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October 1976 and the budgetary proposals themselves. He has pointed out that there is no economic case for budgeting for a balanced budget and that there is a good social case for budgeting for a deficit.
12. Despite the fact that the Hong Kong Government has laid down plans for increased expenditure on social account, the present Budget, like its predecessors, is essentially a "good housekeeping" Budget, which certainly served its purpose in earlier decades but is not now sufficient for the increasing complexity of Hong Kong's economic and social life.
Conclusions
13. The fuct that the Governor, both at his meeting with Lord Goronwy-Roberts last December and in his telegrams in February, provided a preview of this year's Budget, represents a step forward and one on which we should seek to build. It is too late now to
influence budgetary policy in 1977/78: our efforts should be directed towards influencing the Budget for the year 1978/79, with regard both to presentation and content. Lord Goronwy-Roberts has put the Governor on notice that he may well have points to raise with him (and the Governor will be expecting to hear from us). The following points might be included in a communication to the Governor:
(i)
notwithstanding Lord Goronwy-Roberts' injunction to the contrary last December, the Budget Speech once again set forth a fairly rigid set of guidelines within which budgetary policy is confined. It thus gave the impression that the Hong Kong Government were incapable of changing their budgetary policy this is not economically realistic (paragraph 10 above)
(ii)
the Budget Speech was not sufficiently related to the social policies announced by the Governor last October (paragraph 10);
(iii) there was significant under-spending on the capital expenditure account in 1976/77 and the Governor has already indicated that a similar outcome is likely in 1977/78 (paragraphs 4 and 8). In retrospect, it seems that it would have been better to have budgeted for a deficit in the recession years in order to take advantage of under-utilized resources in the private sector (and thus reduce the level of unemploy- ment). The tendency to cut spending as soon as there is any sign of a down-turn in trade should be resisted (paragraph 9);
(1v) some of the tax concessions in this year's Budget introduce an element of progressivity but other changes, such as the increases in rates, will have an adverse effect on the
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