Scrooge's budget

The financial secretary is a hoarder. Hong Kong has enormous amounts of money and yet he does not want to spend it on recurrent expenditure. The issue is not just this year's large budget surplus of HK$71 billion. The government's medium-term forecast over the next five years - from 2010-11 to 2015-16 - shows estimated operating surpluses of HK$64 billion per year on average. This surely means our government has the capacity to increase recurrent expenditure by a sizeable margin.

The revised operating expenditure estimate for 2010-11 is HK$240.8 billion and by 2015-16 the amount is estimated to be HK$317.7 billion, an increase of about HK$77 billion in five years, but there is expected to still be a surplus of greater than that amount that year.

These numbers are in the government's cash accounts. If we examine the accrual accounts as well, the government's net assets up to March last year stood at a very substantial HK$1.23 trillion. The civil service pension provisions of HK$470 billion can be easily covered. This year's surplus will only add to the city's overflowing riches.

However, the government is unwilling to increase recurrent spending by much to improve public services. Instead, the financial secretary provides a range of 'one-off' payments, in the name of helping us ease inflationary pressure. So, we get a subsidy on electricity cost for our homes, rates are waived up to a certain ceiling, public housing tenants get two months of rent paid and welfare recipients get an extra month's payment.

Beyond these non-recurrent payouts, the financial secretary is proposing to spend HK$328 million more a year to help 55,000 people with disabilities on welfare. Moreover, he is willing to increase from HK$120 to HK$250 per month a supplement to those who are severely disabled involving HK$590 million per year and benefiting 190,000 recipients.

This suggests Hong Kong's welfare payments may be too low to start with. There should be no question that the poor, old and disabled need public assistance. A means-tested able-bodied person over 60 or one with 50 per cent disability only gets the standard rate of HK$2,680 per month. While there are special grants and supplements that he or she can apply for on top of that amount, the fact is the standard rate is very low; even with various add-ons, life remains extremely tough for the recipients. The question is whether Hong Kong's welfare payments need to be revised upwards. The answer seems to be 'yes'.

Let us look at education. The financial secretary tells us the government is already spending 22.5per cent of recurrent expenditure on education, amounting to HK$54 billion for the year. By the way, in 2003, the spending was less than HK$50 billion - so, in dollar terms, there has been a relatively small increase between then and now.

The budget reveals 360,000 students, or 34 per cent of the total student pool, receive various levels of financial assistance, with 110,000 of them getting the full assistance. This is surely a sobering fact that so many of our students need financial assistance. Despite the city's wealth, many of our young people are from low-income families and they need help with buying textbooks, covering travel costs to school and paying for internet access.

The new budget offers an additional 75,000 students assistance for these things and will take the total number of students getting full assistance nearer to 190,000. This will cost the government HK$300 million more per year. In light of the huge riches the government has and expects to continue to have, why not give all students in need full assistance, which would presumably increase the annual recurrent expenditure only by HK$600 million, a sum Hong Kong can well afford? Indeed, there seems to be room to be even more generous so that our young people can do more.

Why does the financial secretary hoard so much of the people's money?

Christine Loh Kung-wai is chief executive of the think tank Civic Exchange