TNAG-0735-FCO40-939-Policy-objective-for-the-developing-of-Hong-Kong-in-the-1980-1978 — Page 151

(6)

32.

Management of the public finances

At the same time, I can assure Miss Dunn that the

Government is mindful of its responsibilities "in the way it

manages its own affairs and, in particular, in the way it

controls the growth of public expenditure". In this connection,

I can assure her that, however frequently I may be encouraged

on other occasions not to take too seriously the framework

within which our budgetary and fiscal policies are constructed, I intend to stick by it. None of my guideline ratios and absolute guideline figures relating to the relative size of

the public sector or the construction of the annual budget or

the balance of the fiscal system or the steady development of

the public sector's services and facilities or the relative

size of our fiscal reserves, is sacrosanct, but each imposes

discipline and reminds us to think through the consequences

of particular courses of action. For instance, the financing

of the capital account would be placed in jeopardy if we did

not watch very carefully the proportion of recurrent revenue

absorbed by recurrent expenditure and this means accurate

forecasting of the financial implications of policy decisions.

33.

Thus I really cannot accept that our rolling three-

year forecasts are prepared "more for presentational reasons

than to provide us with an effective regulator". I would not

argue that these forecasts are a perfect regulator and, although

our objective is always to foresee and to monitor the

implications for expenditure in the following years of new

policies and projects approved and implemented during a year,

we sometimes fail to do so. It is for this reason that I have

sympathy with Mr. T.S. Lo's suggestion that "the Government might seriously consider spacing out expenditure on the P.W.D. programme", but I think he has overlooked the fact that the very concept of the absolute guideline figures for the two components of the Public Works Programme is designed to ensure

that bunching of expenditure does not occur. That, at any

rate, is the theory even if, in practice, we make a few mistakes.

19

/34.

Nor