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
election 2015The 10 best quotes of the campaign
News
A caravan being used as a polling station in Ford near Salisbury, during the 2010 election
election 2015The Independent's guide to get you through polling day
News
people
Voices
David Blunkett joins the Labour candidate for Redcar Anna Turley on a campaigning visit last month
voicesWhat I learnt from my years in government, by the former Home Secretary David Blunkett
ebooks
ebooksA celebration of British elections
  • Get to the point
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: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

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

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

Pan Am Experience: A 'flight' back to the 70s

Tim Walker checks in and checks out a four-hour journey with a difference
Humans aren't alone in indulging in politics - it's everywhere in the animal world

Humans aren't alone in indulging in politics

Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

Crisp sales are in decline

As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

Barcelona vs Bayern Munich player ratings

Lionel Messi scores twice - but does he score highest in our ratings?
Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

Explosive batsman who sets the range for Kiwis' big guns

Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'