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C.

The prospect of a downturn in private capital investment was highly unwelcome since other countries were likely to continue investing at a high level. One

particular concern was that the United Kingdom would fail to get a proper share of the substantial inward investment into the European Community likely over the next few years. Some measures to encourage continued investment might be

considered as part of the Budget strategy. But the current prospect was that although capital investment would not continue to increase during 1990 at the very high level of this year, it would still show satisfactory growth.

d. The markets would be interested in the prospects for

onetary aggregates. To retain confidence, it would be necessary to show that the long-term trend for them also was satisfactory. It was expected that MO would move down towards its target range of 1-5 per cent this year. A target range of 4 per cent had been set for next year. Movements in broad money were difficult to interpret, but there were signs of slevelling off in its growth.

e.

The

It would be important in presentation to stress that prospects for the economy were still good. The Opposition would no doubt claim that it was entering a recession. forecast that RPI inflation would still be at 5 3/4 per cent in the last quarter of 1990 would also attract criticism. However, the continued increase expected in exports and capital investment would help to show the underlying strength of the economy, which would certainly enter the 1990s in much stronger condition than the 1980s. The public would also welcome the extra resourc

areas such as transport and higher education which were of high priority because of their importance to the health of the economy in the long term.

f.

Some past forecasts had proved in the event to be too optimistic, and the Government had been forced on to the defensive when this became apparent The new forecasts were the best and most central forecasts which could be made; but inevitably there were considerable uncertainties, especially at an important turning-point for the economy.

THE PRIME MINISTER, summing up the discussion, said that the Cabinet congratulated the Chief Secretary on the outcome of the Survey. They endorsed the recommendations in his grandum C(89) 13. They also agreed with the recommendations made by the Chancellor of the Exchequer as to the content of the tumn Statement, and noted that he would make an oral statuent in Parliament that afternoon, with publication of the ful printed version on Wednesday 22 November. She would arrange fo Press to be told that the Cabinet had today successfully concluded its work on the 1989 Public Expenditure Survey, that the Chancellor proposed to make his Autumn Statement

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