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Budget Speech by the Financial Secretary (10)

Revised Estimates for 2015-16

159. The revised estimate for government revenue for 2015-16 is $457 billion, 4.2 per cent or $20 billion lower than the original estimate.  It reflects mainly the provision of $45 billion for the Housing Reserve and changes in different incomes.

160. Revenue from land sale is $8 billion, or 11.6 per cent lower than the original estimate because some sites were unable to be disposed of as scheduled.  Given the fluctuation of the Hong Kong stock market, with trading hectic in the first half of the year, stamp duty revenue for the whole year is $14 billion, or 28 per cent higher than the original estimate.  The total revenue from salaries tax and profits tax is $17 billion, or 8.9 per cent higher than originally estimated.

161. As for government expenditure, I forecast a revised estimate of $427 billion, 3.1 per cent or $14 billion lower than the original estimate.  This is mainly because the Finance Committee may not be able to complete as scheduled the deliberation on the proposed endowment of $10 billion to HA for public-private partnership initiatives in 2015-16.

162. For 2015-16, I forecast a surplus of $30 billion.  Fiscal reserves are expected to reach $860 billion by 31 March 2016, equivalent to 24 months of government expenditure.
Estimates for 2016-17

163. Last month, the Chief Executive delivered the Policy Address covering a spectrum of policy initiatives which involve $220 billion of expenditure.  I shall ensure that financial resources are adequate to fully support the launch of these initiatives.

164. Operating expenditure for 2016-17 is estimated to be $380 billion, representing an increase of 11.1 per cent or $38 billion over the revised estimate for 2015-16.  Recurrent expenditure, which accounts for over 90 per cent of operating expenditure, will reach $350 billion, reflecting an increase of 6.7 per cent or $22 billion over the revised estimate for 2015-16.

165. I forecast that capital expenditure will be $110 billion, including $79 billion on capital works.  With a number of projects at their construction peaks, capital works expenditure is expected to remain at relatively high levels in the next few years.  We are, however, concerned about the slow progress of deliberation in LegCo, resulting in a mounting backlog of funding proposals and delayed commencement of livelihood-related projects.

166. The civil service establishment is expected to expand by 2 223 posts to 178 495 in 2016-17, representing a year-on-year increase of 1.3 per cent.  This has to do with manpower increase in government departments for implementing new policies and improving existing services.

167. Total government expenditure is estimated to reach $490 billion in the next financial year, 14 per cent more than that of last year.  Public expenditure will be equivalent to 21.2 per cent of GDP.

168. Total government revenue for 2016-17 is estimated to be $500 billion, of which earnings and profits tax is estimated at $206 billion.  Land revenue is estimated to be $67 billion.

169. Taking all these into account, I forecast a surplus of $11 billion in the Consolidated Account in the coming year.  Fiscal reserves are estimated to be $870 billion by the end of March 2017, representing 35.2 per cent of GDP or equivalent to 21 months of government expenditure.
Medium Range Forecast

170. The global economy has seen rather low and unbalanced growth in recent years.  Uncertainties in the external economic environment will linger on in the next few years.  For the medium term, the average growth rate is forecast to be three per cent per annum in real terms from 2017 to 2020, lower than the trend growth of 3.4 per cent over the past ten years; and the underlying inflation rate is expected to average 2.5 per cent per annum.

171. I forecast an annual surplus in the Operating Account and an annual deficit in the Capital Account in the four financial years from 2017-18.  There will be deficit in the Consolidated Account in 2018-19 and 2019-20, which mainly reflects Government's financial allocation for the healthcare reform and retirement protection.  On the whole, the financial position of Government over the medium term remains sound.

172. Fiscal reserves are estimated at $835 billion by end-March 2021, representing 28.3 per cent of GDP or equivalent to 18 months of government expenditure.
Concluding Remarks

173. Mr President, I set up a Facebook account on the eve of the last Budget Speech, hoping that its contents could be presented to the wider community through a channel that was popular among young people in order to help broaden and rejuvenate my communication with the public.  Social media enables me from another perspective to observe people's daily lives and to hear their voices, including messages that cannot be accessed through traditional media and views that have not been captured by the mainstream.  In the past year, I have gained a much deeper appreciation for the current state of play.

174. I believe that many of you would share my feeling that tension and turbulence are mounting in Hong Kong.  Many of us feel suffocated by and, indeed, helpless with the tiresome confrontations day in and day out.  This highly charged atmosphere has continued to deteriorate since the unlawful occupy movement a year and a half ago, even after the defeat of the constitutional reform package.  Confrontations have not eased, and worse still, our society has become even more polarised.  Political disputes are spreading both inside and outside the Council Chambers, setting off a spiral of intensifying struggle between rival factions.  Calm and rational discussions no longer have a place in this Council.  There is not even room for dialogue in our society.

175. As a member of the Hong Kong community, I am deeply troubled by the current situation.  What we are facing today is the result of a raft of intricately-related factors.  We need to look squarely at these factors in resolving the differences and, more importantly, we need to have the determination to resolve these conflicts.  If we should allow the situation to get worse, what lies in store for Hong Kong will be even greater chaos, and our future generations will grow up in the midst of hatred and malice.

176. A statesman once said, "Our problems are man-made, therefore they can be solved by man."  For the problems of Hong Kong, they cannot be solved by anyone else except ourselves.  As long as everyone is willing to set aside short-term political considerations in favour of the long-term overall interests of Hong Kong, we shall have a chance to return to rationality.  It is a long journey.  We must be patient and persevere in helping our community to heal, one step at a time.

177. The road trodden by the people of Hong Kong has been thorny and winding.  Our journey has been fraught with wars, poverty, epidemics, economic recessions and financial crises.  In spite of all these scourges and storms, we have always been able to find a way out; and the experience gained over the years has enabled our economy to progress, our system to become more refined, and our society more diverse.

178. Looking back on the road that we have travelled, I believe we have both the ability and the wisdom to cope with the problems that we are facing today.  I also believe that one day we can break the deadlock.  When the storms are over, we shall cherish all the more the harmonious and cohesive society that we have restored.

179. Last year, throughout their World Cup qualifying campaign, the Hong Kong team and their fans had never for a second lost hope in the face of strong competition.  I remember clearly the evening match against Qatar.  Although falling behind by three goals, our team and their fans remained united, and persisted to mount a comeback scoring two goals in the final five minutes.  We lost the match, but the never-say-die spirit that they exhibited won the hearts of our city.  To Hong Kong, this very match has taken on a significance beyond victory and defeat.  It has led me to believe that, with our love for Hong Kong, we are able to overcome any challenge ahead of us, no matter how difficult it is.

180. Thank you, Mr President.

Ends/Wednesday, February 24, 2016
Issued at HKT 12:26


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