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The following is the "Letter to Hong Kong - Budget 2008-09" by the Financial Secretary, Mr John C Tsang, broadcast on Radio Television Hong Kong this morning (March 9):
My fellow citizens,
It's been almost a fortnight since I delivered my first Budget.
In the weeks and months leading up to Budget Day, I was extremely busy meeting people from all sectors of the community to get a better feel of their needs and aspirations for the future.
I am pleased to see that the Budget, so far, has been quite well received. I won't go into the details today. There has already been much discussion, and there will no doubt be plenty more opportunities to talk about it in the future.
Instead, I want to take this opportunity to share with you the thinking behind my Budget. I believe it's important that everyone understands the principles behind our decisions.
There has been much talk about the huge surplus this year, a record $115.6 billion. The determination, ingenuity and sheer hard work of the Hong Kong people has helped us achieve this. It is even more impressive when you consider that in the past decade, we had to weather the Asian financial crisis, SARS, the bursting of the dot.com bubble and the downturn after 9-11.
During those difficult times, we were faced with large deficits and a long period of deflation during which we all had to tighten our belts.
This Budget was a great opportunity to give some of the wealth back to the people, while at the same time securing good prospects for the longer term.
In drawing up the 2008-09 Budget, I decided to base my proposals on three main guiding principles, which are essential in achieving the right balance for Hong Kong.
These three principles for fiscal management are: a commitment to society; sustainable financial policies; and pragmatic decision-making.
Let's take a look at the last one first, pragmatism.
With an all-time high surplus, my first priority was to ensure that money should go where it is needed most, and that every dollar should be well spent and have an impact.
A pragmatic approach requires a commitment to our goal of "Big Market, Small Government". It also requires keeping expenditure in line with economic growth. This point is not only a priority of the government - it is also stipulated in the Basic Law that we should strive for fiscal balance.
Whether you look at the tax breaks or the strengthening of child care services, I was conscious of the need to spend pragmatically.
My second principle - sustainability - weighed heavily on my mind. A "crystal ball" would have been useful here to see exactly what the future has in store for us. Alas, crystal balls only work in movies and fairy tales.
Our economy has been doing well over the past few years, but experience tells us that this growth is subject to any number of variables. We are already keeping a keen eye on the impact of rising global prices as well as a likely slowdown in the world economy. There will undoubtedly be other challenges that will come out of the blue, without warning. So, what we must try to do is use our financial resources to plan ahead so that we can better absorb the effects of any sudden shocks.
I dedicated roughly half of our Budget spending to long-term measures such as health care, retirement for the lower-income groups, job creation and boosting the competitiveness of our pillar industries, such as tourism, logistics and trade.
More jobs and retirement protection, especially for low-income groups, will benefit our entire community. We have also proposed expanded education opportunities and more resources for retraining so that people who want to upgrade their skills can do so.
Importantly, I have also made a renewed commitment to research and development in the promotion of innovation and ideas as the driving force for long-term sustainability in a knowledge-based economy.
Last but by no means least, is the principle of social commitment. I am very concerned about the plight of low-income families, the disadvantaged and the elderly in our community. I appreciate that some people are finding it hard to make ends meet, even when the economy is doing well.
In my pre-Budget discussions with community groups, it was important for me to find the right formula to give people in need a helping hand.
On the vexed question as to how best to improve the Old Age Allowance Scheme in the long run, we will be seeking the views of the community. We have an open mind on the issue, but we aim to have a decision before the end of the year. Meanwhile, with the concurrence of the Finance Committee, we hope to disburse $3,000 each to our elderly recipients so that they, too, can share in our economic success.
My fellow citizens, by following the principles of social commitment, sustainability and pragmatism, we have been able to strike a good balance between spending and saving, meeting long-term objectives and achieving short-term goals, and caring for the needy while ensuring greater opportunities for the next generation.
And that's why I'm confident that the Budget can lay a solid foundation for Hong Kong's prosperity in the years to come.
Ends/Sunday, March 9, 2008
Issued at HKT 08:40
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