The recent saving and best lending rates increase in Hong Kong is mild, Secretary for Financial Services and the Treasury Frederick Ma said Saturday, adding a rate increase was taken into account when formulating the 2005-2006 Budget.

HSBC announced Friday that both the saving and best lending rates will go up to 0.25 percent and 5.25 percent respectively.

Speaking on radio talk shows, Ma described the rate increase as "mild" and the pace of rate revision slower than that in the United States.

As Hong Kong's economy is affected by a number of factors, including changes in interest rates and oil prices, it is hard to estimate the revenue impact, he added.

In view of the unstable revenue base, there is a need to remain prudent when formulating the Budget, Ma said.

On spending cuts, he said new government services will be introduced from time to time and government departments have made great efforts to reduce spending. The number of civil servants has shrunk from 170,000 to 166,000, and several thousands more will be cut in the coming years.

Ma stressed the Hong Kong government has struck a balance between public service quality and reducing spending.

He also reiterated the need to broaden the tax base, as only 1.2 million people out of the 3.3 million working population have to pay salaries tax, and about 60 percent of the profit tax comes from about 500 companies.

Ma pointed out the proposed goods and sales tax is part of the tax reform, adding the government will not go ahead with the new tax without consultation and public support.

Source: Xinhua