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of compilation which does over-estimate in comparison with the British). Not surprisingly, public assistance for the year was $74.5 million more than in 1974 and about 300 per cent more than in 1973. Though by March it was clear that the economy was bottoming out the Government had been so concerned at the trend that contingency plans were ready for the introduction of labour-intensive works, and even for the mass distribution of free meals in case distress got out of hand. But by the middle of the year it had become clear that recovery had started, and the plans were thankfully shelved. But even by September unemployment was still running at about 9.1 per cent of the work force.
17. By the end of the year there seemed no doubt that recovery was reason- ably strong, unemployment had fallen, and incomes were rising. The rapid slowing down of the inflation generated in 1973 and early 1974, the static cost of living, as well as lower raw material prices, have played a major part in bringing this about through recovery of competitive edge.
18. The future depends upon a sustained recovery in world trade. Never- theless the mood here has strikingly changed since even two months ago, and is now one of confidence and expectation.
19. I wrote above that during these two years of recession the Hong Kong Government continued to find the resources to maintain credible progress and expansion in its social programmes. This it did, but a degree of rephasing and consequent public disappointment was inevitable. The figures of achievement in the principal fields such as housing, education, social welfare and medical and health services show significant growth, and make satisfactory reading, but certainly in neither housing nor secondary education were they as high as we would have wished, given the deficiencies which exist. Now that there is a prospect of recovery, it is essential that as soon as possible we make up for lost time. Failure to do so risks forfeiture of the goodwill of the population. However over-burdening the economy or taking any action which will have the effect of discouraging investment or employment, might retard the recovery and growth on which, in the final analysis, social progress here must be based.
20. In such a rapidly changing situation it is hard to be certain about budgetary possibilities, but at the moment of writing-and one must never forget that everything depends on political and economic events elsewhere-the figures encourage me to believe that this Government will find the resources to achieve a significant further surge of progress in 1976, and that by 1977 we should be back on the course plotted before the recession struck.
21. I am sending copies of this despatch to Her Majesty's Ambassadors at Peking, Tokyo and Washington.
I have, etc.,
MURRAY MACLEHOSE,
Governor.
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