TNAG-2977-FCO40-1469-Economic-policy-in-Hong-Kong-1982 — Page 88

G.F. 326

CONFIDENTIAL #2

8

16.

The sluggish state of the economy has inevitably

affected Government revenues. Though it is too early to

estimate accurately the revenue and expenditure outturn

for the year, land sales revenue So far has been below

original expectations. It seems likely also that revenue

collections from other sources which are affected by the

current recession, such as earnings and profits tax, will

turn out to be somewhat lower than the budget forecasts.

In consequence any surplus must be moderate, and indeed at

present a breakeven result seems indicated. I would be

relieved to see such an outcome, which might be unique in

the world.

17.

the

In my budget speech I promised to monitor closely

rate growth

of public sector expenditure and the

relative size of the public sector in relation to the

gross domestic product. I fully agree with unofficials'

views on the need for firm control. The budget estimate

expenditure

Consolidated Account for this

of

on the

financial year was $37.7 billion, representing an increase

As this was higher

over

1981-82 of 22% in money terms.

than the growth rate expected at that

money

terms, which

was

almost

time of the GDP in

18%,

it

represented an

increase in the share of the economy's resources going to

the public

sector. I accepted that

this

outcome was

undesirable,

though the best that

that could be realistically

achieved; and I indicated the need for further tightening

in the next financial year.

CONFIDENTIAL # &