THE REVIEW OF ALL ASPECTS OF SOCIAL WELFARE
PAYMENTS AND SERVICES),
3. THE PASSAGES ON BUDGETARY STRATEGY IN THE FINANCIAL SECRETARY'S
-SPEECH, AS IT NOW STANDS, IS IN MIFT.
4. NOW THAT IT IS FIRMING UP, I AM PLEASED WITH THE BUDGET WITH ITS INCREASED INPUT OF RESOURCES OF 20% IN MONEY TERMS (OR POSSIBLY 15% IN REAL TERMS, THOUGH THE CALCULATION IS NOT EASY TO MAKE), THE PROPORTION OF SOCIAL SERVICES IN TOTAL EXPENDITURE OF 39.4% IS ALSO SATISFACTORY, AS IS THEIR INCREASE OF 20% (ESPECIALLY CONSIDERING THAT BOTH PROPORTION AND INCREASE ARE UNDERSTATED FOR THE REASONS GIVEN IN PARA, 28 OF MY TEL .155).
5. NEVERTHELESS I HAVE TWO AREAS OF CONCERN:-
(A) THE ADMINISTRATIVE AND PHYSICAL EFFORT NECESSARY TO ACHIEVE THE INCREASE IN EXPENDITURE ON CAPITAL ACCOUNT WILL BE FORMIDABLE:
(D) THE UNCERTAIN OUTLOOK FOR WORLD TRADE IN 1978 IN GENERAL, AND ABOUT THE FUTURE OF THE MULTIFIBRE TEXTILE AGREEMENT IN PARTICULAR. WHILE MAINTENANCE OF FISCAL RESERVES AT THE COMPARATIVELY HIGH LEVEL PROPOSED IN 1977/78 SHOULD ENABLE US TO SUSTAIN THE PUBLIC SECTOR BY DRAWING ON THEM IN CASE OF A SHORT FALL IN REVENUE IN '78/79, A PRONOUNCED DOWNTURN WOULD INEVITABLY FOCUS PUBLIC ATTENTION ON THE GROWTH OF PUBLIC SPENDING (38% IN REAL TERMS SINCE 73/74 AND 77.5% IN MONEY TERMS),
HOWEVER LET US HOPE THAT THINGS WILL TURN GUT MORE HAPPILY.
MACLEHOSE
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FILES
ND/IKD
PS/LORD GORONWY ROBERTS
MR.CORTAZZI
MR.MURRAY
I've
SEROT