§ (a) Exchequer Outturn
§ When both sides of the account are adjusted to put the S.E.T. on a gross basis, rather than the net basis used in last year's estimate, total revenue in 1966–67 was £10,279 million—that is, £240 million less than I expected. The measures taken in July had their impact on the Revenue, as on everybody else.
§ Total expenditure at £9,541 million was £69 million, that is, less than three-quarters of 1 per cent., above the Budget estimate.
§ Against my estimate of £1,047 million, we finished the year, therefore, with a surplus of £738 million, which I used towards financing loans from the Consolidated Fund. These loans were higher than I had estimated, mainly as a result of additional lending to local authorities. They amounted to £1,478 million. Exchequer borrowing and special transactions therefore were £740 million, as against the estimate of £287 million.
§ (b) Exchequer Prospects
§ (i) REVENUE
§ In the coming year, and before allowing for Budget changes, I expect to finish up with a surplus of revenue over expenditure of £642 million; this is £96 million less than the surplus for 1966–67. I will take the revenue side of this first, and then expenditure.
§ Revenue from taxation and other current receipts is estimated at £11,705 million, the increase on last year being £1,426 million, of which Income Tax and Corporation Tax between them provide about half. There are two factors affecting the comparison with last year. First, the revenue is shedding the cost of certain capital allowances as investment grants take their place. Second, we shall have a full year's gross revenue from the Selective Employment Tax and this accounts for a large part of the increase in total receipts.
§ The net estimated yield of S.E.T. on current rates is about £180 million, but this cannot be compared directly with last year's net yield of £258 million, since this year's figure reflects the planned reduction in the interval between payment of tax and receipt of refund and premium.996
§ (ii) EXPENDITURE
§ Total expenditure at £11,063 million is expected to be £1,522 million higher than the outturn for 1966–67. Most of this increase arises in respect of the supply services. If S.E.T. refund and premium payments and investment grants are excluded, so as to reduce it to a basis comparable with last year, then the rise in these services is £651 million—just over 8 per cent. Consolidated Fund standing services are estimated to rise by £127 million.
§ Turning now to Government lending from the Consolidated Fund, I estimate net outgoings this year at £1,580 million—£102 million more than in the year just ended. A full analysis of these figures is provided in the White Paper on Consolidated Fund lending. Among the nationalised industries the largest borrowers will be the Electricity Council and the Gas Council.
§ A large part of the Gas Council's increased capital requirements are to exploit the discovery of North Sea gas. This great natural find is an uncovenanted blessing for Britain, but in the early years it will need a great deal of capital. Likewise, the heavy investment in electricity generating stations—some of them nuclear powered—is to ensure that there is at all times an adequate reserve of energy for British industry. I mention these examples to put in perspective the mischievous pretence in some quarters that Government borrowing and lending is somehow bad. The truth is that most of it is for essential capital investment without which the private citizen and private industry could not thrive. But these capital outlays absorb a large part of our national savings, and the Government's policy is to ensure that every new investment promises a reasonable rate of return; and that the consumer—in the price he pays for the services he receives—should make his proper contribution to the capital cost.
§ The loans provided for the Shipbuilding Industry Board, £15 million, and for the Industrial Reorganisation Corporation, £20 million, are further illustrations that this lending by the Government is to strengthen our economy.
§ A new item is the allowance of £75 million for the National Steel Corporation in respect of its investment programme and other obligations.997
§ Local authorities are also large borrowers from the Government. Under the new arrangements recently announced they will be able to borrow up to 34 per cent. of their actual capital payments from the Public Works Loan Board this year; in addition, they will be able to obtain from the Board up to 30 per cent. of the longer-term borrowing required to bring temporary debt within the limit of 20 per cent. of total outstanding loan debt. I am extending the period over which they are required to reach this objective by one year, to 31st March, 1969. For authorities in Scotland and Wales and in the Northern and North-Western Economic Regions the quotas will be 10 per cent. higher, that is, 44 per cent. and 40 per cent. I am also proposing a new feature, namely, to extend the higher quota rates to authorities in Cornwall and Devon, who face many problems.
§ On this basis, I estimate that net Exchequer issues to the P.W.L.B. in 1967–68 will be £480 million. Together with repayments of earlier debt, this will enable the P.W.L.B. to lend about £620 million gross. This is a little less than local authorities borrowed from the P.W.L.B. last year in the event, though it is about £100 million more than I provided for at the time of last year's Budget.
§ The limit on the total of advances from the United Kingdom Exchequer for the purpose of loans by the Northern Ireland Government will be raised by £50 million to cover a further period. These loans are mainly to finance electricity development, housing and the capital expenditure of local authorities in Northern Ireland. There will be a Special Procedure Resolution.
§ To repeat, and still before taking account of my Budget changes, I expect the surplus of total revenue over total expenditure to be £642 million. This will cover part of the net Consolidated Fund loans of £1,580 million, leaving £938 million to be met by borrowing by the Exchequer and other special financial transactions.