• Sat
  • Dec 20, 2014
  • Updated: 8:30pm
NewsHong Kong
FINANCE

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.

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This article is now closed to comments

chuchu59
For a guy who has managed to get practically all of his budget forecasts wrong and by a wide margin he cannot blame people for saying he is 'overly pessimistic'. So now he attaches importance to Task Force's findings to lend him support. Let me tell you TSANG, Economy begins at home. Keep a lid on the wastefulness of the civil service and you will already have trimmed your expenditure by 5-8%. Place into the civil servants' thick skulls that they have a role to play in spending wisely.
rpasea
JT is in way over his head. There are problems in govt. finances for sure and those revolve around excessive capital works spending and hoarding. Did I mention overpaid ministers and their flunky assistants?
keresearch
PS..his task force consisted of two tax experts, two professors and.....five civil servents ...how can he be taken seriously
keresearch
John - if, as you have done,. you have recurrent fixed cash infrastructure expenditure at 4 per cent of GDP and land revenue at 2.5 per cent, of course you get long term divergence. But don't squeeze the middle class and poor to build an Arts centre in Kowloon or a third runway for tourists on budget airlines to arrive,
keresearch
they will be budget airline passengers and tourists ...wherever their final destination - it makes no difference. Its a waste of our money with landing fees a fraction of their economic rate - just as we have build an Express Rail Line and the Macau Bridge with no mention of what we are charging
keresearch
yes..especially when you previous pessimism has built up an extra unintended surplus of USD 80 billion
rpasea
The third runway is to accommodate transit passengers who neither live here nor visit HK.
anotherguy
without understanding his financial model, it is not possible to judge whether he is right or wrong. too many people make frivolous comments without understanding things at a professional level. way too easy to comment someone is wrong without doing some homework.
ognevodd
Tsang faces typical retaliation against perceived "pessimism". Even highly trained professionals fall for this - it's easier to be overly optimistic and then just say "oops" when things go less rosy.
anotherguy
you don't even have a proper understanding what 80 billions mean. to you, it just means a lot of money. if you have 1 trillion revenue and 920billion in expenditure, the net revenue is 80billions which is just an 8%. Making an error of 8% using forecasting methods is way too easy even for professionals. so if professionals can't do it, are you saying you can do way better?

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