Balancing act appears on the cards for Hong Kong budget
With a healthy surplus at his disposal, Financial Secretary Paul Chan is being asked for more handouts by the public but fiscal prudence must come first
Managing public finance in a sophisticated and fast changing economy such as Hong Kong’s is no easy task. Managing public expectations on this front is no less difficult. With his second budget just a few weeks away, Financial Secretary Paul Chan Mo-po must be feeling the heat. On one hand, the government’s windfall surplus will give him more room to manoeuvre but, on the other, expectation has been raised so high that he cannot turn a deaf ear to people’s calls for more goodies.
The successive budget surpluses in recent years, HK$11.1 billion in 2016-17, have made the financial secretary’s job the envy of his world counterparts, many of whom are still struggling to balance the books.
Without divulging details, Chan confirmed that the government was heading towards another major surplus this year. As in the past, he has been bombarded with an array of demands from political parties and the community, including giving citizens a cash handout as in 2011. He said he would give the idea some thought, although he cautioned that it would cost a lot to do so.
The better-than-expected revenues this year, according to Chan, are attributed to land and property sales, an unstable source of income. It would be wrong for the government to assume that a bullish property market will prevail all the time.
Indeed, our robust finance belies the problems facing the city – a narrow tax base, spiralling public expenditure, widening wealth gap, a fast ageing population and a volatile economy in need of new growth.
The finance chief must therefore resist the temptation of delivering a giveaway budget as in the case of his predecessor, John Tsang Chun-wah. He should instead make good use of the surplus to invest in a better future. This means continuous spending on the innovation and research front, getting prepared for the burden and opportunities arising from our ageing population and addressing the imbalance between the haves and have nots in society.
Last year, Chan opted for a steady-as-it-goes approach for his first budget, which was also the last for the outgoing administration. Now that a new government is in power and another huge surplus is looming, the public is expected to be more demanding.
It is imperative for Chan to articulate long-term visions and strategies for the city to stay ahead in a competitive global environment. He is also under pressure to instil feel-good sentiments by dishing out sweeteners of all sorts. Whether he can satisfy an increasingly demanding public while adhering to fiscal prudence and lead Hong Kong to a brighter future will be a major test.