XN000022-1978-11-02 — Page 2

THURSDAY, NOVEMBER 2, 1978

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STABLE TAX RATES AND FISCAL POLICIES ESSENTIAL TO ECONOMIC PROGRESS

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WE SHOULD CONTINUE TO MAINTAIN OUR STABLE TAX RATES AND STABLE FISCAL POLICIES IF WE ARE TO CONTINUE TO REALISE ECONOMIC PROGRESS WITH SOCIAL JUSTICE. THE RESULT OF THIS STABILITY IS OBVIOUS FROM OUR HISTORICAL EXPERIENCE, THE HON. LYDIA DUNN SAID IN THE LEGISLATIVE COUNCIL TODAY.

SHE SAID SHE WOULD EVEN SAY THAT THE STABLE TAX RATES IN THE PAST, AND PARTICULARLY THIS DECADE, HAVE POSITIVELY ENCOURAGED ECONOMIC PROGRESS AND HAVE GENERATED SUFFICIENT REVENUE FOR AN EXPANDING PUBLIC SECTOR.

IN ADDITION TO THE MAINTENANCE OF STABLE TAX RATES, MISS DUNN POINTED OUT THREE OTHER PRE-CONDITIONS FOR OUR CONTINUED SUCCESS IN PURSUING ECONOMIC PROGRESS WITH SOCIAL JUSTICE: ADEQUATE CONTROL OF PUBLIC EXPENDITURE, PROPER MANAGEMENT OF THE CIVIL SERVICE AND A MORE TRUSTING AND DIVERSE GOVERNMENT RELATIONSHIP WITH THE PUBLIC.

SHE WAS CONCERNED ABOUT THE GROWTH OF EXPENDITURE IN THE PUBLIC SECTOR. SHE POINTED OUT THAT BETWEEN THE PERIOD 1971 TO 1978 PUBLIC EXPENDITURE IN REAL TERMS HAS INCREASED BY 150 PER CENT AND THE RELATIVE SIZE OF THE PUBLIC SECTOR HAS BEEN INCREASED BY ONE-THIRD. IT SHOULD, SHE BELIEVED, BE HELD AT THIS LEVEL AND NOT ALLOWED TO GROW FURTHER.

+WHATEVER MAY BE TRUE IN THEORY, IN PRACTICE THERE TENDS TO BE SOMETHING SACROSANCT ABOUT PUBLIC EXPENDITURE. SO, TO AVOID HAVING TO CUT PUBLIC EXPENDITURE BACK IN A CRISIS SITUATION, WE SHOULD ENSURE THAT ITS GROWTH IS PROPERLY MONITORED AND CONTROLLED, SHE SAID.

SHE FELT THAT THE SIGNS OF +OVERHEATING+ IN OUR ECONOMY CAN BE MORE DIRECTLY RELATED TO THE DEMAND OF THE PUBLIC SECTOR THAN THE GOVERNMENT SEEMS PREPARED TO ADMIT.

ALTHOUGH THE EXISTING IMBALANCE BETWEEN DOMESTIC SECTOR AND EXPORT SECTOR ACTIVITY CANNOT LAST FOREVER, IF IT PERSISTS FOR TOO LONG THE ADJUSTMENT PROCESS IS BOUND TO BE PAINFUL. MISS DUNN ASKED THE GOVERNMENT TO ENSURE, BY THE CONTROL OF PUBLIC EXPENDITURE, AND THE WAY IT MANAGES THE ECONOMY, THAT THE PROCESS IS NO MORE PAINFUL THAN NEED BE, NOTING THAT WE MUST REMAIN EXTERNALLY COMPETITIVE TO EARN OUR LIVING.

SHE FURTHER URGED THE GOVERNMENT TO HAVE EFFECTIVE PROCEDURES FOR REGULAR, EVALUATION AND REVIEW OF ITS POLICIES AND PROGRAMMES, BECAUSE NOT ALL OF THEM, EVEN IF THEY ARE BASED ON VALID ASSUMPTIONS, CAN BE PERFECTLY CONCEIVED AT THE OUTSET, AND CIRCUMSTANCES ARE FOREVER CHANGING.

THE CIVIL SERVICE TOO HAS BEEN UNDER CONTINUOUS PRESSURE DUE TO OUR MASSIVE PROGRAMMES, SHE NOTED. SHE WAS NOT SO SURE THAT THE PRESSURE GENERATED ON IT BY THESE PROGRAMMES WILL EASE OFF WITHIN THE NEXT FOUR OR FIVE YEARS, AS WAS ENVISAGED BY THE GOVERNOR. SHE FEARED A BREAKDOWN IN MORALE AS A RESULT AND THAT WE WILL NOT HAVE A CONFIDENT, ALERT AND REALLY EXPERIENCED CIVIL SERVICE+ IN A FEW YEARS' TIME JUST WHEN THE NEED FOR SUCH A SERVICE WILL BE CRITICAL.

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/SEE THOUGHWA