Carrie Lam vows to boost social policy spending; tighten controls over financial secretary

The chief executive hopeful said the Basic Law does not prohibit an annual fiscal deficit

PUBLISHED : Tuesday, 14 February, 2017, 2:50pm
UPDATED : Tuesday, 14 February, 2017, 11:24pm

The front runner in Hong Kong’s leadership race, Carrie Lam Cheng Yuet-ngor, has refused to commit to maintaining the government’s annual budget surplus, defying her arch-rival’s long-standing fiscal conservatism in a bid to push for her ambitious social policies.

At the start of the two-week nomination period yesterday, Lam took aim at John Tsang Chun-wah’s former powers as ­financial secretary, vowing to keep a tight rein on the post if elected. She even threatened to fire her future finance minister in case of disobedience.

Tsang, the popular underdog in the race, did not respond to Lam’s take on public finances, but said he was confident he would eventually win more votes under a secret ballot in the March election than initial nominations.

Lam, who announced on Monday she would spend an extra HK$5 billion a year on education and cut taxes for the first HK$2 million profit for all companies, questioned the approach to maintain budgetary surpluses when the financial reserves were standing at nearly HK$917 billion.

“While I will uphold a prudent approach to public finance, there is nowhere in the Basic Law that says there cannot be fiscal deficits,” Lam said, stressing the mini-constitution’s wording was that the government should “strive to” avoid such a situation.

On a radio show, she went into detail on what she thought had gone wrong in the relationship between the chief executive and the financial secretary.

“In theory, the chief executive [oversees the work] of the financial secretary.” she said. “In reality, when you pay attention to ordinances pertaining to monetary or financial policies, most power rests with the ­financial secretary, which I ­believe was to provide internal checks and balances.

“But under today’s accountability system, the chief executive is responsible for the whole SAR. Without monetary or financial capability he or she can hardly be held fully accountable to the HKSAR and central government.”

If she were to win the election, Lam said she “would not say, ‘these areas belong to the ­financial secretary, so I will keep my hands off ’. It is necessary for me to give advice and directions.

“If the financial secretary says, ‘this legislation is mine, I’m not going to listen to you’, there’s still a way out: accountability. Of course this would be an extreme step.”

Tsang did not respond to Lam’s concerns. In his platform unveiled earlier, Tsang proposed to move the Civil Service Bureau under the financial secretary’s purview, and reshuffle the current set-up to have a planning, lands and housing bureau and a works and transport bureau.

Asked if the power distribution had been unworkable for him, Tsang said: “You can’t say it’s unworkable, but [my proposal] will have a better effect [on resource management], as the expansion of civil service establishment is closely linked to government ­expenditure.”

Responding to Lam’s plans, Michael Tien Puk-sun, vice- ­chairman of the Legislative Council’s finance committee, said he did not believe Beijing – which is responsible for appointing the ­financial secretary – would prefer the chief executive to have the ­only say on fiscal matters.

Party chairwoman Regina Ip Lau Suk-yee and former High Court judge Woo Kwok-hing are also contesting the race.

While Lam said the government had failed to act on the business sector’s idea to give tax cuts to small firms, Tsang, who has proposed similar relief, said maintaining a low tax rate was a new international trend.

Yesterday, Lam also launched a veiled attack at outgoing Chief Executive Leung Chun-ying’s way of handling appointments to advisory bodies, criticising his decision to appoint Sophia Kao Ching-chi to oversee the handpicking process at the Central Policy Unit.

“The current administration has a special practice: to have a friend help make appointments,” Lam said, in a mocking tone.