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Jake's View
PUBLISHED : Sunday, 21 July, 2013, 12:00am
UPDATED : Sunday, 21 July, 2013, 3:24am

If government wants people to have more cash, don't take it from them

Property tycoon Ronnie Chan Chi-chung stepped up his war of words with John Tsang Chun-wah yesterday, claiming the financial secretary's dishing out of sweeteners worth nearly HK$200 billion in recent years was "foolish".

SCMP, July 19

Much as I find it curious that a main board director and audit committee member of the disastrously failed Enron Corporation should so publicly offer advice on financial prudence, I have to agree with Ronnie Chan in this case.

I think he was perhaps a little assertive in calling it foolish. Ill-advised might be a better way of putting things. Far be it from me to accuse our financial secretary of taking any decision except on advice.

But, yes, this crude practice of keeping people happy by scattering largesse dates back to the cynical ways of ancient Rome or, in more modern times, to the populist follies of an Eva Peron. Surely we have more refined ways of conducting public policy now.

Perhaps I should not be so certain, however, under a man whose ideas of public policy were acquired in Kennedy family election campaigns in the US. Bread and circuses was also their style, well, circuses anyway.

My point here is a simple one. If a government wants its people to have more money in their hands, its best course of action is not to take their money from them in the first place. Public expenditure should be restrained to necessary expenditure that can only be made through the public purse.

I recognise the counter-argument - Tsang's giveaways returned money to people in low-income brackets, who needed it and who would not otherwise have had it. Fiscal revenues were better than expected and why not use the surplus to alleviate income disparity in that case?

I don't buy it. Firstly, it does not seem to have worked. All the studies suggest that income disparity has steadily widened in recent years despite the financial secretary's efforts.

More to the point, I do not believe it ever works. The bottom stones of the pyramid always carry the greatest weight. It is lower-income working people who always bear the burden of public expenditure. The rich only adjust their investment yield expectations or move away. Give the poor a big handout and their employers say, "Well, that's so much less that we have to pay them."

You can't get around it. If government wants to relieve the burden on the poor then it should pay closer attention to its own expenditures. The benefits of this will inevitably trickle down to the poor just as the burdens of heavier government expenditure always do.

And it would be disingenuous of Tsang to pretend that all his handouts come in the form of social benefits. More by far has gone to hugely expensive and pointless infrastructure projects such as high-speed rail to the border, the Macau bridge, and highways to serve a declining port. These will certainly be a burden to the poor and dribbling coins into their hands will not make up for it.

If Tsang doesn't really need the money, he should stop taking it away from us just to give it back again.

And he doesn't need it. We are still running a fiscal surplus at an annual rate HK$80 billion and, as the chart shows, we have now amassed free fiscal savings equivalent of HK$220,000 for every man, woman and child of our population. It's time to change course.

But I still think Ronnie Chan an unlikely champion of the cause. How might Enron's dismayed shareholders have thanked you, Sir, if you had devoted as much attention to their company's accounts as you now do to Hong Kong's?




This article is now closed to comments

Does anyone know what's happened to the $30 billion odd the brilliant FS put aside years ago for a universal health insurance scheme, because he couldn't think what else to do with a whopping surplus? Surprising the insurance industry has not been able to come up with ideas to get their hands on those funds as they do with the MPF.
Most of people's money goes into the pockets of the property tycoons and / or the banks by way of sky high mortgage payments on grossly inflated values. If you don't want to take the money away from people in the first place, then reduce the cost of residential housing and commercial rents. Government must stop colluding with the crooked property cartels, eliminate their influence in Exco and Legco, bring back rent control and take effective measures to ensure property prices are in line with people's salary incomes. The sky won't fall for everyone, only for a few parasitical rats.
Mr van der Kamp should have a look at the overwhelmingly convincing data that proves the causal link between progressive taxation and redistributive policies on the one hand, and income inequality levels on the other. Do we really have to explain to Mr van der Kamp that relatively low levels of income inequality in (for example) Sweden, Canada or Japan, and the relatively high levels of income inequality in places like the US, the UK or indeed Hong Kong are largely (not solely) the result of (long-term) government policies? Hard to believe that is necessary.

If we want to address the sharp and painful (for those at the bottom end of the distribution) inequality in income and other key areas (housing, education etc) in Hong Kong, the government would need to increase its spending on redistributive policies and/or increase the level of progressiveness in its taxation, for example by introducing a tax on dividends and capital gains, or by increasing top income tax rates.

Not tax less. We have a (limited) progressive taxation system. Taxing less will therefore also progressively benefit the top incomes, not the bottom ones.

And by the way, the point about employers trying to pay lower wages because of policies like electricity and housing subsidies that support low incomes . Yes, that effect exists. The answer is simple: a minimum wage. Which is one of the main reasons it was introduced. Done. Moving on.

What a silly column on this otherwise fine Sunday.
John Adams
I agree with johnyuan.
We certainly don't need a FS like Mr J Tsang who seems to have about as much imagination as monkey when it comes to using our fiscal surplus wisely.
And judging by the SCMP's opinion poll the other day almost 90% of HK people agree with that statement.
That $200 billion could have got all polluting vehicles off the streets and polluting ships out of the harbor, built more hospitals, universities, social welfare facilities, built state-of-the- art incinerators , and still have had money left over for more air traffic controllers ! ... and more, besides
ALL of those things would have directly benefited the lower-paid far better than the $ 6 K tea money hand-outs.
It seems Tsang -FS is trying to emulate Tsang- CE for the title "best-of-class" in the post-1997 most incompetent civil servants category of HK's tragic comedy show.
Tsang-CE at least limited the damage he did by doing almost nothing in his time.
Tsang-FS is going several steps worse by doing almost every possible stupid thing.
A comptroller would at least get the numbers correct.
And a real monkey would probably have more imagination
Hong Kong, a city, and merely with a population of 7 million doesn’t need a financial secretary on its payroll. New York City of 8 million has a comptroller whose job qualification is an accountant and whose job is to keep a record what has received and what has spent of city’s tax revenue. And the mayor is his boss. I don’t think many locals even know who their comptroller is. Hong Kong after the hangover, might want to streamline its government structure and get a comptroller whose royalty is not to UK before the hangover or Central China now but to his boss the Chief Executive. Administratively more efficient and financially less costly too. And CY Leung needs not to pretend to be the boss.


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