XN000022-1974-08-08 — Page 4

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TUESDAY, AUGUST 8, 1974

THE ISSUE OF GOVERNMENT BONDS FOR FINANCING PUBLIC PROJECTS WAS ALSO SUGGESTED BY KUK LEADERS.

MEMBERS FELT THAT IF TAX HAD TO BE INCREASED, IT SHOULD BE ON LUXURY ITEMS.

ON THE QUESTION OF THE UNDERGROUND RAILWAY, ONE MEMBER FELT THAT THE QUOTED COST FOR ITS CONSTRUCTION WAS UNREASONABLY LOW. HE WARNED THE GOVERNMENT TO BE PARTICULARLY CAREFUL IN INVESTING IN THE PROJECT LEST THE CONTRACTOR FAILED TO COMPLETE THE UNDERTAKING WITHIN THE SAID COST.

THE ECONOMIC SECRETARY NOTED ALL THE POINTS MADE BY THE MEMBERS. HE PROMISED THEM THAT THESE WOULD BE BROUGHT TO THE ATTENTION OF THE FINANCIAL SECRETARY.

MR. JONES EXPLAINED THAT THE FINANCIAL SECRETARY'S PURPOSE FOR CALLING FOR A PUBLIC DEBATE WAS TO FIND OUT WHETHER THE PUBLIC WOULD LIKE TO SEE THE PRESENT EXPENDITURE PROGRAMME CONTINUED IF TAXES HAD TO BE RAISED, OR WHETHER IT SHOULD BE. MODIFIED.

HE SAID THAT GOVERNMENT WAS AWARE OF ALL THE PROBLEMS. DIFFICULTIES AND DANGERS IN RAISING TAXES AND THAT HE WOULD NOT LIKE TO SEE THIS HAPPEN, BUT ON THE OTHER HAND, THE PUBLIC WERE ASKING FOR MORE HOUSES, ROADS AND SUCH FACILITIES.

HE SAID THAT GOVERNMENT INTENDS TO FINANCE SOME PROJECTS BY BORROWING AND THAT DISCUSSION WITH THE ASIAN DEVELOPMENT BANK ON THE QUESTION OF LOANS WAS TAKING PLACE.

BUT THE PROJECTS SO FINANCED WOULD HAVE TO BE CONFINED TO THOSE WHICH WOULD GENERATE INCOME TO PAY OFF THE DEBTS.

MR. JONES POINTED OUT THAT THERE HAD NOT, IN FACT, BEEN ANY CUT-BACKS SO FAR IN PUBLIC EXPENDING.

HE SAID THAT ESTIMATED EXPENDITURE THIS YEAR WAS LIKELY TO BE ABOUT $6,000 MILLION AS COMPARED WITH $5,000 MILLION LAST YEAR AND THAT REVENUE FROM EXISTING TAXES AND FEES MIGHT NOT RISE FAST ENOUGH TO MEET THIS INCREASED SPENDING DUE MAINLY TO THE OIL CRISIS.

+IF, THEREFORE, THERE SHOULD BE A SMALL DEFICIT THIS YEAR,

BUT WE CANNOT CONTINUE THIS WOULD BE MET FROM THE RESERVES. TO SPEND FROM THE RESERVES WITHOUT ENDANGERING OUR FUTURE,+ MR. JONES VARNED.

HE SAID THAT OUR RESERVES WAS A RESOURCE OF STRENGTH BECAUSE THEY ENABLED THE GOVERNMENT TO BORROW. THEY ALSO HELPED TO MAINTAIN THE VALUE OF THE HONG KONG DOLLAR AND THEY EARNED A BIG INCOME FROM INTERESTS EQUIVALENT TO $400 MILLION A YEAR.

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