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Contents, Summary and Appraisal

We have also included two special articles by members of the National Institute on topics of widespread current interest. In the first, R.W.R. Price tackles the problem of how to have a public expenditure programme which enables a government both to form objectives in terms of real levels of services and investment and yet also to adhere to financial targets for expenditure. He explains that if the real levels of government services are largely measured by the number of employees involved it is implicitly impossible to increase productivity. There is then pressure to expand public manpower while at the same time suppressing the incomes of public servants below their counterparts in industry. Eventually, this causes financing problems because public servants demand parity with the private sector. The so-called ’relative price effect’ then suddenly re-emerges and calls for rapid and disruptive volume adjustments to programmes. In the present instance the article shows that despite the programme of public expenditure cuts and cash limits for the years 1979/80 and 1980/1 the overall result has been to maintain the level of public expenditure in money terms at that originally planned by the previous government in January of this year, but to plan for a smaller volume of services with that expenditure. Maintaining the original volume of services would of course have increased planned expenditure, and until the level of government services is measured in terms other than employment and provision is made in planning for the likely movement in the relative price of those services government expenditure will tend to increase its share of GDP and cut backs will have to be