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questions of increasing the revenue and the consequent tax reforms are dealt with in the separate submission of 17 November. It is particularly important in this context that we receive advance notification, in as much detail as possible, of the 1978 Budget
proposals.
5. The major area in which it seems the Hong Kong Government will fall short of our expectations for social progress is in the pro-
vision of retirement and unemployment benefit. A scheme was proposed by the Governor on 5 October at the opening of the Legislative Council which would be semi-voluntary and would provide insurance against sickness, injury and death and possibly a small retirement benefit. The scheme is based on equal contributions
from employer and employee of 2%. Even for such a limited scheme it has been suggested that 3 years is the minimum time needed for its introduction. The Governor has agreed that such a time scale is excessive but, as yet, no shorter period has been suggested.
6. This proposal falls far short of our original idea for a more comprehensive scheme, including an adequate pension and unemploy- ment benefit. However, the scheme as now suggested was drafted in conjunction with Mr Heppell, a senior official from the Department of Health and Social Security. Mr Heppell is not scheduled to return to the UK until 21 November and it will not be possible to
de-brief him before the Governor calls on Lord Goronwy-Roberts.
7. Talking Points
I recommend that Lord Goronwy-Roberts be advised to:
a) Congratulate the Governor on the social progress so
far achieved in Hong Kong, particularly in the fields
of education and housing;
b) Make clear to the Governor that there is a
continuing need for social progress;
c)
Suggest that officials should begin discussions
on the next stage;
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/a)