Public Expenditure In Britain: The Crisis of Control

Authors


  • *

    I am grateful to Mr. T. S. Ward of the Department of Applied Economics, Cambridge for his comments on an earlier draft of this paper.

Footnotes

  • 1

      Wynne Godley, evidence to the Select Committee on Expenditure, 1st Report from the Expenditure Committee, 1975–76. The Financing of Public Expenditure, V. 11. pp. 212223. Mr. Godley is Director of the Department of Applied Economics at Cambridge.

  • 2

      For an extreme view, see Milton Friedman, Encounter, October 1976.

  • 3

      Friedman, op. cit.

  • 4

      R. R. Neild and T. S. Ward, The Budgetary Situation: An Appraisal, Department of Applied Economics, Cambridge, 1976.

  • 5

      Ibid.

  • 6

      H. C. Deb., 26 October 1976.

  • 7

      Klein, Buxton and Outram, Constraints and Choices, Centre for Studies in Social Policy, March 1976, Table 2.

  • 8

      The reasons for this are technical and complex. See Wynne Godley, ‘The Measurement and Control of Public Expenditure’, Economic Policy Review, No. 2, March 1976; and, Godley, Measurement, Forecasting and Control of Public Expenditure, 3rd Report from the Expenditure Committee. 1970–71. H.C. 549, pp. 138–144.

  • 9

      Quentin Outram, The Significance of Public Expenditure Plans, Centre for Studies in Social Policy, 1975, pp. 8–10. Even for the years up to 1973–74 when the aggregate public expenditure forecasts and outturns were in rough balance, individual programme components showed much greater variation between forecast and outturn.

  • 10

      White Papers, passim, and Sir Samuel Goldman, The Developing System of Public Expenditure Management and Control, Civil Service College Studies No. 2, HMSO 1973, pp. 9–12.

  • 11

      An analysis by the Centre for Studies in Social Policy shows a discrepancy between planned expenditure and outturn for 1975–76, 1976–77 and 1977–78, on the basis of estimates contained in the white papers up to 1976. Provisional outturn for the first two of these years shows them to be roughly in balance, as a result of the cuts made to programmes in July and December 1976. Their explanation of the cause of the estimated discrepancy gives greater weight to political factors then to the inadequacy of PESC Constraints and Choices, op. cit., pp. 15–22 and Table 7.

  • 12

      From a paper delivered by T. S. Ward, Special Advisor to the Select Committee on Expenditure, to the Institute of Fiscal Studies, 1976.

  • 13

      Evidence of Wynne Godley to the Select Committee on Expenditure, 1st Report, 1975–76. The Financing of Public Expenditure, Vol 2. H.C. 69–11, pp. 21223.

  • 14

      Treasury evidence and memo to Select Committee on Expenditure, 1st Report, 1975–76, op. cit., pp. 225–54.

  • 15

      The Times, 19 December 1975.

  • 16

      Select Committee on Expenditure 4th Report. 1975–76, The White Paper ‘Public Expenditure to 1979–80’ (Cmnd. 6393), H.C. 299.

  • 17

      See the memo and oral evidence of D. Heald to the Select Committee on Expenditure. 1st Report, 1975–76, The Financing of Public Expenditure, Vol. 11. H.C. 6971, pp. 199–211.

  • 18

      H. Heclo and A. Wildavsky, The Private Government of Public Money, Macmillan, 1974.

  • 19

      4th Report of the Select Committee on Expenditure, 1975–76, The White Paper ‘Public Expenditure to 1979–80’ (Cmnd 6393), H.C. 299, para. 11.

  • 20

      The effectiveness of such action is questionable. Public expenditure as a short term regulator is now thought by many economists to be at best a dubious policy instrument. ‘Many people, often coming to the problem from radically different positions, have expressed dissatisfaction with the attempt, and scepticism at the ability, of governments to bring off a policy of “fine-tuning”.’ Memo by Francis Cripps, Wynne Godley and Martin Fetherston, 9th Report of the Select Committee on Expenditure, 1974. Public Expenditure, Inflation and the Balance of Payments, H.C. 328, p. 1.

  • 21

      See 3rd Report of the Select Committee on Expenditure, 1974–75, The White Paper ‘Public Expenditure to 1978–79’ (Cmnd 5879), Vol 1, H.C. 278–1, p. xi.

  • 22

      9th Report of the Select Committee on Expenditure, 1974, op. cit., qu. 419.

  • 23

      3rd Report of the Select Committee on Expenditure, 1974–75, op. cit., para. 22.

  • 24

      C. Sandford, ‘Public Spending and Private Benefit’, The Financial Times, 29 December 1975.

  • 25

      T. S. Ward, paper to Institute of Fiscal Studies, 1976, pp. 11–12.

  • 26

      1st Report of the Select Committee on Expenditure, 1975–76, The Financing of Public Expenditure, H.C. 69–11, Vol 11, qu. 796.

  • 27

      Ibid., evidence of Sir Alec Cairncross, former Head of the Government's Economic Service, qu. 129.

  • 28

      Wynne Godley, ‘The Management and Control of Public Expenditure’, op. cit., p. 58.

  • 29

      Wynne Godley in evidence to the Select Committee on Expenditure, 1st Report, 1975–76, op. cit., qu. 778.

  • 30

      Wynne Godley, ‘The Measurement and Control of Public Expenditure,’ op. cit.

  • 31

      See for example, 3rd Report of the Select Committee on Expenditure, 1970–71, Command Papers on Public Expenditure, H.C. 549; 8th Report. 1971–72, Relationship of Expenditure to Needs, H.C. 515; Sir Richard Clarke, New Trends in Government, Civil Service College Studies No. 1 HMSO, 1971.

  • 32

      3rd Report of the Select Committee on Expenditure, 1970–71, op. cit., paras. 15–19 and evidence qq. 328–47.

  • 33

      1st Report of the Select Committee on Expenditure. 1975–76, op. cit., qq. 784–6.

  • 34

      For details see ‘Control of Local Authority Expenditure’, memos, by the Department of the Environment and Prof. A. R. Ilersic, and their evidence to the Select Committee on Expenditure, 1st Report, 1975–76, op. cit.

  • 35

      Proposed by Wynne Godley and endorsed by the Select Committee on Expenditure. 1st Report, 1975–76, H.C. 69–1, V. 1. para. 11.

  • 36

      Ibid, para. 12.

  • 37

      2nd Special Report of the Select Committee on Expenditure, 1975–76, The Financing of Public Expenditure, Observations by the Treasury on the 1st Report, H.C. 178, 10 Feb. 1976, para. 6.

  • 38

      3rd Special Report of the Select Committee on Expenditure, 1975–76, Cash Limit Control of Public Expenditure Programmes, Observations by the Treasury on the 12th Report. H.C. 204, 19 Feb. 1976, para. 8.

  • 39

      Supplementary Estimates will still be required, not to finance over-spending, but to provide for a forecasted movement of pay and prices which occurs after the submission of the main Estimates which provide the cash for services at the then ruling prices plus any pay increases, etc., in the pipe-line.

  • 40

     Cash Limits on Public Expenditure, Cmnd. 6440, HMSO, April 1976.

  • 41

      For a discussion of this, and the issue of Parliamentary control of cash-limits, see the report of the Public Accounts Committee, 1976–77, April 1977.

  • 42

      Arthur Anderson and Co.

  • 43

      Their employment as Treasury consultants became the subject of Parliamentary criticism in the Spring of 1977, when it was alleged that the firm provided simultaneously advice on tax planning matters for large companies, and laid on tax avoidance courses for senior executives. H.C. Debs. 9 Feb. and 6 Apr. 1977.

  • 44

      Peter Vinter, former Chairman of the Public Expenditure Survey Committee. ‘The Early Warnings Cash Limits Need’Financial Times, 1 April 1976.

  • 45

     Cash Limits on Public Expenditure, op. cit.

  • 46

      Colin Jones, ‘How Whitehall Grants Invite Local Authorities To Spend’. Financial Times, 12 July 1976.

  • 47

     The Government's Expenditure Plans, Cmnd. 6721–1, 6721–11, 1977.

  • 48

      The Select Committee on Expenditure criticised the cuts on the grounds of the disproportionate share contributed by capital expenditure. In the two years to 1978–79 capital expenditure is planned to fall by 18.4% in real terms, while current expenditure is planned to rise by 0.7%. Select Committee on Expenditure, 1976–77.

  • 49

      In April 1977 the Treasury announced a campaign to obtain value for money and avoid waste in the expenditure programmes of the Whitehall departments, and its intention to invite the PAC and the Select Committee on Expenditure to undertake ‘value for money’ investigations. The Times, 19 April 1977.

Ancillary