details of the social programme to which the Governor refers. The totals involved are impressive. The Governor accepts that. if this programme requires a somewhat less conservative budgetary policy over the next ten years, then this, within reason, will have to be accepted. Thereafter the approachim; end to the New Territories lease will put an increasing emphasis on confidence and stability.
4. The second despatch describes the new phenomenon, for Hong Kong, of real wages falling 11% in one year.
This gene
to the root of why the Chinese population of the Colony channe to live there, and to acquiesce in an alien administration. The Hong Kong Government's remedy is the traditional one of growth. This has worked before, and is really what Hong Kong is all about. The safety-net approach of minimum wages lu less appeal, and the possibility of keeping wages up by strengthening the trade unions, which was a subject of the Labour Adviser's recent report, does not get a mention. 5. These two despatches, with the third one, when received, will provide a solid foundation for Lord Goronwy-Roberts bulm with the Governor on 18 June. The Minister may also wich'te consider whether the Secretary of State should see the desple ches, before receiving the Governor. Although they are somewhat specialised, the political and administrative problem of our largest remaining dependency are of general interent and I have sent the despatches for printing.
A C Stuart
Hong Kong and Indian Ocean Dept.
5 June 1974
cc:
PS/PUS
Sir D Watson o.r.
Mr Wilford
Mr Youde
Mr Foggon (Overseas Labour Adviser) Mr Evans (Far Eastern Dept.)
SECRET