|
III. Decisive Action to Eliminate the Fiscal Deficit
45. The Financial Secretary will propose
specific measures to solve the fiscal deficit when he
presents his 2003-2004 Budget Speech to the Legislative
Council in March. Today, I will only set out our basic
thinking and guiding principles.
Causes and Solutions
46. The major cause
of our fiscal deficit lay in the rise in public expenditure
during the period of the bubble economy. In the six
years between 1991-1992 and 1996-1997, public expenditure
grew on average by 14% annually. From 1997-1998 to 2001-2002,
we took steps to cut spending. This was done cautiously,
taking into account the acceptability of those cost-cutting
measures to the community during difficult times of
economic restructuring. But public expenditure still
continued to grow at an average annual rate of 5%. Having
public spending consistently exceeding the rate of economic
growth is a departure from the principle of small government
we have always promoted. If expenditure continues to
grow unchecked, we will have no alternative but to keep
on raising taxes and increasing fees, thus channelling
more and more resources to the Government. Such a move
will only result in less efficient use of community
resources and a deteriorating business environment.
None of us would like to see this happen.
47. To eliminate the fiscal deficit,
we must adopt a three-pronged approach - boost economic
growth, cut public expenditure, and raise revenue. Public
revenue hinges essentially on economic performance.
In the final analysis, the solution to the deficit problem
lies in economic growth. The measures I mentioned earlier
to promote economic restructuring and restore growth
will, in the long run, tackle the problem at source.
We accept that we need time to achieve economic restructuring,
but solving the fiscal deficit problem is an immediate
imperative. We therefore consider it necessary to raise
revenue and cut public expenditure at this critical
juncture. Coupled with our efforts to promote economic
growth, we should be able to solve basically the deficit
problem within a few years. Our target is to reduce,
through various means, Government's projected spending
of $220 billion in the operating accounts in 2006-2007
by $20 billion. We also intend to introduce appropriate
tax increases and adjust government fees and charges
upwards to help eliminate the fiscal deficit. Detailed
arrangements will be announced by the Financial Secretary
in his Budget Speech.
|