Spending to be reined in, revenues broadened
February 26, 2014
Growth in public expenditure should be strictly contained, and the revenue base preserved, stabilised and broadened, to remain in line with the city’s economic growth, says Financial Secretary John Tsang.
Delivering his 2014-15 Budget today, Mr Tsang ruled out major tax hikes, and accepted the Working Group on Long-Term Fiscal Planning’s recommendation to maintain expenditure at around 20% of GDP.
He said the Working Group projected that enhancing education, social welfare and healthcare services would result in a structural deficit if they continue to outpace economic and revenue growth. This would require urgent attention, especially given the challenges of an ageing population.
“I believe that as long as we take timely, resolute and effective actions, we can prevent the projected results from surfacing, and avoid subjecting our future generations to irreversible fiscal plight,” he said.
To contain spending, he proposed that Government departments consolidate services and funding schemes, and phase out outdated and redundant ones. They should conduct reviews to find ways to boost efficiency and do more with less.
To preserve the revenue base, he recommends keeping indirect taxes such as rates and business registration fees, while reviewing the possibility of increasing other charges, from leisure facilities to environmental hygiene, noting water charges, as an example, have not been revised for 19 years.
He also proposed a savings scheme, such as a “Future Fund” including the Land Fund and other future surpluses, which could be drawn upon as a contingency in the event of sustained budget deficits to finance infrastructure projects for the city’s future development.
