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The Financial Secretary, Mr John C Tsang, today (February 27) delivered his annual Budget, pledging to develop the economy, invest in human capital, invest in infrastructure and livelihood matters, and plan for future challenges.
The Financial Secretary set aside $60 billion to underpin initiatives announced by the Chief Executive in his Policy Address last month in key areas of economic development, optimising human resources, infrastructure and livelihood issues.
He also proposed measures with a view to promoting economic growth, investing in the future, and improving employment opportunities and people's livelihood.
"The package of measures in this Budget will have a stimulus effect of 1.3 percentage points," Mr Tsang said.
The Financial Secretary said Hong Kong's economy grew by 1.4 per cent in 2012, well below the average of 4.5 per cent growth over the past 10 years. He forecast GDP growth of 1.5 to 3.5 per cent in 2013.
He announced a range of counter-cyclical relief measures to help cope with short-term economic fluctuations, maintain spending power and support the employment market (see separate press release for details).
The relief measures, involving a total of $33 billion, will help to ease the pressure on the middle class, grass roots and SMEs, Mr Tsang said.
Social welfare, education and medical services continue to be the Government's major expenditure areas. In 2013-14, recurrent expenditure in these three areas is expected to approach $170 billion, or 60 per cent of recurrent government expenditure.
Mr Tsang proposed injecting an additional $15 billion into the Community Care Fund to provide resources to the Commission on Poverty to alleviate poverty by plugging gaps in the existing social welfare system. This additional funding, together with the original $5 billion government injection, is expected to generate an annual investment return of over $1 billion.
On healthcare, the Financial Secretary allocated an additional $44 million to the Hospital Authority to include two chemotherapeutic drugs for cancer treatment in its Drug Formulary and expand the application of two special drugs for patients with advanced Parkinson's disease and cancer.
He also said $8 billion would be used to redevelop Kwai Chung Hospital to strengthen care and support for mentally ill patients.
The Financial Secretary unveiled a range of measures to support the development of Hong Kong's pillar industries, namely, trade and logistics, tourism, financial services and professional services.
These include setting aside two dedicated sites in Tsing Yi and Tuen Mun for logistics clusters, offering a $2.3 billion loan for the Ocean Park to develop an all-weather Water World at Tai Shue Wan, offering tax incentives to promote Hong Kong as a centre for fund and asset management, and launching a further inflation-linked iBond issue of up to $10 billion under the Government Bond Programme.
The Financial Secretary proposed to designate $100 million to establish a training fund for maritime and aviation transport.
To provide sustained and stable financial support for the Employees Retraining Board (ERB), the Financial Secretary proposed setting aside $15 billion for the ERB.
Education is the single largest spending area with estimated recurrent expenditure for 2013-14 of $63 billion, representing more than one-fifth of total recurrent government expenditure.
The Financial Secretary proposed injecting $5 billion into the Language Fund which provides financial support for projects and activities aimed at promoting biliteracy and trilingualism among the local community.
He also earmarked an additional $480 million for the Government Scholarship Fund (GSF) to set up scholarships for outstanding local students to pursue studies in prestigious overseas universities. They are required to undertake to teach in local schools upon graduation.
To foster economic development and enhance the quality of life in Hong Kong through infrastructure development, Mr Tsang estimated that capital works expenditure for 2013-14 would exceed $70 billion.
In line with the Government's commitment to provide adequate land for residential and commercial property development, the Financial Secretary said 46 sites, including 28 new sites, would be included in the Land Sale Programme for 2013-14.
"We shall continue the practice of announcing government-initiated land sale arrangements in advance on a quarterly basis, and exercise flexibility in supplying housing land in the light of market demand," Mr Tsang said.
He said the 2013-14 Land Sale Programme would include nine sites for commercial/business use and one "hotel only" site, providing a total floor area of about 330,000 square metres and some 300 hotel rooms respectively.
Mr Tsang estimated that 24,000 first-hand flats could be offered for sale this year.
He also said he would allocate $4.5 billion in the coming five years to carry out studies and design work and roll out development projects relating to reclamation outside Victoria Harbour on an appropriate scale, opening up new development areas and the development of caverns.
The Budget also provides funding for environmental initiatives announced in last month's Policy Address, including $10 billion to subsidise the phasing out of old commercial diesel vehicles and $5 billion to support initiatives under the Environment and Conservation Fund.
The Financial Secretary forecast a Budget surplus of about $64.9 billion for 2012-13.
He said this was mainly due to higher-than-expected revenue from earnings and profits tax which exceeded the original estimate by $24.8 billion while revenue from land premiums, stamp duty and the dividend from the West Rail Property Development Limited were all above original estimates.
The revised estimate for government revenue for 2012-13 is $445.5 billion, or $55.2 billion higher than the original estimate. By end-March, fiscal reserves are expected to be $734 billion.
As for 2013-14, the Financial Secretary forecast a small deficit of about $4.9 billion. Fiscal reserves are estimated at $729.1 billion by end-March 2014, equivalent to 20 months of government expenditure.
He said Hong Kong should learn important lessons from the impact of the global financial crisis on major economies in Europe and the United States.
"Beset with huge debts from overspending, these countries eventually find themselves in a dire financial crisis, and have to cut the deficit through fiscal austerity," Mr Tsang said.
"Hong Kong must draw a lesson from them.
"We must maintain effective fiscal management and fiscal discipline by adhering to the principles of keeping expenditure within the limits of revenues and allocating resources where they are required.
"Any indiscriminate increase in expenditure will only impose a heavy burden on our next generation."
Mr Tsang also warned that the impact of Hong Kong's ageing population would deplete Hong Kong's reserves in the long run and put pressure on the city's low and simple tax regime.
"With an increase in the number of the elderly, a shrinking working population, reduction in the number of taxpayers and decelerated economic growth, I expect that the growth of government revenue will drop substantially if our tax regime remains unchanged. Moreover, expenditure on welfare and healthcare will soar. We may not be able to make ends meet," Mr Tsang cautioned.
"Prolonged depletion of the reserves to meet ever-increasing recurrent expenditure is not sustainable," Mr Tsang said.
"I shall set up a working group to be led by the Treasury Branch to explore ways to make more comprehensive planning for our public finances to cope with the ageing population and the Government's other long-term commitments," Mr Tsang said.
Ends/Wednesday, February 27, 2013
Issued at HKT 13:00
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