Select Committee on Trade and Industry Second Report


II FUTURE EXPENDITURE

Spending Review 2000

7. On 18 July 2000, the Treasury published the results of its 3-year spending review, Spending Review 2000 (SR 2000). This set out for each Department, including DTI, an outline of expenditure plans for 2001-02, 2002-03 and 2003-04.[7] An accompanying Press Notice of 18 July 2000 entitled "Boost for 21st Century Science and Enterprise" referred to "winners in the three-year Spending Review" as including "science, e-commerce, small business, the regions and disadvantaged communities and the Post Office network."[8] Overall, the figures for DTI expenditure were said to represent average annual real growth of 6.6% over the three years.

Science

8. Much of the increase is attributable to spending on science

Non-science: general

9. The non-science budget is to increase in several ways —

Small Business Service

10. The sums also include "new funding" for the Small Business Service of £54 million in 2001-02, £73 million in 2002-03, and £63 million in 2003-04.[14] No details were given in SR2000 of the underlying assumptions of future expenditure on the SBS. We obtained from the department the actual figures of the level of funding of the SBS now planned, and the funding for the current year. The level of funding for the SBS in the current year, 2000-01, is £220 million. The figures for SBS funding in the years of the SR 2000 settlement (£284 million, £303 million, and £276 million respectively) seem to imply projected spending on the SBS prior to the planned increases of £230 million in each of 2001-02 and 2002-03 and £213 million for 2003-04.[15]

11. In 1999 we drew attention to increases in planned expenditure on the Smart scheme, and discovered the baseline figures used in calculating the scale of increases. A letter from the Secretary of State explained that there was no assumption that such schemes would continue for ever, and that they were re-considered for funding at intervals of no more than three years.[16] He accepted that " it is important to make clear what the underlying assumptions are in making future announcements of extra funding".[17] The substantial real rise in planned expenditure on the Small Business Service is welcome. It was however unfortunate that neither the department nor the Treasury published the baseline figures from which these increases are measured. We recommend that this become the invariable practice of the department.

Total budget

12. The total DTI budget rises very sharply from an estimated £3.73 billion in the current financial year (2000-01) to £4.60 billion in 2001-02, before falling back to £4.28 billion in 2002-03 and £4.22 billion in 2003-04. This is said to be largely attributable to heavy estimated expenditure early in the 3-year period on liabilities in the nuclear and coal sectors. The resource budget for the department falls from £3.9 billion in 2001-02 to £3.5 billion in 2002-03 and £3.2 billion in 2003-04, and in real terms from £3.7 billion to £2.9 billion over that period .[18]

13. In July 2000 we sought details so as to be able to establish the significance of the total figures for different parts of DTI's budget, and in particular for the non-science budget. Once coal and nuclear liabilities are stripped out, and the capital expenditure on Airbus launch aid is disregarded, which is expected in due course to achieve a net return to Government, the non-science DTI budget for the three years of the SR2000 settlement looks broadly like level funding, with the third year slightly lower in cash terms than the first year. We note with some concern that the core of DTI's non-science programme and project expenditure shows no real growth over the three year period from 2001 to 2004. Given the welcome increases announced in some programmes, we are concerned that there will have to be as yet unannounced reductions in other areas of DTI activity.

Table

  
2001-02
2002-03
2003-04
Total
4595
4280
4222
- Science & Exploitation
1776
1920
2165
Total
Non Science less
Nuclear Liabilities
2819
298
2360
298
2057
298
Total
less
Coal Liabilities
2521
928
2062
447
1759
95
Total
less
Airbus launch aid
1593
136
1615
139
1664
255
  
1457
1476
1409


Sources: Ev, p 35 Q (a) (liabilities), Q (b) (launch aid): Ev, p 37, Table for science/non-science divide


7  Cm 4807, pp 77-79 Back

8  SR 2000/DTI Back

9   See Thirteenth Report, The Post Office and the Future of the Network, HC 724 of session 1999-2000  Back

10  Ev, p 36, Qf Back

11  ibid Qe Back

12  ibid Qi Back

13  ibid Qg Back

14  Cm 4807, para 15.9 Back

15  Ev, p 35, Q (d) Back

16   First Report, HC 49 of session 1999-2000, and Fourth Special Report, HC 237 Back

17  ibid Back

18  Cm 4807, Table A3 and HC Deb, 28 July 2000, col 1026w  Back


 
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