CONF DENTIAL
6.
face of massive rises in costs, an economy which has paused,
and a dropping revenue.
7.
In simplest terms the rise in costs coupled
with a forecast drop in revenue at constant tax rates of about
7%, and provision for a small contingencies reserve of $70 m.,
produced a deficit of HK$2,338, or 35% of total expenditure
in '74/75 if existing plans were fully implemented.
To bridge this gap the Financial Secretary proposed to
raise new resources amounting to $896 m. $467 m. from
new taxes and charges and $429 from loan finance
cut back the draft estimates by $1442 m.
and has
8.
In several ways this budget broke with
Hong Kong traditions.
unknown.
Hitherto deficit budgeting has been
Secondly, loan financing of the budget has been
unknown. Thirdly it is proposed that part of this loan
finance will be raised by an issue of Government paper in Hong
Kong again a totally new departure.
Fourthly, substantial
increases in taxes and charges in Hong Kong are always hard
to get (in this instance equal to 7.3% of the revised
estimates for '74/75) and to do so in time of unprecedented
recession obviously much more so.
9.
I realise that in Whitehall, inured to
massive deficits, and more massive scales of taxation and
even more massive public debt the caution of these first small
steps nay raise a smile. But in the circumstances of Hong
Kong, which are totally different, this path followed too
/far leads to hell