CONFIDENTIAL
a)
b)
c)
To use the reserves to subsidise food and reduce the cost of living (Comment: a subsidy sufficient to reduce the food bill by 20% would cost $1,300 m. a year. Government subsidies at present apply to Housing, Education, Medical and Health Services and to public assistance and to help for the handicapped. I should be most unwilling to cut back on these basic long-term policies on which I believe the future life of the population so largely depends. See also comments on the use of the Hong Kong reserves in paragraph 21 of my immediately preceding despatch. Either of these expedients would be worth considering in a crisis, but we are not in a crisis situation).
For the Government to enter the food market and itself import some of the staple foodstuffs (Comment: judging by Hong Kong's own experience in the 1950s and Japan's last year, nothing would be more likely to produce confusion and expense).
For the government to institute price control. (Comment: firstly it would be an immensely complicated administrative exercise and the Government has not the ability to do it efficiently; secondly it could not affect imported prices which are at the heart of the problem. It could only affect mark-up, and we believe that the Consumer Council and the pressure of competition can achieve all that can be done. If mishandled price control could also result in shortage, which would be disastrous).
d) For the Government to declare a minimum wage. (Comment: if it
was high enough to affect current wage levels it could result in either widescale dismissals amongst small employers, or more likely evasion by agreement with employees. If it was low it would be valueless. A minimum wage may well eventually be appropriate in Hong Kong, but I believe it would be an ineffective method of attempting to raise wages in present circumstances and likely to discredit the principle. The latter might be easier to get accepted in more favourable conditions).
e)
For the Government to expedite its own construction programmes to provide employment, drawing on the reserves for the necessary finance. (Comment: impact on employment would be relatively slow, and could not be of great significance, though an announcement to this effect might have a psychological value. Really extensive use of public works to provide employment would have a serious effect on the balance of payments because of the high import content of all labour intensive construction schemes).
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CONFIDENTIAL