XN000022-1997-03-13 — Page 2

1.

-

Transcript of FS's press conference

Following is the transcript of the press conference on the 1997/98 Budget by the Financial Secretary, Mr Donald Tsang; and the Secretary for the Treasury, Mr K C Kwong, at GIS press conference room this afternoon (Thursday):

Mr Donald Tsang (in Chinese): So today we meet again to talk about the Budget. I hope that - and actually it has already happened - both the members of the public as well as members of LegCo have already expressed certain views with regard to my Budget yesterday. And so today we are to meet the press members again - it would be helpful.

Response has been made by members of the public, the press as well as LegCo, on my Budget and some of them are criticisms while others are favourable and I think the response revolves around two main themes. First we have a large surplus, why don't we spend it? And if we are not spending it, are we being too miserly? And secondly, for CSSA, why is it that it has not been increased? I think these are the two main themes most of the responses centred around.

About our prudent fiscal management policy, actually we have put a lot of effort into such a policy over the years and the surplus is the result of that policy. And the reason why we have such large reserves is that the years of prudent fiscal management have enabled us to suppress inflation and we could contain government spending so that the civil service is efficient and it is not unwieldy. The result of such efforts is the surplus as well as the reserves.

We have our own fiscal management philosophy because over the years we have been keeping the increase in government spending within the trend economic growth rate and this is a philosophy that we have been applying all along.

Now, with regard to the CSSA for the elderly, in the past few years, especially with regard to recurrent expenditure, the figure has been on the increase every year and for the past five years the real term growth in welfare spending is over 80%. That is discounting inflation. Three years ago we revamped the CSSA system and over the past three years the real term growth is over 90%. And if we use 97/98 as a reference point, recurrent welfare spending accounts for over 10% of total public expenditure and I think this level is acceptable and is satisfactory.

As I have explained yesterday, for this year we have already exhausted all the room for manoeuvre within the 5% growth in public sector spending and if we were to increase further spending on welfare it would mean either we would have to take away from other areas of expenditure or we have to do away with our fiscal management philosophy. In other words we have to allow the 5% spending limit to be exceeded.