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One problem I have not been able to resolve in this Budget is retirement protection for the elderly. Our proposal for an old age pension did not receive sufficient support, and so we have to think again. But let me assure you that, one way or another, we will do all we can to solve this problem.
Over the last three years, the healthy state of our finances has allowed me to introduce tax concessions that have eased the burden on practically every tax payer. The proportion of the workforce paying no salaries tax has gone up from 49% to 62%. The proportion of the workforce paying salaries tax at the standard rate has gone down from 5% to 2%. These are very substantial improvements.
Obviously we cannot be so generous every year. As always, we have to think of the future, and be mindful of the risks facing an economy as open as ours. We need an adequate cushion to protect us against future uncertainties. Nonetheless, the underlying strength of our finances means that we can afford to make some further tax concessions.
This afternoon, I have proposed to increase most personal allowances by 10%, slightly more than the rate of inflation. I have also proposed a number of concessions for those who have special needs. I have proposed a 25% increase in the single parent allowance; a doubling of the allowance for a dependent parent or grandparent living with the taxpayer; and the introduction of a new allowance for disabled dependants.
My proposals will mean that 96% of taxpayers will pay less tax in future. To give you just one example. A typical sandwich class family with a monthly income of $22,000 will have its tax bill cut by 37%.
For the coming financial year, I expect a small deficit of $2.6 billion, largely because our expenditure on the Airport Core Programme will peak during this period. Despite this deficit I expect our reserves in future years to be even stronger than previously forecast. I now estimate that the reserves at 31 March 1997 will stand at $151 billion. The new SAR government will have a very reassuring cushion with which to face the future.
I have not proposed any drastic or dramatic changes in this Budget. I make no apologies for that. The advice I received in my consultations with Members of LegCo suggested that what the community wanted at this time of transition was a steady and cautious Budget. And that is what I have delivered.