Executive Councilor Joseph Yam criticized the government for taking a penny-pinching financial philosophy for the past 10 years, the Hong Kong Economic Journal reports.
In a blog post Thursday, Yam said the government should be more proactive in spending to drive economic growth. He appeared to blame former financial secretary John Tsang.
Yam said the government’s outdated financial policies have been too stingy and have done no good for Hong Kong.
He said that when economic growth is too slow, the government should go into a budget deficit occasionally if the spending was for the public interest.
The comments, which came after a five-year hiatus for Yam, come as Chief Executive Carrie Lam prepares for her first policy address in October and her government draws up a spending plan.
Lam, who is currently in Singapore, agreed with Yam’s views, saying these are quite similar to her agenda during the election campaign.
Lam said she is aware of Article 107 of the Basic Law, which requires the management of public finances to “follow the principle of keeping expenditure within the limits of revenue” and to “avoid deficits”.
However, she said the rules should not be interpreted narrowly. She praised Yam for his constructive post and said everything in it were Yam’s ideas.
Yam, a former chief executive of the Hong Kong Monetary Authority, said the large amount of expenditure left from government spending is “pulling the hind leg” of Hong Kong’s financial development.
Although the policy would be stable for the government to adopt, it will leave Hong Kong’s finances stagnant, he said.
Yam said the Basic Law does not specifically ban deficits. Thus, it could be acceptable for the government to go into deficit to drive the economy and ensure long-term benefits for Hong Kong.
Hong Kong’s fiscal reserves tripled to HK$935.7 billion in 2016-17 from HK$365.8 billion in 2006-2007, according to government statistics.
The financial budget for the past 10 years was prepared by Tsang after accepting the recommendations of the Working Group on Long-Term Fiscal Planning to maintain public spending at about 20 percent of GDP.
Yam said the budget should be measured with the amount of money spent, rather than the speed of economic development such as GDP.
Finance and Investment Professor Billy Mak from the Baptist University said Hong Kong should invest in various sectors, such as logistics and shipping in order to catch up with other cities.
Also, he said that the third airport runway would ensure that the air transport business would not be saturated. It would also help other industries such as tourism and technology, he said.
Mak said deficits are acceptable as long as the resources are in place for projects that are worth investing in.
– Contact us at [email protected]