PRICES , THE HIGH RATE OF UNEMPLOYMENT AND THE LOW RATE OF CAPACITY UTILIZATION ALL INDICATE THAT THE ECONOMY COULD DEAL FAIRLY SMOOTHLY WITH MUCH MORE VIGOROUS DOMESTIC DEMAND . FOR EXAMPLE , WHILE WAGE RESTRAINT - INVOLVING VIRTUALLY NO CHANGE IN PER CAPITA REMUNERATION IN 1984 - IS REGARDED AS NECESSARY TO MAINTAIN COMPETITIVE CAPACITY AND TO IMPROVE THE PROFITABILITY OF FIRMS AND THE CLIMATE FOR INVESTMENT , IT MAY , IF TAKEN TOO FAR , EXERCISE AN EXCESSIVELY RESTRICTIVE EFFECT ON FINAL DEMAND . ON THE OTHER HAND , THERE WOULD NO DOUBT BE MAJOR OBJECTIONS TO THE USE OF BUDGETARY POLICY IN PROMOTING RECOVERY .
THE SCOPE FOR ACTION ON THE PUBLIC FINANCE FRONT IS PARTICULARLY NARROW BECAUSE THE BORROWING REQUIREMENT HAS BALLOONED OVER THE PAST FEW YEARS . INDEED , IT HAS DOUBLED IN THREE YEARS , AND THE EXPANSION IS LIKELY TO GAIN MOMENTUM IF NEW SUITABLE MEASURES ARE NOT TAKEN . THE SITUATION IS THE MORE ALARMING AS THE PRESSURE OF TAXATION , SOCIAL SECURITY CONTRIBUTIONS AND PUBLIC SERVICE CHARGES , THE GREATEST IN THE COMMUNITY , IS INCREASINGLY ERODING BOTH REAL DISPOSABLE PRIVATE INCOME AND BUSINESS PROFITABILITY . THERE IS NO ALTERNATIVE TO PURSUING A POLICY OF BUDGETARY AUSTERITY , ESPECIALLY AS TAX REVENUE IS EXPANDING ONLY VERY SLOWLY BECAUSE OF SLACK ECONOMIC ACTIVITY AND LOW INFLATION , REVENUE FROM NATURAL GAS IS TENDING TO STABILIZE , AND SOME ITEMS OF EXPENDITURE , NOTABLY ON UNEMPLOYMENT , ARE STILL GROWING RAPIDLY . THE DRAFT BUDGET FOR 1984 ONCE AGAIN INCLUDES A PROGRAMME TO REDUCE EXPENDITURE BY OVER FL 10 000 MILLION , MAINLY ON PUBLIC SERVICE REMUNERATION , SOCIAL SECURITY AND PUBLIC HEALTH . THE DRAFT BUDGET ALSO PROVIDES FOR A REDUCTION OF FL 2 000 MILLION IN THE BURDEN ON ENTERPRISES AND NEW REVENUE AMOUNTING TO ABOUT FL 3 000 MILLION , WITH VERY LITTLE CHANGE IN THE TOTAL BURDEN OF TAXATION . THE NET BORROWING REQUIREMENT OF CENTRAL GOVERNMENT AND LOCAL AUTHORITIES , ON NATIONAL DEFINITIONS , SHOULD BE REDUCED TO 12,4 % OF NET NATIONAL INCOME IN 1983 AND TO 12,1 % IN 1984 . THIS SHOULD MAKE IT EASIER TO LOWER INTEREST RATES - WHICH IN REAL TERMS ARE STILL AMONG THE HIGHEST IN THE COMMUNITY - AND STIMULATE PRODUCTIVE INVESTMENT .
IN THE MEDIUM TERM , THE STRATEGY ADOPTED IS EXPECTED TO PROMOTE GROWTH BY IMPROVING COMPETITIVENESS , THUS BOOSTING EXPORTS , AND BY IMPROVING PROFITABILITY , SO PROMOTING INVESTMENT . IT WILL NOT , HOWEVER , PREVENT A FURTHER RISE IN UNEMPLOYMENT IN 1984 . SPECIAL ATTENTION IS THUS CALLED FOR TO EXPLORE WAYS OF REDUCING WORKING HOURS AND INCREASING LABOUR MOBILITY WITHOUT INCREASING LABOUR COSTS .
TABLE 12
THE NETHERLANDS : MAIN ECONOMIC AGGREGATES , 1961 TO 1984 ( SEE OJ )
IN THE UNITED KINGDOM , ECONOMIC ACTIVITY HAS EXPANDED RELATIVELY QUICKLY IN 1983 ( GDP GROWTH 2,5 TO 3 % ) , FASTER THAN AT ANY TIME SINCE 1978 , AND AT A RATE