TNAG-0621-FCO40-769-Budget-of-Hong-Kong-1977 — Page 57

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(B) RECURRENT AND CAPTIAL ACCOUNTS

83. IF THE CAPITAL ACCOUNT IS TO BE FINANCED WITHOUT RECOURSE TO SUBSTANTIAL BORROWINGS, THEN RECURRENT EXPENDITURE MUST NOT ADSORB MORE THAN A CERTAIN PROPORTION OF RECURRENT REVENUE AND RECURRENT

EXPENDITURE MUST BEAR A CERTAIN RELATIONSHIP TO CAPITAL

EXPENDITURE. MY PRESENT GUIDELINES ARE THAT RECURRENT EXPENDITURE

SHOULD NOT ABSORB MORE THAN 82% OF RECURRENT REVENUE AND THAT

RECURRENT EXPENDITURE SHOULD NOT REPRESENT MORE THAN 70% OF TOTAL

EXPENDITURE.

84. THUS, IN 1973-74 AND IN 1975-76 THE PROPORTION OF RECURRENT

REVENUE ABSORBED BY RECURRENT EXPENDITURE WAS BELOW THE GUIDELINE

AT 71% AND 76% RESPECTIVELY AND IN THESE TWO YEARS WE RAN

SURPLUSES OF DOLLARS 373 MILLION AND DOLLARS 224 MILLION, THE LATTER

SURPLUS BEING DUE TO THE UNDERSPENDING ON CAPITAL ACCOUNT WHICH, HOWEVER, UPSET THE BALANCE BETWEEN RECURRENT AND CAPITAL EXPENDITURE,

IN 1974-75, ALTHOUGH THE BALANCE BETWEEN RECURRENT AND CAPITAL EXPENDITURE WAS CONSISTENT WITH THE GUIDELINE, AS 81% OF RECURRENT

REVENUE WAS ABSORBED BY RECURRENT EXPENDITURE A DEFICIT WAS THE

INEVITABLE RESULT.

BY CONTRAST, IN 1976-77, WHEREAS RECURRENT EXPENDITURE WILL AGAIN ABSORB NEARLY 81% OF RECURRENT REVENUE (REVISED ESTIMATE), AS RECURRENT EXPENDITURE REPRESENTS AS MUCH AS 79% OF TOTAL EXPENDITURE, THE RESULT WILL BE AN EVEN LARGER SURPLUS THAN THE HIGHER RECURRENT REVENUE YIELDS WOULD HAVE OTHERWISE THROWN UP. AT THE SAME TIME, AGAIN IN CONTRAST TO 1974-75, CAPITAL REVENUE AT DOLLARS 689 MILLION WILL EXCEED THE ESTIMATE BY AS MUCH AS

DOLLARS 202 MILLION.

(C) REVENUE TRENDS

85. RECURRENT REVENUE INCREASED FROM DOLLARS 4,550 MILLION IN 1973-74 TO DOLLARS 6,711 MILLION IN 1976-77 (REVISED ESTIMATE) OR BY 47.5% DISCOUNTING THE NET EFFECT OF THE REVENUE PROPOSALS IN

EACH OF THESE FOUR YEARS, THE INCREASE WAS ONLY 32%, BEING 104

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