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John Tsang Chun-wah

Financial Secretary John Tsang hints one-off budget relief measures may be withdrawn

Tsang prepares for keynote address by hinting one-off relief may be withdrawn to tackle the challenges ahead as global outlook improves

Financial Secretary John Tsang Chun-wah has dropped the strongest hint yet that tax reductions and one-off relief measures will "very soon become history" as the global economy improves.

He made the comments as a government source told the that the middle class should expect fewer "sweeteners" when Tsang delivers his budget on February 26.

Writing on his blog yesterday, Tsang said one-off relief measures, such as salary tax reductions and rates waivers, were introduced to help the public in difficult times.

Three years ago, adult permanent residents were given HK$6,000 each and Tsang offered a HK$33 billion package of relief measures in last year's budget.

But he wrote: "I hope people can understand that these measures … are defensive ones [introduced] at a time when the external economic [conditions] were unstable. When [things] start to stabilise gradually, we should cancel these one-off measures step by step. Judging from the current situation, this day should be coming very soon."

The government source said Tsang was under pressure to maintain a healthy fiscal balance and prepare Hong Kong for the challenges ahead as the population ages rapidly. "The cut in expenses will have to be across the board," the source said.

Relief measures might also be cut for families on low incomes. These could include the two-month exemption on public housing rents that have been a feature of recent budgets.

But the middle class, already upset about being ignored in the chief executive's policy address last month, are expected to be complaining again.

The benefits given to the middle class come mainly in two forms - a reduction in salary tax and rates waivers. The source said the government may scrap or scale down the rates waivers, which would save the government between HK$4.2 billion and HK$11.7 billion a year.

It is also thinking about dropping the HK$1,800 annual electricity subsidy for each household, which cost the government close to HK$4.5 billion last year.

Tsang is expected to tell the public in his budget speech that the city's HK$734 billion fiscal reserves could dry up in 20 years if nothing is done to lessen the financial burden.

Dr Li Kui-wai, of City University's department of economics and finance, said cutting the rates waivers and electricity subsidy would not greatly affect the middle class. "Only 40 per cent of Hongkongers own a flat. Waiving a fee of about HK$200 per month is not a big deal. They would spend it all on a trip to Macau or even just a meal," he said.

Li supported the decision to cut "Santa Claus-style" one-off relief measures, which he regarded as a "superficial political tool".

But Ivan Choy Chi-keung, a political analyst at Chinese University, said it would trigger a backlash from the middle class. "They [officials] should get ready for the political cost," he said.

This article appeared in the South China Morning Post print edition as: Budget aid measures 'will soon be history'
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