:
3
Financial Structure
ALTHOUGH the approval of the Secretary of State for the Colonies is still required before decisions are made on certain major matters including currency and banking, the Colony in other respects has complete autonomy in financial affairs and the ultimate financial authority is the Legislative Council.
Hong Kong is financially self-supporting apart from the cost of its external defence. To this, also, it makes a substantial con- tribution. Since 1958 the Colony's contribution to defence ex- penditure has been £1 million a year; in 1964 it was announced that an additional £6 million would be made available over the years up to 1970 as a contribution to the costs of army and air force building programmes. The Secretary of State for the Colonies, Mr Frederick Lee, visited Hong Kong twice during 1966 to discuss, among other matters, the future defence contribution. Revenue from local sources meets the cost of all the Colony's works and services. The Legislative Council is the sole taxing and spending authority. Apart from the Housing Authority, which has a certain measure of autonomy, there are no financially independent subordinate bodies similar to the local government authorities in the United Kingdom and other Commonwealth territories. The revenue and expenditure figures therefore represent all the public income and all the public expenditure of the Colony other than 'below the line' operations of various funds.
A small deficit was returned in the first financial year after the war. Since then, with the exception of 1959-60 and 1965-6 when there were deficits of some $45 million and $137 million respec- tively, substantial surpluses have been accumulated. Comparative figures for the past four years are shown in Appendix IX. The accumulation of these surpluses in the varying economic conditions which the Colony has had to face since the war is a considerable achievement, particularly since it has taken place after charging annually against current revenue all capital expenditure other than