SECRET
In
from general revenue), but are doubtful whether this is the best way to proceed. There could be problems of public acceptability, particularly as regards unemployment benefit (the Hong Kong Government's view that need rather than entitlement should be the criterion for public assistance reflects a fairly wide spectrum of Chinese and expat- riate opinion). There are also administrative complications. addition, it has been argued strongly that the political uncertainty about the future of Hong Kong would make it impossible to include provision for pensions in any contributory scheme which was also compulsory. This point in particular will need re-examination if the problem of the New Territories leases is resolved in a satisfactory way. 15. The point may soon be reached where additional programme s cannot be financed without an increase in the level of direct
taxation. It is never likely to be possible, without wholly unacceptable economic consequences, to increase direct taxation to the levels prevailing in advanced Western democracies. But present levels are very low, even by Asian standards, and modest increases would probably be accepted by local opinion provided it could be demonstrated that they were necessary. There is also scope for measures of tax reform.
Trade Unions
16.
At present between 20 and 25% of the workforce in Hong Kong belong to trade unions. The weakness and fragmentation of the trade union movement, and the absence of collective bargaining on any significant scale have been the subject of a good deal of criticism in this country, particularly from the TUC. Professor Turner's long delayed study, which is now expected to be completed shortly, may point the way forward. But there are major difficulties, among them the small scale of much of Hong Kong's industry, the lack of any real trade union tradition in China, and, in particular, the division of political loyalties in the trade union movement. Pro- Peking unions represent more than three quarters of the local member- ship; some of the remaining unions are pro-Taiwan and the others politically non-aligned. The most sensible policy would probably be to seek to encourage the non-aligned "unions, now mostly in the
- 8
SECRET