IN PUBLIC EXPENDITURE'S SHARE IN THE ECONOMY , NO LESS AMBITIOUS ( AT LEAST IN THE RATE OF REDUCTION OF PUBLIC EXPENDITURE'S GDP SHARE ) THAN IS SEEN IN THE OBJECTIVES ALREADY SET BY THE COUNTRIES WHICH HAVE MEDIUM-TERM STRATEGIES .
THESE GLOBAL OBJECTIVES FOR PUBLIC EXPENDITURE IMPLY EVEN MORE SEVERE RESTRAINT ON MANY CATEGORIES OF CURRENT PUBLIC EXPENDITURE , SINCE PRIORITY SHOULD BE GIVEN TO THE EXPANSION OF PUBLIC EXPENDITURE PROGRAMMES THAT CONTRIBUTE EFFICIENTLY TO RESTORING THE PRODUCTIVE POTENTIAL OF THE ECONOMY . THE LATTER IMPLIES INVESTMENTS IN HUMAN AND PHYSICAL CAPITAL : IN RETRAINING PROGRAMMES AND IN THE FORMATION OF SKILLS THAT ARE IN INCREASING DEMAND , AND ECONOMIC INFRASTRUCTURE INVESTMENTS , VITAL FOR ECONOMIC DEVELOPMENT . IN THE SEARCH FOR BUDGETARY ECONOMIES , CUTS IN PUBLIC INVESTMENT HAVE IN MANY COUNTRIES BEEN SEVERE . AS A RESULT THE CONSTRUCTION INDUSTRY IS AT PRESENT AT A DEPRESSED LEVEL OF ACTIVITY IN MOST MEMBER STATES , ESPECIALLY GERMANY . PUBLIC INVESTMENT PROPOSALS MUST BE JUDGED ON THE ECONOMIC RATE OF RETURN THEY OFFER . PROJECTS OFFERING HIGH AND RELATIVELY SURE RATES OF RETURN SHOULD BE UNDERTAKEN IN THE PRESENT WEAK ECONOMIC CLIMATE , WHEREVER THE BUDGET DEFICIT IS NOT IN PARAMOUNT NEED OF REDUCTION . GIVEN THE TIME LAGS INVOLVED IN PUBLIC INVESTMENT PROJECTS , PREPARATORY WORK FOR WELL-CONCEIVED PROGRAMMES OF EXPANDED PUBLIC WORKS SHOULD NOW BE SET IN HAND .
TABLE 17
PUBLIC EXPENDITURE'S SHARE OF GDP , PAST TRENDS AND A POSSIBLE OBJECTIVE FOR 1987
* 1970 * 1984 * 1987
CURRENT PUBLIC EXPENDITURE * 32,6 * 47,3 * 43,3
INVESTMENT AND CAPITAL TRANSFERS * 5,1 * 4,0 * 5,0
TOTAL PUBLIC EXPENDITURE * 37,7 * 51,3 * 48,3
IN SETTING OUT SOME SIMPLE , ILLUSTRATIVE FIGURES FOR FUTURE PUBLIC EXPENDITURE TRENDS IN TABLE 17 , TWO IMPORTANT QUALIFICATIONS SHOULD BE BORNE IN MIND . FIRSTLY , WHILE ALL MEMBER STATES SHOULD ENVISAGE A DECLINING GDP SHARE FOR PUBLIC EXPENDITURE , SOME COUNTRIES WHOSE BUDGETARY CONSOLIDATION IS WELL ADVANCED MAY BE ABLE TO AFFORD SOME MODEST PUBLIC EXPENDITURE GROWTH IN VOLUME TERMS . SECONDLY , THE DISTINCTION BETWEEN CURRENT AND CAPITAL EXPENDITURE IS ONLY A VERY SIMPLE CRITERION OF PRIORITIES . IT IS TO BE INTERPRETED AS FAVOURING PUBLIC EXPENDITURE THAT SUPPORTS THE GROWTH OF THE ECONOMY'S PRODUCTIVE POTENTIAL . THIS WILL INCLUDE SEVERAL TYPES OF CURRENT EXPENDITURE , JUST AS PUBLIC INVESTMENTS OFFERING POOR ECONOMIC AND SOCIAL RETURNS SHOULD BE REJECTED .
POINT 3 : THE RECENT CHECK TO THE RISE OF PUBLIC EXPENDITURE SHOULD BE MAINTAINED FOR A MEDIUM-TERM PERIOD IN THE COMMUNITY AS A WHOLE , WITH AS A POSSIBLE OBJECTIVE , A REDUCTION OF 1 % POINT IN GDP SHARE PER YEAR . HOWEVER , OPPORTUNITIES FOR PUBLIC INVESTMENT ( AND , MORE GENERALLY , EXPENDITURE FAVOURING ECONOMIC DEVELOPMENT ) GIVING HIGH RATES OF RETURN IN RELATION TO THE RATE OF INTEREST SHOULD BE EXPLOITED . PROGRAMMES OF PUBLIC INVESTMENT SHOULD BE STRENGTHENED ESPECIALLY IN COUNTRIES WHOSE PUBLIC FINANCES HAVE BEEN ADEQUATELY CONSOLIDATED