28
FINANCIAL STRUCTURE
The principal reason for these results, which appear so favourable, was that during the earlier years exceptionally rapid increases in population generated economic activity which raised the yield from taxation and other sources of revenue without appreciable increases in the rates of tax. Revenue expanded more than 19 times from $309 million in 1951-2 to $5,875 million in 1974-5. 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 necessary 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 narrowed.
The pace of economic growth gave rise to surpluses in the years from 1969-70 up to 1973-4, with the highest surplus of $640 million being achieved in 1971-2. In 1974-5 however, although revenue reached a new record of $5,875 million, exceeding the original estimate by $30 million, actual expenditure of $6,255 million exceeded the original estimate by $508 million. This large expenditure excess was due partly to increased spending on public works, social welfare and University and Polytechnic grants, all of which accounted for $242 million of the excess. The increased cost of civil service salaries was largely responsible for the balance. As a result of the increase in expenditure over the original estimate, there was a net deficit of $380 million in 1974-5 as compared with an estimated surplus for that year of $98 million. Revenue and expenditure for the years 1973-4 and 1974-5 together with the estimates for-1975-6 are detailed and compared in Appendices 7 and 8.
For 1975-6 the estimated revenue is $6,184 million and expenditure $6,615 million, so that a deficit of $431 million is estimated for the year.
At March 31, 1975 net available public financial assets were $2,522 million, while the public debt was equivalent to some $135.8 million-about $31 per head of popula tion. Indebtedness increased by $81.4 million during 1974–5. Additional borrowings under the Asian Development Bank Loan towards the construction of seawater desalting works near Castle Peak in the New Territories totalled $83.9 million during the year. The interest rate for this loan is 71 per cent per annum, and the capital sum is repayable over 10 years from January 1976. Britain's interest-free loan of £3 million for the development of Hong Kong International Airport was extinguished when the final repayment was made in October 1975. The loan was repaid by 15 annual instalments, beginning in 1961. 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 $36.6 million on March 31, 1975.
In addition to these assets and liabilities, there is a Development Loan Fund and a Lotteries Fund which exist for special purposes. The Development Loan Fund, which is financed mainly by transfers from general revenue, interest payments and capital repayments, totalled $835.2 million at March 31, 1975. It is used to finance social and economic developments of a self-liquidating nature. The greater part has been used for low-cost housing schemes, but during the year 3,930 university students
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