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The Governor once said that while Hong Kong is not and never will be a welfare state, we do care about the state of our welfare safety net. But we care equally about rewarding enterprise, hard work and initiative. That is why I am doubtful about arguments for a more progressive tax system. The Hong Kong Government, like the Hong Kong people, believes in giving the most capable among us every incentive to succeed at a level comparable with the best in the world. Inevitably, this leads to some people being richer than the rest. As a capitalist society, we will always have a disparity of wealth between the richest and the poorest sections of our community. It is true also that the more highly-educated and better-skilled members of our community are enjoying faster income growth than the average. This is a healthy phenomenon in any dynamic economy where opportunities for advancement abound. That is why we have laid so much stress on better education, better skills training and equal opportunities for all our people, particularly the less well-off. Hong Kong is probably the most upwardly mobile economy in the world today, and the very essence of the Hong Kong way is that everyone should have their chance to succeed.
The simple fact is that we must first create the wealth before we can distribute it. Any move towards a more progressive system of taxation would risk undermining the incentive for wealth creation and, thus, weaken the driving force of the economy. Success must have its rewards. Other advanced economies have discovered that if a community obscures or frustrates this simple truth, it will pay a price in terms of lower economic growth and poorer standards of public service. We must set no ceiling on
success.
Preparation of the 1997-98 Budget
Finally, I have taken careful note of Members' views on how we should proceed with the preparation of the 1997-98 Budget. You have expressed wide differences of opinion on the degree of Chinese participation in this process. I appreciate Members' deep concerns. I hope Members also appreciate the Administration's clear position on this matter and how we propose to undertake the transitional Budget.