CAB128-94_A1b — Page 196

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THE CHANCELLOR OF THE EXCHEQUER continued that, as to public expenditure, he proposed to leave the estimate of privatisation proceeds unchanged at £5 billion a year. He also proposed to fix the Reserve at £3 billion, £6 billion and £9 billion in the three Survey years. These figures were lower than those fixed

in the last Survey, but the Reserve would no longer have to accommodate the risk of overruns in self-financed local authority expenditure. The result was that the Planning Total in the three Survey years would be £179 billion, £192 billion and £203 billion, and general government expenditure £215 billion, £227 billion and £239 billion. Over the next two years this was £5.5 billion and £6.5 billion higher than the figures published in the 1988 Autumn Statement. These figures were probably higher than the markets were expecting, but lower than had second possible earlier in the Survey. The ratio of GGE to GDP would be the same over the first two Survey years as forecast in last year's Autumn Statement. It was, however, unexpectedly low this year at 38 3/4 per cent, and would therefore shor following year cent, and at $8 since 1965-6.

rise in 1990-91 to 39 per cent. In the two it would fall to 38 3/4 per cent and 38 1/2 per

per cent it would be at its lowest level

tcome, although satisfactory, would need to be presented with care, The new definitions of the Planning Total would be unmilar to the markets and it would therefore be better to concentrate on GGE. This was forecast to grow between 1988-89 and 1992-93 at 1 3/4 per cent a year, the same rate of growth as forecast in last year's Autumn Statement for the period 1988-89 to 1991-92 and much lower than the 3 per cent in the ten years up t

If Cabinet agreed, he would that afternoon make his Au tatement announcing this outcome.

9.

SEC!

In discussion the following wer

the main points made:

a. The decline in the volume of government debt had reduced the level of debt repayment and so had allowed some increase in programme expenditure within the Government's objectives. This benefit should be reflected in presentation.

b. One of the most disturbing features of the economy was the growth of credit encouraged by banks and financed partly by the import of capital. It helped to account for the worse than expected deterioration in the current accour and in inflation. More direct pressure on the lender by the Bank of England should be considered. On the other bad although it was true that the creation of credit was at a Meher level than was desirable or had been expected, there was evidence that it was declining. this from the housing and retail markets, although ocional indicators like those for new car registrations still

the other way.

10

There were clear

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