• Tue
  • Jul 29, 2014
  • Updated: 7:54pm
My Take
PUBLISHED : Wednesday, 22 January, 2014, 4:02am
UPDATED : Wednesday, 22 January, 2014, 4:02am

Finance chief John Tsang clueless when it comes to budget forecasts

If finance chief John Tsang Chun-wah disagrees so deeply with his boss, he should do the honorable thing and resign. But instead, he has made snide remarks about the new anti-poverty funding committed in Leung Chun-ying's latest policy address, and sent one of his lackeys to speak off record to the media to distance himself from Leung ahead of his budget release next month. Talk about gutless!

You may or may not agree with Leung's programmes for the poor and grass roots, which is expected to add between HK$10 billion and HK$20 billion a year to the government's annual spending. But it's hard to take Tsang's warnings seriously other than as a pitiable attempt to ride a middle-class backlash against the poor. He claims in his blog we may be able to afford the extra spending on welfare now, but that it won't be the case for long.

"The day when the budget turns into deficit and fiscal reserves are used up will not be in the distant future," he wrote, "though not while the current administration is still in office. I will spare no effort to maintain a budget surplus in my remaining term to save more and fight for more time to tackle these structural problems."

Since his appointment in 2007, Tsang has never managed to produce a single accurate budget forecast. If he can't do it from year to year, it's really pointless for him to pontificate on what may happen fiscally after 2017, when Leung's current term ends. Here is a man who is singlehandedly most responsible for giving away depleting, one-off sweeteners like electricity-bill subsidies and HK$6,000 to every permanent resident, including our tycoons. Such handouts in the past five years add up to HK$200 billion, enough to cover 10 to 20 years of the new spending on low-income groups. But now, in off-record briefings, Tsang's lackey claims his boss "has all along disagreed with handing out too many one-off sweeteners". Really?

At least Leung has a target for helping the poor; Tsang's one-off sweeteners are nothing but wasteful. They show a man who has no idea how to run public finances other than the blind accumulation of surpluses, which now amount to a ridiculous HK$1.5 trillion, money that has been taken out of the economy for the proverbial rainy day.

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whymak
Mr. Lo, I urge you not to start a John Tsang Bashing Club.
Although I agree with you on wasteful handouts, I take issue with your criticism of HK budget forecasts, which inherently have a high volatility due to our sources of government revenues.
If you think you can predict the month by month stock market performance for the next 5 months, then go ahead and do a HK budget forecast.
Government revenues have 2 main categories, Total Operating & Total Capital Revenues. In $HK million, the figures for the latter during last 5 years 2009-2013 are 35,077, 55,582, 76,681, 98,302, 97,544. Can you give me the rate of increase with any level of confidence? The biggest line item is Land Premium. Here are the numbers: 16,936, 39,632, 65,545, 84,644, 69,563. Is there any sign of a trend?
Stamp Duty under operating income is as large as Salary Tax and fares the worst in volatility in this category: 32,162, 42,383, 51,005, 44,356, 42,880. This is almost flat with 16% standard error!
Total operating portion may seem more predictable, many items aren't. Though salary tax - 2nd largest line item of category - varies slightly with business cycle because this is a "fixed cost" from employees' wages, the largest item, Profits Tax, fluctuates wildly.
Any attempt at regression analysis for longer time series as basis for budget forecast is likely to be far off the mark.

321manu
Not as simple as one side being right and one side being wrong here. CY is on the side of angels here, and one certainly can't be faulted for trying to assist the most disadvantaged of society.
On the other hand, a desire to avoid structural deficits should not be scoffed at. Many cautionary tales within China now of local precincts running up ginormous deficits, with relatively few levers for those local governments to reverse the trend, let alone dig themselves out of their holes. Fortunately, HK is currently is a much better position than those mainland precincts.
Mr. Lo makes a fair point that social programs still need to be fiscally responsible, and the HK6000 for every head was a legitimate example of government waste. But this is also why 1C2S is needed....HK doesn't want to become just another Chinese city, with all of the unpleasant accoutrements.
daily
Good article and right on the point about this dim-wit Tsang..........I always thought before that Donald Tsang was the most incompetent government official but it seems that this Tsang has taken the title from him............If you are reading this John Tsang, you should do the righteous thing and resign now before more eggs are aimed at you.
lbsaw
Every year we read the same comments about the shortcomings of the government budget and the ever neglected middle class - the class of people who barely benefits from any relief measures but the one class that consistently contribute to annual income taxes. The failings in the government is not about what freebies they will offer to this middle class but what has and will the government do to make their contributions put to better use and their living standard better in the city. Cleaner air, better education for their children, more green areas for children to run and play, ensuring a safe and low crime rate, are all key performing indicators that the government should deliver. The civil servants should not be complacent and be reminded they are employed to serve the residents of Hongkong, who are their real paymaster and employer.
pragmatist
20 yr prediction in this age of uncertainty and unpredictable china? Oscars for this financial entertainment, please.
sammckhk
Twang should resign and stop undermining CY. I'm sure all his developer pals will look after him for the rest of his life after all he and turdus minimus have done for them.
pslhk
Slowed-down in winter vacation
AL my favorite columnist
understandably needs time
to pick up speed
-
Resource allocation and income distribution
are essential economic questions
not to be dismissed spinally
by subjective preferences
-
AL doesn’t have any argument
for his opinionated reiteration of yesterday’s report
“Middle-class backlash may stop sweeteners”
-
Franklin Lam is right about HK’s continued strength to date
against general decline of developed economies
but what has worked hitherto may not in the future
-
HK has lost the economic strength / degree of independence
that it once enjoyed as the world top producers of toys, garments etc
-
The key now is connectivity with the consequences of
marginalization based on comparative advantage
-
Hk’s tourist prospects are restricted in scope and depth (JvdK Jan16)
A runway-less Narita in western harbor
may prove less useful than a white rhino
-
Why plan HK like it’s a besieged city
and face the dire consequences envisaged by John Tseng?
-
For sustainable development
the question is how best HK may merge with China
Under 1C2C we should leverage the market
to attract talents from China and the world
to build a strong HK with its own real strengths
and to encourage the needy and out-competed in our population
to consider benefits in the “socialist” system across the border
-
HK in PRD, China Asia the World
is like San Francesco in Bay Area CA USA
and not pre 1989 West Berlin
Byebye
Thanks Mr Alex Lo. I can't help but think very soon "the poor would be told to eat cake", like Marie Antoinette ~ "Qu'ils mangent de la brioche" - actually she asked the poor to eat buns. Perhaps for the poor Hkers, we may have to settle for pineapple buns 菠蘿包.
pragmatist
exit, voice, or loyalty - which one you are choosing?
Byebye
@ pragmatist - for the time being I have to imagine the pineapple buns are made by Gordon Ramsey, a famous Michelin chef from Great Britain.

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