XN000022-1986-03-26 — Page 32

WEDNESDAY, MARCH 26, 1986

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BETTER ASSESSMENT OF LONG-TERM EFFECTS

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THE INCLUSION IN THE BUDGET FOR THE FIRST TIME OF A MEDIUM-TERM FORECAST FOR GOVERNMENT FINANCES WAS WELCOMED BY THE HON HELMUT SOHMEN IN THE LEGISLATIVE COUNCIL TODAY (WEDNESDAY).

SPEAKING DURING THE BUDGET DEBATE, MR SOHMEN SAID THAT IN ADDITION TO PROVIDING AN ACCURATE GUIDE FOR HONG KONG'S FUTURE FINANCIAL PERFORMANCE, THE FORECAST WOULD ALSO HELP THE DEBATE ON THE VALIDITY OF THE GENERAL ECONOMIC AND SPECIFIC BUDGET ASSUMPTIONS MADE AND PRODUCE A BETTER ASSESSMENT OF THE POSSIBLE LONGER-TERM EFFECTS OF CURRENT ACTIONS.

HE BELIEVED THAT IMPROVEMENT AS WELL AS CONSTANT CORRECTIONS AND REFINEMENTS TO THE FORECAST WOULD, OVER TIME, ENHANCE ITS VALUE AS A FINANCIAL PLANNING INSTRUMENT.

MR SOHMEN DESCRIBED AS MOST REASSURING THE EXISTENCE OF SUBSTANTIAL FISCAL RESERVES BECAUSE HONG KONG WAS DEPENDENT ON WHAT HAPPENED IN THE OUTSIDE WORLD, AND ALWAYS EXPOSED TO SUDDEN AND UNFORESEEN ECONOMIC AND POLITICAL SHOCKS BEYOND ITS CONTROL, AS WELL AS TO THE OCCASIONAL ATTACK OF NERVES AT HOME.

+ATTACKS ON THE POLICY OF ACCUMLATING SUCH SURPLUSES AS REFLECTING HAMSTER TENDENCIES', AND CAPABLE OF ADVERSELY AFFECTING OVERALL ECONOMIC GROWTH OR THE EXPANSION OF SOCIAL PROGRAMMES ARE IN MY VIEW SHORTSIGHTED, AS ARE COMPLAINTS THAT THE TRANSFER OF SURPLUSES FROM GENERAL REVENUE ACCOUNT TO THE VARIOUS FUND ACCOUNTS WILL MAKE IT EVEN MORE DIFFICULT TO IDENTIFY ACTUAL REVENUE AND EXPENDITURE, HE SAID.

THOUGH THE LATTER WAS OBJECTIVELY TRUE, HE SAID IT SEEMED IMMATURE TO DOWNGRADE THE SUBSTANTIVE BENEFITS DERIVED FROM THESE ARRANGEMENTS FOR THE SAKE ONLY OF BETTER APPEARANCES OR EASIER COMPREHENSION.

THE SAME APPLIED TO CRITICISMS THAT EFFORTS TO REDUCE RECURRENT EXPENDITURE, WHICH HAD BEEN SUCCESSFUL IN PARTICULAR IN ACHIEVING THE ZERO-GROWTH TARGETS IN THE CIVIL SERVICE ESTABLISHMENT AND IN REDUCTIONS IN DEPARTMENTAL EXPENSES, SHOULD BE SUSPECT BECAUSE THEY RESULTED IN A BUILD-UP OF SUCH SURPLUSES, HE ADDED.

+THE MAINTENANCE OF BALANCED BUDGETS OVER THE LONGER TERM, DESPITE THE INEVITABLE CYCLICAL FLUCTUATION IN REVENUE, ALSO ASSURES A FUTURE ABILITY TO HOLD OVERALL TAXATION AT CURRENT LEVELS AND MAKES THE CREATION OF SUCH SURPLUSES IN THE SHORT TERM MORE DESIRABLE, HE SAID.

MR SOHMEN SAID THE GOVERNMENT SHOULD GIVE CONTINUING CONSIDERATION TO MAKING THE RELATIVE SIZE OF THE PUBLIC SECTOR SMALLER, AND TO TRANSFER ANY FUNCTIONS TO THE PRIVATE SECTOR WHEREVER POSSIBILITIES EXISTED TO DO THIS.

/COMMENTING ON