Tag: 1998

The press release issued by HM Treasury on 11 June 1998.

The Chancellor of the Exchequer at the Lord Mayor’s banquet at the Mansion House on June 11th 1998.

I am delighted to be here at the Mansion House, to thank you Lord Mayor for your kind introduction to me and to thank you also for your toast to the prosperity of the public purse and to my health.

The Chancellor of the Exchequer, Gordon Brown, speaking to the British Retail consortium annual dinner said:

“just as we must work with our international partners to secure global stability and growth, so we have been taking action at home to set in place a long-term and credible  platform to achieve the stability that is an essential  pre condition for long-term investment, growth and jobs.

It is in pursuit of our long-term goals – high and stable levels of growth and employment- and the rejection of the short-termism and stop-go polices that have undermined the UK economy in the past- that we have taken tough decisions.

In the face of rising inflationary pressure and the large structural deficit we inherited, we made the bank of England independent, the MPC raised interest rates and we tightened fiscal policy by 20 billion pounds last year, amounting to 3.5 per cent of GDP from financial year 1996-97 to financial year 1999-2000.

There must be no return to the boom-bust we saw in the late 1980s and early 90s, when interest rates reached 15 per cent, 1 million manufacturing jobs were lost, nearly 170,000 businesses went under and thousands who faced mortgage misery and negative equity are even now not yet recovered from it.

We are committed to steering a path of stability based on a stable monetary framework and sound public finances.

And it is because of the reduction in borrowing and tough action on inflation, which has today seen us meet our inflation target for the second month in succession, that Britain is now better placed to steer a path of stability in these troubled times for the global economy.

We have consistently taken a prudent and cautious approach to managing the public finances and we will continue to do so. Our projections have been based on cautious   assumptions   which have been audited by the independent national audit office and our plans have built in margins to cover uncertainties, including the risk of slower growth.  We have worked within the previous government’s spending plans for the first two years and our careful plans mean that current spending is now set to grow in real terms by less over this parliament than the last.

As I have said, slower world growth makes it inevitable that growth in Britain next year will be more moderate than previously expected.

But because of the prudent approach we have followed, even with more moderate growth next year we remain on track to meet our strict fiscal rules over the economic cycle while maintaining our commitment to an additional 40 billion pounds for improvements in health and education.”

The press release issued by HM Treasury on 11 June 1998.

A new format for the public finances was unveiled today by the Chancellor, Gordon Brown in the first Economic and Fiscal Strategy Report.

The new format:

• emphasises the importance of distinguishing between current and capital spending;
• corresponds more closely to the Government’s two fiscal rules; and is more in line with best international practice and national accounts.

The main changes are to separate the current and capital accounts and to focus on an  internationally-accepted accruals-based measure of budget balance.  The three principal measures are:

•  surplus on current budget – the difference between current receipts and current spending – will be used to judge the golden rule;
• public sector net borrowing – measuring the extent to which net investment is not financed by the surplus on current budget – will be the principal measure of the Government’s budget deficit; and
•  net public sector debt ratio – total debt of the public sector (net of certain liquid assets) as a proportion of GDP – will be used to judge whether the Government is meeting its sustainable investment rule.

The public finance tables will continue to show the public sector net cash requirement  (previously called PSBR, but being renamed because it does not exactly match what  the government has to borrow).  However, public sector net borrowing will be given  greater prominence because it is a better indicator of the underlying budgetary position.

This presentation links the current and capital budgets to other key fiscal concepts:

•  the current budget is linked to achieving the golden rule over the economic cycle and to the change in public sector net wealth;
•  the sum of the current and capital budgets is linked to the net cash requirement and the change in net public sector debt.

There will be no change to the financing rule.

The press release issued by HM Treasury on 11 June 1998.

Major changes to tighten the control and to improve the long term planning of public spending were announced today by the Chancellor, Gordon Brown, in the Economic and Fiscal Strategy Report. The Chancellor announced that:

Departments will be given distinct current and capital budgets and will be expected to manage them separately. This means that investment plans will no longer be squeezed out by pressure of current spending; spending plans in total will now be based on all spending across the public sector, to be known as Total Managed Expenditure (TME); the Government will end the practice of the annual Public Expenditure round; instead departments will be set firm multi-year spending limits for 1999-2000, 2000-01 and 2001-02 when the outcome of the Comprehensive Spending Review (CSR) is announced;

these departmental limits will be drawn together into a new total, the Departmental Expenditure Limits (DEL); and
departments will have much extended powers to carry budgets over from year to year; resources will be allocated and monitored on the basis of agreed outcomes and departments will be set new quality standards; firm multi-year limits are not appropriate for the large demand-led programmes, which will be brought together in Annually Managed Expenditure (AME);

AME will be subject to annual scrutiny as part of the Budget process and taken into account when the Government sets its plans for TME and DEL.

The press release issued by HM Treasury on 11 June 1998.

Public investment will almost double, up to a level of 1.5 per cent of the economy by the end of this Parliament, announced Chancellor Gordon Brown in launching a comprehensive programme to reverse past capital under-investment in public services and infrastructure.

To address the track record of under-investment and ensure that existing and new investment meets the public’s best interests the Chancellor today announced a comprehensive programme:

• an Investing in Britain Fund of up to 1.5 per cent of GDP a year by the end of this Parliament;
• to ensure resources are used to best effect, Departmental Investment Strategies will be published together by the Treasury in Spring 1999; and
• a Capital Modernisation Fund to encourage worthwhile, innovative investments on top of the resources allocated in the CSR;
• decisions on investments and existing assets will be taken on the basis of what delivers the public interest. What counts is what works. So there will be a programme of asset sales and additional investments financed by PFI arrangements;
• following publication of the National Asset Register last November, a further £1 billion a year will be made available for reinvestment as a result of central government disposals;

The following public private partnerships are also planned so as to:

• create new investment in safety for the National Air Traffic Services;
• finance higher investment in developing countries for the Commonwealth Development Corporation;
• new commercial opportunities for the Royal Mint and a broader partnership with the private sector for the Tote;
• in addition, the Government plans sales in 1999-2000 of: a further tranche of student loans;
• debt held in British Energy plc.
• Belfast Port;
• licences to operate the new generation of mobile telecoms services;
• the plans include £2 3/4 billion a year of local authority asset receipts.

The press release issued by HM Treasury on 11 June 1998.

The Government’s planned spending totals for the rest of the Parliament were announced today by the Chancellor, Gordon Brown.  The plans lock in, and take forward, the fiscal tightening published in the 1998 Budget and ensure the Government meets its two strict fiscal rules.

The Chancellor said:

“Today I have outlined  the Government’s fiscal strategy for the remainder of this
Parliament through announcing the overall spending plans.

It is only because we have set this tough framework, based on strict control of  current spending, a prudent debt ratio and a fiscal tightening, that it is possible to take the action necessary to reverse the chronic under-investment in our country’s health, education and transport and housing infrastructure, and to re-equip Britain as a modern nation.”

The key features announced today are that:

• real current spending will grow at an average of 2 1/4 per cent a year over the remainder of the Parliament;
• an Investing in Britain Fund will be established to raise public sector net investment towards 1 1/2 per cent of GDP;
• surpluses on the current budget are forecast for the rest of the Parliament;
• the public sector net debt ratio is set to continue to fall to below 40 per cent of GDP by the end of the Parliament; and
• net public sector borrowing is projected to fall by 3 1/2 per cent of GDP over the three
• years between 1996-97 and 1999-00 – the same fiscal tightening as was published in the Budget.

The press release issued by HM Treasury on 11 June 1998.

‘Stability and Investment for the Long Term’, is the message of the first ever Economic and Fiscal Strategy Report published today.  It lays the foundations for the Comprehensive Spending Review and illustrates the Government’s commitment to an open and transparent economic and fiscal policy.

The Chancellor said:

‘Today I set out a new framework for sustainable public finances that will deliver  modern public services for our country.

A month from now, on the basis of this framework, the Government will set out the results of the Comprehensive Spending Review with the detailed allocations to individual departments.

The central challenge is to combine prudence and stability in public finance with  investment and reform in public services.’

The EFSR:

•  provides the first key information on the outcome of the Comprehensive Spending Review;
•  sets out a fiscal strategy and planned spending totals for this Parliament(Treasury Press Release 98/98);
•  launches a comprehensive investment programme to invest in the renewal and improvement of Britain’s infrastructure and public sector (Treasury Press Release 99/98);
•  announces planned public private partnerships and a programme of asset sales (Treasury Press Release 99/98);
•  announces a major reform of public expenditure planning and control(Treasury Press Release 100/98); and
• unveils a new and better format for the public finances (Treasury Press Release 101/98)

The press release issued by HM Treasury on 3 June 1998.

Andrew Turnbull is to be the new Permanent Secretary to the Treasury. He will take over from Sir Terence Burns who will be retiring at the end of June.

It was also announced today that the Queen has been pleased to approve a life peerage upon Sir Terence Burns.

Andrew Turnbull who moves from his current post of Permanent Secretary of the Department of the Environment, Transport and the Regions, said:

“I am delighted to be able to return to the Treasury. It has of course moved on significantly since I left four years ago in its structure and its objectives. What is unchanged, however, is the importance of its role at the centre of government. I look forward to working with many old friends, and the new arrivals too, in carrying forward its huge agenda.”

The Chancellor of the Exchequer, Gordon Brown said:

“I regard Terry Burns as one of our country’s outstanding post-war economists and public servants, who has made an enormous contribution to public policy and public administration in nearly twenty years at the heart of the Treasury.

“And while I fully understand that after carrying the responsibilities of Permanent Secretary for seven years he now wishes to seek a fresh challenge, I know that the Treasury – and Chancellors of both parties – have reason to be grateful for the expertise, wisdom and quiet resilience he has brought to the job of Permanent Secretary.

“In the last year, in particular, I am grateful to him for so expertly managing the transition to a new Government and, among his many other successes, in guiding us through the major reform of monetary policy that has brought the independence of the Bank of England.

“I am pleased to count Terry not only as an adviser, but as a friend, and I hope that as a member of the House of Lords he may be prepared to be called upon for his advice in future years.”

In announcing his retirement, Terry Burns said:

“After more than 18 highly enjoyable and fulfilling years in the Treasury, 7 as Permanent Secretary, and having managed the smooth transition to a new Government, I have decided that now is the right time to consider a fresh challenge and a different mix of responsibilities in the next period of my working life.

“It has been an enormous privilege to have worked at the heart of the Treasury with so many able and dedicated people and to have played a part in the successful transformation of the conduct of economic policy.

“Andrew Turnbull and I have worked closely as colleagues. I am delighted that he is to succeed me.”

The press release issued by HM Treasury on 2 June 1998.

Three new venture capital funds totalling 240 million pounds to support small and medium size businesses – particularly in high-tech sectors such as computers, biotechnology, electronics and communications – were announced by Chancellor of the Exchequer Gordon Brown today.

The announcement was made at a major conference on venture capital, growth and employment, hosted by the Chancellor as part of the UK Presidency of the EU. Commenting on the announcement, Mr Brown said :

“The UK has made the creation of prosperity and jobs a keystone of its Presidency of the EU.

“Encouraging entrepreneurs to start up new businesses and helping dynamic and innovative small businesses to grow is vital to achieving the high levels of growth and employment we all want to see.

“The funding announced today is an important addition to the steps already taken to encourage UK businesses to prosper. It will do much to encourage initiative among businesses seeking to launch new ideas and new products, supporting them in the vital early stages of development and giving them greater confidence to enter highly competitive market places where they can make their mark.” The funds announced today are:

120 million pounds regional development fund set up by Baring Private Equity Partners, in collaboration with the parent company, ING Bank, and the European Investment Bank.

100 million pounds fund established by British venture capital company Advent, aimed specifically at start-up and early stage high tech firms. The fund, including 7.5 million pounds from the European Investment Fund, will invest 80 per cent of its funds in the UK and the remainder in the rest of Europe.

20 million pounds support for the network of Midland Enterprise Funds, to be raised by the Midland Bank and the European Investment Bank.

Today’s conference was addressed by a range of international speakers, including Dominique Strauss-Kahn, the French Minister for Finance, Economics and Industry, EU Commissioner Mario Monti and representatives of US and European venture capital and entrepreneurial sectors. It was attended by experts from the UK, other EU Member States and Eastern Europe.

It is seen as a vital opportunity to share lessons from those who have already succeeded in developing a vigorous venture capital sector, particularly to hear the views of entrepreneurs and investors from the United States and from other EU countries.

The conference will raise the profile of venture capital and to underline its importance across the EU in supporting small and medium-sized enterprises (SMEs), particularly in high tech, high growth areas such as IT and biotechnology. It will promote venture capital finance for innovative SMEs with high growth potential, focussing on start-up and early stage finance.

Gordon Brown’s invitation to French Finance, Economics and Industry Minister Dominique Strauss-Kahn to address the conference reflects cooperation under the Franco-British Taskforce on Entrepreneurship, announced by the Prime Minister in his speech to the French National Assembly in March 1998, and subsequent progress in paving the way for effective assistance to developing companies.

The Taskforce has already met once, chaired by Christian Pierret, Minister for Industry in the French Finance Ministry and his UK counterpart, Lord Simon. The countries share the enthusiasm to develop an agenda to encourage entrepreneurship, looking at areas of public policy which impact on entrepreneurs – taxation, regulatory structures, quality of labour and access to venture capital.

The UK is keen to learn from the French about their system of tax credits for research and development, and to share experience of trying to reduce red tape, making the tax system more entrepreneur-friendly, and to hear about progress in changes initiated by Mr Strauss-Kahn to French research and development funding which facilitates the move from hi-tech research into commercial development.

The press release issued by HM Treasury on 2 June 1998.

Part I: UK Government Reserves

The overall level of the UK Government’s spot reserves fell by $13 million in May, bringing the end-May total to $34,792 million (21,325 million pounds) compared with $34,805 million (20,809 million pounds) at the end of April.

The underlying change in the reserves was a fall of $1 million.

The underlying change excludes capital transactions that are included in the overall change. In May:

• there were repayments of $13 million of public-sector borrowing for which the Government has provided an exchange-rate guarantee under the Exchange Cover Scheme (ECS); and
• receipts of $1,064 million from Government ECU Treasury bills issued exceeded capital repayments of $1,063 million on those maturing by $1 million.

Part II: Bank of England Holdings of Foreign Currency and Gold

The level of the Bank of England’s spot holdings of foreign currency and gold was $4,957 million (3,038 million pounds) at end-May compared with $4,407 million (2,634 million pounds) at the end of April.

The change in the Bank’s holdings includes changes in foreign-currency and gold deposits placed with the Bank by overseas central banks and other customers and the change in valuation over the month.

The change also includes an increase of $755 million in the Bank’s spot holdings due to the net effect of foreign-exchange swaps conducted in the course of the Bank’s money-market operations. These foreign-exchange swaps are undertaken as a supplement to the Bank’s usual money-market techniques to provide sterling liquidity to the market. The operations are purely technical in nature and have no monetary-policy significance; they are likely to be used from time to time in the future, depending on market conditions.

Notes to Editors

1. Due to the two-day settlement lag in the foreign-exchange market, both the UK Government figures and the Bank of England figures include transactions conducted in the last two working days of March exclude transactions conducted in the last two days of April.

2. The Quarterly Report on UK Official Holdings of Foreign Currency and Gold, to be published on 2 June 1998 and covering the quarter ending 31 March 1998, will contain further information about the foreign-currency and gold holdings of the Government and the Bank of England. This will include, for each, the size of the forward foreign-exchange position, the currency composition of foreign-currency assets, the size and currency composition of foreign-currency liabilities and information on intervention operations, if undertaken.

3. The Government and Bank of England figures have been produced on the basis of different accounting authorities. Therefore, no overall total for the two is shown. Details of the accounting methodologies were included in the Quarterly Report published on 3 March 1998 (covering October-December 1997) and will be included in future Quarterly Reports.

4. The underlying change in the Government’s reserves is the result of a variety of transactions, both debits and credits, including, for example, transactions for Government departments, transactions with other central banks and interest receipts and payments. For these reasons, the underlying change should not be taken as an indication of market intervention.

5. Repayments under the Exchange Cover Scheme in May were as follows:

6. Capital repayments on the ECU Treasury Bills relate solely to the repayment of the original amounts which were received when the maturing Bills were issued. The difference between the full redemption payments on the maturing Bills and this capital repayments figure (the “discount” on the Bills) is regarded for this purpose as an interest payment rather than a capital repayment, and therefore does not form part of the capital transactions which are excluded when calculating the underlying change in the reserves.

7. The figures contained in this press release can also be obtained from the Reuters Monitor (page TREA), Bridge News (page 170), Telerate (p22494) and Topic (p6800).