The following is the "Letter to Hong Kong" on Budget 2011-12 by the Financial Secretary, Mr John C Tsang, broadcast on Radio Television Hong Kong this morning (March 6):
Just over a week ago, I delivered my Budget for the 2011-12 financial year. As is often said: A week is a long time in politics.
This was my fourth Budget, and the first since our economy's full recovery from the global financial crisis.
These aspects brought into sharp focus two important elements of my budgetary deliberations.
First, it soon became clear that our strong recovery would result in a sizable surplus. Indeed, the Budget surplus came in at around $71 billion. And second, our robust recovery also provided an opportunity for people to share in the fruits of this recovery.
I have done this through various measures, including additional funding for the elderly, welfare recipients, homeowners, chronic patients and students, among others. In fact, total Government spending in the coming financial year will increase by 22% year on year.
However, soon after my Budget Speech on Wednesday, February 23, it became quite clear that some of my initiatives were at odds with the aspirations of the public and legislators.
In particular, my decision to use the Mandatory Provident Fund, or MPF, as a platform to leave wealth with the people did not receive an enthusiastic response.
Over the past week or so, I spent a lot of time listening to the views of the public, legislators and different sectors of the community. I appreciate this opportunity for open and candid dialogue. It has also given me a chance to fully explain my budgetary initiatives and the constraints involved.
A common criticism that I have heard is that the proposal to inject $6,000 into each and every MPF account would not benefit the entire community. For example, civil servants and housewives would not be included. Another concern is that people would not have immediate access to the money. More importantly, people want to have a say as to what they would like to do with the money rather than letting Government decide that it should be left for post-retirement purposes.
Another criticism is the omission of a tax rebate, and the third area is that some people still stand to gain nothing from the Budget - the so-called N-nothings!
I heard these views loud and clear. I promised to take up the relevant issues, look into the specific suggestions with an open mind, and make our decisions known to everyone as soon as possible.
In the meantime, I consulted with our legislators and reached a consensus with them on some of the key points of contention.
We agreed that the MPF scheme is not the ideal platform through which to leave wealth with the people. Instead, we should set up a new platform under which $6,000 would be given to each and every Hong Kong Permanent Resident aged 18 and above.
Details of this proposal will be announced as soon as possible. Our initial thinking is that recipients will be able to draw on this cash as they wish. However, there will also be an incentive - perhaps in the form of an interest payment - to encourage people not to immediately withdraw the money.
For non-Permanent Residents, such as one way permit holders from the Mainland, separate arrangements will be made for those in need of financial assistance so that they too can benefit from Hong Kongˇ¦s prosperity. One way to achieve this would be to set aside a specific sum of money to cater for the needs of this sector of our community. The Community Care Fund can be a suitable platform to reach this group of people. I shall work out details with the Chief Secretary and inject additional money into the fund for the purpose.
I also proposed a tax reduction of 75 per cent of salaries tax capped at $6,000. I believe this is an important aspect of meeting the public's aspirations now that our economy is fully recovered.
However, we must not - and we will not - turn a blind eye to the adverse economic environment and turbulent conditions in other parts of the world. Ultimately, these will have the potential to impact on Hong Kong this year.
In particular, in proposing adjustments to my Budget, we weighed up their potential impact on inflation. Tax rebates and other proposed measures will add to inflation. But I have decided to adopt them after balancing all relevant considerations, in particular, public aspirations.
I appreciate the heart-felt views of all sectors of our community on the Budget. Sincere and open dialogue throughout this process between Government, lawmakers and the general public helped produce the best possible outcome for our community.
Beyond the amendments that I have mentioned, other commendable suggestions have to be dealt with separately. These include calls to resume building HOS flats, introduce a comprehensive retirement scheme for everyone, and take further measures to narrow the wealth gap.
These are all valid concerns with which the Government has been fully engaged. We have been dealing with these and other livelihood issues over the years in a gradual mode. Much progress has been achieved along the way, but I agree there is still much to be done. We will continue to strive to make further improvements, raising the standard of living in Hong Kong in an incremental manner.
It is important to remember that - in any given year - the Budget is just one of the many avenues to address important issues affecting our community.
Many of these issues require long-term planning, thorough discussion in the community and elaborate financing strategies. Most important, their success hinges on strong consensus within the community. We will continue to actively engage the public and listen to their views on tackling livelihood issues.
This past week has provided a valuable and positive learning experience for everyone involved in consensus-building.
We will continue to engage the public, lawmakers and stakeholders on all the issues through various platforms and respond to the legitimate wishes of our people.
Have a great day.
Ends/Sunday, March 6, 2011
Issued at HKT 09:33