FINANCIAL STRUCTURE
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authority is responsible for squatter control, clearing squatters from sites required for development, and developing licensed areas. The cost of these activities and the deficit arising from the management of former resettlement estates are financed from general revenue.
The Mass Transit Railway Corporation, which was established in September 1975, is a statutory body independent of the Hong Kong Government but owned by it. The corporation was set up to construct and operate the mass transit railway now being built. It has an authorised share capital of $2,000 million. Of this total, the government has stated that it will subscribe $800 million in cash. Part of this sum will be set off against the indebtedness of the corporation to the government for pre-incorporation expenses, and the balance_will provide funds for the corporation to meet its overhead preliminary expenses and certain land costs. Unlike the Housing Authority, the rest of the corporation's capital expenditure is being financed through export credit facilities and from borrowings in local and international markets. The bulk of these borrowings are backed by government guarantees.
Surpluses and Deficits
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A small deficit in the government's accounts was returned in the first financial year after World War II. In the 30 years since then, three other deficits have been returned-in 1959–60, 1965–6 and 1974–5, when there were deficits of some $45 million, $137 million and $380 million respectively. Otherwise a series of surpluses, some of them substantial, have been accumulated in the years up to and including 1975-6. The accumulation of these surpluses has been consistent with the need for the government to build up reserves so that the holdings of these reserves grow broadly in line with the growth of the economy and of public expenditure, and to otherwise balance its total expenditure and revenue on average over a period of years.
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The accumulation of reserves has been achieved partially through a strong growth in revenue. Particularly during the earlier years, revenue went up without appreciable increases in rates of tax because of exceptionally rapid increases in population and consequently in economic activity. Revenue has expanded more than 21 times from $309 million in 1951-2 to $6,519 million in 1975-6. The rate of increase has been 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 the 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.
It was the pace of economic growth which 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. There was a net deficit of $380 million in 1974-5 due largely to increased spending on public works, social welfare, and university and Polytechnic grants, but