ENG-1967 — Page 68

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FINANCIAL STRUCTURE

for the past four years are shown in Appendix IX. The accumulation of these surpluses in the varying economic conditions which the Colony has had to face since the war is a considerable achievement, particularly since it has taken place after charging annually against current revenue all capital expenditure other than a comparatively small amount financed by borrowing. In 1966–7 capital expenditure totalled nearly $625 million.

The principal reason for these results, which appear so favourable, is that exceptionally rapid increases in population have generated internal economic activity which has raised the yield from taxation and other sources of revenue without appreciable increases in the rates. Annual revenue expanded from $292 million in 1950-1 to $1,818 million in 1966-7. 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. In expenditure there was inevitably a time-lag before government could develop the public and social services necessary for the increased popula- tion. However, as these services were developed at a gradually accelerated rate, the margin between recurrent expenditure and recurrent revenue tended to narrow. For example, in 1952-3 recur- rent expenditure absorbed only 50 per cent of the recurrent revenue, but by 1959-60 the figure had risen to 82 per cent. Consequently, in that year the surplus of revenue over expenditure could no longer finance all the capital expenditure and an overall deficit of $45 million occurred. Subsequent budgets anticipated further and sub- stantial deficits, but statistics now available suggest that the eco- nomic strength and resilience of the Colony was underestimated, at any rate temporarily, for it was not until 1965-6 that another deficit was recorded.

The intervening years saw an upsurge in recurrent revenue, arising mainly from the very active trading conditions prevailing in the Colony, with the result that while recurrent expenditure continued at approximately the levels expected, it absorbed a smaller-than-anticipated proportion of the recurrent revenue. By 1963-4 the proportion was down to 65 per cent, but by 1966–7 it had increased to 68.4 per cent. At the same time capital expenditure, though rising substantially, was lower than originally forecast while capital revenue, due mainly to heavy receipts from land sales,