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Cop Attached
Mr
Jaze
Mr Cortazzi
PS/Lord Goronwy Roberts
CONFIDENTIAL
RE
IN
RC
.0.51
N1977
HKK 100/2.
Mu. Dutty for
Mu. Stigwart or.
Aim
HONG KONG: PROSPECTS FOR THE 1977-78 BUDGET: RATES
1.
기..
The Governor of Hong Kong telephoned today to say that he will be making an announcement tomorrow, Wednesday, 5 January, about an increase in rates for the coming financial year. He wished us to know about the increase in advance of the announce- ment, to explain why the decision was being made public in advance of the 1977-78 budget and to allay any doubts we might otherwise have that he was departing from the outline budget he had set out at his meeting with Lord Goronwy-Roberts on 9 December (Item 2, paragraphs 1-2 of the record of the meeting refers).
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2. The Governor said that the increase in the rates now decided This upon would produce an increased revenue yield of about 25%. would be equal to about HK$160 millions. The Governor recalled that he was recorded as having said, at his meeting with Lord Goronwy-Roberts, that the Hong Kong Government had tentatively decided on about a 30% increase in revenue from the rates. But he had also said at the meeting, though it was not included in the record, that it remained to be decided whether there would be an increase of 7 or 8 "poundage" points. In the event, the Hong Kong Government had decided for the lower figure. Governor was at pains to say that a 25% (as opposed to a 30%) increase in rates would not affect the anticipated total size of the 1977-78 budget, the planned increase in revenue in real terms or the ability of the budget to fund the agreed programme of social reforms.
The
3. The Governor explained that he was having to make an announcement in advance of the budget because public opinion was much agitated about the issue. Since, as he had explained at Lord Goronwy-Roberts' meeting, the very large increase in rateable values combined with retention of the existing "poundage" would lead to a 100% increase in rates, there was a good deal of speculation about the Government's intentions. In fact, the Governor said that he had not known an issue on which public opinion had become so agitated so quickly. He himself had been pressed hard on it at a press conference he had given on 23 December. A "monster rally" had been planned for the second half of this month to protest against the anticipated increase in rates. The Executive Council, at a meeting earlier today, had not expressed any strong views about the level of the increase to be made in the rates but had pressed hard for an early announcement in order to defuse the situation. As a result, the Governor said he had decided that it would be better not to try to hold the position until Budget Day but, instead, to take the opportunity of tomorrow's fortnightly meeting of the
CONFIDENTIAL