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9. Mr Cortazzi said that the Office naturally accepted the Governor's view on the personality and attainments of the other nominees for the enlarged Legislative Council; but they did seem to represent a considerable effort to widen the social basis of the Council. Sir M MacLehose said that there was little doubt that his announcement of the changes would cause a furore in Hong Kong but he thought this would be manageable. He had not yet decided whether the inclusion of a trade unionist would cause him to drop any of his other nominations: it was just possible that he might leave out Chan Ling-Fung, who was otherwise a good candidate, particularly because of his connection with the MACs. The question was one of balance on which he had not yet made up his mind.
10.
Mr Cortazzi wondered whether it was now time to drop Sir Sydney Gordon from the Executive Council and to substitute Mr Brenridge. Sir M MacLehose replied that he wanted to do this but he thought that it would be much easier to effect next year. With the change in the composition of LegCo he needed Mr Brenridge to contime in LegCo for a further year and Mr Bremridge himself was reluctant to go on to ExCo without a further year's experience in the Legislative Council. Sir Y K Kan had also advised that it would be imprudent to make this change without giving Sir Sydney Gordon a year's notice, which was the normal form. Sir Y K Kan himself wanted to leave ExCo before the Governor's own departure and had thus given the customary year's notice of his wish to retire.
11. Sir M MacLehose said that he was quite willing to see what could be done to improve the flow of information between Hong Kong and the Department but he was worried about the implications of exchanging information over the budget. He explained that the budget in Hong Kong, as indeed in Britain, was prepared over a short period when all the figures came together. It would be perfectly possible to notify London of what the budget proposals would be in the light of the financial information available but, by this time it would not be possible to change the Hong Kong Government's proposals through a 1process of negotiation with HMG. In general, he would hope that this
matter would not arise with Lord Goronwy-Roberts. Mr Cortazzi explained that this was hardly possible. The Minister's real concern was not over the details of the budget but over the simple question of when moves towards a more progressive system of taxation were likely. Could not, for instance, some move be made towards raising the limit on the individual tax-payers' liability at the next, budget? Sir M MacLehose said that he thought this would be impossible. The Inland Revenue Ordinance Review Committee was due to report towards the end of the year and time would simply not allow for this to be digested and budgetary proposals formulated on the basis of its conclusions by February next. Mr O'Keeffe said that experience had shown that this was a matter to which Ministers attach considerable importance. There had been a widespread understanding that the limit on direct taxation was to rise substantially this year, partly to meet the increased costs of the garrison to Hong Kong and also to provide money for the social programmes. He could now see the reasons why the Hong Kong
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