Man of the moment takes on more confident aura

PUBLISHED : Thursday, 03 March, 1994, 12:00am
UPDATED : Thursday, 03 March, 1994, 12:00am

THE Legislative Council saw a far more confident Financial Secretary than it did two years ago when Sir Hamish delivered his maiden Budget.

The political parties were so disappointed by his lack of tax breaks for the sandwich class that even rival groups threatened to close ranks to veto his 1992-93 Budget.

To rescue it, Sir Hamish had to resort to withdrawing his proposed rates increase to pacify the conservative bloc in the assembly.

His third financial plan, however, marks the first occasion in the history of Hong Kong in which the Government is able not only to meet, but actual exceed, most of the major demands by the councillors.

The most vocal faction in the assembly, the United Democrats, had asked for the personal allowance to be raised from $56,000 to $72,000. Sir Hamish has done exactly that.

This 28.6 per cent increase even surpassed the $61,000 level proposed by the Liberal Party. The party was the only political group that wanted the 17.5 per cent profits tax be reduced one percentage point. Even that feeble voice was also heard.

Sir Hamish went a step further by introducing a new allowance for dependent grandparents. Without much prompting, he also slashed the airport departure tax to a symbolic $50.

Most of the tax concessions, as he noted, originated from the consultation exercise he initiated after his controversial maiden Budget.

In their hats as the opposition, politicians are as bound to find faults with the financial plans as they are to make more demands.

The parties will have three weeks to digest the offer before their representatives hold a two-day debate on the Appropriation Bill.

When they rise to criticise the financial blueprint, the legislators should admit at the bottom of their hearts that the 1994-95 Budget has been more than generous.

Instead of putting pressure on the lower and middle income earners, Sir Hamish has chosen to target those who are in a relatively well-off position to evade taxes.

A staggering $100 million has been recovered from examining 237 tax files of one profession alone. His call to legislate against what he described as a tax bonanza will certainly fall on receptive ears in the assembly.

Critics of the Government will probably base their case against the Budget on the wisdom of being cautious in public spending in the run-up to 1997.

Semi-official Chinese news agencies warned against lavish government spending just a couple of days before Budget day.

The projected hefty reserves that the post-1997 Special Administrative Region (SAR) can expect to inherit has rendered such worries unconvincing.

The Chinese had considered a reserve of $25 billion comfortable. The amount has subsequently been written into the terms of the Sino-British memorandum on the new airport.

Sir Hamish must have embarrassed the Chinese negotiators when he revealed that the latest estimate reaches $141 billion. The amount will be on top of another $125 billion generated for the SAR from pre-1997 land sales.

The figures will probably offer the Chinese more ammunition in pushing for more public funds to be injected into the Chek Lap Kok project so as to reduce government borrowing.

Public pressure on Sir Hamish to meet the Chinese demand will mount. A one-to-three ratio for borrowing for a massive project such as the new airport would normally make commercial sense.

But given the potential financial loss caused by any delay because of Chinese opposition, coupled with the healthy accumulated surpluses, there is a case for the Government to settle the issue just by dipping a little deeper into its full pocket.

After all, the Financial Secretary had prepared for a deficit of $3.36 billion, which has turned out into a surplus of more than $15 billion.

This unexpected revenue will alone be sufficient to meet the Chinese concern that public borrowing for the airport scheme is kept below $5 billion.

The Chek Lap Kok plan now serves as a political barometer for local and foreign investors. An early settlement of the issue will help remove one of the biggest remaining uncertainties arising from the Sino-British confrontation over political reform.


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