CO129-623-9 Estimates of Expenditure- includes a report for the year ending March 1952 1-2-1951 - 30-11-1951 — Page 61

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that the establishment of a Development Fund on these lines will prove of great benefit to Hong Kong, and while it will appreciably relieve pressure on the ordinary budget, the intention is that the Fund should only be used to finance revenue-producing projects and such other development and welfare projects as will not commit Government to increased recurrent expenditure to be financed from general revenue. It is considered that this will provide a useful safeguard, as it will ensure that any scheme involving increased recurrent expenditure will not be lightly undertaken, but will receive very careful scrutiny in the light not only of the initial recurrent costs, but the level to which these may rise when the scheme is fully developed.

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35.

Thus the financial year 1951/52 will open with en estimated general revenue balance of $1911 million, Development Fund standing at approximately $55 million and an Essential Commodities Equalisation Fund of $30 million. The liquidity position is affected by the fact that owing to rises in price and the necessity to increase the stock-riles of certain essential foodstuffs, it may become necessary to spend a further $30 million for this purpose during the year. This will mean that some $90 million of our surplus funds will be tied up in stocks of commodities. A further sum of nearly $25 million is immobilised, representing advances pending the raising of a loan. A total of $50 million of these advances was charged off to expenditure during 1950/51, and if the current year should again end with a reasonable surplus, I would propose to take advantage of this in order to charge off the remaining balance.

36.

To sum up, the financial position, at the moment, is quite satisfactory, but although revenue during the opening month of 1951/52 continued to come in at a satisfactory level, it is impossible to say with any certainty how long this will continue, as some sources of revenue such as railway receipts are already declining, because of the restrictions now in operation. It seems almost certain that the effects of the American embargo will be more apparent in 1952/53, and it may in consequence be necessary to impose some additional taxation in connection with the 1952/53 budget, particularly if security expenditure has to be maintained at its present level, which represents 22.9 per cent of the total expenditure. If the contribution to His Majesty's Government is finally fixed at approximately last year's figure the percentage of expenditure on defence and security measures will rise to 25.9 per cent, which is a very high figure indeed for a Crown Colony.

37.

Quite obviously, while security expenditure remains at this very high level, it will be impossible for the Colony to attempt anything more ambitious than the present five year programme on capital works totalling over $106 million, plus the modified Tai Lam Chung Reservoir scheme, to which reference has been made in paragraph 33, if this is favourably reported upon by the consulting engineer. I trust that even if revenue shows less buoyancy than it has done in the past, it will still be possible to adhere to this programme. Whether or not it can be carried out in its entirety, however, depends to a considerable extent on