Despite the dramatic drop in revenue and the fact that we are still facing probably the worse economic recession in our living memory, public expenditure continues to grow with little, if any, corresponding adjustments in revenue measures. True, those who own or aspire to own expensive houses, gamble on horse and drive private cars have been asked to pay a little more for such privileges.

However, for the ordinary man or woman, life on the street has hardly changed, and those who are fortunate, they may even get a small laisee in tax rebate and / or reduction in rates. The bottom line, however, is 4 years of continuous budget deficits adding up to a total burden of over $70 billion on our taxpayers' purses.

Fortunately, given the size of our huge reserves, we can no doubt afford this bill. I can also understand why the Financial Secretary does not want to sound downbeat in the present difficult situation. However, accountants would be remiss for not sounding early warning bells if our usually robust economy does not bounce back as quickly as the Financial Secretary has rather optimistically predicted, more drastic measures to reduce expenditure and to raise revenue may be needed no matter how politically unpalatable. I hope the Financial Secretary has a contingency plan.

On his fourth budget, the Financial Secretary has mastered the art of political packaging - the public readily accepted the really poor financial out-turn as a matter of course. I am also quite impressed by some of the good points made and bold steps taken to relieve the community's pain.

You might remember that I led public opinion last year in advocating several courses of Government action: namely to:

• manage a temporary deficit budget whilst looking for longer term solutions;
• seriously strive to control public expenditure, especially the size of civil service and its pay structure;
• review the business plans for public corporations and Government departments and enhance their value to the public through public listing of their shares or privatisation by competitive bidding, and last but not least,
• deliver on the Financial Secretary's pledge to improve investment and business environment.

In his recent budget, the Financial Secretary positively responded to all these calls.

Despite the obvious difficulties in his attempt to simplify the structure of the Securities Market, the Financial Secretary seems determined to make this happen, which is a step in the right direction. Such a move is in line with the rapid changes in other global financial markets if Hong Kong is to maintain its competitive edge as an international financial centre.

In my response to the Policy Address, I suggested that the people of Hong Kong expect a miracle rabbit to jump out of the hat to keep their hopes alive (eg the New Airport, Metroplan and Disneyland). Luckily, the Financial Secretary pulled out a fury creature in the form of Mickey Mouse, the Cyberport and a $8.5 billion tax rebate - all of those are thoughtful nice touches. Such niceties, however, have also served well in diverting of public attention from the more fundamental budgetary issues.

During last year's Budget debate, I specifically stated that although the Government had already provided considerable tax reliefs in profits tax, the accounting profession still strongly expected the Government to introduce further reductions, such as group tax relief or allowing tax loss to be carried backward to offset against profits made in the previous two financial years.

Despite less political appeal, I still believe these and other tax concessions, as recommended by the accountancy profession, would have been much better than the massive tax rebate of $8.5 billion which has now handed out indiscriminately, irrespective of need.

The diversion created by the controversial massive tax rebate and Mickey Mouse has, at least temporarily, concealed the following other fundamental budgetary issues which deserves serious public debate: -

• there is no long-term solution to restoring budgetary balance. Is a highly uncertain, rapid economic recovery dependable? If not, what contingency plan do we have?

• the vulnerability of exceeding our narrow tax base has been exposed time and again in successive economic recessions. As such, there are extremely limited options for finding alternative tax source which has a sufficiently wide bases to provide the needed high yields with low costs, and at a low tax rates. Is now, while they can still readily see the issue at hand, not the right time to explain this reality to the public?

• Are the Government's efforts to enhance productivity, i.e. to reduce base-line operating expenditure by a total of 5% in three years vigorous enough? This is mild compare to the serious cost reduction exercises by former Financial Secretaries.
• Is it prudent and fair to recognise the $38 billion income, a large part of which is probably still unrealised, accruing from the Exchange Fund's investment yields? This is particularly pertinent when public expenditure is still accounted for on a cash basis.

I shall follow up these issues with the Administration and your ideas are welcome as always.

Trying to sum up my views in the limited space available for this column the day after the Budget has been a very challenging exercise. I shall of course provide a fuller account through my own circular in due course.