TNAG-0761-FCO40-965-Budget-of-Hong-Kong--1978-1979-1978 — Page 102

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Reference

HKK 100/2

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Mr Quantrill

Mr Stewart

HONG KONG: 1978/79 BUDGET

11973

053K OF INDEX

No 66

BRY

The earlier

1. Hong Kong telegram no 156 is disappointing. telegram (no 119) and the letter of 31 January from the Governor gave some cause to hope for a shift in thinking towards an expenditure orientated budget; I now believe that this hope was ill-founded. Given an upward revision of revenue, the only proposed action is to drop the increase in corporation profit tax. This in itself will be unpopular in a UK political context.

2. While I would very much like to be able to suggest some positive action to redress the balance, I accept that lack of time precludes any major measure along these lines. It is not practicable to expect the planning of a new undertaking involving significant expenditure in time for the budget; nor is it practicable to suggest the introduction of another

revenue earner.

3. I would, however, propose that the Governor be asked to abolish the HK$3 per day levied on in-patients at government hospitals. Such a move ought to be administratively easy, it would give greater proportionate benefit to the poorer sections of the community, it would be politically useful in this country and would bring Hong Kong into line with UK practice.

4. It has not been possible to quantify the effects of this proposal from any statistics which we have available.

I doubt, however, whether effects would be particularly significant. Nevertheless, I would suggest that we urge the Governor to re- instate the planned increase in profit tax. This is less because I believe it to be necessary but rather because it would have useful cosmetic advantages and would bolster Hong Kong's reserves: not that they would seem to need any boost, but better that they be increased for future use than that no action is taken.

5.

I attach a draft telegram.

The Economists Department

concur.

CODE 18-77

SS 10/76

6 February 1978

epen

J Thompson

Hong Kong & General Dept

While I sympathinge with ir Thompson, I suspect that the considerations in his para 2 apply equally to the measve proposed & his para 3: though it may look simple enough,

i there are almost certainly more problems then are immediatel

apparent

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