Why the govt must resist calls for cash handouts

February 26, 2019 18:09
A file photo depicts signage related to the Hong Kong government's HK$6,000 cash handout scheme in 2011. Lawmaker Dennis Kwok argues that authorities must ignore calls for similar programs. Photo: HKEJ

As always, a key priority for the Hong Kong government after the Lunar New Year holiday has been preparation for the annual Budget announcement by the Financial Secretary.

And as usual, at this time there is a heated public debate as to whether the government should offer cash handouts to the citizens given the enormous fiscal surplus.

If you ask me, I am against the idea of providing cash handouts, a position I also took last year.

I am opposed to the idea not out of concern about the government’s fiscal shape or the current political environment in the city, but because of my firm belief that giving cash handouts goes against the government's legitimate function and because I feel it won't satisfy the basic principles of public finance management.

One of the most vital functions of any government is to facilitate wealth redistribution in society.

In general, there are two ways to do that: first, the government can impose heavier taxes on more economically capable people or organizations in society and then transfer the wealth to those who lack economic capability, through different policy initiatives.

For example, social welfare and public housing are both commonly adopted policy means to facilitate the redistribution of wealth in society, through which the government is either directly providing money for those in need or transforming money into other forms of resources to help those less economically capable and make sure they can lead a decent life.

The second way to enable wealth redistribution is to establish public facilities or services in order to protect the basic rights of all members of the public, to maintain their needs in everyday life and to foster the overall development of society.

For instance, by providing public healthcare for the citizens regardless of their socio-economic status, the government can guarantee the basic rights to which every lawful local citizen is entitled.

Education is also the basic right of every citizen, and it can generate momentum for social development and progress as well.

In a nutshell, no matter whether it is direct financial assistance for specific individuals or groups of people in need, or public facilities that are open to everyone, the most important goal and effect is to facilitate a more balanced and all-round development of society.

Even though at first glance, giving cash handouts to citizens from all walks of life appears to be an absolutely fair way of redistributing wealth, in reality such move cannot foster a more balanced and all-round development of society.

The main reason is because there is simply no social goal or policy support behind the act of giving cash handouts. In other words, apart from satisfying the personal financial needs of some but not all individuals, it is hard for cash handouts to achieve any real social effect.

In contrast, allocating public money into policy initiatives that are backed by other supportive measures will not only work in favor of the overall development of society, it can also substantially benefit the average citizens in the long run.

Take the government’s huge annual budget surplus as an example. Should we just hand the money out to the public directly, or use it to establish a universal retirement protection scheme?

My answer would be, of course, the second option. It is because for grassroot families, they will definitely benefit far more from a universal pension scheme, under which they may receive HK$3,000 or more per month, than a one-off HK$6,000 cash payment every year.

The allocation of public money into specific undertakings with the support of a policy initiative will definitely bring more profound, more lasting and more specific benefits to society than one-time cash handouts.

Just look at Macau. Although its government is handing out cash on a yearly basis, it hasn’t made the city a more equal and progressive society. Nor has it noticeably improved the quality of life of its citizens either.

As such, like I did in the past, I will continue to oppose cash handouts by the government this year, and I would also like to urge my fellow citizens to ditch the “cash-handout” thinking.

Instead, we should demand that the government and the pro-establishment camp divert more resources into long-term public policy initiatives and infrastructure.

This article appeared in the Hong Kong Economic Journal on Feb 25

Translation by Alan Lee

[Chinese version 中文版]

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Legco member representing the Legal functional constituency (2016-2020) and a founding member of Civic Party