CONFIDENTIAL
7.
b)
c)
d)
thus safeguard itself against under- or over-reaction to interested pressures. A special group has been set up to do this.
The 'safety net' of public assistance must be adequate to the situation. The normal period of review between adjustments to the rate has been shortened (a 24% increase over the rate established at 1st January 1974 takes effect from 1st June), and the C.O.L. basket on which the rate is based is being re-examined.
It must not add to imported inflationary pressures if it can possibly avoid it. The extra taxes in the recent budget applied principally to car owners and consumers of alcohol and tobacco. Certain charges for Government services such as water and accommodation in public housing are badly overdue for revision; we recognize the need to proceed very cautiously in present circumstances.
It must do what it can to prevent profiteering or excessive mark-up between imported and retail prices. Though the effect of excessive mark-up on prices is relatively small, the psychological effect on the public and its willingness to live with hugely increased import prices is great. In the case of rice the Government has statutory powers over importers, and these and various other methods have been used to stop profiteering and squeeze profit margins with considerable effect. For the rest a Consumer Council has been set up under the vigorous chairmanship of Sir Y. K. Kan to act through publicity and persuasion or recommendation to the Government on all matters affecting price levels. Its composition is mostly lower income bracket, and it represents a new and rather exciting departure in Hong Kong advisory bodies. It is equipped with investigatory staff and is already having some impact. Its role is inevitably limited to giving the public increased insurance against local exploitation; it can do nothing about the level of import/world prices which is at the heart of the present situation.
e) Since the final remedy lies in a rise in wages, the Government should set an example as a good employer in its wages policy. This it is doing.
Apart from these steps the Government is of course being urged to take more drastic action and in particular:
3
CONFIDENTIAL
No comments yet.
Private notes are available after approval.