Jake's View | Time to put an end to the squandering

The finance chief has denied any intention to underestimate government revenue after a HK$40 billion surplus was recorded for the first three quarters of the 2012-13 financial year instead of the deficit he had earlier estimated.
SCMP, Feb 4

My colleague, Tom Holland, wrote this one up in his column yesterday and I agree with him on every point he made except that I think he underdid his grilling of our financial secretary, John Tsang Chun-wah.

The surplus figure we should be looking at is HK$54 billion, not HK$40 billion. The difficulty with these fiscal accounts is that revenue accrues much more unevenly than expenditures so that the fiscal balance swings up and down considerably from one season to another.

The best way of looking at the trend is to calculate a 12-month rolling total. This eliminates the seasonality and, as the first chart shows, gives you a sudden jump to a HK$54 billion surplus for the 12 months to December. Over the last two months of the year revenues swung sharply up and expenditure swung down.

There are indications, however, that the government is beginning to think again about its consistent surpluses. The clue comes from the accruals accounts, which are compiled along with the straight cash accounts and portray the government's operations more as a private company would do.