The government, which came under huge political pressure to offer giveaways in recent budgets, may have reaped a bitter fruit from seeds it has been sowing.
A government official familiar with the administration's management of public finance, who declined to be named, said the government's over-prudent approach in drafting budgets had the unintended effect of spurring persistent calls for one-off handouts.
Treasury officials, when preparing budgets, had got in the habit of underestimating revenue, particularly non-recurrent revenue from land sales and stamp duty, while overestimating government expenditure, the official said.
'Treasury officials are not inclined to give green lights to substantial increases in recurrent government expenditure,' the official said. 'By underestimating revenue and overestimating expenditure, the government can play down public expectation of bigger recurrent expenditure.' The public, seeing a hefty fiscal surplus and no rise in recurrent expenditures on the horizon, naturally clamours for some of that cash to come back to them - fast.
The official said that when the government had detected a higher-than-expected fiscal surplus shortly before a budget's delivery, officials had usually favoured the idea of offering one-off relief measures to ease public pressure for increase in recurrent expenditure.
'Ironically, the practice creates the public expectation that the finance chief had to grant handouts in his budget speech', the official said. 'That's why the financial secretary's initial refusal to offer a tax rebate in this year's budget speech, as he did in the past few years, sparked a public outcry.'
Since February 2007, the government has handed out HK$122.3 billion in relief packages, usually consisting of tax rebates and waivers of public housing rents and property rates.