TNAG-0570-FCO40-703-Planning-paper-on-Hong-Kong-1976 — Page 73

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Which would hand

the effect of

conising

DUN

to forward planning is to establish what, social programmes are necessary and at what level and to work, from this to an estimate of the appropriate level of public expenditure. From the 1976/77 budget papers it is possible to derive an estimate of total public expenditure of 22% of the estimated GDP in 1979/80. It is not possible at this stage to say whether the programmes outlined above can be met from this. It should, in our view, be possible within the parameters set by the Hong Kong Government as to the acceptable rate of increase in public expenditure (12-14% per annum) to raise the level of public expenditure to 25% of the GDP which prima facie seems to allowa sufficient margin to finance expanded programmes on the lines suggested, above by then, increased public expenditure at thin sate wined, we calculate, absorbs some 37% of the expected melease in endnotrias pasiution.

thin.

23. However, it will be necessary to implement & policy of expanding public expenditure with some care. With its uncertain political future, commercial confidence in Hong Kong is both fragile and prone to over-reaction, and influential opinion there has, over many years, been conditioned to regard increases in public expenditure, small by UK standards, as potentially dangerous to the competitiveness of her exports and thus to her economic prosperity. Abrupt fiscal action could thus discourage the retention or attraction of the capital on which employment depends far more directly than the mere figures involved might suggest.

7.

24. While it is constitutionally possible for the Governor with the use of the official majority to impose taxation or introduce legislation, this power has not been used since 1947. Implementation of this policy

will therefore require the support of the unofficial members of the Executive and Legislative Councils. There is some reason to suppose that support for the necessary degree of taxation will be forthcoming

as

it has been for the substantial social advances in the

last few years. As in the past, taxes and charges of all kinds will need to be steadily and unobtrusively increased, in such a way as to lessen opposition.

25.

It would clearly be impossible to prescibe detailed

/fiscal

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