XN000022-1971-02-24 — Page 36

36

Wednesday, February 24, 1971

REVENUE EQUALISATION FUND

Transfer Back To Genoral Revenue Balance

****

Sir John Cowperthwaite, Financial Secretary, today proposed to wind

up the Revenue Equalisation Fund and transfer its assets back to the General

Revenue Balance but it was a formal proposal, without any substantial

practical consequences, and would require a resolution of the Council.

The Fund was established in 1953 after a resolution had been passed

by the Legislative Council specifically for the purpose of meeting any serious

shortage of revenue for a particular year, or for meeting any non-recurrent

increase in expenditure in any particular year.

It was then proposed gradually to build up this Fund up to the level

of one year's revenue, and as a first step, to transfer to it from the General

Revenue Balance the sum of $100 million,

Sir John said since then only $38 million has been added, and nothing

at all since 1960, so that the Fund was very far short of the original target

of one year's revenue.

"Indeed, our total financial reserves at present, which many criticise

as excessive, amount to only eight months' revenue, "he commented.

But whatever the situation might have been in 1953, he did not think

that an accounting device of this kind could influence in any way the effect

on the Colony's credit of temporary deficits.

What would influence it in

those circumstances was Hong Kong's overall reserve position whatever mme was

given to the fund in which the assets were held,

Sir John said with financial reserves of the present size and with Hong

Kong's comparatively large reserves of taxable capacity, "deficit years, within

limits, would have no effect on the credit, and indeed, deficit budgets were

now commonplace, if not fashionable."

0

/ 37