§ (a) New Table in Financial Statement
§ I have explained how the Exchequer's large borrowing requirement arises, despite the considerable surplus on revenue account. To help the Committee, I have also included in the Financial Statement for the first time a new table on the capital transactions of the public sector. It is compiled in national income terms. I will just mention a few of the main points which it illuminates.
§ About half the capital expenditure of the public sector, that is, central Government and local government and public corporations, is on economic services. Much the greater part of the public sector's capital expenditure is financed by the revenue surplus and miscellaneous capital receipts and not by borrowing. The surplus on revenue of the central Government exceeds its own capital expenditure. Nevertheless I have to borrow heavily in order to relend to local authorities and public corporations, who cannot be expected to meet more than a part of their capital requirements from their own resources. In 1967–68, they will be meeting nearly 38 per cent. from their current surpluses.
§ To look at the position in its broader setting, the borrowing requirement is large this year because public investment will be rising at a considerable rate. But, as I mentioned earlier, demand in the private sector is being damped by the fall in private investment. In these circumstances, large borrowing by the central Government for onward lending does not mean that an excessive level of total demand will be generated. The full pattern of Government transactions has been taken into account in the assessment of the economic outlook this year which I have been speaking about.
§ (b) Alternative Borrowing Arrangements
§ I hope that the new presentation in the Financial Statement to which I have referred will help to remove some misunderstanding. I have also been considering whether the time is coming to consider changes of substance. Is it necessarily the best arrangement that so much of the borrowing requirement of local authorities and public corporations is financed in the first instance by the Exchequer?999
§ The present arrangements have grown up as a series of ad hoc responses to particular situations over a long period of years. I think that the time has come to take stock of the suitability of the present arrangements in the contemporary world, and I have therefore put a review in hand. This will take some time and I will report my conclusions to the House in due course.