Huge discrepancies between government estimation and the actual amount of budget surplus have become almost a routine feature, and this year’s budget is no exception.
According to a projection made by Financial Secretary John Tsang Chun-wah last year, the government was expected to have a budget surplus of around HK$9.1 billion in the current fiscal year, but the latest figures announced Wednesday showed a whopping surplus of HK$63.8 billion, seven times higher than the initial estimate.
Given this huge surplus, the latest budget has offered more “sweeteners” than last year, and middle class families can enjoy more tax rebates than they could in the past two years.
In fact the public is all too familiar with these treats. Since the 1997 handover our economy has undergone many ups and downs, and various financial secretaries have been good at pleasing the public.
In 1999, when the government ran a deficit of HK$21.4 billion and the local economy shrank by 7 percent, the then financial secretary Donald Tsang Yam-kuen introduced a number of “alleviating measures” to address public demands, and since then all of his successors simply followed his beaten track, and the public have already got used to such sweeteners.
Before this year’s budget was announced, when public eagerness for more sweeteners remained high, John Tsang had argued that it was important for Hong Kong to keep government expenditures within its means. According to official sources, the administration had to take into account the economic prospects in Hong Kong in the near future when deciding the quantum of sweeteners it was going to dole out in this year’s budget eventually.
Meanwhile, there was a feeling that as the economic forecasts for Europe and Mainland China this year were not bullish, Hong Kong might witness a decline in its export performance this year. Given that, we may need to rely on domestic demand to sustain our economic growth this year, and one-off “alleviating measures” may prove helpful in stimulating domestic demand.
From the point of view of the average citizen, who doesn’t like sweeteners? But I believe the logic of giving out sweeteners should be based on how such move can promote a harmonious society and support balanced development.
As we all know, the wealth gap in Hong Kong is quickly widening. The Gini Index of our city has already reached 0.475, far exceeding the dangerous level of 0.4.
By increasing the amount of the sweeteners, the government can at least narrow the current wealth gap a little bit and ease public discontent over the deepening income inequality.
The government should also strive to avoid the wastage of public money and use such savings to support sweetener measures.
According to a list of the “Top 10 Incidents of wasting public money in 2014″ published by a civilian organization, the government wasted billions of taxpayers’ money last year.
To name a few, the cost for building the high-speed rail line blew the budget by almost HK$10 billion, while the Hong Kong-Zhuhai-Macau Bridge overran by HK$5 billion dollars, not to mention the HK$1.5 billion wasted on a completely useless radar system by the Aviation Department.
While the government continues to give out sweeteners, it should also commit itself to long-term planning on health care, pension system and social welfare expenditures. The administration should also come up with feasible measures to help our young people climb up the social ladder, in order to facilitate social stability and promote diversity in our economic development.
Separately, in face of an aging population, the financial secretary has proposed to set up a “Future Fund” in order to cover the cost for infrastructure projects in the future.
However, given the poor investment performance of the Exchange Fund last year, which only recorded a yield of 1.4 percent, and the fact that the global investment market is often volatile, the returns of the Future Fund are far from assured.
We simply cannot afford to ignore the investment risks that are involved. Therefore, more in-depth research is needed on how to maximize returns and minimize risks regarding the Future Fund.
This article appeared in the Hong Kong Economic Journal on Feb. 26.
Translation by Alan Lee
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