WEDNESDAY, MARCH 28, 1984
11
THIS EVIDENCE, SHE SAID, GAVE A +HOLLOW RING+ TO THE FINANCIAL SECRETARY'S STATEMENT THAT THE FIRST OF THE PRINCIPLES WE APPLY IN THE MANAGEMENT OF OUR PUBLIC FINANCES IS THAT THE GROWTH RATE OF PUBLIC SECTOR EXPENDITURE SHOULD HAVE REGARD TO THE GROWTH RATE OF THE ECONOMY+.
+ IN OUR PRESENT SITUATION, THE MORE IMPORTANT POINT IS THAT IT IS APPROPRIATE TO ALLOW THIS CRITERION — THE RATIO OF PUBLIC SECTOR EXPENDITURE TO GDP TO SET THE LIMIT FOR THE GROWTH OF PUBLIC EXPENDITURE WHEN, BUT ONLY WHEN, REVENUE IS SO ABUNDANT THAT THERE ARE NO BUDGETARY CONSTRAINTS ON A HIGHER LEVEL OF PUBLIC EXPENDITURE,+ SHE SAID.
+WHEN THERE ARE BUDGETARY CONSTRAINTS. AS THERE HAVE BEEN SINCE 1982-83, THEN THE OPERATIVE CRITERION MUST BE THE LEVEL OF REVENUE AVAILABLE TO FINANCE EXPENDITURE, SHE ADDED.
SHE BELIEVED THAT DEFICIT FINANCING WAS ACCEPTABLE ONLY AS A SHORT-TERM EXPEDIENT.
+ IN THE LONG RUN, WHETHER THE DEFICITS ARE FINANCED BY BORROWING OR BY INCREASED TAXATION, DEFICIT FINANCING INHIBITS GROWTH AND FUELS INFLATION, WHICH IS STILL TOO HIGH EVEN NOW,+ SHE SAID.
SHE BELIEVED THAT WE SHOULD BE AIMING FOR A BALANCED BUDGET AND SHE WAS CONCERNED THAT THE FINANCIAL SECRETARY HAD NOT SAID, NOR HAD HE GIVEN ANY INDICATION THAT THAT WAS WHAT HE WAS AIMING FOR.
REFERRING TO THE FINANCIAL SECRETARY'S DECLARED AIM TO GET BUDGET DEFICITS BELOW ONE PER CENT OF GDP, SHE POINTED OUT THAT THE FORECAST OF GDP FOR 1984 WAS $240 BILLION AND IT COULD BE EXPECTED TO CONTINUE TO INCREASE IN FUTURE YEARS.
+ I DO NOT BELIEVE THAT DEFICITS OF THIS ORDER OF ONE PER CENT OF THIS SUM ARE ACCEPTABLE AND CAN BE HANDLED' EVEN IF THEY ARE PARTLY COVERED BY BOND ISSUES.
*LET US REMEMBER, WITH THE FINANCIAL SECRETARY, THAT LOANS CARRY INTEREST AND PROVISION MUST BE MADE FOR THEIR REPAYMENT, PROVISION WHICH WILL FURTHER REDUCE OUR FREE FISCAL RESERVES, + SHE SAID.
SHE STRESSED THAT WE JUST COULD NOT DEPEND ON STEADILY INCREASING TAX RATES AND MORE AND MORE COMPLICATED REVENUE LAWS TO FINANCE STEADILY INCREASING PUBLIC EXPENDITURE.
SHE SAW THE NEED FOR +A CALM, STEADY, CLEARLY UNDERSTOOD AND BALANCED APPROACH+ TOWARDS ELIMINATING OUR PRESENT CHRONIC TENDENCY FOR PUBLIC ACCOUNTS TO BE IN DEFICIT; AND CERTAINLY WITHIN THREE YEARS.
/+BUT I