Little comfort to the middle class
The budget was steady, prudent and took sensible steps to help the unemployed. But we in the Liberal Party believe that Financial Secretary Henry Tang Ying-yen should have done more to ease the tax burden on the middle class.
In many ways, this was a budget for jobs. A lot of the ideas put forward are in line with proposals we submitted to Mr Tang in September, and we believe that he successfully targeted the areas where economic growth can help the jobless. The budget highlighted the key areas of tourism, logistics, environmental protection, cultural and creative industries, urban renewal and building maintenance, as well as the extension of aid to help small- and medium-sized enterprises develop.
We support this kind of targeted aid and strongly believe that by doing this, we can create job opportunities, thus helping the poor in the most effective, long-term way. We do not believe in handouts and largesse, and we believe that the majority of Hong Kong people share our views. The way to help the poor is to give them the means to be productive members of society, not to make them reliant on welfare payments.
In February, the Liberal Party conducted a survey in which 53 per cent of respondents said they believed the most effective way to help the poor was to create job opportunities. Fifteen per cent said education opportunities were the answer, and another 15 per cent cited training opportunities. Crucially, only 7 per cent said the best way was to increase welfare payments.
Another aspect of the budget which we strongly support is the abolition of estate duty, something that the Liberal Party has been pressing for over a long period. This kind of duty has been abolished in many of our neighbouring economies in recent years, and it was essential that we followed suit. If we had failed to do so, we would have seen money flow out of the city's financial markets. By scrapping the duty, not only does that money stay in Hong Kong, but we also have the ability to attract more capital inflow. The move is not cheap; it will cost the government about $1.5 billion a year, but we believe it will pay off. With this move, we will gradually see more money invested in our stock and property markets which will give the Hong Kong economy a shot in the arm as a whole.
These are economically buoyant days for Hong Kong but it is important not to allow complacency to creep in. We must continue to work hard to cut spending. We agree with the government's target of bringing down public expenditure to 20 per cent or less of gross domestic product. This is vital to the principle of 'big market, small government' that should be the cornerstone of Hong Kong's economic philosophy. It is important that the administration continues to work hard towards this goal.
Although there was much to applaud, we were disappointed that Mr Tang did not take up our suggestion to return the salaries tax rates and bands to their pre-2003-04 levels, as we are already close to balancing our budget for next year. We believe that such a move would have been prudent and timely to ease the burden on the middle class. Instead, we saw a rise in allowances for dependent parents and children, which was more of a consolation prize.
We are not arguing for handouts for the middle class. Rather, we believe that as Hong Kong bounces back from recession, the government should honour the commitment (of rolling back the salaries tax) that it made two years ago when it raised this tax.
James Tien Pei-chun is chairman of the Liberal Party
