Carrie Lam prepared to reject previous government’s long-term fiscal strategy for Hong Kong
Chief executive also witnesses signing of deal for more cooperation between her government’s trade body and its Thai counterpart
Chief Executive Carrie Lam Cheng Yuet-ngor on Friday said she was prepared to reject the long-term fiscal strategy for Hong Kong mapped out by the previous government as part of her new approach to make better use of the city’s massive surpluses.
The city’s leader said she was willing to revisit the fiscally prudent assumptions and recommendations of an expert committee convened by her former election rival and ex-finance minister John Tsang Chun-wah, which had warned that the city’s reserves would dry up in 20 years.
Making better use of the surpluses could include spending more generously on the elderly such as on ways to allow them to live in their own homes, rather than having them incur higher hospital bills.
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“It’s not a question of overturning the conclusion of the report,” Lam said, referring to the document submitted back in 2014 by the government’s Working Group on Long-Term Fiscal Planning.
“But that report is a piece of work on projections, based on certain assumptions. And I’m just telling you that those assumptions could be changed with a change in policy.”
The chief executive was speaking in Bangkok as she wrapped up a three-day trip to Singapore and Thailand. On Thursday, she backed an assertion by the city’s former central bank chief that the “miserly” fiscal policy of the past decade should be abandoned even if increased spending led to budget deficits.
Lam reiterated on Friday her determination to ramp up public spending, contrasting sharply with the conservative approach of the working group set up by Tsang in 2013. That group advised the government to tighten spending in anticipation of the first structural deficit emerging by 2022.
“For example, if we are willing to spend more, to invest more, then there is a very good chance that Hong Kong’s GDP growth will be a higher figure. And with a higher figure, then we probably will be able to collect more revenue,” she said.
“If we are prepared to spend more on preventive care, on primary health care, on community and home-based care for the elderly, then we could reduce the rate of hospitalisation. So the assumption that we will need to double or triple hospital expenditure for care of the elderly may not be true.”
Lam also noted that the report was drafted against the backdrop of slow economic growth, but that could change if the government could take advantage of national trade initiatives such as developing the “Greater Bay Area” or the central government’s “Belt and Road” plan.
The working group was tasked with exploring more comprehensive planning for the city’s finances to cope with the ageing population and the government’s other long-term commitments.
It suggested saving money for rainy days and tightening public spending, setting up a future fund and reviewing the tax system.
The future fund, made up of a HK$220 billion land fund and part of future government surpluses, was set up to hedge against budget deficits.
Lam also dismissed speculation that former Hong Kong Monetary Authority chief Joseph Yam Chi-kwong, now one of her top advisers, had called for a less “miserly” approach to pave the way for her to increase government spending and to sideline Financial Secretary Paul Chan Mo-po, who was not considered to be her first choice to helm the city’s finances.
“There’s absolutely no truth that this was a well-engineered way to pave the way for me to spend money or to sideline the financial secretary,” she said.
Meanwhile, the Hong Kong Trade Development Council (TDC) signed an agreement on Friday pledging to deepen cooperation with Thailand’s Department of International Trade Promotion. The deal was witnessed by Lam and TDC chairman Vincent Lo Hong-sui.
The letter of intent was aimed at enhancing trade promotion, fostering start-ups and grooming young entrepreneurs.