SECRET
generation) can be (and is) circumvented by care
25.
and patience but not challenged head on. Taxes and
charges of all kinds have been steadily and unobtrusively
increased, but in such a way as to avoid united
opposition.
By these means and by growth in the economy,
an average growth of expenditure in real terms of about
11% per annum is being achieved over the period '72/73
to '79/80, and with a buoyant economy there could be
room for some acceleration.
25.
Against this local background we do not
propose to prescribe detailed fiscal measures to the Hong
Kong Government, on the other hand we must be assured
When agreement is
of what progress it will achieve. It would therefore
be appropriate to establish broad programmes of objectives
taking account of the pressures both on the Hong Kong
Government and on HMG. In effect Annex D represents
a first attempt at such a process.
reached with the Hong Kong Government as to what should
be done, it should thereafter be left as far as possible
to the Hong Kong Government to decide how best to do it.
The responsibility of HMG would then be discharged by the
monitoring of agreed programmes to ensure that achievement
does not fall short of intention. It is of course under-
stood that the phazing of Hong Kong's programmes could
be affected by circumstances outside its control such
as a renewed and major recession in its export markets.
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Private notes are available after approval.