TNAG-0761-FCO40-965-Budget-of-Hong-Kong--1978-1979-1978 — Page 103

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apparent in the abolition of the HK$3 per day hospital charge more fundamentally, by making such a suggestion we would surely be resorting to the very thing we are trying

the Hong Kong Government away from -looking for something to do just because there happens to be some spare money available. There are almost certainly policy. reasons behind the daily charge; it is open to us to question those reasons and if we we not satisfied with the reply, to ask for the removal of the charge. But we should not ask for the claze's removal simply in order to justify a tax increas

2. I would also question whether we have the standing to question the detail of the budget in this way. Our interest in receiving advance notice of the budget is principally to ensure that there is nothing in it that obstruct's the carrying out of the legislative and administrative programme that has been previously agreed. As far as I can see, that is so in this case. If we ever reach agreement with the Hong Kong Government on the way fiscal policies can be used to pursue

social (e.g. income redistribution) or macroeconomic (e.y. countocyclical) policies, we shall also be able to judge the budget against that yardstick-but that is still under discussion. But on the detail of the budget, even with the advice of the Economists, we simply do not have the expertise to challenge proposals that have been drawn up by the Financial Secretary and his staff on the basis, presumably, of many weeks careful work.

3. Nevertheless, the Governor and his financial Secretary are obiroush defensive about the proposals, and I am sve we should not let them think we are too easily satis- fied. I suggest that we should await the promised further note, then send a suitably grudging acceptance of the budget (unless something more fundamentally objectionable wises).

W. E. Mantful

7/2.