The government budget is not the same thing as our personal account, and we should not look at it as if it were. You or I may have no income if we were fired from our job, but a government is a perpetual entity and continues to levy taxes, charges and fines, and obtains income from other sources. It may charge lower rates in some years and it may even abolish some taxes from time to time, but a government continues to receive funds. Moreover, it must provide for a whole range of public services for the benefit of society.
That is why the Hong Kong administration has said, in the past, that it requires about 12 months' public expenditure to feel secure that it has enough to keep public services ticking over. In an SCMP/TNS survey published on Monday, 35 per cent of respondents thought Hong Kong should keep 18 months of reserves, 22 per cent opted for 24 months and 9 per cent chose 30 months. This group made up 66 per cent of the total.
These extremely financially conservative people must be looking at public finances like their personal finances. They forget the government will receive income. Indeed, if the government were to follow their guidance, it would be putting away billions that could be spent on much-needed services. At the same time, the respondents also want more spending on environmental protection, public health, education and social welfare.
They have also forgotten to consider the income that the government expects in the coming years. If they take a quick look at last year's budget figures, they will see that, a year ago, the government expected large surpluses of more than HK$25 billion a year from 2008-09 up until 2011-12 in the operating account. This is before we add on income from the capital account, such as contributions from land sales.
In other words, even a year ago, the government expected large surpluses for the foreseeable future. Of course, this year's surplus is turning out to be very much larger - it is going to be more than HK$100 billion - thereby prompting calls for one-off rebates and the raising of the basic salaries tax allowance. If one looks at Hong Kong's fiscal reserves as of the last budget, they were already HK$365.8 billion, and the government said then that it expected the amount to balloon to between HK$390 billion and HK$580 billion over five years.
No wonder, then, that there are also calls for large sums to be set aside to finance a public health fund, to clean up pollution and fight poverty, as well as other initiatives. However, political parties need to point out to the people the real financial situation and help us ask the hard questions, which we have no chance of putting directly to the government. The main question is this: why, in view of our more-than-overflowing wealth as a community, has the combined spending on social welfare, education and health actually fallen over the past few years? Combined spending in these three areas was HK$113.7 billion in 2002-03, but only HK$112.1 billion five years later.