CONFIDENTIAL
has recently suggested that the Hong Kong economy may achieve a growth rate next year of 5%.
4. The recession has hit Hong Kong just as the government there had introduced a series of 10 year plans aimed at improving the standards of public and community services in the Colony. There is an ambitious public housing programme to accommodate 1.5 million people, in addition to the 2 million, or 47% of the population, who are already living in subsidised housing. In education the government's aim is to provide subsidised schooling for every child up to the age of 14 years by 1979. Hedical services are also being expanded and 4 new hospitals are planned. Although social welfare and social security are still limited by British standards, a number of social benefits have been introduced in the past two years. recession has necessitated some rephasing of the housing and educational programmes. There is some scope for re-acceleration when the economy revives.
5.
The
Public spending in the social sector now accounts for nearly 42% of the Hong Kong Government's budget. There is a growing realisation in the Colony that taxation, increased somewhat in this year's budget, will need to be increased further if the social programmes are to be fulfilled and the increased costs of defence
are to be met. However, there are limits to the amount Hong Kong can raise by fiscal means because of the overwhelming need to attract inward investment on which the prosperity of the Colony
depends.
Hong Kong and Indian Ocean Department
27 November 1975
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CONFIDENTIAL
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