21
The Financial Secretary budgeted for a surplus on the General Revenue Account of $2, 600 million in 1980-81, but in accordance with normal practice he made no allowance for the cost of a service-wide pay adjustment. An adjustment costing in the region of $1,000 million would reduce this surplus to $1,600 million, but actual out-turn could be lower than this because Finance Branch will probably be unable to hold Departments to their cash limits unless exceptional steps are taken to reduce expenditure during the remainder of this year. Claims on the additional commitments subheads, including about $180 million in respect of various recommendations on restructuring of the Civil Service, $90 million in respect of the Defence Costs Agreement and $100 million for payment for water from China and increases in public assistance and special needs allowances indicate that the funds set aside for additional commitments this year ($800 million) may be inadequate. On the assumption that the growth rate of the Gross Domestic Product in money terms is roughly in line with the Budget forecast (of +21%) the net result will probably be that the relative size of the public sector will be nearly 21%. Thus, to this extent, the anti-inflationary strategy of this year's Budget will be frustrated.
Economic Considerations
22
The economic effects of injecting an additional $1,000 million into the economy as the result of a Civil Service pay award appear fairly limited unless the award results, to any marked extent, in subsequent adjustments in the private sector. While it is true that an additional $1,000 million would, in theory, result in a growth rate of private consumption of about 1% to 1,5% higher than anticipated, a part of the $1,000 million will return to the Government as tax and part will go to savings. Nevertheless, there is a danger that the announcement of an adjustment of this magnitude might start off a spiralling effect on wages and salaries, the psychological effect of which might well be much more serious for business confidence than the actual figures imply.
Staff Management/Staff Relations Considerations
23
Staff relations in the Civil Service continue to be sensitive, and while the general mood may appear calm on the surface, there are various undercurrents which could quickly give rise to serious trouble. The annual pay claim highlights the conflict of interests behind the scenes between the three main Staff Associations which sit on the Senior Civil Service Council and the far larger number of departmental and grade associations. The former have established a reputation for moderation and responsibility. The latter include a number of groups which, partly through lack of experience and partly because of a more militant style of
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