TNAG-0747-FCO40-951-Visits-of-Foreign-and-Commonwealth-officials-to-Hong-Kong-1978 — Page 213

SECRETARY OF STATE

CONFIDENTIAL

HONG KONG ECONOMY AND BUDGET

1.

Yes.

Although

I have been keeping half an eye on Hong Kong over the last few months, and helping the long-standing FCO effort, which Lord Goronwy-Roberts in particular has been pushing, to get the Hong Kong Government to bring its budgetary procedures into line with twentieth century rather than nineteenth century practice. there have been some improvements over the past year or two, it seems to me that there is quite a lot of scope for further reformist measures, particularly by increasing certain kinds of public expenditure and making the tax structure. more progressive.

2. Regular visits are paid to Hong Kong by a member of the FCO Economists Department, the next one being due in about April. Hong Kong and General Department have suggested that on this occasion I should undertake this visit, in order to impress on the Governor and Financial Secretary your own personal interest in up-dating Hong Kong's budget procedures, and moving more in the direction of tailoring revenue to public expenditure requirements, instead of determining public expenditure largely on the basis of the revenue which accrues from the present rather odd and regressive tax structure. If you agreed, I would propose to synchronise this visit with that of Mr John Stewart, Head of Hong Kong and General Department, who will in any event be going out to Hong Kong in April on other business. I would not propose to spend more than a week or ten days in Hong Kong, though once out there it might be useful to go on and spend a few days in Tokyo.

3. I have discussed this possibility with Lord Goronwy-Roberts, who is very much in favour. Are you agreeable to the proposal? If possible, it might be feasible to make it coincide with your CENTO meeting in Washington and prospective subsequent visit to

Latin America.

Lufil.

Michael Stewart

23 February 1978

CONFIDENTIAL