XN000022-1995-06-14 — Page 24

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9.

Not higher public spending. The policy of keeping the growth of public expenditure in line with the trend growth rate of the economy is a vital ingredient of Hong Kong's success. In any case, adding to our already substantial programme of infrastructure investment would simply divert resources from the private sector, suck in more imports and increase inflationary pressures.

And last, but not least, not tax concessions or tax incentives. Given the already low rates of corporate tax in Hong Kong, and the generous depreciation allowances for expenditure on equipment and buildings, tax concessions are more likely to stoke inflation than to stimulate the economy. In any case, substantial tax cuts would either require corresponding cuts in public expenditure, or entail a significant budget deficit, which is not desirable on fiscal grounds.

Finally, Honourable Members may wish to know that a recent IMF (i.e. International Monetary Fund) report suggests that given the economic situation of Hong Kong and the prospective acceleration of infrastructural investment, our budget should be formulated in such a manner as to avoid providing additional stimulus to the

economy.

Conclusion

In sum, given an economy as open as ours and as dependent on world markets as ours, the Government's policy of minimum intervention in market forces is not only the best for Hong Kong. It is the only realistic economic policy. Government measures to stimulate economic activity in order to generate employment opportunities would not only be impracticable within the framework of our economic philosophy, but they would also produce undesirable side-effects, which would negate any beneficial impact that they might have in the short term and damage our economy and our economic prospects in the long term. So while my colleagues and I recognise the sincere concerns underlying this Motion and the proposed amendments and while the Government is committed to alleviating the situation through the measures which my colleague the Secretary for Education and Manpower spelled out clearly and in detail during last week's lengthy motion debate in this Council on unemployment, the ex-officio Members will demonstrate the courage of the Government's convictions by voting against the Motion as well as the proposed amendments.