§ The Prime Minister,pursuant to his Answer to a Supplementary Question by the right hon. Gentleman the Member for Bexley (MR. HEATH) on Thursday, 14th March, [Vol. 760, c. 1616] this day circulated the following information:—
House of Commons, S.W.1.
22nd January, 1968.
Dear Prime Minister,
I wonder if you would kindly clarify a matter which you mentioned in your Statement in the House of Commons on 16th January.
You were reported as saying—and I quote from paragraph 24 of Cmnd. 3515—
"The scale of what is involved for the economy can be measured by my expectation that in 1969–70 the Defence Budget which was planned to come down to £1,970 million at 1964 prices as a result of the November devaluation economies will be reduced to about £1,860 million at 1964 prices, that is a cut of £110 million."
I am puzzled to find that the cut which you mention of £110 million at 1964 prices is transposed to the figure set out in the Appendix at the back of the White Paper as a figure which stands at 1967 survey prices. At least this is what I take the figure of £110 million in Column 6 of the Appendix (under "Defence Budget") to mean. Should not the figure which appears in the Appendix be reflated to bring it into line with 1967 survey prices? and if so, what should the figure be as amended?
Yours sincerely,
(Sgnd.) MICHAEL ALISON.
The Rt. Hon. Harold Wilson, O.B.E., M.P.,
Prime Minister.
10 Downing Street, S.W.1.
18th February, 1968.
Dear Alison.
Thank you for your letter of 22nd January about the defence savings announced in Cmnd. 3515.
I agree that there is scope for confusion over the manner of presenting the size of the cuts. But of course there are always difficulties in expressing changes in current programmes at past price levels. I can assure you that the figure of £110 million at "1967 Survey prices" shown in the table annexed to Cmnd. 3515 is correct. The same figure was used in the text of my Statement, when I was trying to compare the cuts with earlier programmes, on the advice of the experts. The point is that the re-calculation at 1964 prices of the cuts in our current programme raises difficult statistical problems, for example, the 376W specification of some items has changed, and of course the problems become more difficult the further away one moves from the base year. Inevitably therefore calculations seeking to express current activities at past prices must be based on a set of conventions. Those used by the Ministry of Defence resulted in the figure I included in my Statement. Other conventions are, of course, possible but I am told that the range of uncertainty is not very large—perhaps 10 per cent. or so—and that the figure I used was a fair approximation.
I hope this clarifies the position.
Yours sincerely,
(Sgd.) HAROLD WILSON.
M. Alison, Esq., M.P.