CONFIDENTIAL: UK MENS A
3-
revenue occurred because of greater revenues from land sales which are not a component of Modified Government Revenue (MGR) and will not affect the Economic Surplu. Also last year the official estimate of revenue from profits and income tax in '77 (36% of MGR) was surprisingly 'round'; this year it looks o though the Economic Services Branch (heartened by its Consumption Function victory) has resisted attempts to round this estimate down (it shows an increase of 18% on the latest figure for '77; nominal GDP is only predicted to grow at 16.6%). So possibly the error in estimating Modified Government Revenue will come down substantially.
7. But the other component of the Economic Surplus,Consolidated Account Expenditure, is still overestimated, I suspect. In '77 actual Expenditure was greater than estimated by $780 m, probably because of the backlog of capital expenditure from the previous year (capital expenditure was $770 m less than predicted in '76, and $730 m more than predicted in '77). Thus, if the capital expenditure programmed has caught up with itself, we are back to equilibrium, except for the Financial Secretary's tendency to disguise reserves and call them Expenditure (para 2). However, if the Mass Transit Railway were included as Government Expenditure (see line (i) of Table 1), the adjusted Economic Deficit (line (j)) rises to 5.4% of expected (DP (line (k)) - a substantial reflationary shove, although hardly caused by conscious application of Keynesian policies.
1
8. Index of Industrial Production. I have already used Graph 2 (the monthly trends in Total, Industrial and Commercial Consumption of Electricity in Hong Kong since 1970) as a proxy for a monthly index of industrial and private sector output in
para 5.
In fact, a proper quarterly Index of Industrial Production is planned and it will be interesting to compare this with the electricity figures, which I would still hope to use as the most immediate finger on the pulse of Hong Kong. The 'total' figure is available about five or six weeks after the end of the month and the 'industrial' figure about three weeks
CONFIDENT TAL: UK EYES A
/after
Au
Page 120Page 121