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Government functionaries walk out from the Central Government offices at Tamar. Photo: K.Y. Cheng

Sell off civil servants' flats and raise water rates for 'future fund', say advisers

Other suggestions in report on setting up 'future fund' savings scheme include raising water fees

The government should dispose of all its quarters for senior civil servants and raise water tariffs to ensure it has the resources to overcome unexpected financial difficulties, according to advisers.

These are among a number of proposals put forward by the Working Group on Long-Term Fiscal Planning yesterday on the establishment of a "future fund" savings scheme. The report also recommends raising money by using government buildings as underlying assets to support the issue of bonds, as well as selling government shares.

Dr Billy Mak Sui-choi from Baptist University's Department of Finance and Decision Sciences said the suggestions were normal commercial practices used to improve cash flow.

Mak said the government could use its reserves to cover a deficit, adding the administration should sell assets in a phased manner to maximise returns.

"If you want to sell the entire block of building in one go there may be only a few potential buyers, but if you divided it into several parts the final price may be better," he said.

The working group noted there would be an oversupply of residences for senior civil servants who joined before October in 1990, as the demand for these units gradually decreases. It was estimated that selling the nine sites and 220 units could raise HK$59 billion.

"Given the government's policy priority of increasing land supply for housing and other developments, it may be difficult to justify retaining some surplus under-utilised sites to generate revenue," the report said.

The report also revealed that, of the four government utilities, only the Marine Ferry Terminals have achieved a higher-than-target return, while waterworks, toll-tunnels and bridge and sewage services had all failed to meet the financial targets.

The report said in particular the Water Supplies Department should increase water tariffs, which have not been adjusted since 1995. Advisers considered a reasonable increase would not be a real burden on consumers as the extra cost could be offset by efforts to save water.

In times of serious financial distress, the working group said the government could consider selling its shares in the 14 enterprises it holds them in, such as the MTR, Airport Authority and Hong Kong Disneyland.

Louis Tse Ming-kwong, a director at VC Brokerage, agreed that issuing bonds was one option, but cautioned dividends had to be attractive to beat banks' interest rates. He added the government should sell its Disneyland shares as soon as possible while officials could still drive a bargain over the price

"How are you going to compete with Shanghai Disneyland when it opens?" Tse said.

A member of the working group, Jennifer Wong, said the government should consider a goods and services tax to broaden the tax base. She said: "With GST in place, the level of salaries tax and profit tax can be reduced. It is worth public discussion as long as there are measures protecting the low-income group from the new tax."

This article appeared in the South China Morning Post print edition as: Sell shares and flats for top civil servants: advisers
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