The government's decision to waive rates by HK$2,000 in last October's Policy Address to soften the economic downturn was inadequate. Now that the maximum concession has been raised to HK$5,000, this, and other incentives announced in the Budget will benefit local businesses, especially SMEs. Waiving business registration fees, which will save companies HK$2,000, and water and sewage charges for one year, subject to maximum amounts set at $800 and $200 respectively for domestic households, are welcome initiatives. Also, government fees and charges will be frozen for one year, and the duty concession for ultra-low sulphur diesel at HK$1.11 per litre will be extended for one more year.

However, all these are just short-term measures. For the long term, the government should review all possible options for generating additional revenue and cutting expenditure to address the Budget deficit. I have doggedly urged the government to slash expenditure instead of instituting new sources of income. The former avoids shifting the financial burden onto the public, in particular, businesses.

The government's Budget woes stem partly from its attitude towards handling its finances. Public expenditure over the past 10 years has expanded from 16 per cent of GDP to the current 23 per cent, representing a big departure from the principle of maintaining a "small government". In comparison, public expenditure (excluding expenses on national security and foreign affairs) in other economies like Singapore and Taiwan, averages only 15 to 17 per cent of GDP respectively. Clearly, the government spends too much. The Financial Secretary's target to restore fiscal balance by 2006-07 by curtailing public spending to 20 per cent or below of GDP is a step in the right direction.

However, I am sure few people would disagree that to achieve such a goal, the civil service payroll, which accounts for 70 per cent of the total public expenditure, needs to be reduced. According to the Liberal Party's recent survey to compare salaries paid to 18 grades of civil servants engaged either in clerical, technical, administrative or professional work with those of their counterparts in the private sector, we found that civil servants are paid on average 57 per cent more than that of the latter. As such, the proposed cut in civil service pay by 4.75 per cent is reasonable. I also hope the government will speed up implementing measures to streamline its structure, outsource more projects and push forward the Enhanced Productivity Programme, among others.

I strongly oppose the introduction of a progressive profits tax. Such a move would undermine Hong Kong's advantage of having a simple tax regime, as well as scare off foreign investors and talent. I also believe that given the weak economy, now is not the right time to impose a commodities and services tax (the so-called consumption tax). The government should first review how it can cut costs before deliberating its feasibility.

Among the initiatives in the Budget to raise income, I have deep reservations about the substantial rise in duty on wine. The existing duty rate of 60 per cent is already the highest in the world. Increasing it to 80 per cent is expected to generate only HK$70 million per year. This move, however, will sour Hong Kongs reputation as a cuisine and tourist paradise and discourage travellers' spending.

Lastly, I would like to ask you to support the proposed "Youth Work Experience and Training Scheme," through which the government will allocate monthly subsidies to employers who offer on-the-job training for about 10,000 young people. Youth unemployment is a hidden threat to social stability, so any measure to help youngsters gain work experience through in-service training is important. Therefore, I hope the business sector will actively participate in the scheme.