ENG-1964 — Page 46

PUBLIC FINANCES

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includes expenditure of $44 million for the operation of tankers in connection with the water shortage.

The principal reason for these results, which appear so favourable, is that during the last 13 years exceptionally rapid increases in population generated internal economic activity which raised the yield of taxation and other sources of revenue substantially without any appreciable increase in their rates. Annual revenue expanded in those 13 years from $291.7 million to $1,393.9 million. The rate of increase was affected by variations in such factors as the economic situation and inflows of capital, but the upward trend was con- tinuous. In expenditure 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 accel- erated the margin between recurrent expenditure and recurrent revenue tended to narrow. For example, in 1952–3 recurrent expendi- ture 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 further and substantial deficits but the picture now available suggests that the economic strength and resilience of the Colony was underestimated. While recurrent expenditure has continued at approximately the levels expected the proportion of the recurrent revenue absorbed in meeting this expenditure has fallen progressively and was only 65 per cent in 1963-4. This has been due mainly to an upsurge in recurrent revenue arising from the very active trading conditions which have prevailed in the Colony. At the same time capital expenditure, though rising substantially, was rather lower than originally forecast, and capital revenue, mainly from land sales, showed a marked increase.

From the comparative statement in Appendix VII it will be seen that a deficit of over $114 million is estimated for 1964-5, indicating that revenue will no longer be able to finance all capital expenditure. Such expenditure arises from Government's very heavy programme of non-recurrent public works, mainly for more schools, medical facilities and housing as well as for water supplies, roads and land development schemes. The estimated deficit may well prove to be