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usual (perhaps even unique) thing for any treasurer to attempt to do. fact that he has attempted to do it is I think of special significance and
derlines what I think: to be the basic message of his Budget speech, namely that in the past two years of boom the Hong Kong Government may have commited itself to a rapid expansion of the social services and basic elements of a new quality of life which could prove to be beyond Hong Kong's now reduced financial Resources unless some sacrifices are made olsewhere. I am left with the
pression of the keeper of the purse issuing a warning to the policy makers, evol if not actually saying "I told you so". And indeed I have over the past few weeks picked up murmurings of disagreements between the Finance Branch und rany of the other branches and suggestions that the Financial Secretary would dearly like (and continues to look for the opportunity) to cut back some of the social services commitments entered into as part of Sir Murray Haclehose's new 1cok approach to the administration of the Colony.
5. Apart from daring to set himself the tough task of trying to predict so far anead this was in all e
a difficult enough Budget for him to prepare (just
as Budgets all over the world will be difficult to prepare) if only because of the uncertainty of the rocketing oil prices. So far Hong Kong has only just begun to feel these in its domestic costs.and even less in the costs and availability of the raw materials and the semi-manufactured products which it needs in order to fuol its om vital export industries. Philip Haddon-Cave has taken sole con- solation out of the fact that, in his viow, the domestic economy was generally set on the right course in 1973 and that the export prices so far have been able to rise sufficiently to offset the rise in import prices. He has also consuled himself that the only inflation experienced by Hong Kong was imported and the internal inflationary tendancies have been kept under control. I suppose others of us could take the same consolation but it still does not alter the basic economic difficulties ahead or the fact that local costs are repidly rising and real wages, conversley, sharply declining. I personally,therefore, am inclined to agree with those critics who wonder whether he is optimistic in assuming that in 1974 the growth of GDP will only be halved to 40 at constant prices (or 14-15%
It would not need much adverse in money terms to approximately $32,400 million) variation in these to produce a fairly substantial increase in the present estimated deficiency of $154 million which, although it is a fairly small figure measured by the sort of deficiencies we have been used to, is a relatively new experience for Hong Kong where Budget surpluses have been almost an article of faith.
6.
If there is room for some doubt about whether the 1974 results will 1001 quite as healthy (if not robust) as has been assumed, the forecasts for the next
e las three and ten years must be subject to even greater reservations. think tried to be on the conservative side in estimating what the revenue g1S be over this period. These calculations are based on the criteria that rcc.....ent expenditure must not absorb more than 70% of the recurrent revenue; that c. ›ital revenue cannot be expected to finance more than 25% of capital expenditure that there must be severe limitations on the use of loan finance (see pur. SUAMI 22 of the speech). Starting from that prenise he makes assumptions about the likely recurrent and capital revenue which lead him to the conclusion that the surplus on recurrent account over the next three years could be of the order of 14,300 million and cupital revenue approximately $1,100 million which combineu would allow sufficient to finance capital expenditure of „5,400 million over the three years (or 1,800 million annually). It is this figure that no then ass to decide what can be afforded. On the other side of the coin he has made
utimates outi...cles (which are set out in detail in the appendices to the draft of expenditure) which show that even on the basis of 194resent speciel
expenditure RESTR
D
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