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The finance chief has denied any intention to underestimate government revenue after a HK$40 billion surplus was recorded for the first three quarters of the 2012-13 financial year instead of the deficit he had earlier estimated.
SCMP, Feb 4
My colleague, Tom Holland, wrote this one up in his column yesterday and I agree with him on every point he made except that I think he underdid his grilling of our financial secretary, John Tsang Chun-wah.
The surplus figure we should be looking at is HK$54 billion, not HK$40 billion. The difficulty with these fiscal accounts is that revenue accrues much more unevenly than expenditures so that the fiscal balance swings up and down considerably from one season to another.
The best way of looking at the trend is to calculate a 12-month rolling total. This eliminates the seasonality and, as the first chart shows, gives you a sudden jump to a HK$54 billion surplus for the 12 months to December. Over the last two months of the year revenues swung sharply up and expenditure swung down.
There are indications, however, that the government is beginning to think again about its consistent surpluses. The clue comes from the accruals accounts, which are compiled along with the straight cash accounts and portray the government's operations more as a private company would do.
These accounts would have shown a surplus of about HK$50 billion last year but then someone got busy to tweak a discount figure one way and an expected salaries compensation figure another way (who would possibly take note that these two moves contradicted each other?) and suddenly the big surplus was no more. The pen is a mighty instrument indeed and it wrote here that big surpluses are becoming an embarrassment.
There is good reason why they should be. As the second chart shows, our fiscal savings, taking unencumbered government deposits with the Exchange Fund plus the accumulated surpluses of the fund, have now crossed the HK$1.5 trillion mark.
This is up from the 2003 low point of about HK$600 billion and amounts to fiscal savings of HK$630,000 per household in this town. It is an astoundingly high figure and poses the obvious question - when will enough be enough?
As Tom pointed out in his column, it is particularly pointless that a good deal of this surplus should be set aside in the capital works reserve fund and earmarked for infrastructure projects because it comes from property sales. Does this mean that salaries taxes should only be earmarked for income support and stamp duties for promotion of the stock market?
We have this capital works reserve fund only because a previous financial secretary got it spectacularly wrong 30 years ago and forecast a huge fiscal surplus only to get an even larger fiscal deficit. Setting up the fund was his way of wiping the egg off his face. Why do we still bother?
The clear danger facing us is that our savings will now be squandered by bureaucrats with big infrastructure projects on their minds. It is happening already with a pointless bridge to Macau, a proposal for a hugely overpriced runway and a border railway that no one really wants.
Please, John, if you have nothing worthwhile to do with the money, don't take it from us.