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1996 - Mr Major’s Comments on the Economy

Below are extracts of Mr Major’s comments on the economy, made during an interview held at Chequers on Wednesday 18th September 1996.


QUESTION:

[Mr Major was asked if he planned to spend less money and where cuts would come from].

PRIME MINISTER:

I think there are two elements, as you say: firstly, expansion of the economy; and second, saving money and spending it more effectively. And that is what we have been doing. If you look at the relative comparisons, most of our partners in Western Europe, in the same economic space, would spend between 47-50 per cent of national income. We are down to 41 per cent, we are continuing to see that drop. As the economy grows, we will ensure that the growth in the economy is not wholly used by the state, that predominantly it is used to reduce the state’s role in terms of taxation. But in addition to that there are savings. It is hard to get savings, no-one should pretend that that is easy. We have been chipping away at elements of waste for 17 years and will continue to do so.

QUESTION:

[Mr Major was asked how he could get below 40 per cent when it had been higher than that for most of the last 17 years].

PRIME MINISTER:

We have set a target for the moment of 40 per cent, just as originally when we wanted to cut tax we set a target of 25, when we got to 25 per cent for the basic rate, we set a new target. So our first objective is to get it below 40 per cent.

QUESTION:

[Mr Major was asked how much lower].

PRIME MINISTER:

Well we will get it below 40 per cent first and then we will set a further target. I am not going to set a long distance target at the moment. Let us reach the target we have set ourselves for the moment and then see how much further we can take it. That is what we have been doing and is it the only sensible way in which to proceed.

QUESTION:

[Mr Major was asked if he would make cuts or believe the economy would grow at a sufficient pace to make cuts unnecessary].

PRIME MINISTER:

We have been saving public expenditure for some years. Let me take the most practical example - the welfare state and in particular social security. Social security since the war has been growing at a faster rate than the growth of the economy. Because of changes that we have made, widely supported I think by most people in this country, the growth of the social security budget is now about 1 per cent a year. That has never been achieved before. It opens up options for government either to spend that money elsewhere, on health or education for example, or to spend it partly to reduce taxes.

The question - is there a single simple way in which you could massively save money? If there were that would have been done by governments a long time ago. It is a steady accretion of cutting out unnecessary expenditure and there are still areas where the government spend money unnecessarily.

Let me give you a practical illustration. Suppose in the last few years we had not privatised all the utilities - gas, electricity and other matters - they were heavily subsidised when they were in the public sector. Heaven alone knows what the standard rate of tax today would be if we had not shrunk the state in that fashion. And we have to continually look to see where we can extend that thought.