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KENNETH CLARKE'S BUDGET SPEECH SECTION 4: SPENDING PLANS

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'These massive sums more than deliver the Government's firm commitment to help the less well-off groups in society....
'These massive sums more than deliver the Government's firm commitment to help the less well-off groups in society. They extend that significant help to all our pensioners. I am sure they will be welcomed by everyone who wants to see revenue raised in a sensible and fair way.

PUBLIC SPENDING Mr Deputy Speaker, let me now turn to the Government's new spending plans for the rest of this Parliament.

In June, the Cabinet imposed tight ceilings on public spending over the next three years - a real terms freeze in the new control total over the next two years, with growth limited to 1 per cent a year thereafter. In my view, nothing tougher has been attempted since this Government came to power in 1979.

Anyone who has actually run one or more of the big departments of state knows how unacceptable it would be to contemplate cuts in the health service, in our education system, or in the resources needed to improve law and order. In a modern and civilised society no one can regard all public spending as a bad thing.

Of course, more spending is not the only way to improve our public services. Quality public services also depend crucially on greater efficiency, better value for money, and where sensible, on the involvement of private sector money, management and advice.

Earlier this year, my RHF the Chief Secretary launched a series of fundamental public expenditure reviews to establish more clearly what the Government's spending priorities should be. Already this programme is producing dividends. The first four reviews have played a key role in this year's public expenditure survey.

I can now announce to the House that overall, even including the package of help with fuel bills, the Government's new spending plans are fully consistent with the tough limits agreed by the Cabinet in June.

For the next three years, total government expenditure will grow by substantially less than the projected growth of the economy. Public spending will therefore fall as a proportion of national income, from around 45% this year to 42 1/2 per cent in 1996-97.

Public sector pay

To achieve this, we have started with a rigorous approach to the Government's administrative costs. Central government running costs, including paybills, will be frozen at this year's cash level. Pay increases for public sector staff will therefore have to be paid for by greater efficiency or savings in the cost of running government.

But, Mr Deputy Speaker, we have also had to conduct a searching examination of spending on government programmes That examination began with the largest spending programme of all, social security.

SOCIAL SECURITY Social security spending is increasing at an underlying rate of more than 3 per cent a year in real terms, well above the sustainable growth rate of the economy as a whole. If this trend continues it will place a quite impossible burden on the working population in the future - our children and our children's children. If we do not plan the social security programme properly, we shall be unable to give effective help to those who need it most.

A good social security system, under which the better off and people in work pay to support the poor and the disadvantaged-, is an essential feature of a modern civilised state.In reviewing the social security budget, the Government's objectives have been to ensure that the social security system is better targeted on today's real needs and to make it simpler and less susceptible to fraud.

Job seeker's allowance Let me start, Mr Deputy Speaker, with two proposals designed to help people back into work. The present convoluted system for supporting the unemployed includes two entirely separate benefits - income support and unemployment benefit - and two quite separate bureaucracies for delivering them - the Employment Service and the Benefits Agency, employing between them no fewer than 44,000 civil servants to do the job.

We intend to cut through this bureaucratic maze by introducing, from April 1996, a single benefit for the unemployed - the job seeker's allowance. This will align rates and rules and reduce the contributory element of the benefit from 12 to 6 months. But it will also build on the success of the Restart programme introduced in the 1980s, by drawing a much closer link between the receipt of benefit and the claimant's demonstrated willingness to look for work. And it will be reinforced by a strengthening of Restart itself; by an extension of community action places; and by the introduction of pilot schemes offering intensive guidance, assessment and a financial incentive to long-term unemployed people who need it most.

Family credit Our second proposal should have a more immediate impact. The House will be aware of the rising level of concern about the causes, consequences and costs of the growth of lone parenthood in this country. There are many lone parents - and married mothers as well - who have no desire to remain trapped in poverty or dependent on benefits, but who believe that they have no choice. As a result of the cost of childcare, they simply cannot afford to go out to work.

That cannot be right. The Government has therefore decided to introduce next autumn a new allowance available to all those on family credit who need to pay for childcare. This will be worth up to £28 each week per family and it should help tens of thousands of mothers to get back into work and off income support. I am sure it will be warmly welcomed by all those who want to see the poorest parents back on the road to financial independence.

Statutory sick pay

I turn next to statutory sick pay. At the moment, employees who go sick and meet the qualifying conditions are entitled to receive sick pay at specified rates. After the first three days of sickness, their employers are entitled to reimbursement from the Government for 80 per cent of the cost.

We have no plans to reduce the sick pay entitlements of employees. But, with effect from next April, we propose to stop reimbursing the cost of statutory sick pay for the largest employers.

For smaller companies, the current special exemptions will be extended. At present, those with national insurance bills of less than £16,000 a year are fully reimbursed after the first six weeks of each statutory sick pay claim. I propose to increase that threshold to £20,000, to bring more companies into the scheme, and to provide full reimbursement after only four weeks. Two-thirds of all employers will therefore continue to get help.

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