Secretariat file 35/2321/50.
CONFIDENTIAL
No. 120
19
20
Sir,
GOVERNMENT HOUSE,
HONG KONG,
14 November, 1950.
452
I have the honour to refer to my savingram No.853 of 10th August, 1950, and your savingram No.948 of 18th September, 1950, on the subject of charging to expenditure advances totalling about $50,000,000 made under the Rehabilitation Loan schedule.
2.
0
On the 31st March, 1951, expenditure under the loan schedule totalled $109,434,976.83. of this amount $50,000,000 was covered by loans raised by public subscription and the balance of $59,434,976.83 by advances pending the raising of further loans. On the same date the general revenue balance stood at $154,152,842.57.
3.
The revenue balance was adequate to meet the transfer of all loan advances outstanding on 31st March, 1950. However, the only method of clearing the advance account is to charge it off to a new subhead of expenditure and bring the transfer into account during the current financial year. This would result in a paper deficit of over $56,000,000 on the budget estimates for 1950/51. To this figure must be added an additional $16,000,000, not provided in the current estimates, for the 1950/51 contribution towards the reinforcement of the garrison. In addition, during the course of the year, large items of expenditure have been authorized by Finance Committee, including provisions for wiring the frontier, general security measures, additional fire fighting services, and the maintenance of Chinese Nationalist refugees at Rennie's Mill camp. It is probable that, taking this expenditure into consideration, the paper deficit would reach the large figure of about $75,000,000.
4.
An economy drive on departmental expenditure was in consequence organised and this has produced some good results. Revenue fortunately has remained buoyant, the yield under duties, particularly those on tobacco, being greatly in excess of the estimate, which was based on a level of consumption that could be expected with some confidence even if conditions during the year suffered some deterioration. It is thus possible that the surplus for 1950/51 may reach a figure of some $60,000,000 which would reduce the paper deficit to about $15,000,000.
5.
In these circumstances, it was considered appropriate to charge off to expenditure only $50,000,000 of the loan advances. This would reduce the estimated deficit to about $6,000,000 with an outside chance of reaching only a nominal deficit in the current year's account. The position was explained to members of Finance Committee who agreed in principle to charging off $50,000,000 of the loan advances. They also agreed that, if towards the end of the present financial year a small surplus appeared imminent, a further portion of the loan advances might be charged to expenditure.
16. Finance Committee
THE RIGHT HONOURABLE
JAMES GRIFFITHS, M.P.
21 NOV 1950 MAISTRY