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  • Jul 12, 2014
  • Updated: 11:10am
CY Leung policy address 2014
NewsHong Kong
POLITICS

'Hong Kong could run out of money within 20 years', warns John Tsang ahead of budget

Financial chief says surpluses will not last forever, days after chief executive's welfare splurge

PUBLISHED : Monday, 20 January, 2014, 5:09am
UPDATED : Monday, 20 January, 2014, 4:46pm

Financial Secretary John Tsang Chun-wah warned yesterday that fears public spending was rising too fast were "not without reason" - doing little to ease talk of a split with Chief Executive Leung Chun-ying.

Leung used his policy address last week to announce a huge increase in recurrent spending, much of it on welfare, and insisted that the government could afford the bill of up to HK$20 billion per year. Writing on his blog yesterday, Tsang (pictured) said that while the government could afford the cost for the foreseeable future, the day would come when surpluses turned to deficits.

But one of Asia's richest men, Sun Hung Kai Properties co-chairman Thomas Kwok Ping-kwong, said the government "deserves much praise" for its poverty alleviation plans.

In his post, Tsang warned that recurrent spending, once implemented, could be difficult to cut, and said spending could snowball if factors such as inflation and a growing number of beneficiaries were taken into account.

Tsang wrote that "the day when the budget turns into deficit and fiscal reserves are used up will not be in the distant future, though not while the current administration is still in office [its term runs until 2017]".

"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," he wrote.

Talk of a split between Leung and Tsang arose on Friday, when Leung's No2, Chief Secretary Carrie Lam Cheng Yuet-ngor, said extra spending in the policy speech would cost half the HK$20 billion Tsang claimed.

Tsang announces his budget next month, and is expected to warn that the city's fiscal reserves risk drying up in 20 years due to costs associated with the ageing population. His comments will be based on the findings of a team of economists.

Tsang warned on his blog last month: "One day we will have to deploy our reserves to maintain our public expenditure. And eventually, reserves will be used up." He said revenue from taxes might have to rise.

The government's spending, including an allowance for low-income working families, won praise from tycoon Kwok.

"The government has indeed done a good job in helping the poor and it encourages people to work," said Kwok, who served on the commission that set the city's first minimum wage at HK$28 in 2010. "I wouldn't say it is welfarism; the government has a responsibility to help the poor and Hong Kong is financially sound."

On the government's pledge to bring 470,000 public and private homes on line in the next decade, Kwok said a clear target would help market players make decisions, and reduce the risk of big price swings. He said a pilot arbitration scheme for premiums paid by developers for change of land use would help provide an extra 4,000 to 5,000 flats a year.

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This article is now closed to comments

amunro
This guy has got things wrong and cried wolf for years. Now he is going against what his boss is saying on welfare and continuing to be overly pessimistic. Time for CY to dump him - very few would be upset if he did.
johnyuan
To amu....
.
I don't think CY Leung has the liberty to dump the FS. John Tsang is de facto the head of the civil servant as far as looking after their pension goes. Leung would be further dropping stones on his toes if he does so. CY Leung can't even ask John Tsang to shut up.
Deal or No Deal
Yet another thoughtless comment from Nostradamus. If he is so forward thinking, Hong Kong wouldn't be in such mess. Another egg in the face to wake him up....maybe an ostrich's egg???
pragmatist
You can see 20 years ahead really? You gotta be kidding and have to be so naive in making predictions that far.
Do you know anyone who made a prediction for 20 years and turned out to be correct?
anthonygmail
The only reason Johnny is still serving as FS is because he (like his ex-boss Donald) is a servant of the tycoon class. He is completely out of touch with HK society in general and his only claim to greatness is that he has generated surpluses (when in fact any monkey could, given HK's several years of soaring revenues from land/property transactions).
The best thing that can happen to HK is to have Johnny come back with some leg pain and retire.
John Adams
I offer to knee-cap him if someone will provide a gun
johnyuan
To John,
.
I don’t know what a knee-cap job is. But I will get out of your way if a gun is involved. When that happens, John Tsang most likely is the first one to have a knee-cap job done to an alumni from Kennedy School of Government, Harvard University. What a case study and what a waste. I mean a place at the school.
mh0908
I don't like this policy but John Tsang can always revisit GST to help fill the gap should the bottom line turns red. Furthermore, taxing luxury goods in return for more programs for the middle class (the tax paying 1.5 million in Hong Kong) will always be popular politics. Not sound politics but at least a popular one. Whether we like it or not, popular politics will eventually drive Hong Kong into a welfare state, it is indeed a slippery slope.
keresearch
Operating (recurrent) revenue has exceeded operating (recurrent) expenses cumulatively by almost HKD 100 billion since 2006 according to the Government's full financial accounts to March 2013.
chuchu59
Nobody likes GST but this is a fair way of raising revenue. If expenditure cannot be contained and other taxes cannot be raised GST needs to be revisited but only after heavy consultation with the public.

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