CONFIDENTIAL
BOUT DE PAPIER
THE BUDGET
REC REW*
IN
1 6 MAR 1977
HKK 100/2
1. In your letter of 26 February you asked that any criticisms of the Budget should be put to you for comment before they are submitted upwards, and you mentioned this again when we spoke on the telephone at the beginning of this month.
2.
The full set of Budget documents are presently with the Economists and detailed comments will not be available until about the middle of May, in time for the next meeting of our Standing Committee. You may be interested, incidentally, to learn that Michael Stewart, author of, inter alia, "Keynes and After" has now joined the Office as Special Economic Adviser to the Secretary of State and will be commenting on the Budget. He has also taken over the economic functions which David Lipsey used to perform. However, enough comment on your telegrams nos. 155, 192, 193 and 214 has been brought out for me to give you an indication of what definitive reactions you can expect. I shall, of course, write to you again once Adrian Smith and Michael Stewart have given us their definitive views. We shall be in touch with you again when we are in a position to comment in more detail. Mean- while, Donald Murray's visit and my own will provide an opportunity for a preliminary exchange of views,
3.
What follows is a synthesis of views of our Economists, the Department and other interested bodies, e.g. the Overseas Labour Adviser. The long-term financial forecast given in your telegram no. 192 is regarded as broadly acceptable. It is also pleasing that there is provision for additional social expenditure and that there will be a large increase in real terms of Government expenditure with significant increases in the key areas of education, housing, social welfare, medical, health services and labour. It is gratifying that there will be a sizeable increase in expenditure on education, an area in which there had been some
CONFIDENTIAL
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