John Tsang's big problem is how to hide Hong Kong's cash
Financial Secretary John Tsang Chun-wah was up to his usual tricks with the budget yesterday. His overriding problem is how to hide the oodles of cash that flow into the government coffers. There was the usual "magic" when the budget surplus of HK$3.5 billion forecast last year turned into a surplus of HK$65 billion. For some reason, this appalling inability to get anywhere near the right figure is almost viewed with pride.
In the medium-term forecast that accompanied his 2009 budget, Tsang forecast fiscal reserves for 2012-13 of HK$401.2 billion. But this has ballooned to HK$734 billion, a difference of a mere 83 per cent. So it is with some amusement that we read in yesterday's budget: "We must maintain effective fiscal management …"
Hong Kong's public finances are out of control, and have been for years. This year, Tsang has been reduced to a not so subtle sleight of hand to try to hide some of Hong Kong's largesse. This he needs to do so as to avoid having to explain why he is taking as much as he does from us and why the government is unable to do anything about people living in cages.
So he indulges in a little scare-mongering towards the end of his speech, saying that the government needs to build up reserves to pay for looking after the elderly, HK$300 billion in capital projects and civil service pension obligations, which stand at HK$600 billion. The naive might be alarmed by this since the cash reserves amount to HK$734 billion.
"We may not be able to make ends meet," Tsang observes, although he concedes "we do not need to settle them in a lump sum within a short period …" But he is not comparing like with like. It makes no sense to compare the HK$600 billion pension liability, which comes due over a long period of time with the government's cash reserves. Rather, they should be compared to the accruals accounts. The government's website clearly states that it has reserves of HK$1.38 trillion, almost double its cash reserves.
Hong Kong has more funds than it knows what do with. It is therefore interesting to hear Tsang is setting up a working group to explore ways "to make more comprehensive planning for our public finances to cope with the ageing population and the government's other long-term commitments". If this results in a broad reappraisal of how the government organises its finances, then this is to be welcomed. But it is long overdue.
One thing the group should look at is the government's practice of paying cash for its huge infrastructure projects, which is practically unheard of elsewhere. It should issue bonds so payment for infrastructure that will last for a number of generations will be paid for by the present generation and also future generations that stand to benefit. However, by the time this working group has reported, and there has been a public consultation and the Legislative Council has scrutinised the proposals, it will probably be four to five years. By this time, Tsang and probably Chief Executive Leung Chun-ying will be gone. Meanwhile, Hong Kong will keep piling up surpluses.
We have often felt that senior government civil servants are somewhat removed from everyday life and possibly out of touch with the people of Hong Kong. This was reconfirmed yesterday towards the end of the financial secretary's post-budget press conference, which had wandered on to the topic of the middle class. At this point Tsang, speaking in Cantonese, said something along the lines, "I think I regard myself as middle class, and I know how Hong Kong's middle class feel." After a moment's pause of disbelief, his observation was greeted by peals of laughter. Good to see the press gets some things right.
One of our colleagues was surprised recently while walking through Pacific Place when he literally almost bumped into Thai Prime Minister Yingluck Shinawatra. She was accompanied by a number of officials and appeared to be on her way to the Shangri-La hotel. Our man was struck by the absence of a security presence. He was even more surprised when the party approached the lift and joined the queue behind the other waiting members of the public. They recognised the prime minister and let her through. But her low modus operandi was in stark contrast with visiting dignitaries from you know where.
