Tax increases proposed in 2003-04 Budget will cause only short-term psychological effects, says the Secretary for Financial Services & the Treasury.

Speaking on an RTHK radio programme, Frederick Ma noted that the Government understands the measures, such as the new arrangement for Motor Vehicle First Registration Tax, may affect people's buying habits and the industry's operation.

However, he hopes the impact will be a short-term one, adding that all sectors will be willing to pay extra taxes when they experience the revitalisation of Hong Kong's economy.

In response to a query about the slow progress of the Government's plan to cut its expenditure, Mr Ma explained that the Government needs to consider public-services standards and staff morale before introducing any spending cuts.

The Government, unlike the private sector, needs to go through a number of procedures before making any changes, he added.

Mr Ma reiterated that the basic public services will not be affected by the expenditure cuts.

In reply to a question from a caller, he said the Government will handle infrastructure projects carefully, studying every project's cost-effectiveness.