FCO_49_622_PLANNING_PAPER_ON_HONG_KONG_1976 — Page 37

22.

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SECRET

Page 37.

The Hong Kong Government's plans to deal with

crime and corruption, organised recreation and other

services for youth, to develop a modern communications

system including an underground railway, and to provide

for urban renewal and improvement, all involve very

substantial finance and are highly relevant to the

objective of achieving domestic contentment and external

respect by the '80s. But, with the exception of

corruption, they are of less UK political interest.

details are covered in Annex D.

23.

Provided the Hong Kong Government is able

The

to finance the programmes described above, the necessary

advances in the colony will be achieved, and will

(and already do) provide much material with which to meet

reasonable criticism in the UK. However we have some

doubts of its ability to continue to do this, firstly witho

reform of the fiscal system, and secondly without an incres

in the level of direct taxation or recourse to borrowing

or probably both. The Governor has appointed a committee

chaired by an ex-UK-Commissioner of Inland Revenue, to

make recommendations about reform of the fiscal system,

and these are expected by early next year. The Governor

is confident of his Government's ability to find the

money meanwhile and accepts that there is a reserve of

taxability available, and that money will be borrowed as

necessary.

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However he must also take account of the

Page 37ith its uncertain129

realities in Hong Kong.

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