Financial Secretary John Tsang Chun-wah turned his sights to the future in his sixth budget.
He pledged to deal with the financial challenges posed by an ageing population while offering a HK$33 billion package of one-off fiscal relief measures.
In the first budget of Chief Executive Leung Chun-ying's administration, Tsang said the package of 11 relief measures would ease pressure on the middle class, grass-roots families and small and medium-sized enterprises.
The measures include salaries and profits tax rebates of up to HK$10,000, more generous allowances for parents and an extra month's cash for recipients of Comprehensive Social Security Assistance.
But the budget received a cool response from lawmakers, economists and the public, who criticised it as being too conservative, lacking in focus and not going far enough to address short-term problems such as rising living costs.
Tsang said a working group consisting of academics and experts in the field would "make comprehensive plans for public finances" to deal with the ageing population. He cited projections that the city would have only two workers for every dependent elderly person in 20 years - from a ratio of 10 to one in the 1980s.
"The average life expectancy of Hong Kong people is continuously increasing. We must not overlook the challenges posed by an ageing population," Tsang told lawmakers.
While fiscal reserves topped HK$700 billion, Tsang warned of a substantial drop as revenues declined and economic growth slowed as more people retired.
But the committee, led by Elizabeth Tse Man-yee, permanent secretary for financial services and the treasury, will not consider an overhaul of the tax system.
"It will be a technical committee looking at the whole issue from a professional, and a politically neutral position," Tsang said. "It will study the options based on the current tax system, so it will not be looking at the tax issues [or] policy issues."
Labour Party lawmaker Dr Fernando Cheung Chiu-hung said tax reform should be on the working group's agenda. "If you are talking about public finance without dealing with the tax system, it's like tying your hands before you draw," he said.
Cheung said Tsang's decision to spend money on one-off measures rather than increasing recurrent spending on poverty alleviation "shows the deficit in his own knowledge about poverty".
Tsang predicted that the city's economy would grow at a rate of 1.5 to 3.5 per cent this year, up from 1.4 per cent last year.
His revised estimate for the government's budget in the financial year ending next month is a HK$64.9 billion surplus - against an original forecast of a HK$3.4 billion deficit. He cited unexpected receipts from land premiums, stamp duty, taxes and dividends for the discrepancy. The government expects to end the year with HK$749 billion in reserves, enough to pay for 23 months' expenditure.
Tsang predicts a budget deficit of HK$4.9 billion for the 2013/14 financial year, with government spending increasing by 16 per cent. Welfare expenditure will go up 33 per cent to HK$61.2 billion, while capital expenditure will exceed HK$70 billion.
Agnes Chan Sui-kuen, regional managing partner for accountant Ernst & Young, said the budget was "not too exciting" and said the one-off relief measures had failed to meet the expectations of the middle class.
Economist Andy Kwan Cheuk-chiu said the budget offered few surprises and little sign of concrete long-term planning.
"It is disappointing that the government does not deploy more resources on education and health care," he said.
League of Social Democrats lawmaker "Long Hair" Leung Kwok-hung threatened a filibuster of the budget bill in Legco, as Tsang had failed to deliver a universal pension scheme.
Asked whether he understood the burden on the middle class, Tsang said: "I think I do understand the middle class, because I am also middle class. I don't believe that we are doing too little."