Check out why the unexpected surplus is a 'happy problem'

Government looks at $440b budget.

According to a release, having a large, unanticipated surplus is a “happy problem”, Financial Secretary John Tsang said, adding it allows the Government to continue to do more to help the needy.

Speaking on a radio phone-in programme this morning, Mr Tsang noted that his Budget was based on an economic forecast more than a year ago. Despite volatile economic conditions in the last year, the forecast was essentially correct. The Government had anticipated 1.5% growth in Gross Domestic Product - about one-third of the 4.5% GDP growth in the last five years - and it was about 1.4%.

Despite his conservative estimates, the profits and salaries tax revenues were about $25 billion more than anticipated.

“Perhaps that shows the ingenuity of our business sector, with people making money even during such an adverse period,” he said.

“I think it's a virtue for a finance minister to be conservative. I hope I don’t change too much.”

He noted that growth in spending was far more important than having a surplus.

“Today we are looking at a budget of $440 billion. Just compared with last year, that’s a 15.6% increase. You won't see another economy with that kind of a scale of spending. So the spending is important. I think it's a lot more important than what's in the surplus. I think with a bigger surplus, that will allow us even more room for more spending in the future.”

Even recurrent spending had risen more than 10%, he added.

One of the Government’s most pressing tasks was to deal with poverty, he said, noting the social welfare budget had increased more than 30% over last year. His Budget also proposes to inject $15 billion into the Community Care Fund, managed by the Commission on Poverty.

“I have put in the money there, extra money, so they can use a more flexible arrangement outside of the bureaucracy, in a way, to deal with the people who may fall outside the safety net.

“They have done that in the past couple of years. There have been quite a number of programmes they are doing to help, probably close to 20 programmes that they have done for people outside the safety net. We are looking at some of these programmes they have done. If they are found to be effective, and so forth, we will bring that into the current system inside Government.”

Responding to a caller’s suggestion of providing incentives to encourage people to have more children, Mr Tsang said that having a baby in this financial year would attract a $140,000 tax deduction under a proposal in his Budget.

He added that studies suggest financial incentives do not substantially increase birth rates.

The Government yesterday announced it would abolish its application-list system of land sales. Asked why it had taken so long to re-take control of land sales, Mr Tsang noted that Government-initiated sales had accounted for most of the land sold last year.

“We actually took control of the sale. In fact we had quite a large amount of income from land sales because of the increased amount of land we were selling.”