Task force findings out today will justify gloomy budget, says John Tsang

PUBLISHED : Monday, 03 March, 2014, 5:17am
UPDATED : Monday, 03 March, 2014, 8:37am

The findings of a government task force to be released today will justify the gloomy forecasts made about the city's public finances in the budget last week, according to Financial Secretary John Tsang Chun-wah.

Delivering the budget, Tsang said the city's reserves, forecast to rise to HK$745.9 billion, risked being wiped out as outlays grew at a faster pace than revenue.

Citing dire warnings from economists advising him on long-term policy, Tsang had said: "[If] we take effective actions, we can prevent the projected results from surfacing and avoid subjecting future generations to irreversible fiscal plight."

He scrapped a HK$1,800 electricity subsidy in place since 2008, cut the rent-free period for public-housing tenants from two months to one and offered a property rate waiver for two quarters, rather than the full year

Following the budget some politicians and economists criticised Tsang's pessimism, while a poll carried out by the University of Hong Kong found it to be the most unpopular budget for more than a decade.

Writing on his blog yesterday, Tsang said he was aware there was scepticism about the findings of the working group on long-term fiscal planning.

"Some have expressed doubts about the findings of the taskforce. They wonder, for example, why the taskforce is overly pessimistic about the economy in the future," Tsang wrote.

Critics had said the task force had skewed its findings by its choice of base year and that it had made long-term forecasts without a solid basis, according to Tsang.

"If those [critics] listen to the task force's analysis, they will likely change their mind," Tsang wrote on his blog.

Tsang shed some light on the findings of the task force when he delivered the budget. He cited the task force's research when warning that years of surplus could turn into deficit within seven years if spending on health, education and welfare continued to grow as it recently had. He said those outlays would push up government spending at a rate of 7.5 per cent a year.

The task force forecast government revenue to grow at a rate of 4.5 per cent a year.

People Power lawmaker Albert Chan Wai-yip said that Tsang's fiscal planning had shown he was "either incompetent or dishonest".

He said on RTHK's Letter to Hong Kong that Tsang had estimated a total deficit of HK$81.7 billion over the past five years when the city had recorded an accumulated surplus of HK$251.4 billion.

The nine-member task force was set up in June. It was charged with finding ways to ensure the city's public finances could cope with an ageing population and other long-term commitments.