TNAG-0579-FCO40-712-Discussions-with-Sir-Murray-MacLehose--Governor-of-Hong-Kong-1976 — Page 25

CONFIDENTIAL

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points should, however, be borne in mind:-

(i) The Governor gave an assurance at his meeting

with Lord Goronwy-Roberts in July that if· there were to be a requirement for revenue to finance the programme of measures contained

in the Planning Paper, it would be met, The question of the extent to which revenue might be raised by. increased taxation is open to argument but we do have the Governor's word that the programme will be financed.

(ii) The Governor said nothing about fiscal matters

in his statement to the Legislative Council on 6 October. We accepted that the two fiscal

measures contained in the Planning Paper

the provision of sufficient funds, preferably by a more progressive system of taxation or by borrowing, and a further examination of the relationship between the Hong Kong Government

and the banks would not have been appropriate

for inclusion in the Governor's statement.

W

(iii) At the beginning of September the Financial

Secretary announced a revision of his forecast

of the increase in Hong Kong's GDP for 1976.

He originally forecast an increase of 9%. He now believes that it will be 16%. An increase

of this order should enable more resources to be made available, even if there is no increase in the level of taxation. The latest unofficial indication is that this revised estimate may have been a little over-optimistic.

(iv) The forecast deficit on the 1976/77 budget of

HK$ 500 millions (about £65 millions) is now expected to turn into a surplus. The government could therefore have budgeted for a higher level of public expenditure.

CONFIDENTIAL

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