TNAG-0618-FCO40-766-Aid-framework-from-UK-to-Hong-Kong-1977 — Page 93

CODE 18-77

(HMSO 12/76)

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AID FRAMEWORK 1978-79-1980-81

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The purpose of this circular is to invite proposals for the 1978-79 1980-81 aid framework. The general arrangements governing the aid framework procedure are set out in the December 1975 edition of Office Procedure, Volume II, Section B - 2. The only departure from that procedure is that it will not be necessary for functional technical cooperation to be broken down into territorial allocations.

Public Expenditure Survey (PES)

2. Reductions in the Aid Programme announced by the Chancellor last December have been consolidated in the Public Expenditure White Paper (Cmnd 6721). Volume 1 was published at the end of January; Volume 2, with details of individual programmes, is to be published separately. The net aid programme at 1976 prices has been reduced by £50 million and £55.4 million for the years 1977-78 and 1978-79 respectively; reductions for 1979-80 and 1980-81 are by £5 million in each of those years. The Government will be reviewing expenditure plans for 1979-80 and 1980-81 again during the 1977 public expenditure survey: at this stage therefore figures for those two later years can only be regarded as provisional.

Cash Re-valuation

3.

The amount of money available for the aid programme depends on converting public expenditure survey prices into cash using indices provided by the Treasury. As I explained in my minute to Heads of Departments on 16 December the latest indices reflect Treasury forecasts that the export prices of British goods will rise faster than domestic prices (when expressed in sterling) during 1977-78. The cash value of most of the aid programme is related to the forecast export price index with the result that there is a considerable increase in the cash figure of the aid programme for 1977-78. The combined effect of the £50 million cut, at 1976 prices, and re-valuation to the 1977 cash prices gives a provisional cash figure for the 1977-78 net aid programme of £623 million. Although this is less than the figure of £652 million given in my

earlier minute (because we have had to take account of revised Treasury forecasts) it is still some £26 million larger than allowed for 1977-78 in the current aid framework.

Implications for the Current Aid Framework 1977-78 1979-80 (as

approved on 24 August 1976.

4.

In my minute of 16 December I asked departments to regard any part of their framework allocation which was not firmly committed às frozen until Finance Department could give further guidance. This constraint is no longer necessary. However departments should

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