The 2008-09 Budget

Today, Mr. John Tsang, the Financial Secretary announced his 1st Budget and set out his principles of public finance management.  Hong Kong has been recovered from the economic downturn. With the great performance of the financial market last year, the 2007 economy was vibrant.  The low figure of unemployment rate (3.5%), underemployment rate (3%), as well as the high level of surplus (HKD115.6 Billion) are the evidence.

General comment
I welcome the government to adopt my proposal on setting aside HKD50 Billion to set up the Old Age Reserve Fund (OARF).  I believe the OARF would be a good tool for our society to prepare for surging the medical and welfare expenditure caused by the aging population. Nonetheless, I urge the government to reconsider our proposal that to provide half of the investment income of the Exchange Fund to the OARF every year as the recurrent funding injection.

Further, the Budget this year is an innovative one.  The electricity charge subsidy and the one-off injection of HKD6,000 into the MPF accounts of low income group who earns no more than HKD10,000 per month, are good initiatives to relief some hardship of the working poor and make them be benefited from the record surplus.

To share the economic prosperity with the public, the government will also provide a one-off grant of HKD3000 to the Old Age Allowance receipts.  However, the one-off grant may not able to demonstrate the government’s long term commitment on supporting or taking care of the elderly in need.  We recommended, as supported by the various Parties in the LegCo, to increase the Allowance to HKD1,000 per month.

IT related initiatives
In Mr. Tsang’s speech, there is a lack of address on IT but only a Pilot Scheme to establish District Cyber Center for selected districts to bridge digital divide.  With the high level of surplus, I am disappointed that the government refuses to include Internet access charge as an item of basic living expenses under the Comprehensive Social Security Assistance (CSSA) Scheme, which will provide the students from low income families a better facilitation on integrating themselves into the digital society.

The total amount of the Estimates of the computerization projects under the Capital Works Reserve Fund is increased from HKD5.4 Billion to 18.3 Billion. In addition, there will be a few new computerization projects:

• Education Bureau: Upgrading of the Web-based School Administration and Management System (HK61.7M for 2008-09, HKD67M in total)
• Hong Kong Police Force: Redevelopment of Major Incident Investigation and Disaster Support System 2 (HKD 0.58M for 2008-09, HKD43.98M in total)
• Hong Kong Police Force: Redevelopment of Personnel Information Communal System (HKD 0.13M for 2008-09, HKD57.6M in total)
• Department of Health: communicable Disease Information System (HKD 34.96M for 2008-09, HKD144.45M in total)

I welcome the government to invest more government IT projects.  This will not only enhance the efficiency and effectiveness of the government B/Ds, but provide business opportunities to the local IT sector.  However, as to promote the competitiveness and sustainability of the local IT sector, commitment was not shown in the Budget.  Further, the government provides little support on the wider use of new technologies in the community which were identified as strategic areas in the 2008 Digital 21 Strategy.

A thematic webpage on the IT related items of 2008-09 Budget is prepared for your quick reference.  You may find (1) the estimates of expenditure of IT related bureaux and departments and (2) a full list of IT related items in fiscal year 2008-09.

To examine the Budget, I shall submit a list of “budget questions” on the Estimates. Please feel free to write to me if you have any questions on the IT-related items. Administration’s reply will be posted on the thematic website in early April.

Should you have any comments or questions on the Budget / Estimates of Expenditure, please email me at cksin@sinchungkai.org.hk

CK Sin

Major initiatives of the 2008-09 Budget

Promoting the Economy and Employment

• Allocate $21.8 billion for infrastructure projects to create 23,000 new jobs in the next financial year.
• Earmark an additional $150 million on overseas promotion in the next five years; allocated $69 million for the Hong Kong Pavilion at the Shanghai World Expo.
• Lower corporate profits tax rate to 16.5%.
• One-off profits tax rebate of 75% for 2007-08, subject to a ceiling of $25,000.
• Waive the business registration fee for 2008-09.
• Waive the Hotel Accommodation Tax and include sites “restricted to hotel use” in the 2008-09 Application List to promote the development of the tourism, convention and exhibition industries.
• Increase runway capacity of the airport, and probe into the possibility for a third runway.
• Indentify suitable locations for the development of Container Terminal 10.

Improving People’s Livelihood

• Additional $1.2 billion per year to implement 12-Year Free Education.
• Provide $45 million over the next three years to strengthen day foster care services and to promote other child care services.
• One-off grants include:
  • Allocate $4.3 billion to provide $1,800 subsidy for each residential electricity account.
  • One additional month of the standard rate CSSA payments for CSSA recipients.
  • One additional month of allowance for recipients of Disability Allowance.
  • $3,000 for Old Age Allowance recipients.
  • Pay one month's rent for lower income families living at the rental units of the Hong Kong Housing Authority and the Hong Kong Housing Society.

Leaving Wealth with the People where Affordable

• Salaries tax relief measures include:
  • Revert the standard tax rate to its 2002-03 level of 15%.
  • Widen tax bands to $40,000.
  • Increase the basic allowance by $8,000 to $108,000; and increase the married person’s allowance by $16,000 to $216,000.
• Exempt the duties on wine, beer and all other alcoholic beverages except spirits.
• One-off rebate measures include
  • Waive 75% salaries tax and tax under personal assessment for 2007-08, subject to a ceiling of $25,000.
  • Waive 75% property tax for 2007-08, subject to a ceiling of $25,000.
• Waive rates for 2008-09, subject to a ceiling of $5,000 per quarter for each rateable tenement.

Budget Highlights - IT related initiatives

• Launch a pilot scheme to establish cyber centres in selected districts to narrow the digital divide.
• Establish a Research Endowment Fund amount to $18 billion, in replacement of the existing annual funding granted by the Government to the Research Grant Council of the University Grants Committee.
• Additional $300 million to provide 800 additional publicly funded places for postgraduate research programmes in the 2009-10 school year.
• Increase computerization projects expenditure under the Capital Works Reserve Fund from $5.4 billion to $18.3 billion.
• Launch new computerization projects:
  • Education Bureau: $61.7 million in 2008-09 for Web-based School Administration and Management System upgrade.
  • Hong Kong Police Force: $0.58 million in 2008-09 for Major Incident Investigation and Disaster Support System 2 redevelopment.
  • Hong Kong Police Force: $0.13 million in 2008-09 for Personnel Information Communal System redevelopment.
  • Department of Health: $34.96 million in 2008-09 for Communicable Disease Information System development.

My articles on 08/09 Budget

• Budget overview (27 February 2008)
• Ease inflation pressure (20 February 2008)
• Reserve windfall surplus for the future (6 February 2008)
• Budget surplus for better health care financing (1 February 2008)
• Surplus for future healthcare financing instead of salaries tax rate reduction (11 January 2008)
• Spend the hundred-billion wisely (9 January 2008)
• A hundred-billion surplus may be recorded in this financial year (15 Dec 2007)
• Establishing ageing population reserve fund (30 November 2007)
• Rates cut with prudence (16 Nov 2007)
• Spending surplus for long term development (9 Nov 2007)
• Budget preview (2 November 2007)

If you like to comment on my articles, please drop me a few lines of words. (column@sinchungkai.org.hk)

Economic growth

• GDP growth in 2007 was 6.3%. Inflation was 2.8%.
• In 2008, forecast GDP growth is 4-5% and inflation is 3.4%.
  Estimated annual average growth rate for the period of 2009-2012 will be 4.5% in real terms.

2007-08 Outturn

Fiscal surplus are expected in both the Operating and Consolidated Accounts:

• Consolidated Account: $115.6B
• Operating Account: $63.7B

Estimate 08-09

Expenditure HKD 255.7 billion
Revenue HKD 249.4 billion
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Deficit HKD 6.3 billion

Balance of fiscal reserves for year 2008-09:
HKD 477.4billion

More details on the 2008-09 Budget

• Full speech
• Highlights
• Estimates