XN000022-1987-02-25 — Page 11

WEDNESDAY, FEBRUARY 25, 1987

MR JACOBS SAID THAT, IN THE LIGHT OF THE IMPROVING OVERALL SITUATION, IT HAD NOT BEEN NECESSARY TO TRANSFER SURPLUS FUNDS BACK TO GENERAL REVENUE ACCOUNT FROM THE HOME OWNERSHIP FUND AS ORIGINALLY INTENDED.

AS TO CAPITAL EXPENDITURE FINANCED FROM THE FUNDS OUTS İDE THE GENERAL REVENUE ACCOUNT, MR JACOBS SAID THERE HAD BEEN A DOWNWARD TREND IN RECENT YEARS.

+THIS REFLECTS MORE THE PHASING OF MAJOR COMMITMENTS THAN ANY DELIBERATE POLICY. THUS, THERE HAS BEEN LESS OF A DRAWDOWN OF THE FUNDS THROUGH WHICH GOVERNMENT FINANCES CAPITAL EXPENDITURE AND LOANS THAN MIGHT HAVE BEEN EXPECTED,+ HE SAID.

+ALTHOUGH THE LATEST FORECAST FOR THE CURRENT YEAR INDICATES SOME UNDER-SPENDING, THERE ARE SIGNS THAT THE DECLINE IS BOTTOMING OUT. IN TOTAL, CAPITAL EXPENDITURE FROM THE FUNDS WAS BELOW BUDGET BY SOME $0.4 BILLION OR 4 PER CENT.

MR JACOBS POINTED OUT THAT A SIGNIFICANT NEW FACTOR WAS THE INCREASING ABILITY OF THE HOUSING AUTHORITY TO FINANCE A HIGHER PROPORTION OF ITS CAPITAL SPENDING FROM ITS OWN RESOURCES, RESULTING IN A REDUCTION IN THE NEED FOR THE AUTHORITY TO DRAW ON THE DEVELOPMENT LOAN FUND IN 1986-87.

THIS TREND TOWARDS LOWER REQUIREMENTS FROM THE DEVELOPMENT LOAN FUND WAS ON PRESENT INDICATIONS LIKELY TO CONTINUE, HE SAID,

IN RESPECT OF REVENUE ACCRUING DIRECTLY TO THE FUNDS, THE HOME OWNERSHIP FUND'S REVENUE WAS BOOSTED BY A MAJOR SALE OF FLATS DELAYED FROM 1985-86.

+AFTER MAKING THE TRANSFERS TO THEM FROM GENERAL REVENUE ACCOUNT, WE HAVE CONTINUED TO SEE AN INCREASE IN THE BALANCES OF THE FUNDS. THE TOTAL AMOUNT AVAILABLE SHOWS A NET INCREASE OF $1.9 BILLION.

+TAKING THE GENERAL REVENUE ACCOUNT SURPLUS TOGETHER WITH THIS INCREASE IN FUND BALANCES GIVES AN OVERALL SURPLUS FOR THE YEAR OF $4.9 BILLION.+

IN THE LIGHT OF THE IMPROVEMENTS IN 1986-87, MR JACOBS NOW EXPECTED GENERAL RESERVES TO STAND AT AROUND $20 BILLION AT THE END OF THIS YEAR PLUS BALANCES OF A FURTHER $12 BILLION CARR I ED IN VARIOUS FUNDS.

*WE HAVE A NUMBER OF CONTINGENT LIABILITIES AND THESE MUST BE ALLOWED FOR. THERE IS NO ABSOLUTE RULE AS TO THE CORRECT LEVEL OF RESERVES. IT SHOULD BE RECOGNISED, HOWEVER, THAT ALTHOUGH OUR RESERVES ARE INCREASING AGAIN, THEY REMAIN IN REAL TERMS SLIGHTLY BELOW THEIR LEVEL AT THE START OF THIS DECADE DEFORE WE FELL INTO DEFICIT.

/+AND THE