TNAG-1487-FCO40-2044-Hong-Kong-banking-Banking-Bill-1986-1986 — Page 242

APR 09 '86 16:37 GIS HK

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general revenue. But this general rule is subject to any exceptions created either under the Public Finance Ordinance or any other Ordinance. The Exchange Fund Ordinance, which predated the Public Finance Ordinance, provides for a separate legal regime in respect of the control, management and audit of the Exchange Fund and is, therefore, outside the scope of the Public Finance Ordinance and has always been so treated.

6.

He then went on to pose several issues including the right of the Government, that is to say the right of the Financial Secretary on whom responsibility and duty are equally placed, to operate under the Exchange Fund Ordinance without Finance Committee approval.

7.

I explained the basic legal position before and after the Finance Committee hearings that evening. The next day the other Member, being equally and not surprisingly unaware of the position and reflecting only press comments, seemed to suggest that my actual use of the Exchange Fund for the purpose in question was ultra

vires.

8.

The position has always been clear and has recently been reaffirmed in legal advice to the following effect:

The language of section 3(1) of the Exchange Fund Ordinance clearly requires the Financial Secretary to consider matters that may affect, either directly or indirectly, the exchange value of the Hong Kong currency. The use of the words "affect" and "indirectly" enable me to consider not only the immediate consequences of the use, or the failure to use, the Fund, but also second-order consequences, the so-called "knock-on" effect.