14 December 2001
The chancellor, appearing before the Treasury select committee this week, dismissed claims that the extra billions of pounds being pumped into public services were lying unused in government departments' coffers.
Brown told MPs that the legacy of underfunding had meant that ministries had got off to a slow start in using the extra money. But he emphasised that frameworks were being developed to ensure that the new funds would be exploited.
'The increase in public investment is now happening,' Brown told the committee. 'It takes time to develop the means by which these investment programmes move ahead.'
Three-year spending reviews, introduced by the chancellor in 1998, meant that underspends in one financial year could be carried over to the next instead of being returned to the Treasury. These arrangements had put a stop to the end-of-year rush to spend allocations, he said.
'I'm not as worried as some people are about underspends being carried over to future years. It is more important that departments make the right spending decisions rather than that they spend it by March,' Brown said.
Treasury figures published in July show a total Whitehall underspend of £6.9bn for the past financial year. Departments spent £190.5bn, 3.5% short of their £197.4bn allocation, including a £1.5bn underspend on the £19bn education budget, and a £700m shortfall on the £45bn health fund.
During the committee hearing on December 11, the chancellor also restated Prime Minister Tony Blair's pledge to increase health spending to the European average of 8% of national income by 2005.
He declined to give a cast-iron guarantee when invited to do so by Conservative MP David Ruffley, but affirmed: 'it is our policy'. However, Brown refused to be drawn on how much it would cost to meet this target, saying the information would be published during next year's Spending Review.
The chancellor also reaffirmed his support for a health service funded from general taxation. He rejected the social insurance model as being 'administratively expensive and not entirely equitable', and a hypothecated health tax as relying 'on something that is itself dependent on the long-term economic cycle'.
PFdec2001
