TNAG-0547-FCO40-642-Diplomatic-reports-from-Sir-Murray-MacLehose--Governor-of-Ho-1975 — Page 25

CONI DENTIAL

T

7.

far leads to hell rather than heaven, and if we tread

cautiously for fear of brimstone I think we are wise to do so.

But these breaks with tradition are of real significance

and will give greater room for manoeuvre in future.

10.

For my part I am convinced that Hong Kong

must establish a rather but not excessively higher level of

revenue of all sorts if it is to do the things that need

There is danger in leaving them undone and in

doing.

the Government thus losing credibility, just as there is

danger in retarding the growth of the economy by clumsy or

abrupt fiscal policies. In 1972 and '73 we had built up the

public expectation and enthusiasm necessary to carry through

tax increases in '74, but with the oil crisis around us,

and uncertainty and recession ahead, we were only able to

edge forward slightly in '74/75 and make a rather bolder

move in '75/76. Though all to the good this is not enough,

and the Financial Secretary gave notice in his budget speech

of a need for a further $500 m. of resources in '76/77.

11.

Meanwhile this Government faces a period

of acute financial stringency in 1975/76, and in '76/77 too

unless, contrary to all expectation, the economy picks up

so fast as to make it possible to obtain very significant

additional resources. We can continue to expand housing and

the New Towns and related communications, and the forces

/of law and order

CONFIDENTIAL