ENG-1962 — Page 82

PUBLIC FINANCES

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conditions which the Colony has had to face since the war is a considerable achievement. Perhaps equally noteworthy is the fact that the surpluses have been achieved after charging annually against current revenue all capital expenditure other than a com- paratively small amount financed by borrowing. Some indication of how heavy this capital expenditure has been is shown by the figures for the past three years. In 1959-60 capital expenditure totalled $206 million; in 1960-1 $277 million and in 1961-2 $323 million.

The principal reason for these results, which appear so favour- able, is that during the 1950's exceptionally rapid increases in population generated internal economic activity which raised the yield of taxation substantially without any significant increase in its rates. Thus revenue was able to expand from $291.7 million in 1950-1 to $664.6 million in 1959-60. The rate of increase was affected by variations in such factors as the economic situation and inflows of capital, but the upward trend was continuous. On the expenditure side there was inevitably a time-lag before Govern- ment_could develop the public and social services necessary for the increased population. However, as these services were de- veloped and the rate of their development has gradually accel- erated the margin between recurrent expenditure and recurrent revenue tended to narrow. For example, in 1952-3 recurrent ex- penditure absorbed only 50 per cent of the recurrent revenue but by 1959-60 the figure had risen to 82 per cent and in the latter year the surplus of revenue over expenditure could no longer finance all the capital expenditure. An overall deficit of $45.3 million thus occurred and further and substantial deficits seemed likely. Measures were accordingly taken to control expenditure more closely and to achieve a modest expansion of revenue by increases in various duties and charges and by an additional tax on new private cars. The picture now available suggests, however, that the economic strength and resilience of the Colony was under- estimated, for while recurrent expenditure has continued to expand at approximately the rate expected recurrent revenue has expanded more rapidly. Thus the figure of 82 per cent mentioned above for 1959-60 fell in 1960-1 to 74 per cent (the estimate was 88 per cent) and to 69 per cent (against an estimated 80 per cent) in 1961-2. At the same time capital expenditure, though rising substantially,