Opinion/ Comment

Granny stashes the cash under the mattress

Hong Kong’s fiscal surplus is expected to be in the range of HK$120 billion to HK$160 billion when the budget is announced on Wednesday. This is more than saving for a rainy day and there ought to be a rule on returning the surplus every year

Alex Lo

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Published: 2:30am, 26 Feb, 2018

Updated: 2:15am, 27 Feb, 2018

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Financial chief Paul Chan Mo-po. Photo: Edward Wong

Another budget year, another budget speech on Wednesday to justify the government’s embarrassment of riches. The final fiscal surplus is expected to be in the range of HK$120 billion to HK$160 billion.

Almost a year ago, Financial Secretary Paul Chan Mo-po projected a far more modest HK$16.3 billion. This is in line with the fine tradition of his predecessor, John Tsang Chun-wah, of vastly underestimating budget year after year for more than a decade. Total reserves are approaching HK$2 trillion. By now, it’s clear that the government is incapable or unwilling to project its budget accurately year by year and there are no signs that it will ever improve. As a result, the government has enriched itself but our society has not fully shared the benefits. Something must be done. But what?

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According to data compiled by the government and the International Monetary Fund, our current fiscal reserves amount to more than two years of total government expenditure while gross government debt is less than 0.1 per cent of GDP. There is saving for a rainy day; and then there is granny stashing all her cash under the mattress. This proverbial granny is about as qualified to run our budget as our past and current financial secretaries.

Despite the government’s structural surplus, officials have no rules on what to do with it. This is despite our bureaucrats’ pride in being rule-based in forming policies. The approach under Tsang, and now Chan, means that how, what and how much to give away is highly arbitrary, ranging from handing out thousands of dollars to each resident to – in an act of true insanity – subsidising the electricity bills of every household. And lowering property rates meant many wealthy landlords ended up saving millions.

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There ought to be a rule on returning the surplus annually; for example, give back less when it’s low and most when it’s high, like today. What to spend the surplus on will be subject to public debate and consultation, but the rule itself will at least stop the government’s dubious accumulation at the expense of the economy.

One good thing about our US dollar peg under a currency board is that it is rule-based, so we don’t have a monetary policy at the whim and mercy of bureaucrats. It’s about time we have some such rules for fiscal policy, since our bureaucrats have not operated it in a convincing or credible way.