XN000022-1984-02-29 — Page 18

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WEDNESDAY, FEBRUARY 29, 1984

- THOSE WHO COMPARE OUR PROGRAMMES WITH THOSE OF PRESENTLY FAR RICHER COUNTRIES IN THE WEST DO SO AT THEIR -- INDEED OUR PERIL. WE MUST NOT IN PARTICULAR GET LOCKED IN TO OVER-GENEROUS RECURRENT EXPENDITURE WITH THE INEVITABLE OUTCOME OF REALLY DRASTIC INCREASES IN TAXATION.+

SIR JOHN SAID HE DID NOT HIDE HIS CONCERN AT CERTAIN WORRYING TRENDS IN GOVERNMENT'S REVENUE AND EXPENDITURE PARTICULARLY RECURRENT EXPENDITURE. A RIGOROUS APPROACH MUST AND WOULD BE MAINTAINED.

+THIS IS PARTICULARLY NECESSARY IN THE LIGHT OF THE SUBSTANTIAL FALL IN REVENUE FROM LAND SALES, WHICH HAS REQUIRED MAJOR CHANGES IN BUDGETARY STRATEGY, HE SAID.

+ THE ISSUE IS CLEAR. THE BUDGETED REVENUE FOR 1982-83 FROM LAND SALES SPECIFICALLY WAS $9.2 BILLION: THE ACTUAL REVENUE IN 1983-84 WILL BE ABOUT $1.6 BILLION,

+THOUGH NATURALLY WELCOME, REVENUE FROM LAND SALES AT THE TIME OF THE RELATIVELY SHORT-LIVED PROPERTY BOOM WAS OF A WINDFALL NATURE. SUBSEQUENTLY IN ONLY TWO YEARS OUR ANNUAL REVENUE HAS SUFFERED PRIMA FACIE ABOUT A 25 PER CENT DROP. WE THUS MOVED IN ONE YEAR FROM A LARGE SURPLUS TO A LARGE DEFICIT.

+NOR IS RAPID IMPROVEMENT IN LAND PRICES LIKELY. IN ADDITION THE SECOND PAYMENT OF $1.9 BILLION FOR EXCHANGE SQUARE DUE IN 1984-85 WILL NOT BE DUPLICATED IN 1985-86 LAND SALES REVENUE.+

SIR JOHN SAID IT WAS THEREFORE ESSENTIAL THERE BE A CALM, STEADY, CLEARLY UNDERSTOOD AND BALANCED APPROACH TOWARDS MODERATING THE UNFORESEEN DEFICITS NOW FACING US.

SUCH A MAJOR ADJUSTMENT REQUIRED TIME. HIS PRIME AIM WAS TO GET BUDGET DEFICITS BELOW ONE PER CENT OF GDP. A DEFICIT OF THIS ORDER COULD BE HANDLED, PROVIDED THAT RECURRENT EXPENDITURE WAS AMPLY COVERED.

+ I STARTED ON THIS APPROACH IN AUTUMN 1982 WHEN FACED WITH AN EXPECTED DEFICIT OF $3.8 BILLION FOR 1982-83 IN PLACE OF THE BUDGETED SURPLUS OF $2.8 BILLION, AND MUST CONTINUE IT IN THIS BUDGET AND AGAIN WITHOUT DOUBT IN NEXT YEAR'S,+ SIR JOHN SAID.

+WHAT IS REQUIRED CAN ONLY BE A JUDICIOUS MIX OF CONTROLLED EXPENDITURE AND INCREASED REVENUE. GOVERNMENT BORROWING AND USE OF FISCAL RESERVES ARE THEN AVAILABLE. THIS APPROACH MAY SOUND SIMPLE, BUT IT IS NOT. MUCH DEPENDS ON ASSESSMENT OF INCREASED YIELDS FROM INCREASED PROSPERITY. AND THE NECESSARY SUBJECTIVE JUDGMENTS MUST BE SUBJECT TO CONSTRUCTIVE OPEN DEBATE. IN PARTICULAR I WISH TO AVOID SUDDEN SHOCKS.+

HE SAID A MAJOR THEME MUST ALSO BE POLICIES THAT MODERATE INFLATION, WITH PARTICULAR ATTENTION TO THE BURDEN OF INCREASING CONSUMER PRICES ON THE LESS WELL OFF. A GOOD BUDGET WAS NOT JUST A STRING OF FIGURES. IT IS THE STUFF OF PEOPLE'S LIVES. AND THE LESS WELL OFF HAVE ABSORBED SEVERAL BLOWS IN THE LAST TWO YEARS.+

/EIR CEN

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