ENG-1970 — Page 52

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Financial Structure

ALTHOUGH the approval of the Secretary of State for Foreign and Commonwealth Affairs is required before decisions are made on certain major matters including currency and banking, the Colony in other respects has complete autonomy in financial affairs and the ultimate financial authority is the Legislative Council.

Hong Kong is financially self-supporting, apart from the cost of its external defence to which it makes a substantial contribution. This contribution is now under a four-year Defence Costs Arrange- ment which commenced in 1967-8. The contribution to recurrent defence expenditure is £3,925,000 a year, with a sum of £2,400,000 during the four-year period for a services' capital works programme. At the same time, the maintenance function of HBM Ministry of Public Buildings and Works in Hong Kong in respect of certain service property, and the expenditure involved, has been taken over by the Public Works Department of the Hong Kong Government.

Apart from the Housing Authority, which has a certain measure of autonomy, there are no financially independent subordinate bodies simila to the local government authorities in the United Kingdom and other Commonwealth territories. The revenue and expenditure figures therefore represent all the public income and all the public expenditure of Hong Kong other than 'below the line' operations of various official funds.

(A small deficit was returned in the first financial year after the war. Since then, with the exception of 1959-60 and 1965–6, when there were deficits of some $45 million and $137 million respectively, a series of surpluses, some of them substantial, have been accumu- lated. Figures for the past four years are shown in Appendix 9. The accumulation of these surpluses in the varying economic conditions which Hong Kong has had to face since the war is a considerable achievement, particularly since it has taken place after charging annually against current revenue all capital expenditure