ENG-1960 — Page 81

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Public Finances

IN 1948 the Colony was released from United Kingdom Treasury control and given a large measure of autonomy over its own finances. The control which the Secretary of State then retained was that his approval was required for the annual Estimates, for supplementary provisions exceeding $1 million in the case of capital expenditure and $1 million in the case of recurrent expendi- ture, for the issue of any loan and for any expenditure involving important points of principle. In 1958 these powers were trans- ferred to the Colony's Legislative Council which then became the only authority in such matters, and the previous system of control has been replaced generally by informal consultation between the Financial Secretary and the Finance Branch of the Colonial Office. The approval of the Secretary of State is still required before decisions are taken on certain matters, including currency and banking.

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Hong Kong is financially self-supporting apart from the cost of its external defence (to which, however, a substantial contribution is made), and raises its revenue from local sources to meet the cost of all local works and services. The Colony's Legislative Council is the sole taxing and spending authority. There are no financially independent subordinate bodies like the local govern- ment authorities in the United Kingdom and other Commonwealth territories. There was a small deficit in the first financial year after the war (1946-7), caused by the legacy of the world conflict, but substantial surpluses accumulated in each of the twelve years up to 1958-9, even though current revenue covered all capital expendi- ture except for a comparatively small amount financed by borrow- ing. This is a noteworthy achievement, for the capital expenditure has been considerable-for example, the surpluses of 1957-8 and 1958-9 accrued after capital expenditure of $102 million and $163 million respectively had been paid from current revenue, while the deficit for 1959-60 of $45 million is equal to only one-third