PRESS RELEASE
19 February 1998
Democratic Party Assesses 1998/1999 Budget
Financial Secretary Donald Tsang yesterday unveiled Hong Kong's 1998-1999 budget, as one of the region's worst financial crises in decades continues.While approving the government's recognition of the need to spur international confidence and stimulate the economy and the Financial Secretary's adoption of a number of Democratic Party recommendations, party leaders said the steps were insufficient in the face of an economic downturn whose impact is being felt across all sectors of the society.
The Democrats lauded the government's acceptance of proposals made by the party, including mortgage relief and tax incentives for the commercial and industrial sectors, but criticised the administration's failure to address the long-term consequences of the economic crisis and to utilise the budget surplus to adequately reduce continuing economic pressures. In particular, the Democrats criticised the government's budget methodology, as the administration once more proved unable to accurately predict a massive surplus. Party leaders observed that the surplus of $77 billion for 1997/1998 once again dramatically exceeded (by double) the government's estimation and that the accumulated surplus would reach a record high of $445.6 billion. The Democratic Party believes the government should consult the public and then formulate strict guidelines and rational criteria to avert what has become an annual accumulation of excessive surpluses.
In terms of expenditure, government spending should at least equal the growth of the economy. Thus, the administration is in a position to spend another $20-30 billion dollars to alleviate the current economic hardship. Steps such as cutting rates and increasing the personal training exemption to $40,000 will assist citizens in weathering the economic downturn. The government also has the resources to increase the Comprehensive Social Security Assistance (CSSA) to $2,900 and should investigate other ways to assist Hong Kong's most vulnerable sectors as the economic crisis continues.
As the Financial Secretary has conceded, a major hardship faced by Hong Kong citizens is maintaining mortgages for their homes as the government's defense of the Hong Kong dollar continues to cause painful interest rate hikes. While welcoming the government's mortgage relief concession of up of to $100,000 a year for a duration of five years, the party noted this is not sufficient to reduce the current harsh burden on home-owning families. Democrats had proposed that rates be reduced from 5% to 2% to cancel out those who need to pay the 3% "land rent" during the financial downturn. The government, however, only reduced rates from 5% to 4.5%. The Democratic Party also believes that the government should postpone the pre-payment of taxes for half a year as to relieve the current economic strain on taxpayers.
Given the current record surplus -- which is Hong Kong people's money saved for just such a rainy day -- the Democratic Party believes that the administration has the capacity to and should both balance the budget while taking steps to alleviate the economic burden on tax payers and home owners.
For further analysis or comment, please contact the Democratic Party's spokesman on the Budget, Mr. Sin Chung Kai, on 7223-9520.
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