193.     I think Hong Kong should continue to follow the fundamental principle of maintaining a low and simple tax regime and a market-led economy.  It is simply not feasible to support a significant increase in recurrent welfare expenditure by raising taxes or issuing bonds.  In the wake of the financial tsunami, many European governments have been caught in public finance crises and forced to cut expenditure, which gives rise to social unrest in the end.  We have to remind ourselves at all times not to follow in their footsteps.  While increasing public welfare spending is always popular, we have to be aware of the consequences of over-expansion.  Also, we have to bear in mind that raising taxes will make Hong Kong less attractive to enterprises, and running a fiscal deficit and issuing bonds regularly will adversely affect Hong Kong's credit ratings.  As a highly open economy, Hong Kong must preserve the distinct economic features that have underpinned our success.

194.     Market forces represent collective wisdom.  The Government should not step in without good reason.  But neither should it adopt a completely hands-off approach.  When the market fails, the Government should intervene as appropriate.  The introduction of subsidised housing and the statutory minimum wage, for example, highlights the importance of appropriate government intervention.

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