THURSDAY, MARCH 4, 1993
- 1.
TRANSCRIPT OF POST-BUDGET PRESS CONFERENCE BY FINANCIAL SECRETARY
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FS:
THANK YOU. HALF AN HOUR BECAUSE WE RISK OVER EXPOSURE OTHERWISE TODAY. BUT JUST TO DEAL WITH A FEW THINGS THAT ARE COMING UP WHERE SOME MORE EXPLANATION MIGHT BE HELPFUL. FIRST, I THINK THE WORD DEFICIT STRIKES SOME CHORDS WHICH MAY BR MISLEADING. IT'S A PECULIARITY OF GOVERNMENT ACCOUNTS THAT THE ONLY WAY WE CAN ACTUALLY DRAW ON RESERVES IS TO RUN A DEFICIT. IF YOU WERE A BANK WE COULD SIMPLY DRAW ON OUR INNER RESERVES WITHOUT ACTUALLY SHOWING WHAT IN THEIR CASE WOULD BE A LOSS. BUT WE'RE NOT. IF YOU NEVER ALLOW YOURSELF TO RUN A DEFICIT YOU SIMPLY ENDLESSLY ACCUMULATE ADDITIONAL RESERVES. THERE WOULD BE NO WAY YOU COULD DRAW ON THEM AND I GUESS IF YOU DID THAT FOR INSTANCE IN THE PERIOD TO 96/97, ADDED IN THE LAND FUND YOU'D END UP WITH RESERVES OF AROUND $200 BILLION WHICH I THINK MOST PEOPLE MIGHT AGREE WAS PERHAPS A LITTLE MORE THAN WE NEEDED. SO IT'S SIMPLY A DEVICE FOR DRAWING ON THE RESERVES. IT'S EASILY CONTROLLABLE, IT DOES NOT ARISE FROM ANY LOSS OF CONTROL ON RECURRENT EXPENDITURE, QUITE THE CONTRARY, WE'RE CONTROLLING RECURRENT EXPENDITURE AS WE ALWAYS HAVE DONE AND KEEPING IT IN LINE WITH GROWTH OF GDP.
SO
YOU'LL NOTICE THAT THE FIGURE FOR 93/94 IS 5.2 PER CENT WHICH IS ABOUT AS NEAR IN REAL LIFE AS YOU CAN GET IT TO THE TREND GROWTH RATE OF 5 PER CENT. SO, WE'RE QUITE CONFIDENT THAT THE RECURRENT EXPENDITURE IS UNDER CONTROL AND THE DEFICITS ARE ENTIRELY MANAGEABLE AND THAT AS WE NEAR THE END OF PEAK EXPENDITURE ON ACP TOWARDS 96/97 AND AS ADDITIONAL REVENUE KICKS IN FROM INTEREST ON THE LAND FUND AND THE FULL PROCEEDS OF LAND SALES, WE CAN BE COMFORTABLY BACK INTO EITHER BALANCED BUDGETS OR INDEED SURPLUS BUDGETS. THERE'S NOT PROBLEM THERE. IT'S A DEVICE WHICH WE HAVE TO
USE, IT DOESN'T MEAN WE'RE SOMEHOW INTO A LOSS-MAKING SITUATION. FOTUNATELY FOR GOVERNMENTS THERE'S NO SUCH THING AS A LOSS-MAKING SITUATION.
INFLATION. THERE'S NO EASY ANSWER ON THE EFFECT OF PARTICULAR BUDGETS ON INFLATION. THE GENERAL VIEW HAS BEEN FOR VERY MANY YEARS, THIS IS NOT A VIEW THAT WE'VE SUDDENLY INVENTED BECAUSE IT SUITS
US, GENERAL VIEW HAS BEEN FOR VERY MANY YEARS THAT BECAUSE WE'RE A GOVERNMENT, THAT'S TO SAY WE CONSUME A RELATIVELY SMALL PROPORTION
THE SMALL OP
GDP,
THAT WHAT WE DO IN OUR PUBLIC FINANCES IS NOT TOO IMPORTANT IN RELATION TO INFLATION. I DON'T MEAN IT'S IRRELEVANT BUT IT'S NOT TOO IMPORTANT. OF COURSE IF YOU HAVE A MAJOR CHANGE IN THE TAX WHICH IS REFLECTED IN THE CPIA, YU'LL GET A CHANGE IN GENERAL IF YOU'RE MERELY TALKING ABOUT THE SURPLUS AND A SMALL DEFICIT FOR EXAMPLE, GOING TO HAVE A VERY SIGNIFICANT EFFECT ON
CPIA OF SOME SORT, BUT IN DIFFERENCE BETWEEN THE THAT IN ITSELF IS NOT INFLATION.
/SECOND POINT