ENG-1975 — Page 54

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Financial Structure

WITH the ultimate authority resting with the Legislative Council, Hong Kong has almost complete autonomy in financial affairs; but 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. It also makes a substantial contribution to the cost of the garrison stationed in Hong Kong. Under an agreement covering the five years from April 1971 to March 1976, Hong Kong has been making a contribution in kind and in cash amounting to about £40 million. About £28 million of this contri- bution is being spent in Hong Kong on capital works and on the maintenance of buildings which will revert to Hong Kong if no longer required by the British Government. The Public Works Department undertakes the work on behalf of the British Department of the Environment. A new Defence Costs Agreement is to come into effect on April 1, 1976.

The Urban Council, operating through the Urban Services Department, is free to draw

up

its own budget and to determine its own priorities of expenditure within its various spheres of activity. These are financed mainly from the yield from the Urban Council rate and partly from other sources of revenue related-largely through fees and charges-to the services and facilities the council provides.

The Housing Authority, which is responsible for the development and manage- ment of all public housing, is financed mainly from loans from the government's Development Loan Fund and income from rents. It is also allocated land at substan- tially less than its market value. Its executive arm is the Housing Department. 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 in the government's accounts was returned in the first financial year after World War II. Subsequently-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, were accumulated in the years up to and including 1973-4. The accumulation of these surpluses is a considerable achivement, particularly since it has taken place after charging annually against current revenue all capital expenditure other than a comparatively small amount financed by borrow- ing. These annual capital outlays have been increasing in recent years and in 1974-5 they totalled $1,800 million.