It's the infrastructure, not the aged, that's costing us
Early in his budget speech yesterday, Financial Secretary John Tsang Chun-wah set out his stall. The Working Group on Long-Term Fiscal Planning which he set up last year concluded, he said, "that with an ageing population and a shrinking workforce, economic and revenue growth would decelerate; a structural deficit would be inevitable if expenditure growth outpaces revenue growth in a persistent." Hence the need for "living with our means" and "fiscal prudence".
As we have said before, one of the government's problems is to hide the oodles of cash it has at its disposal. This is evident when we see the surplus that emerges after comparing recurrent revenue for 2014-15, which is estimated at HK$430 billion, and recurrent expenditure of HK$307.4 billion. This provides a recurrent surplus of HK$122.7 billion.
This is the surplus that we will have after spending HK$67 billion on education, HK$60 billion on social welfare, and HK$52 billion on health care, and so on. This has to be whittled down through a process of one-off payments and huge spending on infrastructure.
Hong Kong is possibly unique in the way it persists in funding its infrastructure up front in cash rather than spreading it over the life of the asset through the bond market.
Interestingly, by far the biggest increases in spending have occurred in capital works spending. In 2010-11, the government spent HK$55 billion, which ballooned to HK$88 billion last year. This spending is forecast to reach HK$77 billion this year and HK$89 billion next year.
Spending on social welfare in 2010-11 was HK$38 billion and HK$55.5 billion in the current fiscal year, while health care rose from HK$36.7 billion to HK$67.4 billion.
It is curious that while we hear fears expressed about the problems of how to support an increasingly ageing population in the future, similar fears are never expressed about the need to rein in spending on infrastructure or even adjust paying for it over 20 years or so.
So when the working group talks of the inevitability of a "structural deficit", it would be good to know what it really means. Does it mean that supporting the elderly will become problematic with or without spending the HK$70 billion to HK$80 billion a year on infrastructure?
Hong Kong is routinely described as having one of the finest harbours in the world. On clear days, which are getting rare, it is a sight to behold. That it still survives is a minor miracle given the depredations made on it by the government and property developers.
Belatedly, further encroachments have just about been stopped and efforts are being made to beautify the harbourfront. But it has been a lamentably slow business that has been dogged by byzantine inter-departmental responsibilities.
There is a move to set up the Harbourfront Commission as an overarching body to be responsible for the entire 74 kilometres of waterfront. But this is some way off.
The idea is to turn the waterfront into an attractive fun place to visit where people can walk, run, take their dogs, cycle, and maybe even dine or have a drink at a waterfront restaurant. For the moment, these activities are mere fantasies. One has only to look at Singapore to see what can be done with a waterfront.
The poverty of the development of Hong Kong's waterfront has somewhat embarrassingly been shown up by a group of students from Worcester Polytechnic Institute, Massachusetts, who spent two months assessing the accessibility, connectivity and vibrancy of the waterfront and comparing it with a similar study undertaken by students from the same institution in 2008. It's a sorry tale.
In 2008, 21 kilometres were available for surveys, of which 13.4km were accessible promenades. This year, the waterfront space available for survey had extended to 41.9km, with 21.4km accessible promenade. That's an advance of about one kilometre per year. But even then much of the "developed" area is unimaginative, dull and sometimes difficult to access.
In the words of Paul Zimmerman of Designing Hong Kong, which commissioned the survey with the Harbour Business Forum, "There's a lot more to be done."
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