Directions missing in Tang's road map
It had been billed as a mini-budget, but amounted to an expression of intention. Henry Tang Ying-yen's road map for solving our economic woes identified the destinations, but provided few directions to ensure we get there.
The financial secretary has been sounding out different sectors to help him 'devise effective measures' to tackle the many problems our economy faces. But such measures were in short supply during yesterday's address to legislators. There was no clear policy programme. The point of the speech, Mr Tang said, was to explain principles, provide an overview of the economy's performance and to 'pose some questions about how we might go about tackling our budget deficit'. But the principles are well-established; plans for action are needed now.
Mr Tang did, however, end the uncertainty over his predecessor's plans for reining in the budget deficit, which were thrown off course as a result of Sars. The target for balancing the books has been put back two years, to 2008-09, as have the deadlines for cutting expenditure and boosting revenue. Some relaxation of the target was inevitable given that the government has had to fork out an unexpected $12.6 billion to help curb the impact of Sars. And a delayed deadline is better than no deadline at all. But quite how the targets will be reached is difficult to see.
The aim is to cut public spending by 11 per cent over the next five financial years. Principal officials have been informed how much each bureau's budget must be reduced. But they have not been told how such cuts should be made, and at what pace. This has been left to the 'full discretion' of the bureau chiefs concerned. The fuzziness of the procedure is not the way to ensure tough and timely spending cuts will be implemented, and in the right areas. Undoubtedly it is meant to be an example of the accountability system in practice: the principal officers can be held accountable if they fail to enforce targets. But who would now have faith in the effective operation of the system?
When it comes to revenue, the way ahead is even more uncertain. Tax increases and other measures proposed in the last budget are now in place and are expected to bring in an extra $13 billion. But while Mr Tang expressed support for a goods and services tax - necessary to broaden the tax base - such a move is a distant prospect. It is being considered but will not be introduced until deflation is beaten. Even then there will be a need to 'build a consensus with the community' on how to go about it. To muddy the waters further, the revenue targets are moving ones - to be reviewed annually.
Much will depend on the performance of the economy. And here, Mr Tang's cautious optimism may be well placed. The indicators point to a recovery. But this cannot be used as an excuse for ducking the tough structural issues. Maintaining confidence, both at home and abroad, will depend on the government having the political will to make the difficult decisions needed. And in this respect, Mr Tang's speech failed to convince. While he expressed a determination to balance the books, the tone of his address suggested a willingness to waver. Here we see the government's reluctance to provoke vocal opposition coming into play. Mr Tang spoke of his 'wish' to improve public finances and of 'gauging opinions' as to what should be a reasonable level of fiscal reserves. Providing health, education, and welfare services would have a 'major bearing on the budgetary process' and this was why the government would 'listen carefully to the views of the public'.