Response to 2009/10 Budget
The Honourable John Tsang Chun-wah, JP
Financial Secretary
Financial Secretary's Office
Government Secretariat
5/F, Central Government Offices, Main Wing
Lower Albert Road
Central
Hong Kong
14 April 2009
Dear Mr Tsang,
Response to 2009/10 Budget
We are writing to give our comments on your 2009/10 Budget proposals.
Overall, we feel that the specific proposals did not match the rhetoric of your speech nor the gravity of the crisis which has come to Hong Kong. The sentiments of the Budget - job creation, increasing competitiveness, and helping those citizens with new or added burdens - are surely laudable. But the specific measures did not deliver.
Fiscal stance too cautious. Hong Kong's reserves position is very strong. There was certainly room for a larger fiscal stimulus than the HK$39 billion planned. This is deficit, representing 2.4% of GDP, is equivalent to only 9% of the expected balance of fiscal reserves by March 2010. While we would not advocate spending all the reserves, the Budget takes an absurdly cautious stance compared with those of the leading western economies.
Stimulus to demand ineffective. Not only is the planned deficit too small, it is qualitatively inappropriate to perform its intended objective of stimulating demand. The bulk of the deficit is via the Capital Works Account, i.e. spending on infrastructure, which is inefficient in terms of jobs created per dollar spent. Operating expenditure, which would be more effective in this sense, is actually planned to reduce. The 50% tax reduction will also be ineffective since taxpayers, who are mostly of middle income or above, do not need to spend their windfall and will tend to save it.
Too little spent on social improvement. Many of the numerous social initiatives listed in the Budget are in the right direction, but conceived on too small and piecemeal a scale. For example, the HK$37 million funding to residential care homes to take care of infirm elderly and HK$55 million for 650 additional subsidised places are welcome, but are completely inadequate to address the scale of the need. A major strategic review - with ultimately funding in the billions - is needed to establish facilities sufficient to accommodate our ageing society. Homes for the elderly also create employment, on a permanent basis.
Insufficient help for the worse-off. We were especially disappointed that so little was done to help the less fortunate in our society. The best way to stimulate spending in the economy is to give money to poor people - since they will be the most ready to spend it, and will tend to spend it in local outlets. These are the people in greatest need. And the Government has the money to give. We suggested introducing a temporary unemployment benefit for workers previously earning low incomes. We also suggested introduction of an old age pension scheme. If you feel that neither of these are not appropriate, we invite you to propose other means of channelling more money to those who need it.
Measures not thought-through.
The various green measures at first glance appear desirable, but on closer inspection reveal a lack of planning. The advocacy of electric cars is well-taken, but we are not sure that such cars would comply with EMSD guidelines. Electric cars in any event may not be sufficiently developed for widespread use, but what about LPG cars? Why cannot the successful adaptation of taxis be extended to private cars? And what about alternative energy? A convincing green strategy is lacking.
Likewise with the advocacy of creative industries, knowledge economy and technology. A pre-condition for the long term transformation of the economy along these lines would be a fundamental revamp of our educational system, which at present is too focused on rote learning and exams.
Similarly with maintenance of old buildings. Hong Kong's housing stock is ageing. Many old buildings are beyond renovation and should simply be demolished as soon as replacement housing can be made available, with say emergency repairs in the meantime. Again, a fundamental review and ultimately spending on a multi-billion dollar scale will be needed to address the problem.
Lack of vision. The Budget was the opportunity to forge a new consensus within society - a New Deal for Hong Kong to combat the recession, bind society together, and build the platform for a better future. Unfortunately, your budget wasted the opportunity. Piecemeal measures, sprinkled with fine words and quotations, do not meet the need of the hour.
We urge that you reflect on the principles that set out in your Budget and give careful consideration, in consultation with community leaders, on how they can be realised.
Yours sincerely,
George W H Cautherley
Vice Chairman
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