9.
As Sir Hamish Macleod said in this Chamber last year, it is important that we are all clear in our understanding of the key concepts involved. The first point I need to make clear is that when we talk about keeping our expenditure in line with the trend growth rate of the economy over time, we are talking about government expenditure. Government expenditure is the aggregate of spending from the General Revenue. Account and the three Funds the Capital Works Reserve Fund, the Loan Fund and the Disaster Relief Fund. Public expenditure, by contrast, is more broadly defined, and includes expenditure from the Lotteries Fund and a number of financially autonomous public bodies such as the Housing Authority, the Urban and Regional Councils and the Trading Funds.
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As I said in a written reply to this Council on 14 February this year, we have over the past few years consistently adopted a fixed reference point based on projected spending in 1990-91 for setting the limits on government expenditure. Each year, our expenditure guidelines are rolled forward to take account of the forecast trend growth of GDP, the effect of price changes and changes in the scope of government activities.
What has this meant in practice? Over the past six years since we adopted this fixed reference point, GDP has risen by 37.2% in real terms in total, and during the same period government expenditure has risen by 37.7% in real terms. We have thus tracked GDP very closely during this time. This is what we mean when we say that, over time, we keep our expenditure growth in line with the trend growth rate of the economy. There may be relative ups and downs on a year to year basis, but over the six-year time frame since our fixed reference point government expenditure has tracked GDP fairly consistently. So I hope that Members will be reassured that not only do we have a principle that is worth sticking to, but in practice we have stuck to it - firmly.
I have also noted some Members' concerns that expenditure in particular areas. for example welfare, has been growing at a rate much faster than the average. Let me stress again that, insofar as fiscal discipline is concerned, the crucial question is whether we have effectively controlled overall government expenditure to within the levels permitted by our expenditure guidelines. The statistics which I have just outlined should have given a resounding "yes" to that question. Within this overall level, we will of course have to try to allocate the money available in such a way as to best respond to the changing needs of the community. It will be odd indeed if the growth rates in different policy arcas were to be precisely the same as the overall
average.