ENG-1963 — Page 90

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PUBLIC FINANCES

economic conditions which the Colony has had to face since the war is a considerable achievement. Perhaps equally noteworthy is the fact that it has been achieved after charging annually against current revenue all capital expenditure other than a comparatively 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 1960-1 capital expenditure totalled $276 million; in 1961-2 $324 million and in 1962-3 $426 million.

The principal reason for these results, which appear so favour- able, is that during the last twelve years exceptionally rapid in- creases in population generated internal economic activity which raised the yield of taxation and other sources of revenue sub- stantially without any appreciable increase in their rates. Thus revenue was able to expand from $291.7 million in 1950-1 to $1,253.1 million in 1962-3. 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 expendi- ture side there was inevitably a time-lag before Government could develop the public and social services necessary for the increased population. However, as these services were developed-and the rate of their development has gradually accelerated-the margin between recurrent expenditure and recurrent revenue tended to narrow. For example, in 1952-3 recurrent expenditure 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. Subsequent budgets anticipated that recurrent expenditure would continue to absorb some 80 per cent of the recurrent revenue while capital expenditure would continue to expand. Further and substantial deficits, therefore, seemed likely. Measures were accord- ingly taken to control expenditure more closely and to expand 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 at approximately the levels expected the proportion of the recurrent revenue absorbed in meeting this expenditure has

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