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the Central Governmant to give us a certain percentage of the consumers tax to the Urban Council. I propose this for several reasons. First of all, we have a very big spending power and we have a lot of big spenders coming from abroad. they are tourists and even if we are going to raise the tax for consumers' items, it will not be a serious blow to people of the lower social strata and I do not think it will be a great disturbance to our citizens on the whole. I think we should have a higher tax for more valuable consumers' items, so that those who can afford should pay more, for example, we should have tax for jewellery, yachts etc. Also, that will not be a constraint on our administrative fees, I think it will be very easy still for the RS staff to work out the new tax net and we have more tax, let us say, diamond, then I think we will have more income for the Government's revenue. Now I think we really start and I think we must boldly face its challenge and we must find more income or decrease our expenditure, we must choose one from both. The other way is to consult our residents and to base our decision upon public opinion, because every cent is taxpayers' money and of course a taxpayer has full right in deciding how his money is going to be spent, I think we should really solicit direct opinion from residents, we should not do it by indirect means, because through indirect means we may attract a lot of bias opinion and there may be vested interest and I really do not want us to sway public opinion as expression goes. I think we must respect public opinion, but of course we should not pay lip service and try to place a certain sector of our society, as we are Urban Councillors here, we must think of the benefit of the whole community and then think of our districts and then think of the interest of our personal organizations or political associations. This is a matter of principle and we should not make improper use of the priority. Since we are thinking of the whole community and we must let the residents know the financial problem faced by us, we must directly consult them before reaching a final decision, if we really cannot have other sources of income, then we must save money by decreasing our expenditure. It seems that the only way is to scrap capital works projects because we simply cannot decrease any of our recurrent expenditure for the daily services in particular, and even if we are going to scrap this services, it would not really help, because after continuous process of consultation, the recurrent expenditure has already been scraped from $280 million to $180 million. If we cannot do either, then we must all then cross our hands and pray for miracles. Now Mr. Chairman, I object against a budget with a deficit, so I cannot decide whether I am going to support your motion, unless we think of a way of mending this deficit, so later on when the motion is put to the vote, I may abstain from voting as an expression of my personally stand.

MR. FREDERICK FUNG (in Cantonese):-Mr. Chairman, I feel that the Urban Council exists because of three factors. First of all, we serve the public; secondly, we have our political power which is reflected through the elections; and thirdly is the finance, if either any of the three factors is weakened, the Urban Council will not be able to stand. Now for the year end 1984/85 we will only have 1 months of time of reserves, and if we take inflation in as well,

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which is about 4%, then for 1985/86, really we have no reserve at all, so one of the factors for the existence of the Urban Council which is financially resources would be killed. Our existence and the various services we render to the public is endangered. There are two things we have to keep, first of all, how can we keep the items of the expenditures and secondly, we want to keep the level and the quality of the expenditure, we do not want our services to be downgraded so there are many ways of saving money. First of all, from increasing revenue, the first way is to increase rates percentage, another is to increase our charges and the third is to increase the proportion we get from the Government. There are four other points under saving expenditure, are we really paying too much for the staff of the Urban Council now that also ties in with the salary level of the whole civil service? Is the salaries and the standard of living of the civil servants really higher than the rest of the public in Hong Kong? Another thing can consider is how to control items we spend. I refer you to one of the appendices, the highest increase of expenditure is in salaries and PE $131 million and non- recurrent items $8 million and the other capital projects $36 million. Now perhaps we should not try to do more than what we can. The Finance Select Committee and the department should try to consider the various opportunities and options of exploring incoming sources and the reduced expenditure. I have three suggestions to make. Firstly, we should know our limitations and not spend more than we can get, and I would like to remind members, that by 1987 we will be spending more than we can get. Secondly, just now in the reply to that question, a mention was made of the Management Services and Audit Unit and the reply mentioned that if the work done was more smoothly, $2 million could be saved. So as I have already said just now, we have a problem of staffing. I do not have enough data on hand, but is it possible to employ an independent auditor or consultant to see whether our services and projects are cost effective and secondly do we have redundant staff. We are one of the five largest Government departments, should we be a smaller department instead? I think we should employ independent consultant, they may come up with a report which may be a better report than the one compiled by the department itself. Thirdly, I would like to see an increase in the consumers' tax, I have a difference in opinion with Mr. Chow, for normal consumers' goods we can increase tax on those goods, those who will be most seriously affected would be the workers and those in the manufacturing sector, so the consumers' tax should only be levied on the high quality goods and part of that should come to the Urban Council. Thank you, Mr. Chairman.

MRS. NELLIE FONG (in English):—Mr. Chairman, the UC finances are in a very grave situation. Today we can see from the budget presented for the year 1985/86 with a deficit of $180 million that by March 1986, the Urban Council would have run down its reserve to a half-month expenditures. The Urban Council has no hidden reserves, what we can see from the accounts is what we have and nothing more. Being an Urban Councillor and a member of the Finance Select Committee, one feels frustrated in some aspects, because a major