TNAG-0621-FCO40-769-Budget-of-Hong-Kong-1977 — Page 102

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Reference........

6

Mr JAB Stewart (HKD)

RE

Piafus

RE

0.

CC:

Mr M Stewart (Special Economic Adviser) Mr Hall (FRD)

21 FEB:977

HONG KONG 1977/78 BUDGET

1.

to you.

2.

HKK 100/2

May I refer to the Governor's personal telegram no 155 of 10 February 1977

In general terms it provides proof of our constant belief a surplus of $m 557 in 1976/77 vice a forecast deficit, shows that more could have been done and spent; and some of the self-constraints applied were and are not needed. The proposed Budget reliefs (see 3 below) contain a fair degree of regressive elements, in addition to some neat tidying-up. There is no hint of any income tax reforms or the report of the Inland Revenue Ordinance Review Board. As you suggest, the proposals look more like a housekeeper's accounts and contain no indication of overall budgetary strategy or long term fiscal planning. To my mind the proposals/ speech outlined fall somewhat short of what we might have reasonably exepcted and does not meet in full Lord Goronway-Roberts remit of social equitable finding of the programme (at Agenda Item 2, para 6b of his meeting with the Governor on

書

9 December 1976). It would not be difficult to envisage fiscal reforms of the same order some HK $m 127 which would be less regressive in character and would possess a little more social equity.

-

www

My specific criticisms and queries would be: -

para 7 - what is the latest estimate for % unemployment? (this will show unused capacity)

3.

(a)

(b)

para 10

(c)

para 12

(d)

para 21A

4.

(e)

para 21B

(f)

-

what is the effect on income distribution?

what is the basis for the assumption of a constant Hong Kong $ in 1977/8? (when 1976/7 is showing an appreciation of 7%)

the suppression of local rate increases in the next two financial years is of greater benefit in absolute $ terms to the owners of larger properties (ie higher income groups) than to smaller property owners or those in rented or shanty accommodation

improvements in personal allowances benefit in absolute $ than those with higher incomes and higher marginal rate where there is a progressive system - as there is to a limited extent in Hong Kong, subject to a 15% maximum

para 21C - the increases in estate duty exemptions proposed are a straight

giveaway to the (survivors of) higher income groups which is rather regressive. This is a new aspect which was not mentioned in the Governor's visit

(g)

para 23

- a declining public expenditure/GDP ratio is not to be welcome in

this instance it shows more could be done at these levels

I would suggest that we reserve our position for full comment on the total- ity of the Budget.

15 February 1977

un fun

теме

Adrian Smith

Senior Economic Adviser

G 72/G

8815

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