ENG-1968 — Page 61

FINANCIAL STRUCTURE

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The accumulation of these surpluses in the varying economic con- ditions which the Colony has had to face since the war is a consider- able 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. These annual capital spendings have been as high as $735 million; in 1967-8 they totalled nearly $461 million.

The principal reason for these results, which appear so favourable, is that exceptionally rapid increases in population generated internal economic activity which raised the yield from taxation and other sources of revenue without appreciable increases in the rates of tax. Annual revenue expanded from $292 million in 1950-1 to $1,900 million in 1967-8. The rate of increase was affected by variations in such factors as the economic situation and inflows of capital, but the upward trend has been continuous. 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 at a gradually accelerated rate, 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. 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 substantial deficits, but the actual results suggest that the economic strength and resilience of the Colony was underestimated, at any rate earlier on, for 1965–6 is the only year in which another deficit has been recorded.

During the years 1960–1 to 1964–5 there was an upsurge in recur- rent revenue, arising mainly from the very active trading conditions prevailing in the Colony, with the result that, while recurrent ex- penditure increased to approximately the levels expected, it absorbed a smaller than anticipated proportion of the recurrent revenue. By 1963-4 that proportion was down to 65 per cent before the ratio again resumed its upward trend. At the same time capital expendi- ture, though rising substantially, was lower than originally forecast while there were substantial accruals of capital revenue, due mainly to heavy receipts from land sales. The year 1964-5 produced a