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WEDNESDAY, APRIL 20, 1977
HE SAID: +MR. Q.W. LEE ALSO ENDORSED THE WAY THE BUDGET IS ACTUALLY CONSTRUCTED IN TERMS OF CERTAIN GUIDELINE RATIOS. THESE RATIOS SEEK FIRST, TO DEFINE THE SIZE OF THE PUBLIC SECTOR- SECONDLY, TO ENSURE THAT THE BUDGET ITSELF IS CONSTRUCTED WITHIN CERTAIN CONSTRAINTS AS REGARDS THE RELATIONSHIP BETWEEN THE RECURRENT AND CAPITAL ACCOUNTS AND THE FINANCING OF THE CAPITAL ACCOUNT- THIRDLY, TO DEFINE THE BALANCE OF FISCAL SYSTEM- AND FINALLY, TO ACHIEVE STEADY PROGRESS BY FIXING UPON AN ANNUAL GROWTH RATE OF EXPENDITURE IN REAL TERMS WHICH IS PRACTICABLE AND BY MAINTAINING A CERTAIN RELATIONSHIP BETWEEN OUR FISCAL RESERVES AND GENERAL REVENUE ACCOUNT EXPENDITURE.+
THE FINANCIAL SECRETARY NOTED THAT THE TOTAL EFFECT OF THESE GUIDELINE RATIOS WITHIN WHICH THE BUDGET WAS CONSTRUCTED WAS THAT, TAKING ONE YEAR WITH ANOTHER, HONG KONG BUDGETS HAD A NEUTRAL EFFECT ON THE GROWTH RATE OF THE MONEY SUPPLY AFTER MAKING DUE ALLOWANCE FOR ANY NECESSARY INCREASE IN OUR FISCAL RESERVES,
+THIS IS AS IT SHOULD BE. I SAY THIS BECAUSE I BELIEVE THERE SHOULD NOT BE ANY UNPLANNED MONETARY CONSEQUENCES FROM OUR DECISIONS ON REVENUE AND EXPENDITURE RATHER, DECISIONS TO
INCREASE EXPENDITURE SHOULD BE REFLECTED IN DECISIONS TO RAISE THE NECESSARY REVENUE,+ SAID MR. HADDON-CAVE.
THE FINANCIAL SECRETARY SAID: + IT IS TRUE THAT THE 1977-78 BUDGET DOES NOT CONFORM VERY CLOSELY TO THE GUIDELINE RATIOS. THUS RECURRENT EXPENDITURE WILL ABSORB NEARLY 85 PER CENT OF RECURRENT REVENUE (COMPARED WITH THE GUIDELINE RATIO OF 80 PER CENT), THE SURPLUS ON RECURRENT ACCOUNT WILL FINANCE ONLY 55 PER CENT OF CAPITAL EXPENDITURE (COMPARED WITH THE GUIDELINE RATIO OF 60 PER CENT) AND THE RATIO OF RECURRENT EXPENDITURE TO TOTAL EXPENDITURE WILL BE 76 PER CENT (COMPARED WITH THE GUIDELINE RATIO OF 70 PER CENT).
+THESE ARE QUITE SERIOUS BREACHES OF THE GUIDELINE RATIOS, BUT CAPITAL REVENUE WILL BE VERY BUOYANT IN 1977-78, FINANCING 47 PER CENT OF CAPITAL EXPENDITURE (COMPARED WITH THE GUIDELINE RATIO OF 20 PER CENT) AND, THEREFORE, IT WAS POSSIBLE FOR ME TO PRODUCE A BALANCED BUDGET, MAKING THESE BREACHES ACCEPTABLE,+ HE SAID.
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