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1976 proved that we are on the right lines. There is no problem in which the credit of the Government with the population is so deeply involved and it remains my top priority.
9. There has been a predictable backlash to our new emphasis on social and labour legislation announced in my statement of policy in October. While this was received with the normal respectful if rather muted applause, by December a combination of business interests (notably unsupported by the larger firms but strongly supported by the Communists, the Poujadist Centre and the Extreme Right) was in full cry alleging UK pressure to adopt UK models, aimed not at benefiting Hong Kong workers, but at eliminating Hong Kong competition and destroying the Colony. The problem has been compounded by coincidental irritants such as reaction to gradual rises in the excessively low rents in Government housing estates, and by a steep rise in the assessed value of property and the prospect of a sharp increase in rates and property tax. I have the uncomfortable feeling that while Government has acted correctly in all these fields, and in the best interests of Hong Kong, we have put the squeeze on such a wide section of the population at the same time that one false move could cause serious trouble. Though I had to some extent foreseen such a situation, the strength and breadth of criticism has come as an unpleasant shock. It will not deter the Government from its policies or its timetable, but it does indicate that the pace of reform announced was pitched at the maximum level short of unacceptable controversy.
10. Though there is complete agreement between your Department and this Government on the policies and programmes that must be implemented in Hong Kong, and though these provide good answers to reasonable criticism, I remain concerned at the dislike and suspicion of the Colony in some quarters in the UK. I am convinced that the most effective counter would be a substantial increase in British exports, and with so much UK capacity under-used this is surely the right time to make progress. I and my officials lose no opportunity of emphasising to Hong Kong industrialists the importance in their own long-term interests of achieving a larger British share in this market, but there must be a matching effort on the part of UK exporters. The Department of Trade and this Government are conducting a joint study, which I can only hope will come up with proposals that will produce the upward trend that is so badly needed.
11. In 1977 we will have hard work to complete the large programme of labour legislation announced, and there will be controversial legislation affecting insurance and insider trading and giving effect to the recommendations of the Inland Revenue Review Committee's report. But the main new thrust of reform will be in the field of social welfare, where a complete review is due to be under- taken both in respect of services provided to the handicapped, the elderly and youth, and in the wide range of transfer payments now made both as of right and on account of proved need. In addition, major programmes of expansion in housing, education, medical and health services, communications, recreation and of course the fight against crime and corruption, must all be pushed forward. While I look back on 1976 with both satisfaction and relief, I am conscious that an exceptionally busy year lies ahead.
12. I am sending copies of this despatch to Her Majesty's Ambassadors in Peking and Tokyo.
I have, etc.,
MURRAY MacLEHOSE.
Governor
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