New spending rules allow for pre-election spree

THE TREASURY'S new regime for controlling public expenditure leaves scope for a vote-winning surge in spending in the year before the next general election, without the Government having to break its self-imposed rules.

The Treasury's new cast-iron target for most public spending will be able to grow about three times as much in the year before the next election as in the two previous years if the Government serves its full term.

The New Control Target (NCT) is a firm cash limit for all public spending except central government debt interest, unemployment benefit and income support for people of working age.

Each year ministers will have to argue over shares of this total, but they will not be allowed to ask for extra money on top.

The Cabinet agreed last Wednesday that the NCT would be allowed to rise by no more than 1.5 per cent, excluding inflation, on average over the three years for which spending plans are set.

The Cabinet also set ceilings for real growth in NCT of 0.75 per cent in 1994/5 and 1 per cent in 1995/6.

This implies that the Chancellor is free to set a limit of up to 2.75 per cent in real NCT growth in the financial year 1996/7. That financial year runs from April 1996 to March 1997, while the general election does not need to be held until a month later.

The Chancellor will have to decide on the 1996/7 NCT growth ceiling in time for the December 1993 Budget, the first to combine tax and spending decisions.

The Cabinet has also agreed to stick to its planned total of pounds 244.5bn for spending in 1993/4, implying an NCT for the year of about pounds 240bn after unemployment and income support for people of working age is excluded and local authority self-financed spending is added.

Gavyn Davies, page 21