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).

The press release issued by HM Treasury on 1 June 1998.

A national confiscation agency, which would seize cash and property obtained from the proceeds of crime, is one of the ideas the Government is considering to take the profit out of crime.

Speaking today to Commonwealth Finance and Law officials in London, Economic Secretary Helen Liddell outlined the UK response to the threat of money laundering.

“Money laundering is a threat to our democracies and our people. The risk that dirty money may destabilise our economies and corrupt our financial and legal institutions is apparent to all. And unless we can successfully tackle the proceeds of crime, we are not going to be effective in combatting the criminals themselves.

“The anti-money laundering systems in place in the UK have, on the whole, been successful, but there is room for improvement. Firstly, the Financial Services Authority, our new single regulator, will take a pro-active role in regulating compliance with money laundering requirements. This will be underpinned by a high level objective in primary legislation obliging the FSA to monitor, detect and prevent financial crime.

“The FSA will have the power to make rules in relation to money laundering and bring criminal prosecutions for breaches of the UK’s money laundering regulations that are applicable to internal systems and training.

“Secondly, we intend to introduce a system of civil penalties for behaviour which, though failing short of criminal, nevertheless damages, or has the potential to damage, financial markets.

“Finally, our approach to asset confiscation has not been as successful as we had hoped. We are actively considering the idea of a national confiscation agency, that would have the remit to confiscate not only cash but also all property that might be derived from the proceeds of crime. These views are still at a tentative stage, but the Government is determined to do all it can to take the profit out of crime.”

The press release issued by HM Treasury on 1 June 1998.

The Government’s reforms of the financial services regulatory system are on track to deliver a new regulator for the new millennium said Alistair Darling, Chief Secretary to the Treasury today. He was speaking at the Financial Services Authority’s European Conference in London.

On the day that the new Bank of England Act comes into force, he said;

“The first stage of our reforms is already complete with the changes to the Bank of England coming into force today. These give the Bank operational independence in monetary policy as well as moving banking supervision to the FSA. The next stage is the new Financial Services legislation which we will publish in draft in the summer. There is now consensus over the broad framework, but it is important to get the detail right. We want a system that will endure, and time spent listening is time well spent.”

Setting out the rationale for the Government’s reforms, Mr Darling said,

“The case for a single regulator is clear. A single regulator will be more effective because there will be no duplication of effort and no doubt about which body is responsible. Consumers will benefit because there will be single points of access for enquiries, complaints and compensation. Providers will benefit because bringing different regulators together should make regulation more cost effective. And a single, efficient, transparent regulatory regime which commands the confidence of the industry and its customers will be of competitive advantage to the UK’s financial services industry in the global financial services market. The right regulatory structure will enhance prospects for growth in this global market place.”

Concluding, he said,

“We are creating a new regulator for the new millennium. A single regulator to replace the outdated divisions of responsibility in the past. A regulator capable of adapting to change – adapting to a single market and a single currency in Europe and a rapidly changing global industry beyond. A regulator that is outward looking and as international in outlook as the markets themselves. And a regulator which commands the respect of the industry and enhances public confidence. The Financial Services Authority will become the role model for the future.”

The press release issued by HM Treasury on 6 May 1997.

STATEMENT FROM THE CHANCELLOR on the Central economic objectives of the new Government.

The central economic objectives of the new government are high and stable levels of growth and employment. Our aim therefore is to rebuild British economic strength with a modern industrial base,high levels of investment and a culture of entrepreneurship  that, through economic opportunity for all, unlocks British economic potential.

This can only happen if we build from solid foundations of prudent economic management and sound finance. The enemy of growth, and the investment necessary for it, is the instability of short periodic bursts of high growth followed by recession.

So we must break from the short termism of the past – the  economic instability that has characterised the British economy not just in recent years but for most of the century. That is why I want British economic success to be built on the solid rock of prudent and consistent economic management, not the shifting sands of boom and bust.

Now is the time for long-termism. This is the time to set the British economy on a new long term course that will deliver high levels of growth and employment through lasting stability.

First interest rates.  Over the last few days, I have been scrutinising all the available economic data and taking a view on the economic outlook,informed by the latest Treasury forecast. Having looked at the latest internal information  now available to me, my judgement is that we have inherited a situation in which, in the absence of corrective action, inflation will overshoot the Government’s inflation target next year.  This view,in fact, confirms what the Bank of England has repeatedly advised over recent months, as reflected in the published minutes of the monthly monetary meetings.

I have to make decisions on interest rates the results of which will only be clear eighteen months ahead.  In reaching my decision I am influenced by the forecasts I have now received for inflation in 1998.  But I have also been influenced by what we see in the economy today, which affects these forecasts:

• recent rapid growth of consumer spending which has grown by 4 per cent over the last year;
• house prices, which are currently rising at an annual rate of 6 to 9 per cent, and are rising particularly rapidly in the south east;
• the recent pick up in average earnings, which are currently growing at 5 per cent a year;
• and the rate of growth of broad money which has been above its monitoring range for over a year.

Against these pressures, I have had to weigh the current strength of sterling, particularly against the Deutsche Mark.  And I have also taken into account the subdued level of producer price inflation, disappointing levels of manufacturing activity, the weakness of industrial investment and the reduced optimism about prospects for exports,all of which are associated with sterling’s strength.

No one should doubt my determination to create the conditions in which British business, and manufacturing, can flourish. But because inflation is the enemy of investment, we must ensure that it is under control, as it has not been so often in the recent past. We want a stable and competitive pound over the medium-term, consistent with our objective of price stability. I am convinced that it is in the interests of industry that our commitment to low inflation is delivered in practice.

Looking at all the evidence, I believe that the case for an immediate tightening of policy is conclusive.I have decided to raise interest rates by  1/4  per cent with immediate effect. The Governor has indicated his positive agreement with my decision.

Price stability is, as I have said, an essential precondition for the Government’s objectives of high and sustainable levels of growth and employment. The question is how to achieve the long-term stability that we seek?

As the Prime Minister and I have always made clear, this is a new Government that is going to move beyond the old dogmas of the past, and provide a modern and lasting framework for economic prosperity. I have said on repeated occasions that we must tackle the underlying weakness of the British economy- low investment, skill shortages and inadequate infrastructure – all of which have beset the British economy in recent years. These problems are themselves some of the underlying causes of inflation.

I have also made clear that reform is required to put monetary policy on a stable, long-term footing. In a speech in May 1995 and subsequently in our 1995 policy document, A New Economic Future for Britain, I set out my view of the proper roles of the Government and the Bank of England in economic policy.

Government has a responsibility to the public in setting the objectives of economic policy and that means that the Government rather than the Bank of England must set the targets for monetary policy.

However, as I have repeatedly made clear since 1995, we will only build a fully credible framework for monetary policy if the long-term needs of the economy, not short-term political considerations, guide monetary decision-making. We must remove the suspicion that short-term party political considerations are influencing the setting of interest rates.

As our election manifesto said:

“We will reform the Bank of England to ensure
that decision-making on monetary policy is more
effective, open, accountable and free from
short-term political manipulation.”

It has become increasingly clear that the present arrangements for policy-making are not generating the confidence that is  necessary. That is one reason why Britain has higher long-term interest rates than most of our major competitors. And the perception that monetary policy decisions have been dominated by short-term political considerations has grown.

I am now satisfied that we can put in place,with immediate effect, reforms of the Bank of England to ensure that it can discharge responsibilities for setting interest rates in an effective, open and accountable way.

This is the time to take the tough decisions we need for the long-term interests and prosperity of the country.  I will not shrink from the tough decisions needed to deliver stability for long-term growth. I have therefore decided to give the Bank of England operational responsibility for setting interest rates, with immediate effect. The Government will continue to set the inflation target and the Bank will have responsibility for setting interest rates to meet the target.  The Government’s policy is set out in a letter I sent to the Governor yesterday, the text of which I am releasing now. It is the Government’s intention to legislate for these proposals as soon as possible.  In the interim, the Governor has agreed to put in place the arrangements that will apply once the legislation has been enacted.

The main elements of the reforms are as follows. In place of the current personalised system of decision-making, decisions will be made by  a new nine-member Monetary Policy Committee, on the basis of a majority vote.  This is similar to arrangements in other countries including the USA and other G7 members. In addition to the Governor and two Deputy Governors, nominated by the Government, who will sit on the committee, the Government will also appoint four members of the Monetary Policy Committee from outside the Bank of England.

Openness of decision-making will be ensured by the publication of minutes of proceedings and votes of the Monetary Policy Committee. There will be enhanced requirements for the Bank of England to report to the Treasury Select Committee of the House of Commons to explain and be questioned on their decisions. The Court of the Bank of England will review the performance of the Bank of England, including that of the Monetary Policy Committee. The Court will be substantially reformed to make it representative of the whole of the United Kingdom and to take account of the full range of Britain’s industrial and business sectors. These changes in accountability and the new breadth of representation on the Court amount to the most radical internal reform to the Bank of England since it was established in 1694 – over 300 years ago.

Britain is, in fact, one of the few major industrial nations in which its Central Bank does not have operational responsibility for decisions on interest rates. And our record on inflation and interest rates over recent years is poor, while other countries with independent Central banks have performed better.

Taken as a whole, these proposals will ensure that decisions are taken for the long-term interests of the economy and not on the basis of short-term political pressures. This is the way to create the stability we need for higher investment and high levels of growth and employment.

The changes I have proposed are the right decisions: the right decisions for business which wants to plan ahead with confidence, the right decisions for families who have suffered enough from the uncertainties of short-term economic instability, and the right decisions for Britain.

The specific reforms I am proposing are British solutions, designed to meet British domestic needs for long term stability. Our monetary reforms provide the platform for stability  and are the building block for  a new economic policy that will equip us for the challenges of the future: one that takes steps to ensure higher levels of investment, for which I will announce new measures in due course, and improving employment opportunity by the modernisation of the welfare state. These measures will be addressed in the coming Budget and future Budgets.

But there is, as I have suggested today, a more long term context. In the last century, Britain was industrially pre-eminent. The history of this century has been one of economic decline, not least because of short termism and the pursuit of stop-go economics. I am determined that we make the right preparations for  long term national economic success, as we look to the century that lies ahead, so that we can move forward again economically. I am therefore setting in place a long term policy for long-term prosperity. The ultimate judgement of the success of this measure will not come next week , or indeed in the next year but in the long- term. I am convinced that this radical reform, together with measures we will announce to equip our economy for the challenges ahead, creates the platform of stability upon which Britain can build.

The press release issued by HM Treasury on 23 June 1997.

Paymaster Accepts Bates Review in Full New Treasury Taskforce to Combine Project and Policy Expertise Private Finance Panel Stood Down and Executive Disbanded 27 Other Recommendations Promise Real Change

Paymaster General Geoffrey Robinson today announced new institutional and policy changes to streamline the Private Finance Initiative:

Launching his programme of action to re-invigorate PFI, he said:

“We promised to re-invigorate the PFI and that is what we have done.  Malcolm Bates has applied a businessman’s mind to this policy and produced specific recommendations which I accept in full.  We have started work today on those where the Treasury leads and will pursue others as an agenda for action.  We will make a reality of the PFI idea.

“Malcolm says the public sector structure must be simplified and responsibilities made entirely clear.  Departments and agencies must be accountable for their own procurement decisions. However, he has identified an immediate need for strong central input to ensure delivery of quality transactions that provide a sound basis for future business.

“To meet this need, I am creating a new Treasury Private Finance Taskforce  – combining project and policy expertise. We will appoint a top class Chief Executive on the projects side who will report direct to me.

“The new Chief Executive will focus on the quality of PFI transactions.  He will be supported by 6-8 Executives from the private sector with direct project management experience and financial skills.  Until now, the Treasury has been involved too late in the process, leading to frustration and increased costs.  The Taskforce will help central government departments and agencies  road-test significant projects for their  commercial viability before procurement begins.

“The Taskforce’s policy side will also have its hands full. Malcolm’s review include specific recommendations to produce rapidly more standardised documentation for key stages of the procurement process.  We want greater certainty wherever it can be provided.

“The Private Finance Panel will be stood down.  I have written to all members today thanking them for their past contribution.  Malcolm Bates acknowledges the immense value that high calibre members made in freely giving their time to meet key players, speak at conferences, write articles and support a growing band of Executives.  However, he felt their on-going role was unclear and was keen to simplify organisational structures.

“Malcolm’s proposal to strengthen departmental Private Finance Unit’s alongside the  new Treasury Taskforce is directly in line with a key recommendation of the 12 point plan published in our business manifesto.  It also takes away the need for Private Finance Panel Executive.  I therefore accept his recommendation that it should be disbanded by the end of September.  Opportunities will, of course, exist within the new
structure for those individuals currently with the Executive who have the skills and experience we now require.

“The agenda for action is detailed, practical and full of common sense.  I am sure it will be welcomed as long overdue by companies and departments who have struggled for too long under previous management.  I am confident that at last we have the foundations on which public and private sectors in partnership can deliver an Initiative to be proud of.”