TNAG-0453-FCO40-518-Budget-of-Hong-Kong-1974-1975-1975 — Page 221

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MR Sawer

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TO ROUTINE DTI TELNO CREDA 11 OF 28 FEBRUARY INFO FCO BOTB AND TREASURY.

MR CLOAKE

FOR MISS LACKEY (CRE) INFO BOTS,REASURY, FCO FOR STUART (HK10D) AND CLOAKE (TRADE RELATIONS AND EXPORT DIVISION) FROM ASTON.

REF MY CREDA 10 OF 17 FEBRUARY.

RECEIVED IN REGISTRY No. 61

14 MAR 1974

BUDGET.

#KK 5/20

FOLLOWING IS SUMMARY OF PRESS COMMENT TO DATE:

SOUTH CHINA MORNING POST EDITORIAL UNDER HEADING TAKING NO CHANCES

WONDERS WHETHER FINANCIAL SECRETARY MAY HAVE UNDERSTIMATED EEE UNDEK

ESTIMATED AFFECT OF OIL CRISIS PRODUCING A POSSIBLE DEFICIT AND

THEREFORE CONSIDERS HIS CAUTIOUS APPROACH FULLY JUSTIFIED. CAPITAL

EXPENDITURE FOR NEXT THREE YEARS IS REGARDED AS 'DAUNTING** AND

EDITORIAL ASKS WHETHER ''IN OUR GRANDIOSE SOCIAL PLANS WE HAVE NOT

OVER-EXTENDED OURSELVES: BUT THIS BELIEF CAN ONLY BE SUBSTAINED

ON THE SELFISH AND SHORT-SIGHTED ASSUMPTION THAT HONG KONG MUST

REMAIN A TAXPAYER'S PARADISE INDEFINITELY'', IT REGARDS PROPOSED

TAX CHANGES – WHICH IT DOES NOT CONSIDER WILL BE A BURDEN ON SECTOR

OF COMMUNITY HARDEST HIT BY INFLATION – AS RELATIVELY SMALL PRICE FOR PRIVILEGE OF LIVING IN THIS COMMUNITY WITH ITS EXPLODING

SOCIAL COMMITMENTS''. EDITORIAL STRESSES THAT HONG KONG HAS TO BE

SEEN TO BE SQUEEZING EVERY SOURCE OF REVENUE CONSISTENT WITH THE

GROWTH PHILOSOPHY TO ENSURE THAT HELP FROM ADB WILL CONTINUE TO

BE MADE AVAILABLE.

FINANCIAL EDITORIAL SEES BUDGET AS SOUNDING THE DEATH KNELL FOR

A FULLY FLEDGED ASIA DOLLAR MARKET AND REFLECTS DOUBTS OF SOME

BANKERS ABOUT PROPOSAL TO RELAX RESTRICTIONS ON OPENING OF NEW

BANK BRANCHES, HE IS ALSO SCEPTICAL ABOUT PROPOSAL TO LEAVE

REGULATION OF FINANCE HOUSES TO THEM BUT WELCOMES INCREASE OF DEPRECIATION ALLOWANCES FOR MANUFACTURING INDUSTRY. THIS IS THOUGHT

LIKELY TO BENEFIT TEXTILES AND PLASTICS THE MOST, FINANCE EDITORIAL

OF SCMP CONCLUDES THAT BUDGET IS **TECHNICALLY BRILLIANT'',

HONG KONG STANDARD EDITORIAL UNDER HEADING A BUDGET OF WARNING**

SAYS THERE IS AN UNDEFINABLE FEELING OF LET-DOWN''. THE TAX

RELIEF PROPOSALS MAKE DULL READING AT GRASS ROOTS AND MIDDLE

CLASS LEVELS** WHILE PROPOSED TAX BENEFITS AFFECT ONLY **INSIGNIFI- CANT PROPORTION OF THE COMMUNITY**, IT SAYS THAT ''DELIBERATEL Y

VICIOUS RESTRUCTURING OF LICENCE FEES'' AS PART OF A **CAMPAIGN

AGAINST CAR OWNERSHIP'' CAME AS A SHOCK AND WILL UNDOUBTEDLY COME

UNDER IMMEDIATE ATTACK. MUCH OF EDITORIAL IS DEVOTED TO CRITICISING

THIS ASPECT OF BUDGET AND CONSIDERS THAT DECISION ON INCREASED

TAX FOR MINI BUSES PRE-EMPTS OPPORTUNITY FOR PUBLIC DEBATE ON GREEN PAPER PROPOSALS AND WRONGLY TAKES PUBLIC OPINION FOR GRANTED.

EDITORIAL ALSO SEES AS 'DISTURBING** THE CLEAR IMPLICATION THAT

ALL IS NOT WELL IN TEN YEAR HOUSING PROGRAMME. IN CONCLUDING

EDITORIAL REGRETS ''NEGLECT TO TAKE INTO ACCOUNT'' THE MOST PRESSING PROBLEM OF **SOARING INFLATION'' AND SUGGESTS THAT IT **MAY WELL

BE PAST THE TIME WHEN GOVERNMENT SHOULD TAKE A PERSONAL HAND IN BOOSTING RAPIDLY DECLINING DOMESTIC PURCHASING POWER OF THE

HONG KONG DOLLAR**.

TWO LEADING CHINESE NEWSPAPERS SEE BUDGET AS INDICATING A LEAN YEAR AHEAD. NEITHER CONSIDERS THAT TAXES WILL BE EXCESSIVE BURDEN ON TAX PAYERS AND INCLINES TO DISCOUNT THEM AS LONG EXPECTED. BOTH WARN THAT ADDITIONAL TAX ON MINI-BUSES COULD GIVE RISE TO CRITICISM AND MAY MEAN THAT COST WILL BE PASSED ON TO ORDINARY COMMUTERS. ONE CONCLUDES THAT THE BUDGET IS ORDINARY AND CONSERVA- TIVE AND THE OTHER COMMENDS GOVERNMENT ON IT.

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BUSINESS LEADERS FIRST REACTIONS REPORTED IN PRESS INCLUDE CHAIRMAN OF HONG KONG AND SHANGHAI BANK WHO THOUGHT BUDGETMASTERFUL PRESENTATION WHICH GAVE A LITTLE BIT HERE AND TOOK AWAY A LITTLE BIT THERE. HE WAS CONCERNED ABOUT MODIFICATION OF BANKING LICENCES SYSTEM WITH LIKELIHOOD OF EXCESSIVE COMPETITION, SIR DOUGLAS CLAGUE - HUTCHISONS THOUGHT BUDGET CONSERVATIVE AND UNLIKELY TO HAVE MUCH EFFECT ON OVERALL ECONOMY, DIRECTOR OF COMMERCE AND INDUSTRY CONSIOUSLY WELCOMED IMPROVED DEPRECIATION ALLOWANCES FOR INDUSTRY BUT HAD RESERVATIONS ABOUT WARNINGS OF INCREASED DIRECT TAXATION NEXT YEAR. HE THOUGHT NEW PRIVATE CAR TAX WOULD HAVE ADVERSE AFFECT ON STATUS AND MORALE OF CHINESE MIDDLE MANAGEMENT. PROPERTY DEVELOPERS INTERVIEWED WERE NOT SURPRISINGLY DISAPPOINTED WITH PROPOSALS TO INCREASE RATES ON CERTAIN EMPTY PROPERTY AND PREDICTED THAT THIS COMBINED WITH RAPIDLY RISING COSTS WILL CREATE CRITICAL

DIFFICULTY IN RESIDENTIAL FLATS WITHIN A FEW YEARS. PRESIDENT OF HONG KONG ECONOMIC SOCIETY THOUGHT BUDGET WAS OPTIMISTIC IN

EXPECTING 4 PERCENT GROWTH RATE.

TODAYS MID-DAY PRESS REPORTS MINI BUS OPERATORS "UP IN ARMS'' AND WARNING INCREASE IN CHARGES LIKELY. TAXI OPERATORS ARE ALSO SAID TO BE TALKING OF INCREASED FARES. CHINA MAIL SAYS BUDGET MARKS END OF THE DAYS OF NEST EGG'' BUDGETS AND SURPLUS IN THIS BUDGET COULD BE THE LAST OF ANY SIZE FOR A LONG TIME, HENCEFORTH IT IS GOING TO BE A MATTER OF SCRAPING AROUND TO FIND EXPENDITURE THAT CAN BE CUT. IT SEES LITTLE TO BE SURPRISED AT IN THE INCREASE IN TAX BUT CONSIDERS THAT MINI-BUS OPERATORS HAVE PROBABLY GOT THE BEST CAUSE FOR COMPLAINT. CHINA MAIL EDITORIAL CONCLUDES THAT HOPES THAT GOVERNMENT ONE DAY WILL DO MORE IN FIELD OF SOCIAL SERVICES NOW APPEAR VERY FAINT. ACCORDING TO CHINA MAIL UNOFFICIAL MEMBERS OF LEGISLATIVE COUNCIL ARE DIS- SATISFIED WITH LACK OF MEASURES TO CONTROL COST OF LIVING.

ASTON

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