XN000022-1997-03-06 — Page 9

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As to your final question concerning expenditure and the relationship with revenue. I think there is a common misunderstanding that if we get more in revenue we can spend more. That is not how we control expenditure in formulating our Budget. The cardinal rule that we apply in expenditure control is that the growth in government expenditure should over time not exceed the forecast trend growth rate of the economy as a whole. And therefore while revenue might fluctuate and therefore in a particular year we might have revenue growth well in excess of economic growth, that does not mean that in that particular year we can relax our control over expenditure.

Reporter (in Chinese): About private treaty grants, about the revenue, the same question, just a follow-up. Mr Kwong, you mentioned modification of leases, etc. How about private treaty grants? Why is the figure like that?

Mr K C Kwong (in Chinese): Well, it is the same reasoning. It is about the land market. Moreover, for the same size of the land the revenue may change. It is not meaningful to compare the land revenue of one year with that of another year. For 96- 97 we have some high value land along the airport railway for sale.

Reporter (in Chinese): Mr Kwong, in the coming financial year, there is no need to allocate the land premium to the Land Fund. But you still estimate a very low figure for the premium. Why is that so?

Mr K C Kwong (in Chinese): It is not that we estimate on the low side, but for 96-97 you can say that it has been higher than the normal trend. The figures mentioned are in the Suspense Account which have not been shared with the Land Fund yet. So starting from July 1, 1997, the change with regard to the sharing arrangement will not mean that the Suspense Account will suddenly increase its revenue.

Reporter (in Chinese) (follow-up): With regard to the process of the Budget talks, was it that there were concrete proposals from the Hong Kong side and followed by explanations to the Chinese side? Or before you draft your proposals you have heard the views of the Chinese officials and then you draft your proposals, so at the end the Chinese side will accept your proposals?

Mr K C Kwong (in Chinese): I think it is difficult to answer your question. They have been speaking all the time, so how can you say whether we have accepted or we have considered that. Say, in January 96, it was said that we should follow our cautious and prudent approach that we should comply with the Basic Law. That has all along been done. For the specific proposals, I can tell you clearly that the policy branches and the departments carefully considered and come up with the proposals. The Star Chamber considered all the proposals which were then put as a whole proposal to the Expert Group for discussion.