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Helping the Disadvantaged Groups
63. The Government is committed to helping the needy. We have made enormous investments in education, medical care, public housing and provision of a basic safety net. To put into practice the Chief Executive's policy objective that government should be for the people, I will increase the recurrent funding to help disadvantaged groups by about $100 million, starting from 2006-07. New and improved services will be funded by:
* an additional $27 million to strengthen convalescent and continuing rehabilitation day services for discharged disabled and psychiatric patients, and to enhance services for the disabled living in residential rehabilitation service centres;
* an additional $30 million to strengthen family support, including enhanced out-reach services from Integrated Family Services Centres;
* an additional $20 million to strengthen home care services for the elderly to realise our vision of "ageing in place"; and
* an additional $20 million to improve the pilot Comprehensive Child Development Service and gradually extend its coverage for early identification of children and their families with special needs, such as single-parent and low-income families, and provision of appropriate services for them.
64. Jobs are the best way of helping the unemployed restore their confidence and achieve self-reliance. To assist those in need who are capable of working, our focus is not only on providing welfare, but also on enhancing their capability through education and training, and giving them proper employment assistance and support. Over the next five years, I will provide additional funding of about $230 million to strengthen our efforts to help the needy. New and improved services will be funded by:
* an additional $60 million over the next two years to continue the Intensive Employment Assistance Projects, to help unemployed CSSA recipients rejoin the workforce;
* an additional $20 million next year to strengthen our employment assistance measures, which include:
- introducing the pilot My STEP - Special Training and Enhancement Programme to motivate unemployed young CSSA recipients to rejoin the workforce;
- strengthening employment assistance at the district level for long-term CSSA recipients by providing a one-off incentive of $1,500 on a trial basis to help them settle into their new jobs;
- providing short-term travel support on a trial basis for Tin Shui Wai, Tung Chung and North District residents who are financially needy and have completed full-time courses with the Employees Retraining Board. This will encourage unemployed people in districts further afield who are not receiving CSSA to take up employment; and
- training the staff who run social enterprises; and
* an additional $150 million over the next five years earmarked to strengthen district-based poverty alleviation work, including support for social enterprises.
65. The Government will assist further in the development of social enterprises. We propose to relax the existing requirement, under the Enhancing Employment of People with Disabilities through Small Enterprise Project, for an applicant's workforce to comprise more than 60 per cent of disabled people before qualifying for a grant. This relaxation will enable social enterprises to expand their business activities and allow more unemployed and disabled persons to benefit. Social enterprises will also be able to enjoy the support services now generally available to SMEs. Subject to the principles of transparency, fairness and value for money in government procurement, we will facilitate participation by social enterprises in tenders for government contracts.
66. Last year, we established the Commission on Poverty in order to review current policies with the ultimate aim of enhancing their effectiveness. In the coming year, the Commission will continue to study how to help the poor and disadvantaged and co-ordinate the implementation of the foregoing initiatives.
Healthcare Financing
67. Our healthcare services are heavily subsidised. The Government bears over 95 per cent of their cost. Rapid advances in medical science and pharmaceutical technology mean more expensive treatments and drugs and lead to even higher expenditure. According to the Hong Kong Population Projections, the proportion of residents aged 65 and over will rise from 12 per cent in 2003 to 27 per cent in 2033. All these factors will bring greater pressure to bear on government finances. The Health, Welfare and Food Bureau is consequently studying alternative arrangements for healthcare financing, and will conduct a public consultation later in the year. In finalising an overall package, we will consider whether to provide a tax deduction for contributions to private medical insurance schemes, a suggestion put to me by many during my own consultations on the Budget.
Promoting Environmental Protection
68. As I have mentioned in my previous Budgets, we need to impose "green" taxes in accordance with the Polluter Pays principle. The Secretary for the Environment, Transport and Works will introduce the Product Eco-responsibility Bill into this Council later in the year to provide a legal framework for producer responsibility schemes. The products to be regulated under the schemes will include tyres and plastic bags. The Environment, Transport and Works Bureau will levy a fee on tyres and require the industry to be responsible for their recovery and recycling. As for plastic bags, the Bureau intends in the longer term to introduce legislation prohibiting their free distribution and to levy a tax to deter their use. It will consult the industry and the public extensively on the relevant legislative proposals. In the interim, the Bureau will agree a plastic bag reduction target with major supermarket chains and implement a pilot scheme.
69. Hybrid vehicles produce fewer emissions than petrol-only vehicles. When further options are available in the market, the Government will consider using such vehicles itself more extensively and introducing measures to promote their use by the public. Separately, I propose to exempt electric vehicles from first registration tax for a further three years up to 31 March 2009.
Goods and Services Tax
70. In so far as our existing public finances are concerned, expenditure is rigid and revenue, which is subject to economic fluctuations, is unstable. Land premiums and investment income are very important, yet volatile, revenue items. As a share of government revenue over the past ten years, the former has fluctuated between 3 and 28 per cent, and the latter between 0.5 and 18 per cent. Our salaries tax and profits tax, which are the major streams of recurrent revenue, are paid by a minority of residents and enterprises, and such taxes are highly sensitive to economic fluctuations. The problems arising from our narrow tax base are abundantly clear. The existing structure of government revenue is less than healthy. We need revenue items which are less sensitive to the ups and downs of economic cycles to offset the volatility of the others. Widespread experience overseas has demonstrated that a Goods and Services Tax (GST) can achieve this purpose. I believe that it is the civic responsibility of Hong Kong people to contribute an affordable amount of tax.
71. During the past two years or so since I became Financial Secretary, members of the community have periodically engaged themselves in discussions on GST, and have expressed their views to me. I can appreciate the concerns some may have. In working out the details of GST, I will follow the principle of maintaining our low and simple tax regime. The Government will consult the public on the detailed proposals. We intend, inter alia, to provide tax refunds to visitors and allow importers to defer payment so as to relieve pressures on their cash flow. To reduce the erosion of people's purchasing power, we will also propose relief and compensatory measures, including an increase in the level of CSSA payments and reduction of other taxes.
72. As regards timing, we will launch the public consultation in the middle of this year. It will last about nine months in order to allow sufficient time for the public to express their considered views. After the conclusion of the consultation period, we will prepare a report and submit our proposals for consideration by the Government of the next term. From making a decision to introduce GST to its actual implementation will take about three years. I hope the community can take the opportunity of the consultation period to have a rational discussion of the Government's proposals.
(To be continued)
Ends/Wednesday, February 22, 2006
Issued at HKT 11:57
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