HONG KONG LEGISLATIVE COUNCIL.
DRAFT ESTIMATES, 1941-42.
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THE FINANCIAL SECRETARY.-Sir, I rise to move "that the craft estimates of expenditure for 1941-42 be approved."
A detailed exposition of the financial position 1939, 1940-41 and the estimates for 1941-42 is contained in the memorandum already in the hands of Honourable Members.
Let me first summarise that financial position. We closed the year 1939 and entered the year 1940 with a general reserve balance of $17,091,170, a handsome sum, but largely a nominal one. Most of the money had already been expended as advances in anticipation of loans. It was to improve the liquid position that Government in June last floated the second tranche of the 1934 Dollar Loan of which Government itself took up $5,790,000 and obtained cash to the extent of $5,640,000. That reserve of $17,000,000, it is hoped, will not be appreciably diminished at the end of the current 15 months; in fact the memorandum, perhaps a little optimistically, anticipates a small increase. But it must be remembered that of the 17 million dollars with which we hope to commence the next financial year the $5,790,000 already referred to has only a paper existence and represents an accounting expedient to meet past expenditure from future revenue, while by the end of next year a total of over 4 million dollars will have been advanced in anticipation of a future loan. The real reserve is, therefore, considerably short of the desiderated 10 million dollars, which sum is based on past figures of revenue and expenditure and is inadequate in present circumstances, being less than 2 months contemplated expenditure for next year. I have dealt with this matter of reserves at the outset to anticipate, and I hope prevent, any suggestion that we have an adequate hump on which we can draw if necessary to meet any deficit in respect of next year. We have in fact a nominal reserve of 17 million dollars, a real reserve of about 7 million and a public debt of 27 million.
I will now refer to the current 15 months and I do not propose to quote detailed figures, all of which are set out in the memorandum. Suffice it to say that the estimate of ordinary revenue approximated to that of ordinary expenditure, while the proposed separate war budget gave place to a new head entitled War Expenditure. I shall deal with War Revenue and expenditure first. Income Tax, which it was originally proposed to introduce to provide the necessary additional war revenue, was estimated to bring in annually 10 million dollars. The war taxation which was substituted for it was expected to bring in 6 million dollars. The revised estimate which I am afraid is some- what on the optimistic side is $9,700,000. When Mr. Caine addressed this Council on the Budget for 1940-41 he stated in this connection:
"We are proposing a standard rate of Income Tax of 10%, with a possible surtax on very high incomes. I will explain later more of the detail, but the yield at 10% was put by the Taxa-
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