Jake's View

Financial secretary in character as miser of the city’s cash hoard

I would bet any reader a bottle of Scotch that the final outcome of the city’s fiscal balance will not look anything like that red line; it will be much better.

PUBLISHED : Wednesday, 22 February, 2017, 6:01pm
UPDATED : Thursday, 23 February, 2017, 10:53am

“It has also been suggested that the fiscal reserves of over HK$900 billion is just too much...”

-- Financial secretary Paul Chan Mo-po, Budget speech

It must be a heart-warming experience for a financial secretary to launch a maiden budget speech from the position of a near record fiscal surplus, and absolute record fiscal savings. You can do favours for everyone.

And when people then suggest that fiscal reserves of more than HK$900 billion are just too much, you can say, “You’re right. Let’s make some fundamental changes here to keep our accounts in better balance. It’s not good always to stuff money away into a miser’s hoard.”

But there is something about the job that every time again turns ordinary people into exactly such misers when they are appointed to it.

For starters, this hoard is worth a good deal more than just the HK$914 billion of accumulated government surpluses. Add in the accumulated investment profits on this money over time, plus the deposits of other statutory bodies, and the total comes to HK$1.76 trillion at present.

Yet I have never known a financial secretary to concede the true value of these savings. They were all worried that the money would be taken out of their hands if they revealed how much there really is. Paul Chan is right in character.

Then you get the routine nature of the fiscal forecasts. You see it in the chart. Over the last 12 years, we only once had a fiscal deficit on the cash accounts. That was in 2009 after an international financial crisis that effectively bankrupted a number of countries.

In Hong Kong, we dipped briefly into the red and then bounced right back out. In fact if you measure by the fiscal year, it never happened at all. It was an inter-year deficit. Both fiscal 2008/09 and fiscal 2009/10 were actually in surplus.

Yet in every budget speech over those years of consistent surplus the same thing happened. The medium term forecast was based on the theory of a doomsday cloud overhead today, with the sky ready to fall in tomorrow. My friends, beware the threat of a coming fiscal deficit, the financial secretary would say.

And, sure enough, Paul Chan has been in character. Look at the red line in the chart. That’s where he says the fiscal balance will go over the coming five years, right back into deficit, right in character.

Now, I don’t deny that our revenues benefitted this year from a fiscal windfall, which may not be repeated. Nor do I deny that prudence is a virtue or claim that the assumptions behind the forecast are patently unsustainable.

But I look at the red line and I say, “Yup, done it again”, and if this newspaper approved of unlicensed gambling, I would bet any reader a bottle of Scotch that the final outcome will not look anything like that red line. It will be much better.

Sometimes a little dollop of faith in Hong Kong should be required of these career pessimists because, if it were, the concessions in the budget would not be just one-year hand-outs with only slight permanent changes to revenues and expenditures.

We might see real reform such as, for instance, a real reduction in tax rates rather than just a small widening of the income exemption bands.

Better yet, we might even decide that those enormous fiscal savings could be used as the backing of a universal health plan and wouldn’t the world just sit up and take notice if that were to happen. It would be a world first, a pioneering achievement for Hong Kong.

But, no, folks, Paul Chan is not the man to do anything like it. He has made that clear.