Jake's View

Long Hair's pension fund filibuster a grand idea

There is no reason why some of the ample fiscal reserves cannot be designated for uses other than setting up another concrete pouring fund

PUBLISHED : Thursday, 10 April, 2014, 12:57am
UPDATED : Thursday, 10 April, 2014, 12:57am

"My filibuster this year is more meaningful and justified than the one a year ago. I will stop immediately if officials promise that a 50 billion-dollar universal pension fund will be launched before 2017."

Leung Kwok-hung

SCMP, April 9

I think he actually shows restraint here. It's a grand idea for use of our reserves and we could, in fact, transfer 33 times as much from our reserves to such a fund without any real danger to the government's fiscal position.

That's right. As the chart shows, our free fiscal reserves now stand at HK$1.65 trillion, which is 33 times more than Long Hair proposes for his universal pension fund.

By free fiscal reserves I mean savings unencumbered by any other liabilities. Our total reserves actually stand at HK$3 trillion and the difference between this and my HK$1.65 trillion represents money to which others have prior rights.

This mostly consists of backing for banknotes and coins plus balance sheet games played by the monetary authority to keep the Hong Kong dollar weaker than HK$7.75 against the US dollar.

My HK$1.65 billion, however, represents the accumulated fiscal savings of the government and various statutory bodies plus the accumulated investment profits on these savings.

It is like a general public savings account with the bank.

But the one person who will never admit this is financial secretary Johnny Blogger (well, he calls himself that, so why can't I?).

Telling you it's yours would mean telling himself that he cannot just spend it as he likes. Thus he says that it already has "designated uses" except for perhaps HK$400 billion.

It's interesting how our bureaucrats designate things. A country park designation translates as "surplus to immediate development requirements", which means a free land grab if they choose. But don't you dare touch the "designated" free fiscal reserves. Hands off! These are sacrosanct.

They are not, of course. They can as easily be undesignated as they were first designated, starting with the capital works reserve fund, which a former financial secretary designated for concrete pouring alone in order to hide how badly he had got his budget forecasts wrong.

There is no good reason why this money cannot be designated for open use but Johnny Blogger has gone the other way. In his latest budget speech he suggested setting up another such concrete pouring fund rather than unwinding the unnecessary one he has.

The only other rationale ever proposed by our bureaucrats for untouchable big reserves is that we may need them in severe bad times when fiscal revenues fail.

The International Monetary Fund looked at this argument six years ago and came to the conclusion that we would be safe with reserves of somewhere between 30 to 50 per cent of gross domestic product. It also said that we could reduce this figure by as much as 10 per cent if we made certain reforms, which we did make, in booking of investment income.

The present ratio of reserves to GDP is 77 per cent. Nuff said.

In fact, by transferring a big dollop of the money to a universal pension fund to supplement the Mandatory Provident Fund we would address one of the big concerns the IMF had about the volatility of the government's fiscal balance.

We could also do so by setting up a universal health fund to formalise what is already effectively a national health plan funded every year in general expenditure. It would be a superb idea.

Johnny Blogger, however, measures government achievement less in terms of service to the people he helps govern than in tonnes of concrete poured for increasingly pointless infrastructure monuments.

You're on the mark, Long Hair.