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In his weekly blog yesterday, John denied any "sudden change in standpoint". There was still a need for the government to "live within its means", he said. Photo: Edward Wong

City's finances are still safe with me, says John Tsang

Financial secretary defends spending billions on city's new housing reserve

John Tsang

Financial Secretary John Tsang Chun-wah has dismissed concerns his decision to pump billions of dollars into a "housing reserve" goes against his commitment to fiscal prudence.

Long an advocate of restraint in spending despite healthy surpluses and vast fiscal reserves, Tsang raised eyebrows earlier this month by announcing that future government investment income - some HK$27 billion in the first year alone - would go to the new reserve.

In his weekly blog yesterday, he denied any "sudden change in standpoint". There was still a need for the government to "live within its means", he said.

The new reserve is intended to help the Housing Authority meet the government's goal of building 290,000 public flats in the next decade.
"As financial secretary for so many years, I still believe the government requires financial discipline," he said, pointing to other governments plunged into crisis by debt.

"[This] has convinced me further that fiscal prudence is not only an adornment to the account, but that its impacts can be extensive," he wrote.

The new reserve is intended to help the Housing Authority meet the government's goal of building 290,000 public flats in the next decade.

The authority was traditionally self-financing, but has struggled with rising construction costs and growing demand.

"Our financial situation is relatively healthy, the conditions are right to make early financial planning for a number of important public policies," Tsang said.

And Tsang said a prediction last week that the city would enjoy surpluses in the last three years of his term was based not on "personal conjecture" but public budget projections.

He said the improved prediction for 2015/16 was due to a reduction in expected health care expenses under a proposed private insurance scheme.

"We had expected to spend HK$50 billion on health care financing … but according to the recently released health care plan, expenses next year should be lower than expected … changing projections for the balance of payments," Tsang said.

Government departments must still cut spending by 2 per cent over the next three years, he added.

As recently as his budget in March, Tsang warned that a structural deficit would emerge in seven to 15 years.

This article appeared in the South China Morning Post print edition as: Your money is still safe with me: John Tsang
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