XN000022-1975-02-26 — Page 12

WEDNESDAY, FEBRUARY 26, 1975

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+IN 1975-76 THERE IS NO FURTHER INCREASE IN THE ESTIMATED DEFICIT, BUT THE METHOD OF FINANCING IT, THAT IS BY BORROWING RATHER THAN DRAWING ON THE RESERVES, IS DIFFERENT AND EXTRA FISCAL REVENUE IS TO BE RAISED TO FINANCE INCREASED EXPENDITURE,+ MR. HADDON-CAVE SAID.

THEREFORE, THE FINANCIAL SECRETARY THOUGHT THAT THE IMPACT OF THE DEFICIT HE WAS BUDGETING FOR NEXT YEAR WOULD BE MORE EXPANSIONARY THAN THIS YEAR'S DEFICIT. THE REASONS HE GAVE WERE (1) BORROWING OFFSHORE INCREASES THE RESOURCES AVAILABLE TO THE ECONOMY, THAT IS TO SAY, IT ALLOWS AN INCREASE IN THE MONEY SUPPLY AND (2) AS THE INCREASES IN TAXES AND FEES, PARTICULARLY THOSE FALLING ON BUSINESSES, ARE LIKELY TO BE PARTLY AT THE EXPENSE OF SAVINGS, THE NET IMPACT OF THESE INCREASES AND OF THE EXPENDITURE THEREBY FINANCED IS LIKELY TO BE IN THE DIRECTION OF INCREASING DEMAND, AT LEAST IN THE SHORT TERM,

MR. HADDON-CAVE SAID: THE 1975-76 BUDGET IS, WITHOUT DOUBT, EXPANSIONARY BY COMPARISON WITH 1972-73 AND 1973-74 WHEN WE RAN VERY LARGE SURPLUSES AND WHEN COMPARED WITH ANOTHER OBVIOUS OPTION: FURTHER CUTS IN EXPENDITURE,

+IF I HAD REDUCED DEPARTMENTAL SUBMISSIONS BY MORE THAN A NET $1,372 MILLION AND SO ELIMINATED THE NEED FOR LOAN FINANCE, I ESTIMATE THAT THE GROSS DOMESTIC PRODUCT WOULD HAVE BEEN REDUCED BY UP TO 1-1/2 PER CENT.+

AS IT IS, MR. HADDON-CAVE SAID, THE BUDGET WILL MAKE A MODEST CONTRL, BUTION TO THE MAINTENANCE OF THE LEVEL OF DEMAND AND EMPLOYMENT.

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