Comment: Putting a new gloss on an old story

Peering through the Whitehall fog, the public spending savings talked about in the Budget come down to three simple elements: an increase in privatisation proceeds, a cut in the contingency reserve and the knock- on effect of the private finance initiative. The PFI is a newish element in the equation, but the other two are long-standing Treasury tools for putting a new gloss on old figures.

Privatisation proceeds have been raised by pounds 1bn to pounds 4bn in the next financial year, compared with the projections in the Budget a year ago, but that tells only part of the story. The pounds 4bn reflects the firming up of plans to sell both Railtrack and British Energy, the nuclear company, next spring and summer. A year ago, it was doubtful whether the Government would get either away.

It is possible that the Treasury is looking at a two-part offer for British Nuclear or Railtrack, which would delay some of the proceeds to the following financial year. But this is politically unlikely, at least in the case of Railtrack, because it would make it easier for a Labour government to take back control.

The Treasury's estimate for the value of the two sales confirms some of the more pessimistic forecasts from the City - which see Railtrack worth only pounds 1.5bn to pounds 2bn and British Energy perhaps pounds 2.5bn.

As always, the privatisation proceeds figure tells only half the story. The rest of the railway privatisation proceeds, apart from Railtrack, are being absorbed straight into the Department of Transport's budget to offset the railway subsidy of pounds 1.6bn a year. They are being used directly to keep the department's budget under control.

Garnering extra funds from the contingency reserve is another well- tried policy. The reserve counts as part of the ''control total'' for spending, and its shrinkage plays a big role in this year's Budget sums. The amount the Treasury sets aside in each Budget for unplanned overspending is lower for near years than distant ones on the reasonable grounds that it is easier to predict spending levels next year than three years hence.

The tradition is that for the forthcoming financial year, the contingency reserve is roughly halved, but in Tuesday's Budget the cuts were a bit bigger, giving him a bonus of pounds 250m next year, rising to several billion in later years.

Finally, there is the PFI, a laudable method of shaking up the way public projects are financed and run. The drawback is that the Government is perennially optimistic about the rate at which PFI spending can build up. On its own somewhat suspect figures, an average of pounds 2bn a year spent on capital investment under the PFI over the next three financial years has one tremendous public spending advantage.

With the PFI, the Government does not put capital up front, paying for the services rendered only when projects are up and running. That delay in outgoings brings a substantial, though hard to measure, cash flow boost for the Treasury. All in all, these three changes more than account for the pounds 3.1bn tax giveaway.

Start your day with The Independent, sign up for daily news emails
News
newsAnother week, another dress controversy on the internet
Life and Style
Scientist have developed a test which predicts whether you'll live for another ten years
health
Life and Style
Marie had fake ID, in the name of Johanna Koch, after she evaded capture by the Nazis in wartime Berlin
historyOne woman's secret life as a Jew in wartime Berlin
News
news... and what your reaction to the creatures above says about you
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Day In a Page

The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003