ENG-1973 — Page 58

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Financial Structure

WITH the ultimate authority resting with the Legislative Council, Hong Kong has almost complete autonomy in financial affairs. However, approval by the Secretary of State for Foreign and Commonwealth Affairs is required before decisions are made on certain major matters such as currency and banking.

Hong Kong is financially self-supporting, apart from the cost of its external defence, to which it makes a substantial contribution. Under an agreement covering the five years from April 1, 1971 to March 31, 1976, Hong Kong is making a contri- bution in kind and in cash amounting to £40 million. About £28 million of this will be spent in Hong Kong on capital works and maintenance of buildings which will revert to Hong Kong if no longer required by the Armed Forces. The work is under- taken by the Public Works Department on behalf of the British Department of the Environment.

On April 1, 1973, two re-constituted statutory bodies having a significant degree of financial autonomy were created. The newly constituted Urban Council continues to operate through the Urban Services Department, which remains a government department. It is free to draw up its own budget and to determine its own priorities of expenditure within its various spheres of activity. These are mainly financed from the yield from the newly constituted Urban Council rates and partly from other sources of revenue related, largely through fees and charges, to the service and facilities the council provides.

On the same date, the newly constituted Housing Authority assumed responsi- bility for the development and management of all public housing, taking over the responsibilities of the former Hong Kong Housing Authority, the Urban Council and the Resettlement Department. Its executive arm is the newly constituted Housing Department, which is also a government department. The authority is financed mainly from loans from the Development Loan Fund and income from rents, and is also allocated land at substantially less than its market value. The authority is responsible for squatter control, clearing squatters from sites required for development, and developing licensed areas. The cost of these activities and the deficit arising from the management of former resettlement estates are financed from general revenue.

A small deficit was returned in the first financial year after World War II. 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 sub- stantial, have been accumulated. The accumulation of these surpluses in the varying economic conditions which Hong Kong has had to face is a considerable achievement,