The madness at the heart of Hong Kong’s public spending
We are a developed economy, so why are we spending more and more on infrastructure at the expense of people’s livelihoods?
Our government is one of the richest in the world, thanks to its fiscal discipline. Most of our top officials think it’s a virtue. It’s actually become a vice. You want to know what is wrong with Hong Kong today, follow the money, in this case, public money.
The research unit of the Legislative Council has released a nifty study of the history of the government budget since the 1997 handover, right up to the current 2017-2018 budget. One of its conclusions is that what it calls the “fiscal landscape” is broadly unchanged, meaning the proportions of the sources of government revenue and spending have been relatively constant.
That’s generally true, but I would point out some anomalies.
As a share of total public spending, key areas of livelihood spending have either stayed relatively constant or actually shrunk, with the exception of social welfare. That’s good for the very poor, but if you are caught in low to middle income, it means you and your family can expect less and less support from the government.
Why? At the time of the handover, education took up 20 per cent of total annual spending; in the last financial year, it was just 16 per cent. In health care, spending has barely changed, from 12 per cent back in 1997-98 to 13 per cent last year. All this came during two decades of soaring medical and drug costs. Meanwhile, housing has gone from 10 per cent to just 6 per cent of total spending; we all know where that has got us with demand far outstripping supply.
But here is the one that really gets me: the share of spending on infrastructure has soared from just 10 per cent two decades ago to the current 18 per cent. Wow!
Manic infrastructure building and insufficient livelihood spending are characteristic of high growth, developing economies, because they have to prioritise. But we are a developed economy, so why are we spending more and more on infrastructure at the expense of people’s livelihoods?
Developed economies may impose austerity because their government coffers are running out of money. But our fiscal reserves stood at a record HK$936 billion last month, equivalent to almost two years of government expenditure.
In other words, we impose on ourselves – voluntarily – the worst outcomes of developed and developing economies. It’s time to get out of this madness.