It is probably unrealistic to expect anyone in an official position in Hong Kong to listen to reasoned, constructive criticism. After all, this is the city where dozens of former officials line up to plead for leniency when a former government chief executive is convicted of misconduct in office. It is also the city where thousands of police officers assemble to condemn the conviction and sentencing of seven of their colleagues for assault.
Think for a moment about the implications of those actions. Apparently a roll-call of senior officials firmly believe that Donald Tsang’s years of highly paid government employment fully entitle him to accept a bit extra under the table. And the police rank and file are absolutely outraged that fellow coppers should be sent to jail for beating up a suspect.
In neither case did officials show any understanding that public servants, like Caesar’s wife, must be above suspicion. Indeed, in neither case did they display any belief at all that they are in office to serve the public. Instead the message they sent was one of hubris and entitlement; an attitude that they are in office not to serve the populace, but themselves, their political masters and the state. And in reality the state is nothing more than a convenient code for a narrow group of special interests.
This attitude was on display again last Wednesday when Financial Secretary Paul Chan Mo-po delivered his first budget speech. Chan paid lip-service to what he called “the principle of people-based governance” and blathered about improving people’s livelihood. But on even the most cursory examination, it quickly became clear that despite some tinkering around the edges, this was not a budget intended to help ordinary people. Rather it was aimed at benefiting an increasingly bloated government and its favoured business cronies.
Even though the government managed to run a surplus for the current fiscal year expected to hit a scarcely believable HK$93 billion (compared to an initial estimate for a surplus of HK$11 billion), there was no recognition that Hong Kong’s fiscal system is inflicting grievous damage on the city’s economy.
The government ran such a huge surplus largely because it collected over HK$60 billion more than it expected in land revenues – the eighth year running these have exceeded official forecasts.
And it collected such vast land revenues because despite endless official protestations to the contrary, the government operates a high-land-price policy, drip-feeding building land onto the market and conspiring with a small cartel of developers to keep property prices sky-high. The result is the most expensive housing and office space in the world, a combination that marginalises the poor and even the moderately well-off, and crowds out enterprise to the detriment of the local economy and local people’s livelihoods.
Most bizarre of all, despite accumulated excess reserves of some HK$1.5 trillion, the government insists it is facing a cash crunch. On Wednesday, Chan complained about Hong Kong’s “narrow tax base”, the wording officials use when they want to increase taxes. Yet like his predecessor, Chan continues to insist that because land revenues are a “capital” windfall, they cannot be used to fund ongoing spending such as education, health care or welfare for the elderly. Instead they can be used only for “capital” projects.
WATCH: Hong Kong budget 2017
This is self-serving nonsense of a high order. The government only collects land revenues as up-front lump-sum capital payments because it chooses to. It could equally well collect its land revenues in the form of ground rents, which would spread payments out over the full duration of leaseholds.
That way it would ensure itself steadily recurring revenues to fund ongoing expenditure. But all the evidence suggests officials have no interest in removing the artificial distinction they have imposed between capital and recurrent income. By ring-fencing land revenue and calling it capital, they can use it to fund ever more expensive and unnecessary infrastructure projects like the bridge to Zhuhai and the high speed rail link to Shenzhen. The result is a grotesquely skewed budget in which the government intends to spend HK$89 billion on infrastructure next year, more than it plans to spend on either education, health or social welfare. And the price of this distortion is an equally distorted economy where old folk fight over scraps of cardboard to sell for recycling, and the price of a typical shoebox apartment now costs the equivalent of 18 years of household income for the average family.
WATCH: Former Hong Kong chief executive Donald Tsang sentenced to 20 months in prison
It would scarcely be beyond the capabilities of Hong Kong’s public sector to change the city’s fiscal system so that it worked in favour of, rather than against, the ordinary people of the territory. But as officials from the most senior civil servants to the lowliest police constables made clear last week, they are not concerned with serving ordinary people, only themselves, their masters and their cronies. ■
Tom Holland is a former SCMP staffer who has been writing about Asian affairs for more than 20 years