Comment: Putting a new gloss on an old story

Peering through the Whitehall fog, the public spending savings talked about in the Budget come down to three simple elements: an increase in privatisation proceeds, a cut in the contingency reserve and the knock- on effect of the private finance initiative. The PFI is a newish element in the equation, but the other two are long-standing Treasury tools for putting a new gloss on old figures.

Privatisation proceeds have been raised by pounds 1bn to pounds 4bn in the next financial year, compared with the projections in the Budget a year ago, but that tells only part of the story. The pounds 4bn reflects the firming up of plans to sell both Railtrack and British Energy, the nuclear company, next spring and summer. A year ago, it was doubtful whether the Government would get either away.

It is possible that the Treasury is looking at a two-part offer for British Nuclear or Railtrack, which would delay some of the proceeds to the following financial year. But this is politically unlikely, at least in the case of Railtrack, because it would make it easier for a Labour government to take back control.

The Treasury's estimate for the value of the two sales confirms some of the more pessimistic forecasts from the City - which see Railtrack worth only pounds 1.5bn to pounds 2bn and British Energy perhaps pounds 2.5bn.

As always, the privatisation proceeds figure tells only half the story. The rest of the railway privatisation proceeds, apart from Railtrack, are being absorbed straight into the Department of Transport's budget to offset the railway subsidy of pounds 1.6bn a year. They are being used directly to keep the department's budget under control.

Garnering extra funds from the contingency reserve is another well- tried policy. The reserve counts as part of the ''control total'' for spending, and its shrinkage plays a big role in this year's Budget sums. The amount the Treasury sets aside in each Budget for unplanned overspending is lower for near years than distant ones on the reasonable grounds that it is easier to predict spending levels next year than three years hence.

The tradition is that for the forthcoming financial year, the contingency reserve is roughly halved, but in Tuesday's Budget the cuts were a bit bigger, giving him a bonus of pounds 250m next year, rising to several billion in later years.

Finally, there is the PFI, a laudable method of shaking up the way public projects are financed and run. The drawback is that the Government is perennially optimistic about the rate at which PFI spending can build up. On its own somewhat suspect figures, an average of pounds 2bn a year spent on capital investment under the PFI over the next three financial years has one tremendous public spending advantage.

With the PFI, the Government does not put capital up front, paying for the services rendered only when projects are up and running. That delay in outgoings brings a substantial, though hard to measure, cash flow boost for the Treasury. All in all, these three changes more than account for the pounds 3.1bn tax giveaway.