TNAG-2472-FCO40-3599-Confidential-talks-between-the-UK-and-China-regarding-financ-1992 — Page 22

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THE PLANNING AND CONTROL OF GOVERNMENT EXPENDITURE

Introduction

Paper 5 (0.046)

of

Government

This paper sets out the principal elements the system for the planning and

and control of expenditure.

Budgetary Policy and Strategy

2.

The principal budgetary guideline on expenditure is that Government expenditure should not grow at a pace faster than the trend growth rate of the economy (as measured by Gross Domestic Product). This is necessary in order to ensure that the public sector does not consume too large a proportion of resources with the result that

the private sector is crowded out. It is, after all, largely the private sector which produces the wealth and

it must be allowed to continue growing.

1

3.

not

Thus our annual expenditure guidelines are

determined by what the economy can sustain and necessarily by the actual amount of funds available.

4.

Given the cyclical nature of the economy's performance, it is not possible to keep the growth rate of public expenditure precisely in line with that of GDP on a year-to-year basis, nor is it necessary or desirable to do Hence the use of the trend growth rate of the

economy.

This is reviewed on an annual basis, and

adjusted where necessary to take into account changes which have a long term impact on economic growth.

So.