Hong Kong can't afford officials' neurotic prudence in public spending

Mike Rowse calls on officials to use surpluses to address social needs

PUBLISHED : Monday, 06 January, 2014, 3:28am
UPDATED : Monday, 06 January, 2014, 5:40am

"The sky is falling" is a famous catchphrase from an old folk tale. A young chick becomes convinced that disaster is imminent when an acorn falls on his head. Chicken Little, as he is known, persuades other creatures to panic with him quite unnecessarily.

The moral of the story is we should not exaggerate danger; rather, we should assess situations calmly, address them appropriately and generally face up to them with courage.

I sometimes wonder if the spirit of Chicken Little has not lingered rather too long in our community after the end of the colonial era.

For the entire century and a half of British administration of Hong Kong, there was a legitimate question mark over the territory's future. This feeling of uncertainty grew stronger after the second world war and the civil war in China.

The British were particularly keen not to lumber themselves with policies here that might possibly lead back to a drain on their country's own resources.

This spirit affected our city in a number of ways, particularly in the areas of social policy and public financing. It became an article of faith within the government that it should not take on ideas that would carry with them enduring financial implications. In short, one-off or capital expenditures were fine, recurrent commitments would be disastrous.

I am not trying to rewrite history here, or downplay the fact that prudent management of public finances has served Hong Kong well over the years and left us in an enviable position.

But the situation has changed fundamentally since July 1, 1997, while our attitudes have not kept pace. The resumption by China of the exercise of sovereignty over Hong Kong has paid off the debt to history and stopped the clock.

We are now an integral part of China. The uncertainties that lay ahead are no longer unique to Hong Kong's special situation; they are essentially the same as those faced by citizens all over the world.

So while we should continue to be prudent in the way we spend public money, we should also plan for the long term. Instead of clocking up massive surpluses year after year and squirreling them away indefinitely, we should proceed on the basis of broadly breaking even over the course of the whole economic cycle, by running up both deficits and surpluses as we ride out short-term fluctuations.

To its credit, the Leung administration has recognised this in the field of housing and is drawing up proposals to increase the stock and improve the quality, plans that run for decades ahead. The contrast between this approach and the frantic zigzagging of the Tung Chee-hwa and Donald Tsang Yam-kuen eras are striking.

We now need to bring this approach into other areas of social policy. For the elderly, why can't we plan for and implement a proper universal pension scheme? Must we remain stuck forever with the dreadful Mandatory Provident Fund, which is little more than social welfare for the financial services sector?

On health, why did we cut back earlier this century on the number of hospital beds? Why do we leave some families on the brink of penury by refusing to fully meet the costs of treatment for those with chronic illnesses?

There are critical and urgent issues to be tackled in the fields of poverty alleviation and the environment also, and we have the resources to do so.

One does not need to agree with everything Leo Goodstadt writes in his recent book, Poverty in the Midst of Affluence, to realise that what we must do first is shrug off this psychological burden we have been carrying for too long.

Stop panicking, guys: the sky is not falling.

Mike Rowse is managing director of Stanton Chase International and an adjunct professor at the Chinese University of Hong Kong. mike@rowse.com.hk