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difficult.
It was essential to convince the markets that the Government would continue to follow a prudent policy and give top priority to the defeat of inflation. And the tax burden was still higher than it had been when the Government came into office ten years ago.
Against this background, there had to be very substantial cuts in the bids which had been made. In total, they would lead to n increase in expenditure which would be quite inconsistent With the Government's objectives and would build up commitments which would pre-empt the scope for desirable increases in spending later in the Parliament. Some aspects of the bids would cause special difficulty. Policy savings would not be easy to identify and would have to be pursued vigorously where available There had to be an assault on the problem of surplus land and dwellings in central Government. The system of cash planning rested on the assumption that higher inflation would not be automatically accommodated. He was concerned too about the size at the bids for higher capital expenditure and their effect on the already overstretched construction industry: the bids amounted to an increase in total public sector demand on the industry of some 25 per cent. The running cost bids would increase spending on the Civil Service by 10 per cent in 1990-91 over this year. The bids for the nationalised industries would, if accepted, lead to very ambitious increases in their investment programmes, again with damaging effects on the construction industry. It would also be necessary to look for offsetting savings on all expenditure, by way of raising efficiency. He would want to scrutinise territorial expenditure for evidence of overprovision relative to other parts of the United Kingdom. He would now follow up these and other points in bilaterals with colleagues, and he hoped Cabinet would agree that these should take place against the objectives set out in C(89)8.
In discussion the following were the in points raised:
a.
This
The overriding need was to inflation down. was essential both for economic reasons and so
reasons and so that the Government retained its greatest political asset, its reputation for sound economic management.
b. It was better to take the difficult decisions required on public expenditure now rather than later. This year's Survey might indeed prove to be the decisive Parliament.
C.
nt in this
The pay consequences of inflation were imant. If it were not kept under control it would increase still further the already substantial difficulties posed, be the next pay round. Pay pressures in the private sectoth their repercussions on public sector rates, were one of
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