My lunch companion offered some other reasons apart from the Patten-effect why the Cowperthwaite inheritance was spoiled. With Chinese control imminent, the British were offering a bit of democracy and, in a democracy, of course, people are in favour of what they they perceive as 'free' benefits and services from the government. Also, times were good. The government was almost embarrassed by the amount of money it was raking in from property sales and so on. These three factors were a a bad mix (my view, not the official's): a British politician, a bit of democracy and rising prosperity.

Looking back, the big picture is that Hong Kong became prosperous through small-government and then, influenced by that very prosperity, started to give up small government. One measure of the success of the achievement of small government came when the official told me that a secretary in central London gets paid less than one in Hong Kong. And of course the London secretary has to pay much more tax.

Hong Kong retains a massive advantage over Britain in that the government role there is still small compared to what it is in Britain. At the same time, the Hong Kong government provides state schools, state hospitals and welfare benefits. How, I wondered, does it manage to do this for so much less money (as a percentage of GDP)than the British government?

Part of the explanation is that government-funded healthcare in Hong Kong only costs 2.7 per cent of GDP whereas in Britain the cost is in the region of 9.0 per cent. One reason for that big difference is that the Hong Kong government does not do much primary care. There are some government clinics. But the general practitioners are private. (This is not a great burden for patients since a visit to the GP only costs HK$120 (about £8). Seeing a private GP in London, in contrast, is about £60. But then the private GPs in London are aimed at the top of the market and offer plush premises in high-rent parts of town and leisurely consultations - so they are not exact equivalents. You could argue that the Hong Kong prices reveal how cheap GP consultations could be in a genuinely free market.)

Another possible explanation for the lower cost of the Hong Kong welfare state is that all the welfare benefits are means-tested and you do not need much in the way of 'means' to be disqualified. You will not qualify if you have more than about HK$50,000 (leaving aside your own property, if you have one). This is equivalent to only £3,400. Also the measurement of your means is 'family-based' not individual-based. So a young son at home with no money gets nothing if he is living with parents who have some savings. So, too, an elderly parent living with a high-earning son or daughter. On top of that, the welfare benefits are pretty low. I think HK$5,000 a month was mentioned, which is equivalent to only £340. So the benefits are low enough not to distort the behaviour of most people. (Although it must be mentioned that £340 goes further in Hong Kong. It apparently can buy you a place at a very basic old people's home.)

Because you are required to have very little in the way of 'means' and you only get a modest amount of benefits anyway if you qualify, only 15 per cent of people over 60 are on welfare benefits. This compares with virtually 100 per cent of people over 65 in Britain, since we have an insurance-based system in which everyone is required to be covered. The saving in Hongk Kong from this alone must be substantial.

But I got the impression that the Hong Kong government, at least, believes that its services are good and it is therefore seeking to provide more - in care for the elderly, for example. This is worrying. It is reminiscent of the early days after the second world war when it was thought, too, that the government was pretty good at education and healthcare. It was not appreciated that the hospitals and schools were benefiting from their inheritance as private and charitable institutions. Their deterioration took place through two processes: 1. Time and 2. Increasing state control. Both those processes are inevitable once the state has taken over the purse-strings. They will happen in Hong Kong. But it takes foresight for policymakers to realise that they will happen. Civil servants, like Cowperthwaite, can be capable of such long-term foresight. Politicians rarely are.

Already there are aspects of the social policy that have the potential, if they become more significant, to do social damage. It would be a pity if welfare benefits assessed on a family means test became valuable enough to influence families to encourage, for example, the grandparents to leave the family home. That kind of thing was reported both by George Orwell, in The Road to Wigan Pier, and in the 1834 Royal Commission report on the operation of the Poor Laws.

Hong Kong is still one of the few places where the welfare state has not been too pervasive and where, as a result, there has been a wonderful growth in prosperity and relatively little societal breakdown. But it is on a slippery slope.