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until the nature of the benefits had been decided. Moreover, the Planning Paper did not mention the proposed measures to assist the handicapped, youth and the aged which could well cost more than extended social security benefits. Mr Hurst asked whether the UK could help by providing a social security expert for 6-12 months. Sir M MacLehose said that Hong Kong had benefited from the advice of UK experts in drawing up the Disability and Infirmity Allowance scheme and, more recently, improved factory safety measures. A UK social security expert could also be useful but only if he were to be available for two or three years.
12. Mr Smith said that, in his view, the labour and social security measures in the programme would require increased public expenditure. Taxation or a recourse to borrowing would be necessary. Sir M MacLehose said that much of the expenditure envisaged in the programme was already covered by expenditure forecasts. These forecasts would raise the level of public expenditure above 20% of GDP. He could say, without reservation, that if there were to be a requirement for revenue to finance the programme, it would be met. He realised that the Financial Secretary's statements had given rise to difficulty in the UK, but he did feel that there was an ill-conceived "hate" about the Financial Secretary who is in a political position and had his Hong Kong constituency to consider. It was apparent that in future he must give more consideration to his UK one. It seemed to him that the basic proposition that public expenditure should rise as a proportion of GDP during a recession and fall when the economy expanded was incontestable. He agreed with Lord Goronwy-Roberts that the Financial Secretary had been unwise to say that the fiscal system should not be used to pursue social justice as it was liable to be taken out of context: after all, it was well known that the Hong Kong fiscal system was largely directed towards social justice, taxes being levied on the few for the benefit of all, and no direct or indirect taxes being levied on the low income groups. He was opposed, like the Financial Secretary, to raising the level of taxation simply as a political or social gesture.
13. Lord Goronwy-Roberts said that the Secretary of State would need to be assured that the Social Security programme in the Planning Paper would be implemented within the agreed timetable; that the funds would be available; and that it would be raised mainly through taxation with an appropriate balance between direct and indirect taxation. Ministers did not rule out publić borrowing but he thought that borrowing should be regarded as a last resort when the economy was buoyant. The important points, however, were that the programme should not fail because of financial difficulties; and that the burden of the cost fell on those best able to bear it. He would also like to be apprised in good time of the annual budget proposals so that he could, if necessary, offer comments. Sir M MacLehose said that he was horrified at the prospect of negotiating a budget. It had never been attempted by the Colonial Office, though it had had an expert Finance Department. He was ready to submit a prognosis of the budget
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