Lawmakers’ questions on proposed Future Fund left unanswered
Operation of cash reserve plan still to be addressed, says financial services chief
Lawmakers were left in the dark yesterday on the purpose and function of a special fund which has been proposed to tackle possible fiscal problems caused by the city’s ageing population.
Details on the Future Fund, proposed to resolve the city’s possible structural deficits, will be the next task of the government’s economic advisers, the financial services minister told lawmakers today.
Secretary for Financial Services and the Treasury Chan Ka-Keung said he would discuss the purpose and operation of the Future Fund with the working group on long-term fiscal planning, which was set up in June last year.
His comment came in reply to lawmakers at the financial committee meeting who questioned whether the proposed fund could resolve the fiscal problems. The legislators also said they were unclear of how it would work.
The Future Fund, among a list of proposals recommended by the working group earlier last month, would comprise the existing Land Fund and some future fiscal surpluses. It would be locked for a period of time for more aggressive investments with higher returns, according to the working group’s report which does not clarify how the money would be spent.
“Can we use the fund as a seed money for setting up the retirement pension scheme?” asked unionist lawmaker Wong Kwok-hing.
“If it is used to pay for infrastructure, will part of the investment return be used to pay for the needs of the ageing population?” asked Democratic lawmaker Wu Chi-wai.
“I’m unconvinced of the future fund concept. Why do we have to set aside the money when we have already got the reserves?” asked committee chairwoman Starry Lee Wai-king.
Chan said the fund could be used to pay for the city’s infrastructure so that the government would not need to give up projects affecting people’s lives when it faces financial difficulties in future. “But it’s only a preliminary suggestion, we will discuss with the working group on how it would operate in future.”
But Chan said the money should not be used for recurrent expenditures as it would not be sustainable.
Permanent secretary for financial services and the treasury Elizabeth Tse Man-yee added that infrastructure also covers hospitals, elderly homes and environmental projects.
Working group member Jennifer Wong, a partner of accounting firm KPMG, said the future fund concept was borrowed from Australia. “Setting aside the money will prevent people from eyeing on it. The investment strategy can be less conservative as it would be for long-term investment,” she said.
The working group predicted in its report released early last month that Hong Kong may face a structural deficit in seven to 15 years if the government spends at the current pace and no policy is introduced to tackle the ageing problems. The reserves could then dry up in 20 years.
Earlier this month, the government’s fiscal advisers warned that Hong Kong could be facing a structural deficit of HK$1.54 trillion by 2041 if the city’s spending grows at the current pace and nothing is done to mitigate the impact of an ageing population.