XN000022-1991-03-06 — Page 5

WEDNESDAY, MARCH 6, 1991

"THE LOWER REVENUE YIELDS ARE THEREFORE REFLECTED SURPLUSES OR EVEN IN BUDGET DEFICITS.

H

IN SMALLER

PLANNING PROCESS WAS THE THE NEXT

IN THE BUDGETARY STAGE PREPARATION OF THE MEDIUM RANGE FORECAST, SIR PIERS SAID.

AND MORE AND WAS AIMED

THIS FORECAST COVERED A FIVE YEAR PERIOD, A SHORTER MANAGEABLE PERIOD THAN THAT USED IN THE INITIAL PROJECTION, THUS MORE PRECISE, AND SET SPENDING LIMITS WHICH THE GOVERNMENT TO OBSERVE, HE SAID.

IT WAS SEPARATE

CAPITAL EXPENDITURE HE ADDED THAT RECURRENT EXPENDITURE AND WERE CONSIDERED SEPARATELY ALTHOUGH, AT THE END OF THE DAY,

THE THAT MATTERED.

INITIAL TOTAL PUBLIC EXPENDITURE CONSIDERATION RECOGNISED THE DIFFERENT NATURE AND PATTERN OF THE KINDS OF EXPENDITURE.

TWO

FORECAST FOR RECURRENT IN BUILDING

RANGE MEDIUM THE UP

OVER EXPENDITURE, SIR PIERS SAID: "WE BEGIN BY CALCULATING THE COST,

EXISTING LEVEL OF THE PERIOD OF THE FORECAST, OF MAINTAINING THE PUBLIC SERVICES AND OF MEETING INCREASED DEMAND FOR THEM.

COST BEEN

OF OPERATING **WE THEN MAKE ALLOWANCE FOR THE ADDITIONAL COST NEW FACILITIES WHICH WILL COME INTO USE IN THAT PERIOD, AND THE HAVE ALREADY OF NEW OR IMPROVED SERVICES AND POLICIES WHICH AGREED.

OVER

EXISTING PROVIDE

"THIS PART OF THE FORECAST SHOWS THE LEVEL OF EXPENDITURE THE NEXT FEW YEARS WHICH, IN THE ABSENCE OF MAJOR SAVINGS IN PROGRAMMES, IS PROBABLY UNAVOIDABLE IF WE ARE TO CONTINUE TO THE SERVICES TO WHICH WE ARE COMMITTED.

PLANS IN

"THE RESULTS ARE THEN TESTED AGAINST OUR LONG TERM ORDER TO ENABLE US TO JUDGE THE EXTENT TO WHICH FURTHER EXPENDITURE ON NEW OR IMPROVED SERVICES CAN BE ALLOWED.'

TI

HE SAID A SIMILAR PROCESS WAS FOLLOWED IN RELATION TO EXPENDITURE, IN PARTICULAR FOR PUBLIC WORKS.

CAPITAL

AS A FIRST STEP, WE ASSESS THE COST OF COMPLETING THE PROJECTS WHICH ARE ALREADY UNDER WAY OR COMMITTED.

CAPITAL

"THE

OF EXPENDITURE DERIVED FROM THIS LEVELS COMPARED WITH OUR LONG TERM PROJECTIONS.

ASSESSMENT ARE

"THE

DIFFERENCE BETWEEN THE TWO SETS OF FIGURES INDICATES SCOPE FOR ALLOWING NEW PROJECTS TO BE FINANCED.'

THE

THE

AND

SIR PIERS SAID FOR BOTH RECURRENT AND CAPITAL EXPENDITURE, NEW PROJECTS BALANCE OF FUNDS AVAILABLE WAS THEN ALLOCATED TO SERVICES BY MEANS OF AN ANNUAL RESOURCE ALLOCATION EXERCISE, A SYSTEM WHICH WAS INTRODUCED ABOUT FIVE YEARS AGO.

TO IMPLEMENT THIS SYSTEM, THE GOVERNMENT HAD ESTABLISHED HAD BECOME KNOWN AS THE STAR CHAMBER.

WHAT

/"THE EXERCISE