Speech by FS at Joint Business Community 2011-12 Budget Speech Luncheon (English only)(with photo/video)

     Following is the speech by the Financial Secretary, Mr John C Tsang, at the Joint Business Community 2011-12 Budget Speech Luncheon at the Hong Kong Convention and Exhibition Centre today (March 1):

Distinguished guests, your excellencies, ladies and gentlemen,

     Good afternoon to you all.  It is indeed a great pleasure for me to join you once again for this annual joint chambers lunch.

     Today, I'd like to start off with a little bit of music history.  Don't worry - I'm not going to sing!

     And then I would like to explain why this particular music history is a useful allegory for the way we can all help tackle the many and varied challenges facing Hong Kong today.

     I am sure that at least a few of you good people out there will be old enough to have heard of Glenn Miller, and the special "Big Band" sound that he brought to the world of music back in the late 1930s and early 1940s.  Today - March 1 - just happens to be the day that he was born back in 1904.

     Miller loved music and he lived for his music.  And as a kid, he milked cows, probably many cows, to save enough money to buy a trombone - which he did when he was about 11.  When he left high school, he pursued his dream to become a professional musician.  He played with, and indeed learnt from, jazz greats such as Tommy Dorsey and Benny Goodman before he struck out on his own.

     Back in those days, some of the most successful dance bands were those with an individual star musician in the spotlight - featuring in trumpet, clarinet, saxophone, piano, vocals - take your pick.  But Miller didn't take this approach.  Instead, he concentrated on making sure that the entire band was the star.  This also meant that the band members were not confined to just one genre, such as jazz or swing or ballads.  They were versatile and they could play them all.  The hallmark of Miller's music was undoubtedly the harmony - the way in which he blended and balanced the talent of each individual musician and instrument to create the distinctive Glenn Miller Big Band sound that is still popular today.  At least among a few of us.

     I think you can see where I am leading with this.  Harmony and balance don't just apply to music - they also apply to society.  Hong Kong, as a city and economy, has its own distinct strengths and characteristics that have served us well, allowing us to establish a name as well as a niche for ourselves on the global stage.  That is the collective result of the efforts of individuals, of businesses, of government over many years that have shaped the brand identity of Hong Kong.

     Like any modern and sophisticated large city, Hong Kong faces many challenges and competing interests.  The annual Budget along with the annual Policy Address by the Chief Executive are always about trying to strike the right balance in the best interests of the Hong Kong people, as well as our long-term development needs.

     This year we have had to strike a balance between returning wealth to the people, without fuelling inflation. We have also had to prepare for what is likely to be another turbulent year ahead for the global economy, while continuing to invest in Hong Kong's long-term future - in education, in healthcare as well as in maintaining our competitiveness.

     As is often the case, there has been heated debate on the Budget initiatives.  I'm sure you have your own views, and I look forward to taking some of your questions a little later on.  Yesterday, I met some legislators to hear their views on the Budget.  I will keep an open mind, I will look into their specific suggestions and come up with a response to the concerns raised by the community at large.

     In this year's Budget, and also last year, I made reference to the "Big Society" that co-exists along with our "Small Government" and "Big Market".  What I would like to encourage and nurture is the more effective use of our "Big Society" - where lies our social capital - which can better help ensure the balance of our policies and spending priorities with and, ultimately, the harmony of our community.

     The basic premise of our "Small Government" philosophy is to provide an environment that allows the "Big Market" to flourish.

     And that is why the Government continues to invest heavily in infrastructure to enhance the capacity and efficiency of our economy - a record $58 billion for this financial year, and more than $60 billion a year over the next several years.  

     We are continuing to devote resources to develop our pillar industries, as well as other industries where we see potential for growth.  We are continuing to promote Hong Kong as the premier business platform in Asia, and as our nation's global financial centre.  We are actively pursuing opportunities for business growth and expansion in the Mainland by making the best of our skills sets to leverage the directions laid out in our nation's development agenda.  We are continuing to push for further liberalisation under CEPA.  We are building a symbiotic relationship with our Guangdong neighbour, enhancing relationships at all levels.  And we are pushing for a broader and deeper role in the internationalisation of the renminbi.

     Similarly, we also need to provide an environment that will help our "Big Society" to play a more direct and meaningful role in our social development.  Education, which remains our largest spending area, is a necessary prerequisite to achieve this goal.  Education is not just a vital part of developing our human capital - the brainpower that keeps the economy working; it is also a vital part of developing personal capital - the knowledge that empowers an individual to become the master of his or her own fate.  Empowering an individual, in turn, empowers the community.  And I do believe that an empowered community is a responsible community.  Our spending initiatives promote self-reliance, which is the very essence of Hong Kong's famous "can-do" spirit.

     In this Budget and others, we have allocated resources to help more young people pursue their studies; to help disadvantaged groups integrate into the community; to help families take care of their live-at-home parents as well as grandparents; to help elderly people enjoy a happy, healthy and active retirement.  

     It is the intention of Government to nurture an environment for our "Big Society" to grow, become stronger and even more interconnected.

     And talking of connectivity, where better to look than the Internet to encourage "Big Society".  Last year, we initiated a community-business-Government collaboration to promote Internet learning for disadvantaged students.  While subsidies come from the Government, the success of the project depends on service providers and community organisations collaborating to provide the necessary hardware and software guided by market forces.

     We also have the Matching Grant Scheme for our tertiary institutions.  Here again, the Government shares its resources - not for short-term gain - but to encourage a more philanthropic culture among the community, and, in particular, the business community.

     We have also allocated resources, and are taking forward projects that will help community organisations pool their efforts together for social development and innovation.

     Take, for example, the "Enhancing Self-Reliance Through District Partnership Programme".   Since 2006, over 100 social enterprises have been set up with financial help from this Programme.  These enterprises provide long-term solutions to poverty alleviation through community involvement, sharing skills and providing solutions for people to improve their livelihood.  This year's Budget provides additional resources to sustain this Programme over the next five years.

     As a result of the commitments that we have made in the different areas, recurrent spending this year has grown by 8 per cent to $240-something billion - the largest growth in a decade.  This increase will benefit the community as a whole, and many people will personally feel the impact of these ongoing spending commitments.  Education, social welfare and health care will account for $137 billion in total - or about 56 per cent - of all the recurrent spending that we have in 2011-12.

     Education remains our biggest spending area.  We invest heavily in education because it is an investment in our people and in our future.  Education for all - and access to further education - is the best way to help our people compete globally, to pursue their goals and dreams, and to benefit from our economic development.

     Social welfare spending has gone up 11 per cent his year because we need to do more to help the vulnerable and needy - in particular our elderly citizens who have contributed to Hong Kong's prosperity over the years with their perseverance, their resilience and desire for self reliance.

     Healthcare spending is up by 9 per cent - more money for drugs to treat diseases, to reduce waiting times for specialist services, to fight chronic diseases and to enhance mental healthcare services.  And by next year, healthcare spending will take up 17 per cent of our total spending.

     These spending plans relate closely to people's lives - to their future, their quality of life, their health, and to their dignity.  We owe it to the people of Hong Kong to do as much as we can to improve their lives, to help them reach their potential, to empower them to contribute to society, and to care for them in times of need.

     At the same time, we also owe it to the people of Hong Kong to manage their money wisely, to ensure that today's spending will not burden future generations, and to put aside enough money in the bank to help us tide over the rough patches that will inevitably come in future.  

     This financial year, we have booked a rather large surplus of over $71 billion.  This is because of the sudden change in economic fortune in our part of the world, we collected more revenue from salaries and profits tax, from land sales, and stamp duty on property and stock market transactions.  We saw strong GDP growth of 6.8 per cent, exports of goods soared by 17.3 per cent, investment spending grew by 8.1 per cent and unemployment has dropped to 3.8 per cent.  All in all, a pretty good and positive result - particularly in light of the uncertainties, and what we faced just a couple of years ago during the height of the global financial crisis.

     As you will have seen from the papers, there has been indeed quite a lot of discussion about how best to use these surpluses.

     One of the hallmarks of Hong Kong's fiscal philosophy - in fact, it is a Basic Law requirement - is that we live within our means.  That means we keep our eyes on the recurrent expenditure so that any spending growth mirrors the real growth rate of our economy.

     This approach has worked well for us, and I do not intend to depart from that.  In fact, any significant departure from this philosophy would require a complete overhaul of our taxation system - which I don't think would garner much support from the business community, or the community at large.  And it would also run counter to another Basic Law obligation to take a low tax policy as our reference point.

     In that regard, what we do with our income is very much guided by these very basic, very simple, and yet very important guidelines.

     So, what have we done?

     Well, we have returned some of this wealth to the people with one-off measures that will help combat rising inflation, but won't add to inflationary pressure - rates rebate, electricity subsidy, payment of public housing rents, extra payments for those in need.  All up, about $18 billion returned to the people of Hong Kong.

     We planned to inject $6,000 into every MPF account and those of other approved occupational retirement schemes, but as you know this particular initiative received rather poor reception in the community.  Following our meeting with some legislators yesterday, I am giving further thoughts to revise this initiative in order to meet the concerns that they have identified.

     We have also set aside almost $13 billion for specific funds or time-limited initiatives - $7 billion to develop sporting talent; $2.75 billion for education purposes; $1 billion to extend and double the value of the elderly healthcare voucher scheme; another $1 billion for health and medical research; $1 more billion to help rejuvenate old buildings.

     The sporting and education funds are investments in our future - investments in Hong Kong athletes, investments in students, investments in people wanting to upgrade their knowledge and their skills sets.  All together, more than $55 billion in measures that will benefit many in society, but will not impact on our revenue streams or add to inflationary pressure.

     Ladies and gentlemen, the global economy still abounds with challenges.  As a small and open economy, Hong Kong will inevitably be caught up in these global winds of change.  The impact of the changing economic landscape, the pressure of an ageing population, and the social tension arising from the poverty problem call for a broader consensus and greater willingness in society to confront these issues together.  We need to make the best use of our "Big Society" that has the collective wisdom, experience, determination and commitment to help Hong Kong mature and prosper - and to provide the balance and harmony to our social equation.

     The advent of social media and the speed at which information - good or bad, fact or fiction - can circulate en masse to a huge, global audience is a major change that businesses and governments alike are dealing with.  So, there is already a "Big Society" in cyberspace that impacts on what we do.  And this trend is deepening.   

     Similarly, the unfettered access to information in Hong Kong via Internet platforms and 24-hour news media allows our people to quickly and easily benchmark what we do compared to other places around the world.  Many students have studied overseas and return to work or start a business in Hong Kong.  They bring with them new ideas of how our society should develop, and higher expectations of government and corporate social responsibility.  And the very strong presence of international companies in Hong Kong is as much a social asset, as it is a knowledge asset, as it is an economic asset.  We are fortunate to have already such a huge reservoir of social capital in Hong Kong.  And we should make the most of it.

    Thank you very much.

Ends/Tuesday, March 1, 2011
Issued at HKT 17:41