TNAG-2472-FCO40-3599-Confidential-talks-between-the-UK-and-China-regarding-financ-1992 — Page 27

14-OCT-1992 11:45

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SOME PROBLEM AREAS

(I) Underspending

on

Capital

under-estimation of land revenue

1. Introduction

P.25

Paper 6 (P. 1 of 13)

expenditure

and

G

For the last 5 years, actual expenditure on the Capital Works Reserve Fund (CWRF) has been significantly different from the original or indeed the revised estimates. Of particular concern is the fact that for the last 2 years,

there has been increasing underspending on the

original and revised estimates for the Public

Works Programme (PWP) as well

acquisition.

för land

Actual land revenue has for several years now

routinely been under-estimated.

2. Causes of concern

Over-estimation Of capital expenditure and under-estimation of land revenue not only raises

the question of credibility of the forecasts produced by the Government, but also creates the political impression that

that the Government has

failed to achieve its stated objectives under

the PWP.

-

in

term

Regular under-spending of over-estimation capital expenditure affects the accuracy of the

Medium Range Forecast and therefore can produce

a misleading picture of the medium medium

financial position of the Government, in particular, an under-estimation of the fiscal reserve by 1997 (the size of the "cushion"). This lack of certainty can in turn lead to the Government introducing budgetary measures which are in fact not necessary and which may cause

political controversy for no good reason.