Lesson in handouts proves a costly one

  • Hong Kong’s finance chief Paul Chan has hired an army of workers to arrange a cash pledge made to some people in March, but he is finding it hard going
PUBLISHED : Monday, 07 January, 2019, 9:53pm
UPDATED : Monday, 07 January, 2019, 10:18pm

When it comes to the latest handout, the government has tied itself in knots. Finance chief Paul Chan Mo-po has apologised for making people wait for the HK$4,000 handout, which was announced back in March.

The problem is that Chan needed to hire an army of accessors and a whole department after making qualification for the money so complicated for about 2.8 million people.

Administrative cost alone is estimated to hit a whopping HK$310 million, or 2.7 per cent of the HK$11.3 billion total. It’s instructive to compare it with the HK6,000 handout for all permanent residents in 2011, an exercise that administratively cost 0.5 per cent of the total.

How complicated? To qualify, you need to be 18 years or older and do not own property, do not receive any government allowances, and do not pay income tax.

But this government is so thoughtful: if you meet the first two criteria but still pay income tax AND are eligible for the tax breaks announced in the budget, you can claim the difference between HK$4,000 and your concessionary tax bill.

And, if you pay no income tax but live in your own property and receive less than HK$4,000 in rates waivers under the current budget, you can get back the difference as well. Makes your head spin, doesn’t it?

Of course, the government could make life easier for itself and not humiliate everyone by making them jump through hoops: why not give it to everyone like it did in 2011? Well, let’s try to put yourself in Chan’s shoes. Back when the budget was first announced, it was pointed out that 80 per cent of its HK$50 billion spending package would benefit the middle class, rather than the underprivileged.

Under pressure from across the political aisle, Chan announced the additional sweetener. But the handout was supposed to go only to the deserving; hence all the qualifications.

Of course, if Chan had listened to wiser voices from the start, he could have just handed out HK$3,000 to everyone, at a total cost of about HK$18 billion, which would have been slightly more than 10 per cent of the government’s surplus from last year. That would have been perfectly affordable and made everyone happy, or at least less grumpy.

The lesson should have been learned long ago: either don’t give cash handouts, or give them to everyone.