Financial Secretary Paul Chan has concluded his fourth budget with a plea for unity, calling on people to put aside differences to drive Hong Kong forward.
“Living on the same land, we are closely connected, sharing joys and sorrows. Hong Kong may have all sorts of shortcomings, but it is our home which allows diversity and freedom of development. Even if we have been disappointed, we can choose to feel hopeful for our future”, he said.
Chan described the year past as an “extraordinary year” with social unrest laying bare deep-seated conflicts “which cannot be resolved overnight”
“We need to address these conflicts patiently and carefully as they have a far-reaching impact on the stability and development of Hong Kong in the future”, Chan said.
That concludes our live blog of the 2020-2021 budget.
The Financial Secretary Paul Chan warned in his budget speech that Hong Kong won’t be able to keep spending the way it has in past years, warning that the government may need to consider new revenue sources or revising tax rates.
“The one-off relief measures may also have to be progressively reduced”, he warned.
On the expenditure side, Chan said the government should be more mindful of long-term affordability, and spending should only rise commensurate with an increase in revenue.
The Financial Secretary Paul Chan is warning that Hong Kong could face a deficit of HK$139.1 billion for the next financial year, with massive spending planned to shore up the economy, along with increases in recurrent expenditure.
This would be Hong Kong's largest ever deficit by far, and dwarfs the government's new forecast of a HK$37.8 billion deficit for the current fiscal year – the first time its books have been in the red for 15 years.
"Although the deficit will hit an all-time high, a close look at its components shows that almost HK$120 billion of the deficit is related to the cash payout scheme and other one-off relief measures, which will not incur long-term financial commitments," Chan assured.
He had earlier announced HK$10,000 handouts to all adult permanent residents in the territory, together with the usual flurry of tax breaks and sweeteners.
Chan forecast more deficits for the coming five years as well, with expenditure continuing to rise to about 23.2 percent of Hong Kong’s GDP over the medium term.
The bulk of government spending will go to education, social welfare and healthcare. Together they account for about 60 percent of government expenditure, and spending has increased by around 50 percent over the past five years.
He said recurrent expenditure has been rising since the 1997 handover, and warned that “such rapid growth is not sustainable.”
“Our current fiscal reserves of about HK$1,100 billion enable us to roll out special measures amid the prevailing economic downturn, such as paying out cash. Such special measures and the ever-growing expenditure, however, will deplete our fiscal reserves”, Chan warned.
Hong Kong recorded a lower-than-expected projected budget deficit of HK$37.8 billion for the 2019-2020 financial year, even though revenues from multiple sources plunged.
Chan himself had earlier warned that the deficit could reach up to HK$80 billion, which would have been a record high.
In his budget speech, Chan said revenues from profits tax, salaries tax, and stamp duties were all lower than expected – coming in HK$53.4 billion below original government estimates.
The HK$30 billion anti-epidemic fund just announced by the government a fortnight ago only pushed expenditure up by 0.6 percent over Chan’s original estimates.
He explained that spending on public works projects were lower than expected.
Among a series of green initiatives Paul Chan has announced in his budget is a HK$350 million pilot scheme for electric ferries serving routes in Victoria Harbour, aimed at reducing emissions.
Chan said the government will continue promoting the use of electric vehicles, noting that Hong Kong is second only to Beijing among major Asian cities in the use of such vehicles.
A HK$2 billion pilot scheme will be launched to subsidise the installation of charging facilities at carparks in residential buildings.
The Financial Secretary Paul Chan says around 19,600 private flats will be built per year over the next five years – up 25 percent from the previous five-year period.
He said the government will sell 15 residential sites that can provide around 7,500 flats this financial year. Together with private and MTR residential developments, Chan said the ‘potential’ land supply for the year is around 15,700 flats.
On controversial government plans to build a massive man-made island off Lantau, Chan said he is ‘aware’ of public concerns about affordability.
He said authorities have a stringent auditing and monitoring mechanism in place for the use of public funds.
“We are confident in and capable of ensuring that the Government can afford the expenditure on future works”, Chan said.
Financial Secretary Paul Chan has pledged billions of dollars to support innovation and technology, with HK$2 billion to go to the Hong Kong Science and Technology Parks Corporation to convert an old factory in Yuen Long into a Microelectronics Centre “to provide modern manufacturing facilities.”
HK$3 billion will be earmarked for a further expansion of the Science Park.
Another HK$2 billion will be pumped into a matching fund for manufacturers who set up smart production lines in Hong Kong.
With many prospective homeowners continuing to be priced out of the market despite Hong Kong’s economic woes, the Financial Secretary Paul Chan said the government would be rolling out a pilot scheme for the Hong Kong Mortgage Corporation to off fixed-rate mortgage loans, through commercial banks.
Eligible buyers will be able to pay fixed interest rates of between 2.75 and 2.95 percent, depending on the duration of the repayment period, which ranges from 10 to 20 years.
Homebuyers will be able to borrow up to HK$10 million per loan transaction.
Billions of dollars in government bonds will be offered in future, including HK$66 billion in ‘green bonds’.
Financial Secretary Paul Chan said in his latest budget speech that this will consolidate and develop Hong Kong’s position as a premier green hub in the region.
Up to HK$13 billion in Inflation-linked i-bonds, as well as ‘silver bonds’ for elderly investors, will be issued.
Businesses will get handouts as well, with profits tax deductions of up to HK$20,000 and rates waivers for non-residential properties of up to HK$13,000 for the year.
Business registration fees will be waived, and companies will be offered low-interest loans of up to HK$2 million, to be 100 percent guaranteed by the government.
Other sweeteners Paul Chan has announced on top of the HK$10,000 handout to all adult permanent residents are similar to past measures: salaries tax deductions of up to HK$20,000; rates waivers for property owners of up to HK$6,000 for the year; an extra month of payments of welfare, old age allowance, old age living allowance and disability allowance recipients, as well as those who get the Work Incentive Transport subsidy.
Public housing tenants will get one month of free rent, and students won’t have to pay any fees for this year’s DSE examinations.
These measures will cost the government around HK$38 billion.
The Financial Secretary Paul Chan has been announcing a series of sweeteners in his latest budget, headlined by a one-off HK$10,000 cash handout for all adult permanent residents.
Political parties have been clamouring for such a payout, and Chan stressed that this is an “exceptional measure taken in light of the current unique circumstances and will not, therefore, impose a burden on our long-term fiscal position.”
“I consider that, with ample fiscal reserves, the Government has to increase public expenditure amid an economic downturn to stimulate the economy and ride out the difficult times with members of the public”, he added.
This measure will cost the government HK$71 billion dollars.
Financial Secretary Paul Chan is predicting Hong Kong’s economy to contract by up to 1.5 percent for this year, saying it faces “enormous challenges this year.” The most optimistic range of the GDP forecast is 0.5 percent growth.
“The outlook is far from promising in the near term”, Chan said in his latest budget speech at the Legislative Council.
However he said the SAR’s economic outlook remains positive in the medium term, driven by the continued development of the mainland economy as well as that of Asia.
But for now, he said the global economy is still struggling; US-China tarde frictions remains the “most significant uncertain factor” facing the global economy; and the coronavirus epidemic will hit global supply chains.
Financial Secretary Paul Chan says while the impact of the coronavirus epidemic on Hong Kong’s economy could “possibly be greater than that of the SARS outbreak in 2003”, he believes it should be able to recover once the epidemic is over.
He warned that tourism and consumption-related sectors, that were already reeling from months of social unrest, are entering a “harsh winter”.
He noted that Hong Kong’s economy contracted 1.2 percent in 2019, exports of goods plunged 4.7 percent, and unemployment rose to a three-year high of 3.4 percent.
But Chan added that “Hong Kong's economic fundamentals remain solid and therefore our core competitiveness will not be shaken.”
The Financial Secretary Paul Chan has told legislators his latest budget will contain more than HK$120 billion worth of “counter-cyclical measures” to prop up the economy.
Delivering his fourth budget at the Legislative Council, Chan said his focus for the latest financial blueprint is on "supporting enterprises, safeguarding jobs, stimulating the economy and relieving people's burden."
He said while he envisages a record deficit for next year’s books, he believes “that only with such a budget can we help our community and local enterprises ride out their difficulties. “
Paul Chan will be delivering his fourth budget this morning amid the most challenging circumstances he’s had to face as Financial Secretary yet – with Hong Kong struggling to contain a growing coronavirus outbreak and its impact on an already faltering economy – all while the city is still reeling from months of anti-government protests.
The government has already put forth round after round of relief measures over the past few months, with the Chief Executive Carrie Lam putting forward a HK$30 billion anti-epidemic fund just earlier this month, mostly aimed at supporting struggling businesses.
Chan has been cautioning that his budget won’t please everyone, and Hong Kong could already be facing a record deficit for the current financial year of up to HK$80 billion.
Even so, parties from across the political spectrum have been demanding at least HK$10,000 handouts for all adult residents to help tide them through the tough times.
Stay with RTHK for our live coverage of his speech at the Legislative Council.