Revenue has increased in this way is in no small measure, I am convinced, due to our low tax policy which has helped to generate an economic expansion in the face of unfavourable circumstances.

I would suggest to my honourable Friend that the foreign investor is at least as discouraged by high national debt for that, as all example shows, is the surest precursor of high taxation.

We enjoy a considerable net inflow of capital and I am sure that a condition of its coming, and staying, is that it is free to flow out again. It is also important for Hong Kong's status as a financial centre that there should be a maximum freedom of capital movement both in and out.

I still believe that, in the long run, the aggregate of the decisions of individual businessmen, exercising individual judgment in a free economy, even if often mistaken, is likely to do less harm than the centralized decisions of a Government; and certainly the harm is likely to be counteracted faster. As I said earlier in this debate, our economic medicine may be painful but it is fast and powerful because it can act freely.

One trouble is that when Government gets into a business it tends to make it uneconomic for anyone else.

Money cannot be converted into houses or trained teachers or hospitals at the touch of a magic wand. There are limitations to our physical and intellectual resources.

Deficit financing proper is rather the process whereby a Government spends more money that it withdraws from the economy by taxation, borrowing, running down reserves, etc.; thereby causing in most circumstances, and very acutely in ours, monetary inflation and severe pressure on the balance of payments.