The people our budgets forget

PUBLISHED : Sunday, 12 February, 2012, 12:00am
UPDATED : Sunday, 12 February, 2012, 12:00am

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More of the same' does not begin to describe the ultraconservative nature of the financial secretary's budget for 2012-13, even allowing for its 'caretaker' nature as the last budget of the current administration.

The same gross underestimation of the fiscal surplus; the same types of 'handouts' to the same groups of people - public housing tenants, recipients of comprehensive social security assistance, taxpayers and rates payers; and the same mantra of financial prudence and the need for a simple and low taxation system.

Our financial secretary has underestimated the actual fiscal surplus in each of the past five years under his stewardship, with the underestimation being particularly egregious in the past two years (the government's surplus swung from an estimated deficit of HK$25billion to an actual surplus of HK$75billion in 2010-11; and a forecast deficit of HK$8.5billion to a surplus of HK$66.7billion in 2011-12).

The persistent, gross underestimation is worrisome - it not only casts doubt on the financial secretary's ability (or rather the ability of his economic analysis team) to have a good grasp of what is going on in the economy, but also means that the government is very likely to have underinvested in our economy and hence seriously hampered its capacity for growth.

In accordance with the government's avowed principle of financial prudence (rendered in Chinese as 'spend only what you can afford'), if the government underestimates its revenue and hence its medium-range financial forecast, the result has to be that it underinvests in the physical and knowledge infrastructure of the economy.

And this is exactly what has been happening in the past five years: the government avoids increases in recurrent expenditure like the plague. To 'relieve the poor', the government has made use of its windfall surplus to establish numerous one-off funds which have no implications for recurrent expenditure.

To meet rising demand for more university places, the government has been reluctant to add more publicly funded places but has encouraged fledgling 'self-financed' tertiary institutions to provide more places by giving them small plots of land. All that was done without regard to whether such self-financed institutions with a modicum of public support and tiny pieces of land could actually succeed.

Another problem with the budget is that, despite repeated calls from the public and the legislature to help the poor, in particular the 'multiple have-nots' of our society - those poorest members of our society not living in public housing estates, not receiving social security payments and not paying electricity bills - the financial secretary is not offering them any relief.

In case one wonders who these people are, the answer is they are the very people found in our 'subdivided flats', caged beds or even 'coffin homes', who are mostly new immigrants from the mainland, single elderly people who prefer to work rather than rely on social security, or single parents. Non-governmental organisations have put forward different estimates of their numbers. Whatever the number, they are definitely the underclass of our society who need the most help.

If there is a case for dishing out cash again this year, these are the people who should be the priority targets of the government's largesse, not the regular recipients of rates and salaries and profits tax rebates, or beneficiaries of the waiver of public house rentals or 'double payment' of social security benefits.

The latter have now become a privileged class of recipients of windfall benefits, thanks to the financial secretary's determination to stick to the same pattern of offloading the budgetary surplus year after year.

The financial secretary owes us, at the very least, some answers on the estimated number of people in the underclass. Yet such answers are never forthcoming, and no effort is seen to be made to find out who they are and where they are located or to direct our resources to where they are needed most.

As legislators have raised this issue year after year, the only reason I can find for such bureaucratic lethargy is a complete lack of interest in showing any care, in the absence of any need for accountability.

As for the government's guiding principles of public finance management, again it seems to be stuck in a time warp, and unable to go beyond its traditional role simply as a custodian of the public finances, as in the colonial days.

Despite the fact that officials around the world are debating the role of government - whether it should be more Keynesian in playing a more direct role to stimulate economic growth, or continue to follow Hayek's belief in unbridled free- market capitalism, the budget speeches of this financial secretary show no such soul-searching. (And yet, he is a man not unaccustomed to such debates on the margins of G20 meetings or at elegant soir?es in picture-perfect Davos.)

There is no review of the city's macroeconomic policy, and no rethink of the role of government, while administrations in other cities in the region are focusing state resources to chase high-end industries and high-paid jobs.

Yes, we get fat year-on-year budget surpluses and a sop for the middle class, but that may well be just the beginning of our road to perdition.

Regina Ip Lau Suk-yee is a legislator and chair of the New People's Party