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5. Another dissimilarity between Hong Kong and other industrial societies is the reluctance to resort to deficit financing. This in part has its origins in the requirement to obtain UK approval for borrowing which in the 1950's and 1960's was discouraged. This led to a situation in the past in which an unusually high percentage of the Government's capital expenditure was financed from the surplus on current account. Some overseas borrowing was undertaken for the first time last year to cover the deficit then expected as a result of the fall in revenues due to the recession; but it seems clear from the recent Budget statement that the loans have not yet been taken up and that Hong Kong is to return to its traditional balanced budget in 1978/79. It is for consideration whether a greater resort to domestic and foreign borrowing should not become a normal feature of the fiscal system.
6. Hong Kong's prevailing fiscal philosophy has also precluded the creation of other tools of fiscal and monetary management (eg control of the money supply) which have become increasingly important since the detachment of the Hong Kong dollar from sterling in 1972. This has been in part attributed to unwillingness to set up a central monetary authority; and there has been considerable official concern
in the UK over possible conflict of interest between the Hong Kong and Shanghai Banking Corporation's commercial activities and its role as the Government's banker. The basic philosophy has also inhibited the Government from requiring comprehensive financial (and industrial) statistics.
7.
And finally it is for consideration whether too great attachment to Hong Kong's free port status has not imposed unnecessary limitations on the revenue obtainable from indirect taxation.
Social
8. The Government's current social programme is concentrated in
four main areas:
(a) a ten-year housing plan designed to provide additional housing for another 1.6 million people;
(b) a five-year plan for the development of existing social welfare services (eg a means-tested public assistance scheme, non-contributory allowances to "vulnerable groups" and emergency relief) to include improved community services for deprived groups eg the disabled;
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/(c)