REG
RECEIVED
. No.52
25 MAR 1975
WITH
3
CONFIDENTIAL
HONG KONG ANNUAL REPORT: 1974
HKK 13/5
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SUMMARY
Contents
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World-wide recession and consequent pause in Hong Kong's economy and drop in revenue has placed unforeseen difficulties in the way of financing Hong Kong's plans for social betterment.
These problems cannot be solved at the moment by massive increases in taxation because of Hong Kong's peculiar circum- stances.
It is disappointing and bad luck that this economic situation should have occurred just when many things appeared to be going right or getting better: social programmes; Police Force; Independent Commission Against Corruption; Mutual Aid Committees; recreation and sport
Rige in costs and drop in revenue produced a very large deficit which was filled in the budget by a rise in taxes, loan finance and a cut back in estimates. The whole package was designed to maintain as much momentum as possible in unpromising economic and fiscal conditions
The budget broke new ground in various ways.
It was the most that could be done in the circumstances, but eventually a higher level of revenue is essential.
Inspite of current stringency momentum can still be maintained in housing and some other fields, in particular law and order, but generally speaking a pause cannot be avoided.
The real danger lies in the reaction of the population to a lower standard of living, some unemployment, and fear of what the future holds. The situation has been eased by flexibility and by a slight drop in the cost of living.