Henry Tang Ying-yen's second budget speech lived up to its billing: it was a minimalist budget. It was all about keeping a steady hand on the tiller and hoping the economic recovery will do the rest. The financial secretary talked about the need to tackle structural problems, especially the narrow tax base. But he shied away from announcing plans to deal with them. We can understand that he may be reluctant to introduce policy changes straight after Tung Chee-hwa's resignation. This is a transitional phase. But the cautious, steady-as-she-goes approach was also evident in Mr Tang's maiden budget last year. The big decisions cannot be deferred for much longer. There were a few surprises yesterday, but the handouts were little more than Christmas stocking fillers. Mr Tang had successfully dampened expectations ahead of the budget. So these moderate tax concessions appeared more generous - and exciting - than might otherwise have been the case. The child allowance was increased. And the age at which allowances can be claimed for dependent parents and grandparents was lowered from 60 to 55. These measures will be well received and they are not going to break the bank. They were a limited response to the calls for the government to help taxpayers benefit from the economic recovery. Mr Tang also announced his intention to scrap estate duty. This is a sensible move. It is true, as opponents of the decision argue, the duty is a source of revenue that targets the wealthy. But the problem is that most of them can easily find ways of avoiding it. It is a pointless tax. The justification for doing away with estate duty is that it will help attract investors to Hong Kong (and bring back money the rich have parked overseas). The extent to which this is true is not easy to gauge. But removing it will not do any harm. Few Initiatives There was also a $500 million injection of funds for the tourism industry and another $500 million to help small and medium enterprises. The government will provide $830 million for the removal of illegal structures and the improvement of old buildings. But this was about as far as the initiatives went. Mr Tang teased those who like a tipple by making all the arguments for reducing the tax on alcohol - and then leaving the levies untouched. We can expect some action here next year. At least this part of the speech provided a little humour, as the finance chief is a wine enthusiast. The prime reason for the minimalist approach is that Hong Kong's economic performance was much better than expected last year and the outlook is positive. So the policy seems to be: leave well alone. Mr Tang clearly enjoyed presenting his review of the year. He was able to talk about soaring economic growth, falling unemployment and the end of deflation. His assessment of the budget deficit was especially rosy. There is even a nominal surplus of $12 billion for the consolidated account, although after the proceeds of bond sales have been discounted there is a deficit of $13.4 billion. The operating deficit is expected to come in at $14.1 billion, a huge improvement on the $46.6 billion that had been predicted. But Mr Tang was right to point out that the turnaround is mainly due to volatile factors. The government's income has surged because of the recovery. Land premiums alone accounted for more than $31 billion. Danger Signs This is where the danger signs appear. The government's projections make it clear that heavy reliance on land sales is set to continue over the next five years. The estimates have been increased since last year. Mr Tang is now counting on this favourite source of revenue to bring in more than $39 billion by 2010. The government should be well aware, unless it suffers from a collective memory lapse, that our property market is not always capable of defying gravity. What goes up - and it is going up at the moment - will someday come down. If this happens in the near or medium term, Mr Tang's attractive figures are going to have to be hastily revised. Another economic downturn would put paid to his plans to balance the books a year earlier than expected, in 2007-08. And all the old, familiar economic woes would return. This is why there is a need for new, bold measures that will put Hong Kong's finances on a more stable and secure footing. Mr Tang recognised the need to broaden the very narrow tax base. But for all his talk of a goods and services tax, there has been little progress. A consultation is planned for this year and we are told the government will 'listen to the people'. There is worrying lack of urgency. The financial secretary took great pride in announcing that operating expenditure has fallen for the first time in half a century. This is mainly the result of civil service cutbacks - and there should be no let-up there. But the cuts in expenditure are supposed to pave the way for tackling the tax base. That must now be done. Mr Tang said the successful reduction in expenditure demonstrates the government's 'readiness for action'. Hong Kong is ready, too, but it is still waiting for the action. The fear is that, as in the past, the government is hoping to rely on the property market to solve all of Hong Kong's problems. We have been hooked on that drug before - and we know the damage it can do. Yesterday's budget suggests that the government is yet to kick the habit.