Mind the gap: how Financial Secretary John Tsang has never got a budget projection right
Under the watch of former architecture student John Tsang Chun-wah, the gap between the government’s forecasts and reality concerning the budget deficit or surplus, has widened to HK$390 billion.
Since he became financial secretary in 2007, he has managed an unbroken record of never getting a single budget projection right.
As Tsang unveiled his new budget this morning, he updated his surplus projection for 2014-15 to be HK$63.8 billion, HK$54.7 billion higher than the original projection of HK$9.1 billion.
Tsang explained that the difference was a result of the latest estimate that government revenue will be HK$470.7 billion, HK$40.6 billion higher than the original forecast, mainly due to stamp duty revenue, which is $29.7 billion higher than the original estimate.
On the other hand, government expenditure will be HK$397.2 billion, HK$14 billion lower than the original estimate, he said.
Before Tsang rolled out the budget, the Institute of Certified Public Accountants predicted the government will post a HK$60 billion surplus for the fiscal year ending on March 31, while PricewaterhouseCoopers forecast HK$58.1 billion would be left over.
For 2015-16, Tsang estimated that the government will spend a total of HK$440.8 billion, 11 per cent more than that of last year and equivalent to 20.4 per cent of GDP.
Total government revenue is estimated to be HK$477.6 billion, giving an estimated surplus of HK$36.8 billion and taking the fiscal reserves to HK$856.3 billion by the end of March next year.
In the 2010-2011 budget, Tsang managed to turn an estimated HK$25 billion deficit into a buoyant HK$75 billion surplus, chalking up a sizable HK$100 billion black hole in the budget books.
The odds of guessing all six numbers for the Mark Six lottery might be higher than the likelihood of Tsang hitting his budget jackpot.
Experts say the government’s conservative approach, while prudent for medium to long-term fiscal planning, is backfiring. Hongkongers feel aggrieved that a big fat lai see packet stuffed with billions of Hong Kong dollars amassed over the years is not going directly into their pockets.
Curtis Ng from the Institute of Certified Public Accountants agreed that while the government was managing expectations, the sizable surplus of recent years was too large to ignore these days.
“At the end of the day, if we have too much surplus, society will expect the government to spend more,” he said. “With more information it might help.”
The British government’s method of managing expectations is to announce its fiscal position each month. There are few expectations; it is sitting on a budget deficit of £90 billion (HK$1 trillion) and a national debt of £1.4 trillion.
Tsang inherited a conservative approach to the city’s cash – and will still have you think the massive fiscal reserves will, like an incense stick, gradually burn away.
It has now been 10 years since the government racked up a deficit, following the Sars epidemic.
Audit giant Ernst & Young explains that unlike the government’s rigid yearly budget outlook that produces regular over-the-odds surpluses, analysts in the private sector normally make predictions once the fiscal year gets underway.
The accountants have a better view than Tsang, it seems, of Hong Kong’s fiscal crystal ball.