CONFIDENTIAL
5.
A second but more long-term source of uneasiness concerns help to the aged. Any contributory system of social security has been rejected and yet there must be serious doubts about whether help to the aged (at present confined to those of 75 and over) can be materially extended within the framework of the recurrent budget.
6. This lead me to a third point; current budgetary theology in Hong Kong i.e. that there should be no public debt and that all capital expenditure should be met from the annual budget.
In a situation where personal emoluments absorb about 46% of the recurrent budget, the squeeze on the social services is severe. For example, social welfare in all its aspects absorbs less than 2% of the recurrent budget. It may also have resulted in the building of poor quality housing single rooms without kitchens predominate; whereas almost 100% of the houses built in Singapore's large-scale re-housing have kitchens and the great majority of the flats have two or more rooms. The heavy subsidisation of Hong Kong's housing has meant that the scale of rents absorbs between 6% and 10% only of median incomes, as opposed to 20% in the private sector and space, comfort and privacy have suffered.
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7. So much has been achieved in Hong Kong that it may seem unfair to criticise some of the achievements but at least it is, I think, worth raising the question whether the economic and budgetary theories on which Hong Kong's earlier successes have been based could perhaps be relaxed in the interests of social progress now that Hong Kong is more affluent.
26 March 1974
G Foggon
C.
Mr Youde
CONFIDENTIAL
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