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Following is the text of a TV/radio broadcast of a summary by the Financial Secretary, Mr Donald Tsang, on his 2000-01 Budget Speech today (Wednesday):

This afternoon I presented my Budget to the Legislative Council.

Unlike my previous budgets, I am proposing only one or two very minor changes to taxation. Let me explain why.

With the prospect of a third successive year of budget deficits, our financial position simply gives me no scope to repeat the wide range of tax concessions and tax rebates of the past two years. And, to be honest, concessions should no longer be necessary given the recovering state of our economy.

On the other hand, I am acutely aware that individuals, families and business have all had to tighten their belts in the last two years. Now is not the time for me to add to your burden by increasing taxes. But things may not be the same next year.

The world around us is changing. Some of our traditional sources of tax revenue may not be as productive as they have been in the past. This could lead to a persistent deterioration in our finances.

If this occurs we have three choices.

The first choice would be to cut spending. We are doing all we can to make sure that we spend taxpayers' money carefully. We are making substantial improvements in productivity, and we are making sure that civil service pay follows market rates. We will reduce the size of the civil service by 10,000 over the next three years. All these measures will improve our efficiency and contain costs. They will not compromise the quality of public services.

But there is a limit to how far we can go without affecting service quality. Nobody wants longer waiting times for public housing or hospital treatment, a deterioration in law and order or larger class sizes in our schools.

The second choice would be to run budget deficits and keep on dipping into our reserves. This would not be sensible. We would only be putting off the day of reckoning and our reserves would soon reach a dangerously low level.

Without adequate reserves we would not have the ammunition to defend our currency. We would not have the money to give tax concessions and tax rebates in hard economic times. And with our finances in such a state, investors would quit Hong Kong in droves. This is just not a real option. Nor is it permitted under the Basic Law.

The remaining choice would be to increase existing taxes or introduce new taxes. Perhaps but not necessarily the much-talked about sales tax.

This is why we need to look at different revenue-raising options and to consider the way forward. I will set up an independent Committee to advise me. At the same time I want to hear everyone's views. As a community we need to decide how we are going to pay for subsidised housing for the less well-off, for better education for our children, for looking after the elderly and the sick, for improving our environment and keeping Hong Kong a safe place to live.

I will promise you one thing. We have one of the lowest tax rates and simplest taxation systems in the world. I will not change that.

Our public finances are only one part of the picture.

I have much better news on the economy. I am delighted to tell you that the economy bounced back vigorously in the second half of 1999 and the signs for the next few years are very encouraging.

This is good news for everyone. More tourists visiting Hong Kong, more people buying our goods and services means more jobs, reduced unemployment and less downward pressure on wages. The cloud which has hung over us for the past two years is finally disappearing.

The dawn of a new century has also brought a new dawn for Hong Kong.

Over the long term, China's accession to the World Trade Organisation and the ever increasing pace of world trade means that Hong Kong's prospects are very bright.

But we need to position ourselves to grasp the opportunities which present themselves. To do that, all of us need to upgrade our skills and knowledge to meet the challenges of the 21st century.

That is why, this afternoon, I announced a wide range of initiatives costing more than $1 billion a year to provide better training, re-training and education.

Over the last 50 years Hong Kong has gone through many changes. Throughout that time it has been the skills, flexibility, initiative and hard work of our people which has transformed Hong Kong into the thriving city which it is today.

We must build on these qualities. They are the best guarantee that Hong Kong will keep on scaling new heights in this new century.

End/Wednesday, March 8, 2000

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