BR 545
ORIORITY
CYPHER CAT A
FM HONG KONG 300645Z
SECRET
SECRET
HKK100/2
TO PRIORITY F C O TELNO 119 OF 30 JANUARY 1978
FOR STEWART (HKGD) FROM GOVERNOR. HONG KONG BUDGET 1978/79
*kon
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COPY
See
Mr Hull is letting
have his co
by 3/2
909
B
auments
1. BUDGET DAY IS MARCH 1. THOUGH FIGURES ARE STILL FAR FROM COMPLETE I AM PUTTING A NOTE OF HADDON-CAVE'S IN WEDNESDAY'S BAG. SINCE THIS WILL PROBABLY NOT REACH YOU TILL AFTER THE WEEK-END THIS TELEGRAM SETS OUT THE MAIN FEATURES. THE FIGURES HAVE CHANGED SINCE THOSE I MENTIONED IN NOVEMBER, AND WILL CERTAINLY CHANGE AGAIN, BUT NOT THE MAIN PICTURE, IE THERE WILL CERTAINLY BE FUNDS FOR ALL OUR PLANS IN 1978/79.
2. WE EXPECT TO FINISH THIS YEAR WITH A SURPLUS OF DOLLARS 963
MILLION DUE LARGELY TO AN UNEXPECTED FLUSH OF BOTH RECURRENT AND
CAPITAL REVENUE. A CORRESPONDING FLUSH OF EXPENDITURE HAS NOT
OCCURRED FOR VARIOUS REASONS INCLUDING A SURPRISINGLY LOW RATE OF
INFLATION.
3. THIS SURPLUS WILL GO TO RESERVES WHICH ON APRIL 1 WILL THEREFORE STAND AT DOLLARS 4,673 MILLION. WITH EXISTING CONTINGENT LIABILITIES (IE MTR AND HOME OWNERSHIP) PEAKING AT DOLLARS 9,000 MILLION IN 1982, AND THE PROSPECT OF A STEADY RISE IN RECURRENT EXPENDITURE (MUCH OF WHICH IS OPEN-ENDED), NEW CAPITAL EXPENDITURE AS THE KCR AND CONCEIVABLY A BRIDGE TO LANTAU WITH ACCOMPANYING WORKS, ALL OUTSIDE PRESENT FORECASTS, I THINK THIS LEVEL OF RESERVES ONLY PRUDENT PARTICULARLY BEARING IN MIND THE POLITICAL UNCERTAINTIES OF THE 80'S AND THE MORE IMMEDIATE ECONOMIC AND
TRADING UNCERTAINTIES OF THE 70'S.
4. AS YOU KNOW, NEXT YEAR'S BUDGET HAS TO FINANCE NOT ONLY MAJOR EXPENDITURE ON THE EXPANSION OF HOUSING, EDUCATION, MEDICAL AND
SECRET
/HEALTH