TNAG-0103-FCO40-139-Briefs-and-background-notes-for-Lord-Shepherd-1967 — Page 108

CONFIDENTIAL

since Her Majesty's Government is unwilling to help solve the

development problem (and we clearly would not wish to divert any

part of our scarce Aid Programme resources to Hong Kong) they had

better leave Hong Kong to solve it in its own way. This is a traditional

attitude in Hong Kong, and it will be heightened by our requirement of a

substantially increased defence contribution.

6. Revenue, both recurrent and capital, for the current financial

year has been estimated at $1885m. (€117m.) which is $101m. (£6.3m.)

above the previous year's figure. At the same time the total expenditure

estimates are up to $1992m. (£124m.), a $114m. (£7.1m.) increase above

the figure for 1966-7. It is anticipated that Hong Kong is now entering

a period of deficit financing; their greatly increased housing

programme and new education policy are the main factors contributing

to this.

Provided confrontation does not lead to economic recession and

reduced Government revenues (of which there is no sign yet) or to any

substantial expenditure on special measures, their general reserves (which

are substantial) are capable of taking the strain of a series of small

deficits.

Hong Kong Department,

October, 1967.

CONFIDENTIAL