SECRET
If we
34 The future rate of growth of GNP at present assumed in our
public expenditure planning generally is roughly 3% ie some
improvement on past performance. However, we now have a balance of
payments deficit of about £4,000 million, equal to around 6% of
our GNP for 1974. For the time being, we must aim to borrow to
meet this deficit but, on the assumption that we cannot expect to go
on borrowing amounts as huge as this every year until North Sea oil
strengthens our current balance of payments, we must plan to move
resources into exports progressively to help to reduce the gap.
succeeded in closing it by 1979, we should still face the prospect
of accumulated debt and annual interest payments on a massive scale
by the end of the present decade. To the extent that we move
resources into the balance of payments this reduces the annual
increment in resources available for domestic use, ie industrial
investment, private consumption and public expenditure. If spending
on social programmes is to increase at a higher rate than the average
for public expenditure as a whole, in accordance with the Government's
declared priorities, other programmes must be reduced or the rate of
increase of private consumption or industrial investment must be
depressed to an unacceptably low level.
35. The main effect of North Sea oil in raising the potential growth
rate of our GNP occurs while the output from the North Sea is building
up. When output stabilises, at whatever level, the flow of oil
continues to contribute to the current, higher, level of our GNP but
not to the growth of GNP. The extent of the contribution to the
growth rate depends on the speed and duration of the build-up of
North Sea oil output and on the price of oil in world markets compared
to other goods and services. At one end of the range one might
envisage North Sea oil building up only to, say, 120m tons by the
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SPORTRET