WEDNESDAY, MARCH 6, 1991
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SUBSTANTIAL SENSIBLY
"THIS DISCIPLINE APPLIES EVEN WHEN WE ARE RUNNING SURPLUSES. IN THIS WAY, OUR EXPENDITURE PROGRAMMES CAN BE MANAGED WITHOUT SUFFERING UNDULY FROM THE EFFECTS OF A STOP-GO CYCLE, HE SAID.
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THE FINANCIAL SECRETARY SAID THE GOVERNMENT'S EXPENDITURE PLANNING WAS THEREFORE BASED ON TRENDS, AND NOT ON YEAR TO YEAR FLUCTUATIONS IN ECONOMIC PERFORMANCE, AND THE KEY INDICATOR WAS THE TREND GROWTH RATE IN GDP.
"ALTHOUGH OUR ASSUMED
IT
RATE IS REVIEWED FROM TIME TO TIME, IS NOT ADJUSTED WHEN FACTORS APPEAR THAT ARE LIKELY TO HAVE ONLY A SHORT TERM EFFECT," HE SAID.
"ONCE WE HAVE DECIDED ON A TREND GROWTH RATE FOR GDP WE CAN BEGIN TO PLAN OUR PROGRAMME OF EXPENDITURE.
"IN BRIEF, EXPENDITURE IS DETERMINED BY WHAT THE ECONOMY CAN AFFORD AND NOT SOLELY BY THE AMOUNT OF MONEY WE HAVE AVAILABLE.
"THUS, SOMETIMES IT WILL BE APPROPRIATE TO ADD TO OUR RESERVES, AS WE HAVE BEEN DOING IN RECENT YEARS; AT OTHER TIMES IT WILL BE APPROPRIATE TO DRAW ON THEM TO SOME EXTENT.
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THE
SIR PIERS SAID USING THE GDP TREND GROWTH RATE ASSUMPTION, GOVERNMENT PROJECTED OVER A LONG PERIOD OF YEARS THE LEVEL OF PUBLIC EXPENDITURE IT COULD ALLOW CONSISTENT WITH THE PRINCIPLE THAT EXPENDITURE SHOULD GROW IN LINE WITH THE GROWTH IN THE ECONOMY.
THIS FIRST PART OF THE EXERCISE PROVIDED USEFUL PLANNING PARAMETERS, BUT IT DID NOT OF ITSELF SET EXPENDITURE LIMITS, HE SAID.
THE FINANCIAL SECRETARY WENT ON TO EXPLAIN REVENUE AND ITS PLACE IN THE BUDGETARY PLANNING PROCESS, SAYING THAT GENERALLY, THE GOVERNMENT AIMED TO ADJUST RATES OF DUTY, FEES AND CHARGES TO MAINTAIN THEIR REAL YIELD, AND PERIODICALLY REVIEWED TAX THRESHOLDS IN THE LIGHT OF INFLATION.
THE GOVERNMENT ALSO SOUGHT TO MAINTAIN RECURRENT REVENUE AT LEVELS WHICH WOULD COVER THE RECURRENT EXPENDITURE, PRODUCE A SURPLUS SUFFICIENT TO FINANCE AT LEAST HALF THE CAPITAL EXPENDITURE, AND ALLOW THE GOVERNMENT TO MAINTAIN ITS RESERVES AT AN ADEQUATE LEVEL, HE SAID.
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MOST OF OUR SOURCES OF REVENUE ARE DIRECTLY AFFECTED BY THE PERFORMANCE OF THE ECONOMY, HE SAID.
"IN YEARS OF STRONG ECONOMIC GROWTH OUR REVENUE YIELD IMPROVES. BUT IN LINE WITH THE PRINCIPLE I HAVE STATED. OUR EXPENDITURE WILL STILL BE LIMITED TO THE TREND GROWTH IN THE ECONOMY.
"HENCE THE HIGHER REVENUE YIELDS NORMALLY RESULT IN BUDGET
SURPLUSES.
"CONVERSELY, WHEN ECONOMIC GROWTH IN A PARTICULAR YEAR IS BELOW THE TREND WE DO NOT AUTOMATICALLY REDUCE OUR EXPENDITURE.
/"THE LOWER