CO129-597-3 Estimates 1950 22-2-1949 - 3-11-1950 — Page 81

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50.

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I am appointing a committee to examine the whole question of Government transport. It is normally more economical for Government officials to use their own cars on official journeys, and now that most officers have cars of their own, I hope that it may be possible to effect reductions in the number of Government vehicles and in the number of drivers whose pay and allowances in 1949-50 are estimated at $1,117,834. Except for replacements of Police vehicles, no other replacement vehicles for which provision has been made in the estimates will be actually ordered until the committee has satisfied itself that no alternative arrangement is possible. I also propose to examine the position in regard to uniforms, which, excluding the Police and Defence Force, are costing the Goverment just under $1,000,000 annually. This seems a high figure and it is possible that some material economies can be effected.

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51.

There is a strong and widespread feeling that the cost of administration in a Colony the size of Hong Kong should not (exclusive of Colonial Development and Welfare grants) reach a figure of nearly $178,000,000, and it will be my endeavour by the means I have indicated, and by any others which present themselves, to secure an appreciable reduction in expenditure in 1950-51. I shall also continue my endeavours on the lines set out in paragraph 16 of this despatch to increase the revenue derived from rates. By this means I hope to be able to keep revenue and expenditure in balance in spite of the fact that the former will not next year include any contribution from the Imperial exchequer. I must, however, point out that if expenditure on security measures continues during the next few years at the present level, it will place a heavy strain on the Colony's finances and interfere seriously with the development of social services.

52.

I note that in paragraph 4 of your telegram No.285 you enquired whether it would be feasible to raise the standard rate of Earnings and Profits Tax. I would strongly recommend that no change should be made in the rate at present. The machinery for the collection of this tax is operating satisfactorily, and evasion is not a serious problem. Ţ have, however, no doubt whatsoever that if the rate is substantially increased evasion would be practised on a very large scale indeed, and the Inland Revenue Department requires a good deal more experience before it will be in a position to combat such a move successfully.

53.

But there is another aspect of more immediate importance. Information filtering through from the north indicates that the communist authorities only intend to maintain a very low standard of living in the territory under their control. It can be taken for granted, therefore, that there will be no official imports of ordinary consumer goods and that imports will be restricted to such articles as happen to be indispensable to the communist authorities. It is, I fear, inescapable that as the communists over-run the remainder of China there will be a marked decline in Hong Kong's trade. Fortunately the trade of the Colony is not nearly so dependent on China as it used to be, but nevertheless we must

When this will be prepared for an appreciable fall in revenue. take place it is not yet possible to foresee, but we cannot afford to be caught unawares by such a development, and I therefore propose to ask heads of departments to formulate proposals for a speedy reduction in their expenditure, should the need arise. With the greatly expanded staff which has

an increase of 7,000 sim e been built up since the liberation

1941

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a sudden cut in expenditure would not be easy to achieve,