On the air: Financial Secretary Henry Tang shares a lighter moment with RTHK presenter Bryan Curtis during a phone-in show.

The Financial Secretary says his major mission is to improve people's livelihoods - and that is what he set out to do in his first budget. 

Speaking on a radio phone-in show this morning, Henry Tang admitted he felt "a combination of trepidation and excitement" when he prepared the budget for 2004-05.

"Formulating this budget has been a soul-searching experience," he said. "I had to concentrate and review what made Hong Kong so successful today."

He concluded that investors - from business people to regular employees - "have been very, very proactive in searching for opportunities, seizing the moment and to have the guts to take that leap when the opportunity arises."

The budget's main theme was to provide a respite, but it also had to be people-based, improve the quality of life and revitalise the economy so that we can gain more job opportunities.

Public to be widely consulted on proposed GST

Many people called in to express their concerns over the budget's proposed goods and services tax.

The Financial Secretary said Hong Kong must find a way to solidify or consolidate its current revenues to be able to sustain its growth.

"I don't think any amount of wishful thinking on my part will bring back $70 billion of land revenue in one year as we had done in 1997. That is why, although this year I have made a reasonably conservative, but I think a realistic, estimate on the land revenue of about $12 billion."

To make up for the reduction, introducing a GST is believed to be a sensible way forward. "And unless and until we have a thorough discussion of this tax, it will not be fair to those who feel the narrow tax base we have will not be able to sustain another down cycle," Mr Tang said.

"Sales tax has generated extensive discussions and they are very positive and good. I welcome all of these. It's still early days to talk about the nitty-gritty - we will not talk about this in great detail until next year."

Concessions, waivers, exemptions to ease GST's impact

He admitted he was concerned about the likely impact on grassroots people, but added that there would be concessions. "People won't accept GST without compromises so we will consider waivers or exemptions."

When callers suggested that a GST would have a negative impact on tourism and Hong Kong's standing as a shopper's paradise, Mr Tang said he had heard this comment many times.

"Its impact can be reduced to a minimum. In Europe, Japan, other places, there can be a refund mechanism," or even a waiver for visitors who show travel documents.

He stressed he would not introduce the tax anytime soon and that he would get a report from an internal review committee at the end of the year before launching a public consultation.

"GST has a merit," he said. "Broadening the tax base is the right way, a social responsibility."

GST to be decided by consensus - not Gov't

Households with higher salaries would spend more and therefore pay more, he said, while lower-income households would spend less - and pay less.

"We don't want to proceed with any haste because there may be problems and in the community out there there are many voices in opposition to GST, about 30% are for it, but 50% are against it."

"I will engage the community thoroughly before I go any further," he said, citing the need to build a consensus. "This is not something to be decided by Government."

In the same vein, he said he had not suggested the implementation of a land-departure tax since  there were still divergent views on it within the community.

Welfare gets additional support

Mr Tang pointed out that the Government had slashed $7 billion from spending - "not a small amount of money" - and had redirected the money to education, health and welfare.

In reply to a question about improving welfare, he said his was a people-based budget that attaches a lot of importance to protecting people's livelihood. He reminded the caller that the Government will spend $23 billion on CSSA this year, a big increase over last year. "For other policy areas, except social welfare and education, there will be a reduction in expenditure. Social welfare is the only area that will see an increase."

He also highlighted the $200 million fund set aside for the welfare sector, to encourage partnerships between Government, non-governmental organisations and businesses aimed at helping Hong Kong's less fortunate.

"Social workers came to me and said they are facing tremendous pressure," he said. "More business community people are invited to take part in projects that show caring towards the society, that give more support to the social welfare sector."

Market to take lead, Gov't to play facilitating role

Mr Tang painted an optimistic picture of Hong Kong's future. "The economic recovery has been pretty impressive. In terms of employment, it is a structural challenge; the opening up of the Mainland, things are improving there. This has given Hong Kong greater and bigger challenges."

In meeting those challenges, the market will take the lead and the Government will play a facilitating role. "We have CEPA, this is a liberal platform. There is an unlimited horizon on the platform. We have to seize the opportunities to give full play to the possibilities," he stressed.

The main role for the Government is to improve the investment climate with an aim of creating job opportunities. Mr Tang added: "We are basically getting back down to basics."

In reply to a caller's query, he noted that by 2008-09, there will still be an operating deficit of $5 billion, based on current projections. "But $5 billion out of a $200 billion operating expenditure is not $5 billion we have to deal with right away, it's not too difficult to come up with a revenue measure. I can put it off for a year."

Gov't to issue bonds in HK, overseas

At a special Legislative Council Finance Committee meeting this morning, Secretary for Financial Services & the Treasury Frederick Ma said the Government plans to issue bonds in Hong Kong and overseas. The local bonds will be targeted at small investors here.

He said the Government had issued letters to merchant banks yesterday seeking their views on the issue.

He stressed that the scale, as well as the interest rate of the proposed bond programme has not been decided, adding that market factors will be crucial in the making decision.

The Financial Secretary and other officials will also take part in media programmes tomorrow and Saturday.

For a broadcast timetable, click here.