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ment forecast the rates we would get the figure forecast regardless of the actual amount received by the Government since last year's reform we are

receiving the actual amount so that in this present financial year we are benefiting to the tune of something like HK$70 million, but there is no guarantee that we will do so also in the next few years. However, when one looks at Central Hong Kong and all the new tall buildings coming on stream, one can be reasonably optimistic that at least for the next couple of years our rates income will stay reasonably within forecast.

Last year at this time, I warned that we will be running into deficits in the not too distant future because of the new services and facilities we are introducing to improve the quality of life of all Urban City dwellers in Hong Kong and Kowloon, such as Kowloon Park (with grateful thanks to the Jockey Club), Hong Kong Park on the Victoria Barracks site, the new Cultural Centre, which is now much too obviously spreading its wings on the other side of the Harbour, the new Arts and Science Museums, an extension to the History Museum, refurbishment of the Space Museum, many new cultural centres, improved sports grounds, additional indoor games halls, etc. etc.. And all these new facilities require a great deal of extra staff, equipment, maintenance, utility charges, so inevitably we have to increase our expenditure probably in the same sort of ratio as at present. Where in 1987 spending increased 12% over 1986, 1988, as I have already said, will see an increase of 14%, and we can expect a further (assuming an 8% inflation rate) 15% increase in the following year. However, our five year forecast shows lower increases for the following two years and a levelling off thereafter. One hopes that the rates income will expand at the same rate, but there is no guarantee that it will. However, before our journalist friends start printing scare stories about this Council running out of money, let me give you the good news. The good news is that we estimate a surplus for the current financial year of HK$128 million, which is HK$113 million over budget. Now this increase is due partly to the receipt of additional unbudgeted revenues, some of which I have already mentioned, which will total approximately HK$83 million, and partly to savings in manpower, which have been achieved via our value for money and other management studies, and which is an on-going process. For next year we are forecasting a surplus of HK$72 million, so that by the end of that financial year in the Spring of 1989 our reserves should total something over HK$600 million, which is very close to the 3 months' reserve which we have always aimed for, and which we have very rarely attained. Last year I warned that we may be facing deficits fairly soon, but in view of the much larger surplus we will achieve this financial year and the surplus in the next financial year, I am fairly sanguine that we are reasonably on track for the next three years and living within our income. This forecast is naturally subject to the usual unforeseen circumstances.

In the present economic climate I think it would be foolish to look much further ahead than three years. All we can do is to assure rate payers that we are very careful with how we spend your money and are mindful of the fact that

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Hong Kong's success is based on low tax rates, and that it is important for all of us to keep rates and taxes as low as possible.

So in spite of the relatively healthy financial situation which I have outlined, we must continue to exercise very strict economy and always endeavour to obtain the best value for money possible, and in this connection, and I men- tioned this already last year, there are financial constraints on us in the way the memorandum giving us our financial autonomy was phrased and it really is time some of the conditions which are now, in my view at least, out of date, are altered. There are especially instances in maintenance costs for our buildings and our vehicles where quite considerable savings could be affected if the MAA were altered. We also must step up our investigations into the privatization of various of our activities where I am quite sure quite large savings could be effected.

I would like to thank all my colleagues, Chairmen and members of our various committees, who looked long and carefully at all expenditures and at the budget, which is a weary but important process, and we are all very pleased that we have in the last year managed to become much more accurate in our forecasting, which shows that we do exercise better control. That large bundle of papers in front of members is the product of all this work, and shows clearly and in detail how the available financial resources are employed, to pay for the many services and facilities provided by this Council to our fellow citizens in the Urban areas and would be grateful for Councillors' approval.

Mr. Chairman, I second the motion.

The question was put.

The motion was carried unanimously.

2. MR. SAMUEL P. W. WONG, CHAIRMAN OF THE RECREATION SELECT COMMITTEE, moved the following motion (in Cantonese):-Mr. Chairman, as Chairman of the Recreation Select Committee, I rise on the motion standing in my names:

'RESOLVED that the Public Health and Municipal Services (Public Pleasure Grounds) (Amendment of Fourth Schedule) (No. 6) Order 1987 be made under section 106 of the Public Health and Municipal Services Ordinance, Cap. 132.'

The purpose of the amendment By-laws is to include 15 new venues and delete 1 existing venue in the Fourth Schedule (Public Pleasure Grounds) of the Public Health and Municipal Services Ordinance, Cap. 132.

Sir, I beg to move.

MR. FAN KAM-PING, VICE-CHAIRMAN of the Recreation Select Committee, seconded the motion (in Cantonese):-Mr. Chairman, I second the motion.

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