9.
SECRE
Indeed to maintain it requires hard driving.
e) There is room for debate as to what size is safe for the public sector in Hong Kong. Some put it at no higher than 20% of the G.D.P. Personally I do not agree with this and as you see from para. 4 above it could well go as high as about 221% by '79/80. Nevertheless a view must be formed as to what the upper limit is, and I accept that it must be considerably lower in an open economy dependent on a narrow range of exports like Hong Kong's than in one with a large domestic market on which to fall back in times of dropping exports.
f) Hong Kong's dependence for revenue on the level of external trade (over which it has no control) inhibits the Government from becoming excessively locked into commitments on recurrent expenditure unless they can be maintained in straitened circumstances.
Scope for contributory programmes
11.
The Government has considered the possibility of obtaining additional resources by means of contributory programmes, such as either compulsory social insurance or compulsory contributions to a central provident fund. The latter is at present being re-examined. But the difficulty about such concepts in Hong Kong is firstly that uncertainty about the long-term future makes the potential beneficiary sceptical of the advantages of benefits to be derived many years ahead in exchange for payments now. He prefers to have his money in his own hands to make his own provision against the future. Secondly in view of this attitude it would be difficult to make contributions by employees compulsory, and contributions would probably have to be confined to employers. The latter arrange- ment has no advantage over any other form of direct levy, and there are strong arguments in Hong Kong against what would be a payroll tax. Thirdly the initial benefits from a provident fund are small, and only increase with the passage of sufficient time.
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