The 2011-12 Budget has embraced many initiatives from my earlier submissions, such as expanding RMB bonds market; inadequate MPF contribution for retirement; subsidising electricity, rates, and rent; increasing tax allowance and taking care of the elderly:
Financial Services
My Submission: Expansion of the RMB bonds market – there are huge demands for RMB bonds in Hong Kong. The Government should strive for more Mainland, local and foreign enterprises to issue long term RMB bonds in Hong Kong. Substantial and continual issues of RMB bonds will not only reinforce Hong Kong as an offshore centre for RMB transactions but also promote insurance business in RMB.
- (Budget Speech 93.) First of all, we will maintain close contact with relevant Mainland authorities as well as the financial regulators and market participants of both sides to further develop Hong Kong’s RMB bond market. As at end-January, there were a total of 31 RMB bond issues with an issuance size of about RMB 74.4 billion. The range of issuers has expanded from Mainland financial institutions to multinational non-financial institutions. We will continue to encourage overseas enterprises to issue RMB bonds in Hong Kong, solicit more Mainland enterprises to issue bonds in Hong Kong and seek the expansion of channels for enterprises to invest in the Mainland the RMB capital raised in Hong Kong. Moreover, we will optimise the RMB clearing platform to attract more enterprises to use Hong Kong’s RMB settlement services. Diversification of RMB financial products and services will help consolidate Hong Kong’s status as an offshore RMB business centre.
Injection into Mandatory Provident Fund Accounts
My Submission: Comprehensively review MPF and promptly consider universal retirement protection – the society has become concerned with inadequate protection of the MPF to the low-income and employed, while showing increasing support for a universal retirement protection system, which the Government should promptly reconsider in the face of an aging population.
- (Budget Speech 177.) The Mandatory Provident Fund (MPF) System and other occupational retirement schemes have been functioning well to assist our working population to save up for better retirement protection. We hope to increase the retirement savings of scheme members. In this connection, I propose to make a one-off injection of $6,000 into the MPF accounts of all MPF scheme members and members of occupational retirement schemes covered by the Employment Ordinance of Hong Kong as of 23 February 2011. To assist more citizens in preparing for retirement, no salary ceiling will be imposed for the injection proposal. The proposal will not increase inflationary pressure and is drawn up in the light of our fiscal position.
- (Budget Speech 178.) I have earmarked $24 billion for this measure. The Financial Services and the Treasury Bureau will announce the details in due course, and the Mandatory Provident Fund Authority will assist in implementing the injection. I expect that the injection of funds into the MPF accounts will start in 2011-12.
Relief Measures
My Submission: Subsidise electricity bill – to reduce inflationary pressure on citizens, measures to subsidise for the electricity bill is advised to be extended for one year with the monthly maximum increased from $300 to $450 for all households.
- (Budget Speech 48.(1)) Granting each residential electricity account a subsidy of $1,800. This will cost the Government about $4.7 billion;
My Submission: One year exemption on rates payment and one month rent-free period for public housing – measures to exempt rates payment and public housing rent will directly benefit citizens and relieve inflationary pressure.
- (Budget Speech 48.(2)) Waiving rates for 2011-12, subject to a ceiling of $1,500 per quarter for each rateable property. It is estimated that about 82 per cent of properties will be subject to no rates in the year. This propos al will cost the Government approximately $9.9 billion;
- (Budget Speech 48.(3)) Paying two months’ rent for public housing tenants. The Government will pay two months’ base rent for tenants who are required to pay extra rent to the Hong Kong Housing Authority. For non-elderly tenants of the HKHS’s Group B estates, the Government will pay two-thirds of their rent for two months. This measure will involve expenditure of approximately $1.9 billion; and
My Submission: Raise the child and dependent parent/grandparent tax allowances to a proper level – Hong Kong has entered into an inflation period and inflation stress on citizens will continue to intensify. The Government is advised to simultaneously raise the tax allowances for child and dependent parent/grandparent from $50,000 to $100,000 and $30,000 to $60,000 respectively. The basic Tax allowance should also be reviewed.
- (Budget Speech 51.(1)) Increasing the allowance for maintaining dependent parents/grandparents by 20 per cent. The allowance for maintaining a dependent parent/grandparent aged 60 or above will increase from the present $30,000 to $36,000. At the same time, the additional allowance for a taxpayer residing with his/her parent/grandparent will increase from $30,000 to $36,000. The allowance for maintaining a dependent parent/grandparent aged between 55 and 59 will increase from the current $15,000 to $18,000. The same increase applies to the additional allowance for taxpayers residing with these parents/grandparents. For taxpayers whose parents/grandparents are admitted to a residential care home, the deduction ceiling for elderly residential care expenses will be raised from the current $60,000 to $72,000. This measure will benefit about 510 000 taxpayers and cost the Government $570 million a year; and
- (Budget Speech 51.(2)) Raising both the child allowance and the additional one-off child allowance in the year of birth by 20 per cent from $50,000 to $60,000 for each child. I estimate that this measure will benefit about 300 000 taxpayers, costing the Government $650 million a year.
Taking Care of the Elderly
My Submission: The Government should also actively develop schemes similar to the Integrated Elderly Community Project to generate more elderly and rehabilitating accommodations, which not only will create more training and employment opportunities and accelerate the development of New Towns, but also ease the shortage of accommodations for the elderly.
- (Budget Speech 145.) On residential care services, the Chief Executive has announced in his Policy Address that the Government will provide additional subsidised residential care places by building new residential care homes, making full use of the space of existing homes and offering more places under the Enhanced Bought Place Scheme. I propose an increase of $130 million in the annual recurrent funding to provide about 1 300 additional subsidised residential care places, including nursing home places, care-and-attention places and places offering a continuum of care.
- (Budget Speech 146.) To enhance the service quality of residential care homes under the Enhanced Bought Place Scheme, I propose to increase annual recurrent funding by $40 million to raise the purchase prices for EA1 places. The residential care homes concerned will be required to provide physiotherapy treatment and rehabilitation training for the elderly. This will also help enhance the quality of private residential care homes.
Supply of Public Housing
My Submission: Speed up and expand public housing construction – the Government should speed up the construction of public housing to relieve grassroots citizens from devastating living conditions, meanwhile consider increasing the supply to allow more citizens to move in.
- (Budget Speech 28.) Increasing the supply of land for private housing development will not affect the current supply of public housing. Relevant government departments will identify public rental housing (PRH) sites to maintain the average waiting time for general PRH applicants at around three years.
- (Budget Speech 29.) In the five-year period starting from 2010-11, the forecast production of new PRH flats is about 75 000 flats. The new PRH flat production forecast for 2011-12 and 2012-13 will be some 11 200 flats and 16 700 flats respectively, of which about 84 per cent will be built in urban areas.