Mr Murray
CONFIDENTIAL
Mr Cortazzi
HONG KONG: STANDING COMMITTEE TO MONITOR THE PLANNING PAPER: THE 1977/78 BUDGET
1.
I attach a note on the Hong Kong Budget 1977/8. (Item I(a) of the Agenda for the meeting of the Standing Committee on 19 May.) This note is a combination of the views expressed on the Budget by Mr Smith, Senior Economic Adviser; Mr Stewart, Secretary of State's Special Economic Adviser; and others. These views were recorded both when the Governor's preview of the Budget was received and also when the full Budget Speech arrived.
2.
I am not in complete ugreement with the note as in my view there is one main criticism of the Budget which is of overriding importance and should be made to the Governor, i.e. that the Minister of State would wish to see the Budget express explicitly the strategic, fiscal and budgetury planning of the Hong Kong Government during the foreseeable future to take account, amongst other things, of the need for the expansion planned in Government spending, particularly in the social and related fields. Despite my reservations I believe it right to make available to the Committee the views expressed by others. I will bring forward in more detail my own viewu at the moeting of the Committee on 19 May.
3. I do not believe that sufficient weight has been given to the argument recorded in my minute of 4 April that the Budget in a dependent territory like Hong Kong cannot be equated on its own with the Budget Speech of the Chancellor of the Exchequor.
It may be that it should so equate; however, normal practice in dependent territories and the requirements of Colonial Regulations prevent such a practice at this moment. It is, I think, true to Bay that the Budget, as presented in March 1977, did not, as it should have done, correspond and expand on the expenditure proposals and the strategy propounded in the Governor's Speech at the opening of LegCo in 1977. This is a criticism which should be conveyed to the Governor.
4. A team from the International Bank for Reconstruction and Development (IBRD) is presently engaged in writing one of their regulur four or five-yearly fact-finding reports on Hong Kong's economy. We have had discussions with the leader of this team
· during the past few days. Mr Hinkle's opinion is that the Financial Secretary in Hong Kong is conscious of the need for strategic financial planning so that the Government's social and economic programme can be carried out and that he is proceeding in this direction. Mr Hinkle considers that the local pressures on the
CONFIDENTIAL