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RECORD OF MEETINGS BETWEEN LORD GORONWY-ROBERTS AND THE GOVERNOR OF HONG KONG HELD AT THE FOREIGN AND COMMONWEALTH OFFICE ON 18 AND 20 JUNE (BOTH AT 11.00 A.M.)
The
Social Questions
8.
Sir Murray MacLehose had described llong Kong's current
It was social and economic situation in his despatch dated 28 May. unfortunate that, just as the financing requirements of the Government's. new social programmes were beginning to be felt, the budget should be adversely affected by external constraints. oil crișis, with its effect on overseas markets and on the cost of
and a simultaneous raw materials, had squeezed profit margins; tightening of liquidity had caused particular difficulty to small firms. Workers lacked bargaining power, and real wages had dropped by about 11% in the past year. Hong Kong' had; no unemployment statistics, and there were also no figures for non-industrial employment (which accounted for more than half the total work-force). However, a special new working group was monitoring monthly economic and social trends, using sampling techniques, and was beginning to produce results.
9.
The economy was still functioning fairly satisfactorily in macro terms;. and, although belts had had to be tightened, the
The Communists were unable human picture was not one of real want.
to make trouble, because much of the rise in the cost of living was due to price increases of basic foodstuffs imposed by the Chinese
a Consumer Government. The rises seemed now to have levelled out; Council had been set up to investigate allegations of profiteering; and there was the prospect of an improvement in real wages during the second half of the year. The Government would be announcing wage increases for public servants, ranging between 12% - 22%, at the end of June and there would be a progressive, if not immediate, ripple effect through the private sector.
10.
Lord Goronwy-Roberts asked how the Hong Kong Government intended to finance their social programmes, and invited Sir Murray' views on the possibilities of increasing taxation, drawing on reserves, and borrowing. Sir Murray MacLehose said taxation would be
Increased taxation might increased, though this would be unpopular.
be more acceptable to public opinion if there was also a small drawing on reserves. However, although it might be necessary to draw on the reserves in 1974/75 in order to meet an expenditure 'hump', or if revenue (which was currently running below 1973 levels
/failed to come
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