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Public consultation of the Budget

The Budget will be announced on 24 February to set priorities for next fiscal year’s resource allocation. I attended RTHK’s programme “Voices from the Hall” yesterday to gauge public’s views on the Budget. Due to the epidemic, I could not exchange views with the audience face-to-face as in the past. Yet we still received enthusiastic feedback via video-call, phone-call and Facebook. The two-hour consultation session was particularly fruitful as I was given a chance to listen and understand people’s ideas directly. For those concrete suggestions raised during the exchange, I will consider and follow up within the Government.

I attended RTHK’s programme “Voices from the Hall” yesterday to gauge public’s views on the Budget.

The consultation work for the Budget has started since early last month. Let me share with you some of the common views we have gathered so far.

One of the common concerns is the supporting measures to be proposed in the Budget. In this regard, diverse views were heard over the past month or so. Some people hoped that the Government could hand out cash again to eligible citizens, while some suggested giving out consumption vouchers to boost the economy. Some said that at least tax and rates concessions should continue. On the contrary, considering the large fiscal deficit this year and that the next few Budgets will likely be in the red again, some people viewed that the Government should gradually reduce some of those sweeteners in the Budget, increase tax rate, or even impose new tax and broaden the tax base to increase income.

All these views are valid, but are also bound by limitations. With the shrinking of the economy for two consecutive years, I fully appreciate the pressure and pain that the middle-class and low-income families are facing and experiencing. Nonetheless, we also cannot take the continuous and rapid increase in Government’s recurrent expenditure over the past few years lightly. For instance, the recurrent expenditure in 2020/21 is estimated to be about HK$ 480 billion, which represented a one-third increase from that in 2017/18 (i.e. three years ago), and tripled the recurrent expenditure in 1997/98. Coupled with the fluctuating pandemic situation, this year we are going to see a record high deficit and almost a 30% reduction in the fiscal reserve to about HK$ 800 billion within a year. And with the pandemic still not ending, economic recovery would be hindered. Moreover, given the uncertain outlook this year, we have to reserve resources to cater for known and unknown situations. Take the HK$10, 000 cash handout scheme announced in the Budget early last year as an example. At the time when we formulated the scheme, the estimated deficit for this fiscal year was HK$139.1 billion. However, with the outbreak of COVID-19, the Government has rolled out several rounds of measures under the Anti-epidemic Fund, leading to a surge in the deficit to about HK$ 300 billion. And at the beginning of the outbreak early last year, the market did not expect that it would become a pandemic and dealt a severe blow to the global economy, not to mention the fact that the situation in the US and Europe is still serious until today. Furthermore, the external political and economic environment is still complicated and ever changing. The China-US tension not only poses threats to the investment and financial market, but also bring some impacts on Hong Kong. In face of the uncertain internal and external environments, and the possible coupling of all these risks, we should remain vigilant, make comprehensive and balanced considerations, and reserve strengths to cope with needs arise from time to time.

Nonetheless, as Hong Kong is in the middle of a downward economic cycle, I will maintain a counter-cyclical fiscal policy in my next Budget. By maintaining or even increasing public expenditure, particularly on investment, with a view to buffering the impact of economic recession on the society and people’s livelihoods, and paving the way for post-epidemic economic recovery.

During the consultation, some citizens also made suggestions on how certain existing government measures could be fine-tuned to better serve their needs. Such proposals may only involve adjustments in the implementation details without resorting to large amount of extra funding. I will follow up these suggestions with the related Bureaux. I would like to express my gratitude to citizens for sharing their views, which we have all along taken seriously. Although some of the suggestions may not be able to follow through due to policy or administrative constraints, some have indeed implemented well. For instance, the IT Innovation Lab in Secondary Schools Programme announced in 2019, which allowed each secondary school to apply for HK$ 1 million Government subsidy for enhancing students’ experience in I&T learning, was inspired from the views offered by secondary school students during my exchange with them.

There were also suggestions involving some more important issues, such as to address income inequality through large-scale taxation reform. These issues are important as they involve profound restructuring of the whole society as well as our future direction of development, and the related issues are closely interlinked. The society needs to have thorough and informed discussion to forge consensus before any major changes could be put in place. It is unrealistic to expect that such issues could be resolved in one Budget or two. At the same time, in proposing any taxation adjustment, we have to take into consideration recent changes in the international taxation environment to ensure Hong Kong’s competitiveness and our economic development direction. The Government would continue to keep a close eye and study on such taxation issues.

In the coming one month or so, I will continue to gauge people’s views on the Budget from different sectors through various channels. Although in the reality, it would not be possible for me to address all the requests in one Budget, I will listen and consider carefully the views you have shared with me. I will make my best effort to strike a right balance between different sectors’ interests, support people’s imminent needs, ensure the stability of Hong Kong’s public finance and financial system, and promote the economic development of Hong Kong.

January 10, 2021