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Following is a question by the Hon Frederick Fung and a reply by the Acting Financial Secretary, Mrs Carrie Lam, in the Legislative Council today (June 4):
Question:
When he attended the meeting of this Council on 15th May, the Chief Executive confirmed that, in vetting fare increase applications by public transport operators, the Government would put public affordability first as the most important consideration that would take precedence over shareholders' interests, and he would put forward more specific measures in this year's Policy Address to alleviate the burden of rising prices on people's livelihood. On the other hand, the inflation rate for April this year was as high as 5.4%, which represented an increase of 1.2 percentage point over that of March and was higher than the Government's estimate of 4.5% made when this fiscal year's Budget was published. In this connection, will the Government inform this Council:
(a) whether it will adjust upwards the estimated annual inflation rate, and whether it has assessed the impact of last month's earthquake in Sichuan Province on the food prices and supplies in Hong Kong;
(b) how it ensures that "public affordability" will take precedence over the relevant shareholders' interests as a factor for consideration in vetting fare increase applications by public transport operators, and of the objective criteria for assessing if the relevant rates of increase are within public affordability; and
(c) whether it has assessed if it will be too late to announce, in the Policy Address in October this year, measures to further alleviate the pressure of inflation on the public; whether it will consider implementing some new measures as soon as possible, so as to alleviate the pressure of inflation on low-income families?
Reply:
Madam President,
My reply to the three parts of the question is as follows:
(a) The short-term inflation outlook will hinge much on the movements of food prices in the international markets, which are expected to be volatile. In addition, the persistent high prices of crude oil and other commodities in the world markets, the weak US dollar, the appreciation of Renminbi and the sustained strength of the local economy will continue to exert inflationary pressure for some time to come. The underlying inflation rate for 2008 is forecast at 4.5%. If, however, the alleviation effect of the various measures to help lower the Composite CPI is taken into account, the forecast headline inflation rate for 2008 is 3.4%. The Government is well aware of upside risks to these forecasts, and will continue to monitor the situation closely and review the inflation forecasts as more incoming data become available.
Regarding the impact of the recent Sichuan earthquake on food prices, the hard-hit Wenchuan county, which is situated in a mountainous region, is not an important food and industrial production area. Nevertheless, the impact of the disaster on Mainland's overall food supply chain and food prices remains to be seen.
The Sichuan Province is not a major source of food imports to Hong Kong. While the province is the largest producer of pork in the Mainland, the live pigs consumed in Hong Kong mainly come from other provinces such as Guangdong, Jiangxi and Hunan, with Guangdong accounting for half of the supply. Regarding frozen pork, the monthly supply from the Sichuan Province is 1 200 tonnes. It is estimated that the earthquake will result in a reduction of about 500 tonnes in the monthly supply, which only accounts for 3% of the supply of frozen pork to Hong Kong. To make up for the shortfall, the Mainland authorities concerned will increase the supply of pork from other provinces. The food supply to Hong Kong has been generally normal since the earthquake on May 12.
(b) The Government will certainly handle fare increase applications from public transport operators with prudence. Public acceptability and affordability have all along been an important factor taken into account by the Government in assessing fare adjustment applications submitted by these operators. In fact, we have put in place comprehensive mechanisms to assess and handle fare adjustment applications on public transport services. For example, in assessing the fare increase applications from bus operators, the Government has considered and balanced all relevant factors in the bus fare adjustment arrangement. These factors include changes in operating costs and revenue of operators since the last fare adjustment; forecasts of future costs, revenue and return; the need to provide the operators with a reasonable rate of return; the quality and quantity of services; the outcome of the formula; and public acceptability and affordability.
In the course of handling major public transport service issues, the Government will also consult the Legislative Council (LegCo) Panel on Transport and the Transport Advisory Committee (TAC) to gauge and take into account public concerns. After giving full consideration to the views from the LegCo, TAC and various sectors of the community, the Chief Executive in Council will make a final decision. In assessing fare adjustment applications on services at the district level, the Government will consult local representatives concerned to collect views from the local communities on fare adjustment.
We will thoroughly consider all relevant factors in order to make a decision that is well balanced and in the public interest. Such decision will be made having regard to public affordability on the one hand and to operators' ability to sustain the provision of efficient public transport services to meet the needs of the public on the other hand.
(c) As mentioned above, the short-term inflation outlook will hinge much on food prices. The Government will continue to adopt appropriate measures, with the support of the state, to ensure a stable supply of food for Hong Kong. The Government also encourages the trade to broaden sources of food supply to make it more diversified and stable.
The Government is much concerned about the impact of inflation on the disadvantaged groups and low-income earners, and therefore proposed various relief measures in the 2008-09 Budget to help the disadvantaged groups and low-income earners. These measures include:
* granting electricity charge subsidy;
* paying one month's rent for lower income families living in the rental units of the Housing Authority and the Hong Kong Housing Society;
* relaxing the eligibility criteria and requirements of the pilot Transport Support Scheme;
* providing additional payment of CSSA, Disability Allowance and Old Age Allowance;
* advancing the adjustment of the CSSA payment rates in accordance with the existing mechanism ahead of the normal schedule; and
* waiving rates for 2008-09, subject to a ceiling of $5,000 per quarter for each rateable tenement, etc.
Our most pressing job now is to implement these measures as early as practicable, so as to relieve the burden of inflation on the public, especially low-income families.
Ends/Wednesday, June 4, 2008
Issued at HKT 12:36
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