Budget meets its first duty, but where's the vision?

Joseph Wong says while the financial secretary has largely followed the policy direction set by his boss, his budget offers little long-term vision on poverty, tax reform and an ageing society

PUBLISHED : Friday, 01 March, 2013, 12:00am
UPDATED : Friday, 01 March, 2013, 3:32am


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There are two ways to examine the 2013-14 budget presented by Financial Secretary John Tsang Chun-wah. The first is to treat it as a financial statement that allocates sufficient resources for the implementation of Chief Executive Leung Chun-ying's policy initiatives, contained in his policy address delivered in January. A government budget should also support the chief executive's governance philo- sophy and, where necessary, propose additional measures to propel economic growth and provide relief to those who deserve it.

In carrying out the chief executive's vision, Tsang has done his duty, but only just. Enough resources will be allocated to Leung's projects, such as the new Old Age Living Allowance, amounting to HK$8.3 billion and representing a substantial share of the increase in next year's recurrent expenditure. But Tsang did not seem to share Leung's enthusiasm in certain areas. For example, the Financial Services Development Council - set up by the chief executive as a government advisory body - got just one line in the budget speech.

While singing the chief executive's tune of fostering economic integration with the mainland, the speech was a reminder of the need to preserve Hong Kong's characteristics as an international city, and the core values of individual freedom, the rule of law and a clean government, which align us with the international system. I can see in Tsang a better salesman of Hong Kong than his boss at international forums.

The budget offered one-off relief measures and tax reductions, similar to last year's. This should help remove the negative reaction caused by Leung's first policy address, which was widely criticised as uncaring to the underprivileged and the middle class. However, one should question whether the continuation of annual one-off relief measures is an excuse to avoid tacking the real problems of poverty.

This suspicion is reinforced by the government injecting HK$15 billion into the Community Care Fund, which was set up by former chief executive Donald Tsang Yam-kuen as a one-off welfare project with matching contributions from the government and business sector. With this additional money, the fund could comfortably supplement the government's one-off relief measures by targeting those outside the established safety net.

But the government should start looking at the long-term role of the fund to ensure that it does not become a convenient vehicle for dishing out money, thus avoiding tackling the real causes of poverty and income disparity.

John Tsang has helped raise the credibility of the government's housing policy by providing concrete figures. For example, he announced that the supply of land in the coming year would be sufficient to build some 25,800 private residential flats. He also gave an assurance that, in the next three to four years, a total of 67,000 first-hand units could come onto the private residential market, the highest since 2007.

Together with the pre-budget measures to double stamp duty on property transactions, Tsang has at least done his part to warn potential buyers of the risk of buying property at the present time.

While Tsang may get a pass mark for delivering a budget in support of the first policy address of the new administration, it is necessary to be more critical if the budget is viewed as the sixth version delivered by the same financial secretary, raising the same problems but offering no solutions. For example, Hong Kong's narrow tax base and the proposal for a goods and services tax was the subject of a public consultation exercise in 2006 when Henry Tang Ying-yen was financial secretary.

Although the government decided to abandon a sales tax in face of strong public opposition, Tsang raised the unresolved issue of a narrow tax base in his first budget speech, for 2007-08, and has made it a point to include it in every pre-budget public consultation since. But nothing was done or proposed during his last five-year term. There was also nothing in this year's speech.

When asked about this afterwards, he said there was room to broaden the tax base, but any specific proposals would require detailed examination. Is he prepared to come forward with at least an updated consultation paper in the coming year? Or will he continue to do the irresponsible thing and dodge the issue until his second five-year term ends?

In his second budget speech, for 2008-09, Tsang had the foresight to warn of an ageing population in Hong Kong, and said that the number of people aged 65 or above would rise sharply in the next 20 to 30 years, to one in four by 2033.

But for years afterwards, he proposed nothing to start addressing the problem, and the government has not even presented a public document to explain the size of the problem and possible options to deal with it.

In this year's budget speech, however, Tsang updated the figures and said that the number of elderly people aged 65 and over would increase to 2.56 million by 2041, when the elderly dependency ratio would drop to 1.8 working-age people supporting one dependent elderly person. Faced with this staggering figure, he finally announced the setting up of a working group, with scholars and experts joining, to "explore ways to make more comprehensive planning for our public finances to cope with the ageing population and the government's other long-term commitments".

While this should be welcomed as better late than never, the financial secretary and indeed the chief executive must realise that an ageing population of such a scale and magnitude affects not just our public finances but all aspects of our public policies, such as medical services. The working group is useful, up to a point, but far from adequate in addressing the full problem.

Containing handouts worth more than HK$30 billion, this year's budget should pass the Legislative Council with little difficulty. But it is disappointing to see a budget that offers very little long-term vision, and features just the usual annual acts of balancing the books and spending some money to please everybody.

Joseph Wong Wing-ping is a former secretary for the civil service