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THE GOVERNOR OF HONG KONG'S VISIT: 7-10 DECEMBER 1976
Prospects for the 1977/78 Hong Kong Budget
BACKGROUND
1.
It will be recalled that we criticised the tenor of the
Financial Secretary's Budget statements to the Legislative Council in February/March this year. Mr Haddon-Cave referred to 20% of the GDP as being the limit, in his view, to public expenditure; to his expectation that this percentage would drop as the economy expanded; to his intention to return to a balanced budget by 1978/79; and to the undesirability of using
the fiscal system to pursue social aims. These views are not consistent with the aims of the Planning Paper. Moreover, Lord Goronwy-Roberts had understood that the 1976/77 budget was to have included an increase in personal taxation; in the event, there was only a modest increase in company taxation.
2. The Governor defended the Financial Secretary's statements and Mr Haddon-Cave personally at Lord Goronwy-Roberts' meeting in July.
Lord Goronwy-Roberts then said that we should like to be apprised in good time of the annual budget proposals so that we could, if necessary, offer comments. The Governor resisted this on the grounds that it would be unprecedented and impracticable to negotiate an agreed budget with Whitehall. Instead, it was agreed that the Governor's anticipated visit in December would provide an opportunity for a discussion of budget proposals in general terms, on the basis of departmental estimates available at that time. The Governor added that he would be prepared to supplement such a discussion by a written prognosis about a fortnight before Budget Day.
ARGUMENT
3. It is not likely that any firm information about the budget prospects for 1977/78 will be available in advance of the discussions with the Governor and Mr Haddon-Cave. The following
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