Hong Kong’s finance chief has hinted he would keep splashing money in his upcoming budget in light of a “considerably high” surplus despite the provision in the Basic Law requiring the city to keep the budget commensurate with its GDP growth rate.
Paul Chan Mo-po said the Basic Law, Hong Kong’s mini-constitution, should not be viewed too rigidly and that he would seek to invest in the future instead of giving out “sweeteners” that could only “win plaudits in the short term”.
In a post on his official blog on Sunday, the financial secretary wrote that he expected the surplus for the current financial year to be “considerably high” owing mainly to unexpected land revenue.
He said that in the first eight months of the financial year ending November 30, 2017, the city recorded a cumulative year-to-date surplus of HK$57.2 billion (US$7.3 billion). That compared with the original estimate of HK$16.3 billion for the 2017-18 year.
Chan, who is consulting the public for the 2018-19 budget, said “how to make the best use of the surplus would be a most challenging task”.
Article 107 of the Basic Law states that Hong Kong “shall follow the principle of keeping expenditure within the limits of revenues in drawing up its budget, and strive to achieve a fiscal balance, avoid deficits and keep the budget commensurate with the growth rate of its gross domestic product”.
Critics have long complained the government is sitting on a massive pile of cash and saving up for a rainy day that never comes.
“I wish to stress that this provision should not be the straitjacket to limit our spending,” Chan wrote. “Certain flexibility is allowed. And it is most important that we are able to keep an overall fiscal balance over a period of time, and to avoid structural deficit.”
He cited official figures that recurrent spending in 2017-18 was estimated to reach HK$371 billion, up 41.4 per cent when compared with 2012-13.
“And that was far higher than the cumulative growth of nominal gross domestic products of 27.7 per cent over the same period of time,” he added.
But the financial secretary hastened to note there was a need for the government to stay fiscally sound in the event of adversity, like the recessions during the regional and global financial crises of the late 1990s and 2008.
Chan is to deliver the city’s budget on February 28, the first of the administration of Chief Executive Carrie Lam Cheng Yuet-ngor. In her campaign manifesto last year, Lam highlighted her “new fiscal philosophy” which, she said would wisely use fiscal surpluses for the community.
Chan’s predecessor, John Tsang Chun-wah, who managed the city’s finances from 2007 to early 2017, was regularly criticised for not sharing the wealth on a long-term basis and only handing out one-off sweeteners, such as tax rebates, or special allowances.