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recommendations were accepted by the Government and regulations were then made under the Importation and Exportation Ordinance empowering the Government to collect an ad valorem charge on trade declarations. However, as it was considered inappropriate to tie the Government, and in particular the Legislative Council, to making any particular sums available indefinitely for any purpose, it was decided that the basis on which the Government would make funds available, subject to the consent of the Legislative Council and the overriding financial situation of Hong Kong, should be set out in a Letter of Under- standing. The Letter of Understanding forwarded to the Chairman of the Trade Development Council in November 1966 provided that, subject to the provision of funds by the Legislative Council, the Trade Development Council would receive the yield from the ad valorem charge (less a charge for each trade declaration towards the cost of statistical services). The Letter of Understanding contained the proviso that these arrangements were subject to the Government's basic right to vary them should the financial situation of Hong Kong make this necessary, emphasizing that it was not possible irrevocably to devote particular sums of money to particular purposes with priority over all other objects of public expenditure. Since then, the annual appropriation by the Legislative Council from the general revenue to the Trade Development Council and the Council's annual estimates of income and expenditure have been based in practice on the yield from the ad valorem charge collected by the Government in the preceding financial year (less a charge for statistical services). Initially a further subvention of $5 million was also made from the general revenue but this was phased out over the period 1979 to 1982.
166.
With the growth in Hong Kong's trade, the ad valorem charge on import and export declarations has grown very rapidly since its imposition, from $6 million in 1966-67 to $161 million in 1983-84 and $216 million in 1984-85, and the linking of the amount of subvention to the yield from the ad valorem charge has resulted over the past few years in the subvention being in excess of the guidelines for the containment of public expenditure in other sectors and has allowed the Trade Development Council to build up reserves of $82 million as at 31 March 1985. The guidelines are that over a period of years the growth rate in real terms should not exceed the growth rate of the gross domestic product and, where the budgetary situation so dictates, the growth rate should be less.