TNAG-0761-FCO40-965-Budget-of-Hong-Kong--1978-1979-1978 — Page 31

BACKGROUND NOTE

THE 1978/79 HONG KONG BUDGET

1.

The Budget presented on 1 March makes provision for an increase of 26% in public expenditure, all of which will be achieved without significant changes in the tax structure. changes as there are, increased registration fees for luxury cars and higher duty on imported cigarettes, are more than offset by the abolition of stamp duty.

Such

2. While the Budget will allow the Hong Kong Government to carry out all its planned improvements in the social services, it makes no attempt to introduce a more progressive tax system, an important objective set by Lord Goronwy-Roberts. Nevertheless, largely because of the 35% increase in spending on social services, the Budget, which was seen here in outline before publication, was welcomed by Lord Goronwy-Roberts.

3.

The apparent anomaly of significantly higher Government spending without an increase in revenue producing measures is explained by the very high annual growth rate of the Hong Kong economy. GDP between 1972 and 1977 has grown by 9.3% per annum.