Although Hong Kong was accustomed to budgeting surples, it was also possible to budget for a deficit and to borrow if necessary. He would there-
fore wish to talk with the Governor about taxation
policy and the need to raise revenue for social purposes. It would be short-sighted to keep taxation
down at the cost of social services. Hong Kong depended on overseas investment. But investment was
not income and should not be treated as such. The
discussions with the Governor should also cover
environmental and planning problems.
(iv) Labour Affairs
We should maintain a steady but not undue pressure from here on wages and labour matters. These were important to parliament.
(v)
Death Penalty
The Governor had expressed some anxiety about the
working of the present informal arrangement. It would be necessary to discuss the situation with him frankly The Department would submit a paper which Lord Goronwy-Roberts would ask the Secretary of State
to study personally.
(vi) The Defence Review
The maintenance of confidence in the Colony and its future was a major factor. It would be necessary to seek the Governor's view on how far the garrison could
be cut without undue risks to security and confidence. The present garrison was a deterrent to potential troublemakers by its very presence. It had been suggested that Hong Kong might pay all the costs of the garrison. This however would mean that less money would be available for social policy matters,
and was probably not a practical option. (vii) Administration of Justice
To bring in an outside Advisory Group of eminent lawyers might damage public confidence in Hong Kong's ability to run its own judicial system. The Minister
said he would mention to the Governor the concern
CONFIDENTIAL
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