Invest in the future
The swiftness and scale with which Financial Secretary John Tsang Chun-wah reversed his position on the budget was breathtaking. After adamantly refusing to provide a tax rebate, he decided to do so and, in addition, to give handouts to all Hong Kong permanent residents, most of whom don't even pay tax.
Either measure would probably have been enough to ensure passage of the budget. He decided to adopt both.
Furthermore, he politicised his decision by making the announcement while surrounded by pro-establishment legislators. In doing so, he was helping them in the next election.
While the two new measures have resulted in a great deal of public joy, they sadly have dealt a major blow to the prestige of the government. For one thing, even after the about-turn, the budget remains one that displays no long-term vision. It does not attempt to address the crying needs of Hong Kong society, such as a universal pension plan, health care reform, low-cost housing and coping with a rapidly ageing population.
On the positive side, the financial secretary has shown that the government is willing to consider new ideas. So, even at this late date, he can use the pledge of HK$6,000 for each permanent resident to show that he is capable of tackling Hong Kong's long-term needs and not just look after the government's short-term interests.
This pledge can and should be used to create government accounts for four million people, which form the bulk of Hong Kong's adult population. The creation of such accounts - which can be the basis for, say, a universal pension plan or medical subsidy programme - will be a major step forward.
Hopefully, the financial secretary already has something like that in mind. After all, he has called on people not to withdraw all their money but to save some or all of it. But that is not enough. He must go further.
He must announce an investment scheme for people willing to leave their money in their accounts. Casual conversations with ordinary people over the past few days show that many feel giving HK$6,000 to individuals is dissipating the collective power that billions of dollars can bring. They would rather have the money collectively invested through an investment vehicle for the long term, such as building middle-class housing, so that the community as a whole can benefit.
If the government moves in this direction, it will have snatched victory from the jaws of defeat. It will have shown that it has vision and can work together with members of the community to invest in the future.
For such a purpose, it is important for the government to keep alive the accounts of people who may prefer to withdraw all their money, so that these zero-balance accounts can be reused.
Just how they are to be used again is something that the government can think about. Now that the government has taken this first step to distribute part of the 2010-2011 surplus, it should be willing to consider setting up a mechanism whereby, in future, each time there is a budgetary surplus, part of the money can be set aside for a universal pension scheme or whatever plan the government may have.
This will be entirely government-funded. But since it comes out of a surplus, the government does not have to worry about it being a recurring expense or having to raise taxes.
In future, every time there is a surplus - and, judging from our record, this happens quite frequently - the government should be committed to using part of that surplus for some recognised long-term goal, rather than just putting the money in the fiscal reserves.
What is essential is that the government has a long-term plan. This may well be the last chance for this administration, in its remaining months, to regain some credibility and public support. It must grasp this opportunity with both hands.
Frank Ching is a Hong Kong-based writer and commentator. Follow him on Twitter: @FrankChing1