26
FINANCIAL STRUCTURE
activity which raised the yield from taxation and other sources of revenue without appreciable increases in the rates of tax. Revenue expanded nearly 17 times from $309 million in 1951-2 to $5,241 million in 1973-4. The rate of increase was affected by variations in such factors as the economic situation and inflows of capital, but the upward trend has been strong and continuous. In expenditure there was inevitably a time-lag before the government could develop community and social services neces- sary for an increasing population and made possible by economic growth itself. But as these services were developed at a gradually accelerated rate, the margin between recurrent expenditure and recurrent revenue tended to narrow.
The pace of economic growth gave surpluses rising from $448 million in 1969–70 to $637 million in 1972-3. But in 1973-4 the surplus dropped sharply to $72 million compared with an estimated surplus for that year of $513 million. Although revenue for 1973-4 reached a new record of $5,241 million, exceeding the estimate by some $319 million, this excess was overshadowed when expenditure exceeded the estimate by some $760 million. This large expenditure excess was partly due to the payment of a second contribution, of $300 million, to a fund established to finance the proposed underground railway (bringing the total of that fund to $800 million). Increased spending on public works, social welfare and educational subventions accounted for a further $316 million of the excess and the increased cost of Civil Service salaries was largely responsible for the balance. Revenue and expenditure for the years 1972-3 and 1973-4 together with the estimates for 1974-5 are detailed and compared in Appendices 6 and 7.
For 1974-5 the estimated revenue is $5,845 million and expenditure $5,747 million. In current economic conditions it is unrealistic to expect that actual revenue will exceed the estimate to any significant degree whereas rising costs, in particular pay increases, are expected to cause the expenditure estimate to be exceeded to the extent that the estimated surplus of $98 million for 1974–5 will become an actual deficit.
At March 31, 1974 net available public financial assets were $2,809 million, while the public debt was equivalent to some $54.4 million, less than $14 per head of population. Indebtedness increased by '$1-million during the year. A new item of public debt, the Asian Development Bank Loan towards the construction of seawater desalting works near Castle Peak in the New Territories, has been included. The total borrowings during 1973-4 were equivalent to $3.7 million out of the total of about $109.3 million available under the loan. The interest rate for this loan is 7 per cent per annum repayable over 10 years from January 1976. Britain's interest-free loan of £3 million for the development of Hong Kong International Airport is repayable by 15 annual instalments from October 1961; the repayment of £200,000 in 1973-4 reduced this item of public debt to £400,000. The Rehabilitation Loan, of which $50 million was raised in 1947-8 to cover part of the cost of post-war reconstruction, is repayable not later than 1978; its sinking fund stood at $30.5 million on March 31, 1974.
In addition to the assets and liabilities referred to, there exist for special purposes the Development Loan Fund and a Lotteries Fund. The Development Loan Fund,