§ Mr. Bestasked the Prime Minister if she will explain the criteria used to define capital receipts from the sales of public assets such as British Telecom and British Gas as negative public expenditure.
§ The Prime MinisterIn accordance with the international convention on national accounting, purchases and sales of company shares are classified as "financial transactions" and, as such, are treated on a net basis. Unlike many other financial transactions they represent a direct expression of public policy and are therefore public expenditure (and government expenditure in the national accounts). It follows that, given the net treatment, when the Government buy shares, public expenditure is increased and when the Government sell shares, public expenditure is reduced. Since the Government incurred expenditure in acquiring the shares and assets of organisations being privatised, it is symmetrical and logical that expenditure should decrease when they are sold.
§ Mr. Bestasked the Prime Minister if she will explain the criteria used to determine the definition and status of local authorities' capital from asset sales for the purposes of Her Majesty's Government's policy towards the control of public expenditure.
§ The Prime MinisterCapital receipts score as negative public expenditure in the year in which they are received. Local authorities may, in any one year, spend a prescribed proportion of receipts, new and accumulated.
4WThe Government take account of the various sources of spending power local authorities enjoy, including capital receipts, when setting allocations designed to hold net expenditure to the relevant cash limit.