The Budget that might have been

  1. Mr President, I move that the Appropriation Bill 2013 be read a second time.
  2. I shall not spend a lot of time today describing the state of the world economy. Hong Kong people are widely read, have great interest in and knowledge of world affairs, and are every bit as familiar as I am with the situation in the United States of America, the European Union, the mainland and elsewhere. Suffice to say we shall as usual face many challenges, but I am confident that as usual we shall ride out the various storms that come our way.
  3. Some macro economic data and forecasts are in an appendix to this speech, to give the Chief Economist of the General Chamber and a smattering of academics something to read.
  4. I wish instead to focus on the big picture. The two biggest challenges facing our community today are property prices, and providing a reasonable standard of living for the elderly.
  5. Our Chief Executive has already spelled out in detail the steps he proposes to take to address the former problem by boosting land supply, building additional public rental and HOS flats, and reining in the excessive speculation in the property market.
  6. These measures have my total support. I will do everything necessary to ensure that the various ambitious targets are achieved. And if the Chief Executive concludes that additional measures are necessary to achieve his objectives, I will not hesitate to take further action.
  7. There will be no tax concessions or other giveaways in my speech today. Hong Kong people are already among the most lightly taxed in the world. They should continue to enjoy their good fortune gracefully.
  8. Nor will I be giving further rent holidays to residents of our public housing estates. These tenants are already the most heavily subsidised members of our community. The rent that they pay does not even cover their share of rates and the management charges for their own premises. In effect we are paying them to live free in their apartments.
  9. My proposal is this. With effect from 1 January 2015, every Hong Kong citizen aged 70 or above will be entitled as of right to enjoy a pension paid by a new statutory body to be set up for the purpose. It will replace all our present assistance for the target group. I will personally chair every meeting of the main working group set up to deliver the scheme and the Pensions Authority which will administer it.
  10. The Secretary for Labour and Welfare, and other Ministers as appropriate, will chair the various sub groups to tackle different aspects of the new arrangements.
  11. I recognise that the task will not be easy and much still needs to be thrashed out. But I am already clear in my own mind about some of the key points. First, it must be truly universal, that is everyone must pay in and everyone must be able to draw out.
  12. Secondly, in the long term the majority of the funds must come from working people and their employers.
  13. There will always be a need for government funds to support the scheme because provision needs to be made for housewives, students, the unemployed and so on.
  14. There will be a particular need for government support in the early years to get the scheme up and running. Hence, the whole of this year’s surplus of $60 billion will be deposited in a special advance account as the first instalment of the government’s contribution to this universal pension scheme.
  15. I shall also be taking a hard look at the present level of our fiscal reserves, including those sums deposited with the Hong Kong Monetary Authority, to see what further contributions the government might be able to make. There has been much talk about what the appropriate level of reserves should be. I don’t think we need a complicated formula. A common sense rule of thumb says an amount equivalent to 12 months recurrent expenditure is a prudent minimum, while 24 months would be excessively cautious.
  16. Going forward, I shall also be taking a hard look at the present practice of allocating all land revenue to the Capital Works Reserve Fund. It is good practice to meet costs of capital expenditure from current income so as not to burden future generations with debt. But with most of our physical infrastructure already paid for, there would seem to be a case for allowing at least some of the revenue to come across to the recurrent side.
  17. A lot of hard work lies ahead on the detail of transitional arrangements, what to do about those already in retirement schemes and so on.
  18. One thing I can say now is that the Mandatory Provident Fund must be scrapped and absorbed into the new scheme. The MPF as structured has failed, and I would like to take this opportunity to apologise to the people of Hong Kong for having introduced it. The only beneficiaries I have been able to identify so far are salesmen of luxury yachts and cars peddling their wares to overpaid bankers.
  19. You’ve had your fun fellas, the ride on the gravy train is over.

Thank you Mr President.