NOTHING SO UNNERVES the Hong Kong Government as protesters on the streets. Ever since the 1967 riots saw seething mainland cultural revolution politics spill across the border, containment has become an obsession. Absorbing the great immigrant tide was to be achieved through the three pillars of education, housing and welfare. For new arrivals the promise was of a helping hand in return for playing by the Hong Kong rules.
This year something changed. Call it a souring of the Hong Kong dream, but after three decades of rising living standards, protesters took to the streets - this time, boiling grassroots anger was less about high-minded political principles than anger at bad economics. Officials were stunned, and talk is of a new deal for those who cannot make ends meet in the SAR's struggling post-industrial economy.
Government circles are abuzz with talk of income inequality and its malign effects. Senior advisers to Chief Executive Tung Chee-hwa have quietly spoken about the possibility of introducing a maximum five-day week. Even the past heresy of a minimum wage has slipped back on to the agenda. This October's policy address is being billed as big on welfare, with promised redistributive measures to help those caught in the low-wage, low-prospects trap.
This comes as the free-market-leaning Financial Secretary, Donald Tsang Yam-kuen, continues to push for higher government fees and charges and is laying the groundwork for an arguably regressive consumption tax to broaden government revenue and lessen its dependence on property income. Last week he ruled out a minimum wage and said direct cash payments were a better way of helping the needy.
The new 'welfare' agenda represents an instinctive reaction from Mr Tung, who seems stunned by dissolving popular support. Reformers who had hoped to push the SAR away from Singapore-style paternalism sense another foot on the road to subsidy-laden serfdom. While the measures to be taken remain undecided, experience elsewhere suggests that once introduced they will be almost impossible to roll back.
There can be no doubt that Mr Tung has the means to make good on his intentions. Despite Mr Tsang's worry that recurrent tax income is insufficient to fund spending commitments, fiscal reserves of $444 billion, bolstered by hefty Tracker Fund profits, leave plenty of scope for largesse.