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21
PA
3/1/75
RECORD OF A MEETING BETWEEN LORD GORONWY-ROBERTS AND THE GOVERNOR
OF HONG KONG AT THE FOREIGN AND COMMONWEALTH OFFICE ON WEDNESDAY 18 DECEMBER AT 10.15 A.M.
Present
Lord Goronwy-Roberts
Mr D Ennals
Sir D Watson
Mr K M Wilford
Mr P JE Male
Mr T McNally
Mr G Foggon
Mr A C Stuart
Mr D M March
Mr A C Galsworthy
Mr B H Dinwiddy
I The General Situation in Hong Kong
1.
Sir M MacLeho se
Sir Murray MacLehose outlined Hong Kong's economic and budgetary predicament. The blueprint of ten-year social programmes had been sketched and costed in 1972/73. Following the 1973 inflation in world commodity prices, and particularly the increases in the price of oil, it had been necessary in the 1974/75 Budget to increase taxes and to forecast the need to raise further resources of HK 500 million in 1975/76.
2.
In the past six months there had been a further marked deterioration. The real growth rate (8% in the year to mid-1974) had fallen back to nil, and exports had fallen 10% by volume in November 1974 compared to November 1973. A budget deficit of HK$400 million was now forecast for 1974/75.
3.
The preliminary estimates for 1975/76 had forecast a deficit of HK$2,300 million; it was hoped to achieve a balance by cutting proposed expenditure by HK$1,000 million, increasing taxation by HK$660 million (equivalent to increasing recurrent revenue by 11%), and borrowing HK$600 million. Sir Murray was reluctant to cut capital expenditure, though some rephasing might
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/be necessary;