CONFIDENTIAL
2
points should, however, be borne in mind:-
(i) The Governor gave an assurance at his meeting
with Lord Goronwy-Roberts in July that if there were to be a requirement for revenue to finance the programme of measures contained
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in the Planning Paper, it would be met. The question of the extent to which revenue might be raised by increased taxation is open to argument but we do have the Governor's word that the programme will be financed.
(ii) The Governor said nothing about fiscal matters
in his statement to the Legislative Council on 6 October. We accepted that the two fiscal measures contained in the Planning Paper the provision of sufficient funds, preferably by a more progressive system of taxation or by, borrowing, and a further examination of the relationship between the Hong Kong Government and the banks would not have been appropriate for inclusion in the Governor's statement.
(iii) At the beginning of September the Financial
Secretary announced a revision of his forecast
of the increase in Hong Kong's GDP for 1976.
He originally forecast an increase of 9%. He now believes that it will be 16%. An increase
of this order should enable more resources to
be made available, even if there is no increase in the level of taxation. The latest unofficial
indication is that this revised estimate may
have been a little over-optimistic.
(iv) The forecast deficit on the 1976/77 budget of
HK$ 500 millions (about £65 millions) is now expected to turn into a surplus. The government could therefore have budgeted for a higher level of public expenditure.
CONFIDENTIAL
/ (v)