Expect the cautious approach

PUBLISHED : Sunday, 26 February, 1995, 12:00am
UPDATED : Sunday, 26 February, 1995, 12:00am

TEN years ago the financial secretary, Sir John Bremridge, presented his penultimate Budget in the territory and forecast a deficit of $2.3 billion.

He was to emerge from the 1985-86 financial year with a surplus of $1.4 billion.

But Sir John, who had just been through one of the roughest three years faced by any financial secretary because of the effects of a recession and the talks on the change of sovereignty, was still cautious in his final Budget, that for 1986-87.

This week it is the turn of Financial Secretary Sir Hamish Macleod to present his last Budget statement.

He is flush with funds after huge surpluses in the past three years, but is predicting a deficit in 1995-96.

Following in Sir John's footsteps, and living up to his adopted name of 'Sir Prudent', Sir Hamish is likely to deliver, once again, a cautious Budget.

He faces probably his toughest task yet, with economic uncertainties in the year ahead likely to dominate his thoughts.

There are unlikely to be any specific, dramatic announcements in this Budget, precisely because this is the Financial Secretary's last, and his successor will make the big decisions.

But some of the things to watch out for are likely to include: A substantial deficit forecast as a direct result of the pick-up in spending on the capital account after the airport and airport railway financing and the injection of additional equity into the projects. The deficit is expected to be about $16 billion.

Big increases in capital spending (with airport-related projects stepping up a gear), but a modest real increase in recurrent spending, in line with economic growth.

Fewer giveaways than in Sir Hamish's previous three Budgets because of his overall cautious approach.

Increases in the personal allowances for tax purposes only in line with inflation.

A steep rise in First Registration Tax and Car Licence fees, despite strong community opposition.

No changes to stamp duties or property taxes.

Inflation-related increases in all direct taxes and government fees and charges (with the exception of the big hit on motor vehicles).

There may also be a surprise announcement on the tax front. Sir Hamish perhaps may suggest his successor may look again at a broadly-based goods and services tax (a consumption tax).

Sir Hamish, unlike his most recent predecessors, has never been inclined towards such a broadly-based tax.

But as this is his last Budget, he may have a change of heart.

China also seems favourably inclined towards such taxes - and that is a big factor as 1997 approaches. Ian Perkin is chief economist at the Hong Kong General Chamber of Commerce. The views expressed are his own and may or may not reflect those of the chamber.