XN000022-1986-02-26 — Page 32

WEDNESDAY, FEBRUARY 26, 1986

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+ I WISH LIKE THEM HAD BEEN MORE FAR SIGHTED, THOUGH I WAS NOT ALONE. BUT I ALWAYS ACKNOWLEDGE MY MISTAKES. I DID REPLYI IF FOR INSTANCE GOVERNMENT LAND SALES OR PROFITS TAX OR ANY OTHER MAJOR HEAD OF REVENUE FALL OFF SHARPLY THEN INITIALLY ANY DEFICIT IN OVERALL RETURN WOULD BE TAKEN UP BY OUR SATISFACTORY RESERVES. THAT IS WHAT SAVINGS ARE FOR AND WE MUST NOT GET EXCITED ABOUT ONE OR POSSIBLY TWO DIFFICULT YEARS. FOR SUBSEQUENT BUDGETS WE WOULD THEN HAVE TO CONSIDER WHETHER TO RAISE TAXATION, CUT EXPENDITURE, USE THE RESERVES OR RAISE LOANS.+

SIR JOHN SAID THIS WAS EXACTLY WHAT HAD BEEN DONE, ALL OF IT, AND IT HAD SUCCEEDED.

HE ALSO COMMENTED THAT HE HAD STATED IN 1982 THAT IT WAS ESSENTIAL FOR THE FINANCE BRANCH TO SET UP A PLANNING UNIT TO WORK ON MODELS FOR PROJECTION OVER A FIVE YEAR PERIOD SO THAT +WE COULD SEE WHAT MIGHT HAPPEN TO FUTURE BUDGETS IN THE LIGHT OF VARIOUS ASSUMPTIONS.+

THIS WAS ONLY A PLANNING TOOL, AND ALL EXPERIENCED BUSINESSMEN WOULD BE AWARE THAT IT MUST NOT BE TAKEN AS A LONG RANGE FORECAST +NOT LEAST BECAUSE OF THE HEROIC ASSUMPTIONS THAT HAVE TO BE MADE AND THE IMPOSSIBILITY OF FORESEEING WHAT NEW POLICY INITIATIVES OR PROGRAMMES MAY BE AGREED OR WHAT UNEXPECTED CONTINGENCIES HAVE TO BE MET. I REMAIN VERY SCEPTICAL ABOUT THE RELIABILITY OF FINANCIAL SOOTHSAYING.+

SIR JOHN SAID THAT LAST YEAR IN THE BUDGET DEBATE HE HAD BEEN UNWILLING TO EXPOSE THE MEDIUM RANGE FORECAST, BECAUSE IT WAS STILL CLEARLY IN NEED OF FURTHER REFINEMENT.

+ IT CAN, HOWEVER, NOW STAND IN THE OPEN TO MAKE THE BUDGETARY PROPOSALS MORE COMPREHENSIBLE TO THIS COUNCIL. DO BEAR IN MIND THAT IMPROVEMENTS WILL INEVITABLY BE FOUND POSSIBLE IN LATER YEARS.

+WE ARE THEREFORE IN A POSITION TO TAKE AN OPEN VIEW EACH YEAR ON THE ESSENTIAL MEDIUM TRENDS. THIS FIRSTLY MEANS KEEPING AN EYE ON PROBABLE OPERATING SURPLUSES. IT IS ALSO POSSIBLE TO SEE PROBLEMS COMING UP AND THUS TO TAKE EARLY CORRECTIVE ACTION. +

INFLATION UNDER 4 PER CENT *****

INFLATION HAD FALLEN MORE THAN HE DARED HOPE, THE FINANCIAL SECRETARY, SIR JOHN BREMRIDGE, SAID.

THE RATE WAS UNDER FOUR PER CENT ON CONSUMER PRICE INDICES FOR 1985.

/A SLIGHT