Building social capital

PUBLISHED : Wednesday, 09 March, 2011, 12:00am
UPDATED : Wednesday, 09 March, 2011, 12:00am

A budget reporting gross domestic product growth last year of 6.8 per cent, unemployment contained at 3.8 per cent, a handsome fiscal surplus of HK$71 billion and financial reserves of some HK$600 billion should be the envy of many financial ministers. Yet Financial Secretary John Tsang Chun-wah's plan to distribute some HK$40 billion - injecting HK$24 billion to the Mandatory Provident Fund and other occupational retirement scheme accounts, with each account-holder getting HK$6,000, plus another HK$19.6 billion in one-off relief measures - unexpectedly attracted a social uproar.

So much attention was given to this single controversy that some small 'good things' were ignored - such as HK$110 million to enlist tertiary students to provide after-school homework guidance for primary pupils from low-income families, and HK$7 billion to set up an athletes development fund.

The double irony is that when Tsang decided to withdraw the MPF injection idea and instead give HK$6,000 to each permanent resident aged 18 and above, the critics then blamed him for not being fiscally prudent. So, what has gone wrong in our budget process?

Some fault him for not having consulted properly. Well, most of the political parties and economists had cautioned him against making any handouts. Yet he found it reasonable to return part of the surplus to the population. Doing it through MPF accounts, tax and rates rebates, and public housing rental exemption, as in the past, cannot reach a wide enough group of ordinary citizens, some of whom do not pay tax or belong to specific targeted relief categories.

The post-budget circumstances have turned volatile. When public agitation led to a demand in society for immediate rebates for all, many legislators vowed not to approve the budget if the government did not offer major concessions.

Hong Kong has moved from a British-style executive-led regime to US-style executive-legislative rivalry. In Britain, the government has a parliamentary majority and there is a long tradition of respecting the chancellor of the exchequer's prerogative in drawing up the budget. In colonial Hong Kong, the financial secretary enjoyed similar supremacy.

All this has changed. With limited power to initiate policies and bills, legislators across the parties now use the annual budget as the key platform for political bargaining with the government. If the financial secretary stuck to the past tradition and refused to make any concessions, then the only outcome might be that the budget would be vetoed, leading to a constitutional crisis with the legislature dissolved under the Basic Law, to be re-elected. It is right for Tsang not to insist on a futile notion of budget tradition, and to be pragmatic in taking public and legislators' sentiments on board. Some wonder whether cash handouts represent a precedent of irresponsible concessions. Well, let's look at it in a new perspective. In a listed company, shareholders would demand a dividend even as the company should also put some profits aside for reinvestment; the same with a government with a huge surplus. Just tax rebates don't work. The most direct and equitable way is to give a 'social dividend' similar to what governments in Singapore, Taiwan and Macau have done. The new Community Care Fund has also to make an impact.

Of course, the government must not stop at cash handouts. Budget measures are not just for the purpose of housekeeping but should provide important tools of redistribution and social and economic development, especially in the new competitive global environment. Times have changed a lot since British days where 'small government' and 'non-interventionism' seemed by and large workable principles in a politically dormant society. Nowadays, the government has to embrace new challenges and approaches.

Hong Kong is suffering from deteriorating structural problems - declining social mobility, widening income disparity, soaring housing prices, poor elderly retirement protection, and an insufficient social safety net for new migrants - causing rising frustration among the middle class and grass roots alike. These problems await 'out of the box' solutions and actions. The 'big society' talked of by the financial secretary will materialise only if the government takes the lead in bringing various sectors together to build a society with hope and compassion.

Anthony Cheung Bing-leung is an executive councillor and founder of SynergyNet, a policy think tank