Under our antiquated system of public accounting, the Budget figures published by the Government each year conceal much more than they reveal. There are several reasons for this. First, the Government publishes cash accounts rather than proper income and expenditure accounts. Those figures can be made to produce whatever impression of fiscal rectitude or political generosity the government of the day may wish to convey.
Both income and expenditure items can be brought forward from the following year to the year just ending, or can be pushed off into the next year, as may suit the PR needs of the ruling politicians. Secondly, receipts by public authorities - about £3.7 billion in the current year - are offset against expenditure, thus reducing both sides of the published government accounts.
For example: the estimate for expenditure by the Department of Health this year was just under £3.5 billion, but the actual spending by that Department was planned to be almost one-fifth higher. The difference is accounted for by the expected collection of no less that £670 million in revenue directly by that Department, a sum which will never appear on the revenue side of the Exchequer accounts.
Third, the classification of payments as current or capital items is arbitrary and can be misleading. Fortunately, governments have always had to come clean with their true revenue and expenditure figures when the Central Statistics Office later publishes each year's national accounts.
In fairness, it has to be said that the Government has adopted the practice of publishing as an appendix to the Budget a summary of the figures in a national accounts format.
However, this supplementary information is difficult to match with the CSO national accounts published later. Moreover, the full details for government and local authority revenue and expenditure in national accounts format do not appear until more than 18 months after the end of each financial year.
For all these reasons, finding out how much of national output each year is taken in taxation and is spent by the public authorities, local and national, is difficult.
It is possible to establish that between 1993 and 1999 the share of national output absorbed by public spending fell quite dramatically, from 43 per cent to 32 per cent.
Curiously, however, government taxes on personal incomes took as much of that income last year as had been the case six years earlier, about 20 per cent. Taxes on personal spending, mainly VAT and excise duties, were a good deal heavier last year, absorbing 26 per cent of spending, as against 22 per cent in 1993.
The main reason for taxation appearing somewhat higher last year than in 1999, despite public spending using up less of what we produce, is that we have moved from having a small current budget deficit to running a large surplus on current account.
When measured in national accounts terms, the shift has involved moving from a deficit of 2.5 per cent of GNP to a current surplus of almost 6 per cent of GNP, a turnaround of 8-1/2 percentage points. This explains much of the differential between the sharp drop in the share of national output absorbed by public expenditure and the combination of a rise in the expenditure taxes burden and a static burden of income taxation.
We have needed to keep taxation up to or above its former level to run an overall surplus in place of the substantial overall deficit of 1993. It was not until 1997 that we achieved this crucial objective, and since then the Government has wisely built up a surplus on which we can draw if the economy gets into difficulties.
However, while the need to move into surplus explains a good deal of the sharp dichotomy between post-1993 trends of public spending and taxation in relation to our national output, other factors have also been at work influencing our levels of taxation. First is the huge and overdue shift that has taken place in the use to which we have been putting the additional resources.
This shift, which has important implications for the revenue side of the public accounts, has involved an increase in the pro portion of our invested output from 17 per cent of national output to 27 per cent.
Because we are now investing a much larger proportion of our output than formerly, the proportion we receive as income and spend as private citizens on consumption has been correspondingly reduced, from just under two-thirds of our output to well below three-fifths. This means that the proportion of national output available to be taxed, whether as income or as expenditure, is considerably reduced.
A second point is that the revenue received by the Government from trading and investment - which, for example, includes the share of the Central Bank's profits remitted to the Exchequer - has risen hardly at all during these six years, with the result that the Government has had to raise a larger share of its total needs by taxation.
We already invest well over a quarter of our annual output, as against less than one fifth in other more mature economies of the EU. However, our infrastructural shortfall, above all in housing, roads and public transport, is so great that the share of our output invested may well continue to rise to a figure approaching one-third.
Nevertheless, because we do not need to increase our budget surplus any further, I would judge that even allowing for further increases in our investment ratio, the underlying factors that have hitherto distorted the pattern of our public finances will ease.
This does not mean that the overall tax burden as a share of GNP is likely to fall much further; it means the underlying impediment to improving our public and social services which arose from our need to move from deficit into surplus has disappeared.
There remains, however, a short-term impediment to boosting spending. Our economy is already overheated as a result of last year's unwise Budget splurge, when external inflationary pressures are already dangerously strong and when the US economy could be on the brink of a sharp downturn. Thus, while the shift in public policy towards improving public services is welcome, its scale may prove to be quite excessive. We are embarked on a high-risk path.