HK Budget 2011 Public Reaction: Brickbats Flung at Tsang

Hong Kong — The public is not pleased with John Tsang Chun-wah’s fourth budget speech.

For the first time since Tsang took over as Financial Secretary, he withheld a tax rebate despite unveiling a budget surplus of more than HK$71 billion, well in excess of the $25.2 billion shortfall predicted a year earlier.

He also dashed public hopes for some bold new policies, including tax reform, improved social welfare benefits for the elderly and measures to address the concerns of the middle class who see dreams such as home ownership slipping out of reach.

A poll by the Public Opinion Programme at the University of Hong Kong of 1,031 people rated Tsang’s budget only  51.5 out of 100, his lowest score yet. His popularity rating  dropped from 55.4 to 52.4.

The dissatisfaction was echoed on internet forums and microblogs.

With only 18 months to go before Hong Kong Chief Executive Donald Tsang’s term of office ends, his financial chief John Tsang (no relation) was accused of being a caretaker financial secretary, a charge he brushed off.

“I have never seen such an aggressive caretaker government,” he told a news conference after his budget speech on Wednesday. “The government’s money belongs to the public. When the government gets rich, so will the public.”

Tsang announced a series of give-aways that will cost about $44 billion but these sweeteners failed to mollify critics.  His plan to spend $24 billion on a cash injection of $6,000 into workers’ Mandatory Providence Fund (MPF) accounts came under the fiercest attack.

Deferred Payments

“Who knows what will happen when I turn 65? In the end the money goes into my fund manager’s pocket,” said a Mr Wu, a clerk with a monthly income of $11,000. “I prefer cash-back.”

The MPF pension scheme — operated by private sector providers — has been the target of public criticism for high service charges and indifferent returns.

Tsang defended his refusal to provide tax breaks arguing a rebate would fuel already high inflationary pressure and benefit relatively few. ”Tax payers only account for 40% of the total labour force. The MPF injection will benefit 3 million qualified MPF accounts,” he said.

“The present economic situation is different from the past,” he said.  The current low interest environment will not last forever, and inflation is likely to worsen.  “The inflation rate is estimated to reach 4.5% this year, the highest since 1997,” he said.

Tsang said 510,000 people would benefit from an increase in the dependent parent and grandparent allowance and denied accusations his government was both indifferent to the struggles of the “squeezed” middle class and obsessed with accumulating ever-increasing fiscal surpluses and foreign reserves.

During a scheduled phone-in programme on government-funded radio station, RTHK, on Thursday morning, callers berated Tsang.

Home Ownership A Distant Dream

A social worker who gave her name as Ms Wai, and who is pregnant with her third child, complained her family was unable to buy a decent home despite earning a decent monthly income of HK$40,000.

“My kids are not subsidised, and I won’t benefit from most one-off benefits. I have been watching the market for two years but the price keeps raising. Why is the government not giving any strong measure to increase flat supply?”

Tsang provided a benefit for existing home-owners — a waiver of property taxes or rates — a costly one-off measure that will cost in the region of HK$19.7 billion.

The Ming Pao newspaper however reported that the benefit would be diluted by the government’s revaluation of ratable values, released on Wednesday. It said they would rise by 14% on average, the greatest increase in 10 years. As a result, rates for most households would increase despite the waiver.

Social worker, Ho Hei-wah, director of the Society for Community Organization, dismissed Tsang’s decision to increase the the number of subsidised residential care places for the elderly by 1,300 slots as insufficient.

Professor of finance at Hang Seng Management College Raymond So Wai-man told The Standard newspaper that Tsang’s measures lacked innovation.

“Facing inflation, there is little the government can do,” he said. But he questioned why Tsang did not make use of the abundant fiscal surplus to implement structural economic changes such as widening Hong Kong’s narrow tax base.