Hong Kong could afford to use its huge fiscal reserves to spend more on tackling long-term problems such as housing and health care, the pre-handover government's top adviser says.
Leo Goodstadt, head of the Central Policy Unit from 1989 to 1997, said the reserves were now extraordinarily high and he could not think of any other major economy holding as much as the Hong Kong government does. The administration had estimated that the reserves would reach HK$591.6 billion by March, equivalent to 23 months of government spending.
'With this huge fiscal reserve, there is no doubt we could afford resumption of the Home Ownership Scheme,' Goodstadt said. 'Could we [also] afford to have a social insurance scheme based on monthly contributions, like the Central Provident Fund implemented in Singapore?
'We could easily abolish the fees for schools operating under the Direct Subsidy Scheme and abolish the new charges introduced by the Hospital Authority in recent years.'
Goodstadt said in the 1950s when Hong Kong was very poor and faced a tough external trade environment in the wake of UN sanctions on China, the reserves target set by the colonial administration was 12 months of government spending.
'At the time, businessmen in Hong Kong were [telling the government it was] too prudent. Now the question is: are our fiscal reserves so big that we are embarrassed by them?' he asked.
