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then back to me on file CONFIDENTIAL
Jock
FINANCIAL SECRETARY'S OFFICE,
THE SECRETARIAT,
HONG KONG.
CR L/M 395/76
Dear John,
REGKORY NO. 51
17 MAY 1977
10th May 1977
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Thank you for your letter of 14th February.
As I think you know, Derek Milton has also asked for information on income distribution (paragraph 4 of
AKKO13) his letter HKK 013/4 of 7th February to Peter Williams). акказ) 41
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This letter and enclosures are designed to answer both.
2.
There are two sets of statistics relating to household income distribution. One is from the 1971 Census and the other from the 1976 By Census the results of which have only just become available. Attached to this letter is a short and preliminary note on these statistics which should be used very cautiously. A11 statistics on household incomes are unreliable, including ours. The important reasons why it is rash to draw comparisons between 1971 and 1976 are explained in the
note.
3.
Not covered in the note is the difficult question of the impact of budgetary policies on income distribution, and remember that our tax thresholds are very high given our low effective rates of tax. A crude calculation of post-tax household incomes shows that taxes on incomes result in a greater equality of income distribution; and, of course, our expenditure policies are highly redistributive, at least initially. But, thereafter, the impact is more complicated. Consider the provision of public housing: for those who are housed by the public sector the immediate effect is to reduce considerably the expenditure necessary to obtain accommodation.
Public housing is allocated to low income households. But, once allocated, households enjoy a security of tenure independent of income. This means the redistributive effect of public housing can become diluted. Furthermore, most people not in public housing, but eligible on income grounds are possibly made worse off by the Government's housing policy, for the large public sector diminishes the incentive for the private sector to supply accommodation so tending to drive rents up to the extent permitted by rent control. In effect, this simply reduces the quality of the accommodation. Neverthe- less, on average, the Government's housing policy does
J.A.B. Stewart, Esq., O.B.E.,
Hong Kong Department,
Foreign and Commonwealth Office, London SW1
CONFIDENTIAL