John Tsang delivers 2011 Budget for third time

About 10 minutes into Hong Kong Financial Secretary John Tsang’s almost unbelievably vapid 2013-14 budget speech, it sank in that – sure enough – it’s Groundhog Day. The man really was just presenting much the same set of spending plans as the year before, and the year before that, and the year before that. If there was a slight difference this time, it was that he seemed slightly more concerned about the imaginary problems that on the one hand can’t be solved and on the other hand prevent us from solving our real problems.

He wrung his hands about our terrible fiscal structure (the one he has presided over for some six or so years now). Well, it’s hardly perfect; revenues are volatile and it imposes a disproportionate part of the burden on middle-class people who didn’t buy property at the right time. But it leaves the majority of people and companies free of paying any direct tax, takes no more than 15% from the rest, and avoids – by a million miles – the public deficits and debt that will be the ruin of future generations in the West. If he had any ‘vision’ or plain nous, he would see this as an opportunity to refine a fiscal structure the world would envy, not wet himself about it as some sort of threat.

He went completely over the top about the aging population. His straight-line extrapolation of the dependency ratio (workers to retirees) showed there will be just two sprightly, enterprising, productive people of working age for every burdensome, senile, crotchety old hunchback with a walking stick by 2041. The truth is that we have no idea what will be what in 2041. We do know that the forecast makes no allowance for migration; ignores foreign domestic helpers; assumes everyone will always retire at 60/65 even as rising health levels leave them living well into or beyond their 80s; and assumes educated and skilled future retirees will have the same low savings as today’s elders – refugees who scraped a living in sweatshops.

(Rather than having too many oldies, it could be that we don’t have enough kids. But then why did the last government help push up housing prices, knowing that this delays young people’s marriages, thus births? Why did they consolidate an education system that reserves opportunities for the better-off, convincing more parents to have just one kid? Why are officials, as we speak, up at the Court of Final Appeal trying desperately to ensure that we keep out thousands of Mainland and Filipino children? Why, in short, are we run by cretins? Best stick with the ‘too many oldies’ approach.)

The ‘aging population’ is a problem in the US or Europe because of huge unfunded pension liabilities. Otherwise it is the result of people living (and being productive) longer because they are healthier. If that’s a problem, making people sicker so they die younger would be a solution. The ‘problem’ is a con on the part of Hong Kong’s bureaucrats to make people believe the government needs to hoard resources (not least for their own pensions). Hong Kong’s opposition politicians’ response? Demand a universal pension that will put us on course for a Western-style system that ultimately goes bust – thus apparently proving the bureaucrats’ case.

And what did Tsang decide to do about these terrifying apocalyptic dangers looming over us? Well, let’s boost sunset industries like logistics and parasite industries like tourism, and everyone gets yet another electricity rebate, and welfare recipients get an extra month’s handouts, and there’ll be no property rates to pay for another year, and there’s a few billion for this small and medium enterprises blah blah fund and a few billion for the caring sharing harmonious community do-gooder fund, and… that’ll sort it all out for another year. Oh, and this… 

A middle-ranking property tycoon would lose face setting up something this trivial.

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22 Responses to John Tsang delivers 2011 Budget for third time

  1. The Regulator says:

    How to protect the Octopus monopoly:

    59. We are considering possible amendments to the legislation to introduce a licensing regime for stored value electronic money and to empower the HKMA to supervise the relevant retail payment systems, which will help establish a sound regulatory regime for Hong Kong.

  2. Bela Bibliophile says:

    When the Budget is on its way, I always think it advisable to dip into some old comic favourites: SCOOP, LUCKY JIM, STARS AND BARS or even TRISTRAM SHANDY.

    Imagine my surprise when my nimble fingers whizzed over the screen of the Kindle Paperwhite and found this apposite assessment of the pipe-smoking Walrus’ latest effort:

    ” …niggling mindlessness, its funereal parade of yawn-enforcing facts, the pseudo-light it threw upon non-problems.”

    Growing old is only a problem for people who have never been young. Tsang’s problem is that he has never had a brain.

  3. Spud says:

    “blah blah blah….we can’t be arsed anymore concealing handouts to our tycoon buddies disguised as infrastructure or public works projects, so as per recent years we’ll just do another utility freebie for the nice Li and Kadoorie families – so feel free to keep filling those buckets with lots of nice “free” electricity. But mum’s the word, don’t let that Ms. Lo find out as she is likely to be a bit annoyed by this.”

  4. Stephen says:

    I sadly agree.

    Seasoned political heads (possibly in China) rightly decided that the odious Stephen Lam could not possibly continue in the CY Leung Government. Why did they not do likewise with this buffoon ? Are we going to have to wait until he has a recurrence of chest pains or is someone soon going to realise he is hopefully out of his depth and instruct him to take early retirement. Of course this begs the question of what “visionary” is going to replace him.

    When preparing an annual business plan for your business if you just change a few dates here and there and submit it you are almost certainly going to get rumbled and face the consequences – what sort of bubblegum world do these grossly overpaid Civil servants live in to think they won’t?

    Without collecting another cent the Government has a reserve mountain enabling it to keep its current level of expenditure for 2 years – Why?

  5. Maugrim says:

    Well said Hemmers. 20 scholarships? Im rolling on the floor laughing. What a pity the civil service costs and employment created within the civil service to administer 20 ‘winners’ will be far greater than any net benefit created. The more things change the more they stay the same.

  6. Accountant says:

    $ 480 Mln / 20 scholarships = $ 24 mln per scholarship.

    Or we could have a new hospital or pay teachers more or something….

  7. Real Fax Paper says:

    I tuned in just as he was saying something about disbursing countless millions in a bold plan to Launch the First Phase of a Pilot Scheme… and then sort of tuned out again. I think it was something to do with elderly care services. I wonder if any of them alive today will still be around to benefit by the time it kicks in for real?

  8. EDB says:

    @ Accountant:

    Actually, teachers here are paid quite well already. Partly because of that schools tend to be woefully underfunded. I don’t know any other place in the world where it’s common for primary school teachers working in state schools to own properties in several different countries, go on regular $40,000 shopping sprees to Japan, and show up to work in a Porsche. Add that to the fact that, besides the school closing, the average Rolex wearing, multiple Vancouver condo owning, Chan sir can never be fired, even if caught in delicate (ahem) situations with their young charges, and you’ve got yourself a pretty decent gig.

  9. Joe Blow says:

    So how would you lot of whinging old codgers expand the tax base, apart from introducing VAT ?

    Perhaps David “Mensa” Webb has some suggestions ?

  10. mjrelje says:

    JB, how about capital gains tax, inheritance tax, monoply tax, luxury good tax for a starters??

  11. PCC says:

    Dear Joe,

    FYI, David Webb has produced a comprehensive alternative budget proposal that can be viewed at http://www.webb-site.com .

  12. Bela GM says:

    EDB

    You live in fantasy land.

    Most teachers in HK live with their parents, take sad lunch boxes to school and wear shabby clothes. Most leave the profession after a few years for a job which might enable them to rent a flat or buy a small car.

    Sorry to explode your prejudices.

  13. Aryan says:

    [email protected]

    Given Mr Webb’s views on the genetic primacy of the rich, has the document been cleared with the Reichskanzlei?

  14. Property Developer says:

    Joe, A proper property tax would do the trick, perhaps some judicious combination of stamp duty and rates. Taxing vehicles adequately would be another fair and ecological way, again as a one-off or over time.

    Accountant, The way these things are set up, although I’ve never understood why, is for the fund to just disburse the interest. Also, it’s not 20 students a year, but 60 to 80, since each scholarship will last 3 or 4 years. Assuming 4% return on capital that makes about .3 million per student.

    John Tsang, You are working on the assumption that the HK population will increase hugely while the fertility rate is extremely low. Do you know something you’re not telling us?

  15. Real Sax Player says:

    It continues to baffle why CY would take doofus John Tsang into his new administration. He is not a safe pair of hands, he is a completely useless pair of hands.

    But the almost criminally negligent way in which Tsang deliberately underestimates the finances of Hong Kong every year should have been reason enough to ensure he never sets an incompetent foot back in public office.

    Forget his illegal trellis and idiotic measures to cool the property market, the most brainless thing CY ever did is keep that moustachioed dickhead in his inner circle.

  16. Hugh Chiverton says:

    @Property Developer, One and All

    John Tsang will be answering your questions in an RTHK phone-in tomorrow morning between 8 and 9.

    Give him a call on 23388266 or email [email protected]

    Thank you for your kind attention.

  17. Mongkok Mzungu says:

    It is a mystery indeed why somebody as unimaginative and incompetent as Whiskers has managed to hold on to his job even after the change of guard. This is a man who is responsible for completely erroneous budget forecasts and wrong-headed fiscal measures like waiving property rates in a red-hot property market and HKD 6k hand-out schemes. On top of this, let’s also not forget that through a few cronies the buck also ends at his feet when it comes to our free-wheeling financial sector (Lehman mini-bonds, the way the MPF scheme is (not) regulated, the blatant cash-n-carry money laundering with bags of HKD/RMB notes that you can witness any day in broad daylight at virtually any bank branch etc).

    But back to the budget – for the current fiscal year, Mr Cantcount originally (a year ago) forecast a deficit of HKD 3.5bn. It turns out it will be closer to a HKD 65bn surrplus. Amongst other errors, our beloved (and well paid, much better than teachers) top bureaucrats underestimated government revenue by about HKD 55bn, on an original estimate of HKD 390bn. So that is off by a whopping 15%, the bulk of which comes from ‘unforeseen’ (really!?) profit and property taxes.

    But undisturbed by such a rounding error, Whiskers predicts the coming fiscal year will end with the government HKD 5bn in the red again. He has reduced his estimates of government revenue to 2% below the current year’s (likely) actuals. This is despite the fact that the same budget speech expects a modest improvement in Hong Kong economic performance, and although we may hope for it, property prices (and hence property tax income) are unlikely decline suddenly and sharply.

    How is it possible that Tsang&Co get it 1) so wrong year after year, and 2) are not held accountable for it?

    Policy making begins and ends with the purse strings. How can the rest of the government (the Ce first and foremost) design decent policy if the top purse string dog can’t even get his estimates for government revenue down to a single- digit % margin of error?

  18. Real Tax Payer says:

    @ Real Sax Player

    “moustachioed dickhead” indeed he is . Well spoken Sir.

    I also find it mildly amusing, although very pathetic, that he tries to forecast the annual “deficit” accurate to 0.1 billion when he is consistently wrong by several tens of billions.

  19. Joe Blow says:

    @mjrelje

    Looks like the ghosts of Arthur Scargill and Gus Hall (Google it) have returned to haunt us.

    Do you wear a cardigan by any chance ?

  20. Joe Blow says:

    @PCC

    I had a look at Webb’s budget proposal, but there are no ‘grand ideas’ there. It is all ‘nip & tuck’ and a return to Ayn Rand babble. Not that there is anything wrong with that, per se, but it is not going to make a difference, even if the more practical suggestions -as opposed to the ideology / pie in the sky parts- were implemented.

  21. Property Developer says:

    A few further random thoughts:

    Hugh Chiverton, Thanks but I suspect any questions would simply be deflected to other govt departments.

    With such a huge cash pile, one and a half million million!, there is no point in issuing bonds. It’s like taking out a mortgage when you don’t need to.

    Because CY and his “government” have very little legitimacy, they can’t adopt unpopular measures, but must just resort to band-aid PR, as one of the SCMP terrible triplets said. They are consequently paralysed by a refusal to consider the medium term, and so fail miserably to explain that the HK economy is highly cyclical.

    They do have some inkling that the property market is bound to fall considerably, but can’t openly say so, since they will be blamed if it does, and anyway don’t have the slightest idea when. This is why the forecasts are so “conservative” (have a guess, then subtract 70 bn just in case).

    Hemlock, What is CY doing, asking Peking what “interpretation” means?! And asking whether their casual, incidental and ignorant comments on matters which are none of their business can safely be ignored!? Is he doing it simply to humiliate Audrey and all other brown-skinned lovers or is it simply to betray HK?

    We need to know.

  22. I assume EDB is talking about the ESF, rather than the real world?

    And do you seriously see overpopulation as the remedy for an ageing population? Singaporeans aren’t falling for that one – nor should we.

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