Banking on change: Five things to consider ahead of Paul Chan’s maiden Hong Kong budget
Equipped with a healthy surplus, CY Leung’s administration must try to retain its legacy while giving the city’s next leader flexibility
A sunset budget for CY Leung’s administration
Paul Chan Mo-po will on Wednesday hand down the last budget for the administration of Chief Executive Leung Chun-ying, whose term expires in June. But at the same time, its validity will last through to the end of the financial year next March – nine months after the new chief executive has stepped into the job. All eyes will be on how Leung’s administration strikes a balance between retaining its legacy on housing development and social welfare, and providing his successor some flexibility.
Watch: Why the Hong Kong government has so much money saved up
A make or break moment for Paul Chan
As Paul Chan steps up to deliver his budget to the Legislative Council, he is likely to ask himself whether this moment will end up being his first and last political apex.
Chan was the city’s development secretary until he was suddenly thrown into the role of financial secretary following John Tsang Chun-wah’s resignation to run for the city’s top job.
Chan’s performance will be closely watched by all chief executive candidates, especially front runner Carrie Lam Cheng Yuet-ngor, who has praised Chan as a hardworking official.
Would Leung’s successor endorse the budget?
In a recent blog post, Chan said the budget would provide spending “wherever necessary”. The ambiguous statement provided few clues as to whether he planned to adopt either Lam or Tsang’s approach to fiscal management.
Lam has outlined an ambitious spending model for social policies, which could come at the cost of short-term budgetary deficits.
Tsang, meanwhile, is known for his economic conservatism and for stockpiling handsome fiscal reserves. But he has also faced criticism for spending too little on the city’s underprivileged and for widening the wealth gap over the past decade.
Money in the bank
Initially, Tsang forecast a surplus of HK$11 billion for the 2016-17 financial year. The estimate, however, was quickly overtaken as the city’s cumulative surplus reached HK$65.4 billion by the end of December – with reserves totalling HK$908.3 billion.
Major accounting firms and analysts have since forecast a 2016-17 surplus of between HK$70 billion and HK$85 billion. The government’s handsome bank balance is thanks largely to higher-than-expected land sales and stamp duty revenue, according to a source familiar with the budget.
The final surplus will be disclosed in Chan’s speech on Wednesday, and will set the tone for ongoing discussions regarding Hong Kong’s fiscal philosophy.
How sweet will the budget be for Hongkongers?
In recent budgets, the media has focused on the number of one-off giveaways, short-term stimulus measures or sweeteners for the city’s grassroots and middle classes.
From rate reductions for homeowners and rental waivers for public housing tenants, to medical care for the elderly and reduced electricity bills – the hand-outs in recent years have been wide-ranging.
But despite the higher-than-expected fiscal surplus, the public should not expect an equally as large relief package. In fact, the package is likely to be “more or less the same” as last year.
Hongkongers can expect salaries tax rebates aimed at boosting consumer spending and the city’s wider economy, but waivers for public housing rents and subsidies on electricity tariffs are unlikely.