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HONG KONG LEGISLATIVE COUNCIL
HONG KONG LEGISLATIVE COUNCIL
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represents an excess of approximately $681 million over the original estimate. But this figure does not of course represent the actual surplus on the year's working as it is partly offset by an increase in expenditure. I propose to deal later with the question of the actual surplus.
It has been alleged in certain quarters, that for some unspecified ulterior motive, I deliberately under-estimate revenue and over-estimate expenditure. Anyone who takes the trouble to look up the figures will see straight away that the latter allegation is quite untrue because from 1947 onwards the final expenditure figure has consistently been slightly above the original estimate, though the variation has been comparatively small. The suggestion that revenue is deliberately under- estimated is of course the type of criticism to which the result achieved this year is bound to give rise.
To determine the validity of such criticism, it is necessary in the first place to recall the conditions which obtained when the estimates were framed. These are apt to be overlooked when the year ends with a comfortable surplus, and it is easy to say that the revenue estimates should have been stepped up. But if, instead of a surplus, a serious deficit had developed in the middle of the year, necessitating drastic cuts in expenditure and emergency measures to increase revenue, we should have been accused of having taken an unjustified gamble and of having shown a deplorable lack of foresight.
When the estimates were framed, the political horizon was dark and it seemed that trade with China might temporarily come to a standstill. The ban on dealings in gold gave rise to the wildest rumours regarding the future of the Hong Kong dollar. The "Amethyst" incident and the crossing of the Yangtse by the People's Liberation Army accentuated the feeling of apprehension which was evident among large sections of the population, and a serious exchange crisis developed in May, when the Hong Kong dollar slumped momentarily to eight to the U.S. dollar on the free market. It was not long, however, before confidence was restored, and the strong reinforcement of the Hong Kong garrison helped to consolidate the general feeling of reassurance.
Perhaps not surprisingly in view of these developments, revenue during the first few months of the financial year came in at a rate which was somewhat below that required to realize the estimate which is now alleged to have been unduly low. Moreover, it was then evident that considerable supplementary expenditure would be necessary in connection with the arrival of the reinforcements and for internal security purposes generally. In these circumstances, the position was explained to Heads of Departments. They were asked to curtail their normal expenditure as much as possible, to cut out any which was not absolutely necessary, and to defer expenditure in cases
where there was no particular urgency. I should like to take this opportunity to express to Heads of Departments my appreciation of their co-operation,
Even with the heavy expenditure which has been necessary in connection with security measures, it has proved possible, by exercising strict economy on all normal services, to limit the excess over the approved expenditure figure to $5 million. That this represents no mean effort and is very much to the credit of Heads of Departments, will be evident when I mention that expenditure directly or indirectly related to security mea- sures including of course the cost of the Police and Defence Force, but excluding substantial Loan expenditure on Police stations and block houses, is expected to be in the region of $32 million. It is anticipated that the revised expenditure figure will total $185,550,253, but it is proposed that a supple- mentary payment should be made to the 3 per cent. Rehabilita- tion Loan Sinking Fund, which it will be recollected can be utilized for the purchase of bonds when they can be obtained at a price below par. Such a supplementary payment was always contemplated in a good year and, taking this into consideration, the surplus on the year's working should amount to just under $58 million.
As I have explained, revenue did not come in too satisfac- torily to start with, but half way through the year it began to reach a better level. Later a tendency developed to pay local duty on goods which normally pass through the Colony in bond. This of course was the result of unsettled conditions generally, and to interruptions in the normal distribution of cigarettes from Shanghai factories. Receipts from duty on liquor and petroleum products reached quite unexpected levels, and in the case of tobacco the excess over the approved estimate is expected to be about $17 million, which is equal to the total collections in 1948/49. I would, however, emphasize that these results, which have been responsible for approximately $30 million of the surplus, must be regarded as windfalls. They are unlikely to occur again, and indeed collections are tending to tail off, as with more settled conditions drawbacks are being claimed in an increasing proportion of cases.
Other factors also came into play to produce the surplus, for as more and more people flocked into Hong Kong, so the revenue from such items as royalties from transport companies, entertainment tax, dance hall tax, liquor duties, bets and sweeps tax, restaurant meals tax, water, postal and railway receipts, rose considerably.
The year 1949/50 opened with a revenue balance of $72,143,683. If the estimated surplus of just under $58 million is realized, the financial year 1950/51 should open with a revenue balance of some $130 million.
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