Responses to the 2008-09 Budget By The Professional Commons

Enduring Institutional Defects;

 Lack of Commitment in the Pursuit of “Sustainability”

Responses to the 2008-09 Budget By The Professional Commons

In response to the 2008-09 Budget as announced by the Financial Secretary on 27 February 2008, The Professional Commons hereby suggests the following:

1.      Pragmatic Enough, But Lack of Vision

Generally speaking, the coverage of the Budget is quite comprehensive, as it has responded to the public’s anticipation “pragmatically”. The HK$ 30 billion plus of windfall hand out to the general public has to a certain extent accomplished the principle of “returning the wealth to the people”. However, the share for the underprivileged population only amounted to around HK$10 billion. It also failed to put in place a support system that can effectively address the needs of the underprivileged under the principles of a “fair” and “caring” society. It is important that the concept of “sustainability” should not be restricted to public finance only. However, the Hong Kong SAR Government has been unenthusiastic in addressing structural matters, such as poverty, the ageing of the population, and tackling global climate change in a systematic manner. Missing the opportunities to resolve such fundamental matters in a timely manner is regretful.

2.      Lack of a Mechanism in Identifying and Providing Support to the Low-income Earners

The “Pilot Transport Support Scheme” is still restricted to the low income residents in four districts, and the relatively high income thresholds results in a small number of beneficiaries. Although the proposed “Electricity Charge Subsidies” is claimed to be a measure targeting the poor, in reality it is a subsidy for every household across the territories. The proposed injection of funds to the low income earners’ Mandatory Provident Fund accounts (hereafter the MPF) have ignored the retirement needs of those who did not have a MPF account, such as local domestic workers, hawkers as well as homemakers. It is obvious that there is no existing mechanism which would enable the Government to effectively identify the low income earners, and no existing mechanism in the Government that could direct its assistance to low-income earners as well. It is embarrassing for the Government to have to rely on the MPF accounts and the accounts in domestic electricity charges as the only channels for the provision of these special allowances. Without an effective mechanism placed in advance for assisting the poor, particularly the “working poor”, the Government would not be able to provide a helping hand even if extra financial resources are available.

3.      Lack of a Mechanism in Providing Comprehensive Support in Public Transportation

The provision of the “Pilot Transport Support Scheme” would still be confined to the residents in four districts in the New Territories — Yuen Long, Tuen Mun, North and the Islands. Such a move neglects the needs of the residents in other low income areas. Similar to the four districts covered in the Scheme, six other districts, including Kwun Tong, Wong Tai Sin, Sham Shui Po, Yau Tsim Mong, Kwai Ching and Tai Po which also have an unemployment rate higher than the overall average in Hong Kong of 4.8% (based on 2006 figures). The unemployed living in these districts are looking for additional support in the future. As the “Transport Support Scheme” is supposed to cover the unemployed as a whole, it is widely expected to extend the scheme to this vulnerable group. For these reasons, it is most clear the proposed arrangements would incur in a higher degree of unfairness.

4.      Lack of a Fully-functional “Citizen’s Account”

The measures proposed by the Financial Secretary concerning the injection of funds to low income earners’ MPF accounts has echoed the reality that every citizen would need to prepare for retirement, and they would require a retirement account to deal with the amount concerned. Should the healthcare finance scheme be officially implemented, HKD50 billion that had been be designated as start-up capital, will be allocated to every single citizen. It would result in an extra medical account to be carried by every citizen. Moreover, the recipients of the Comprehensive Social Security Assistance and the Old Age Allowance also have a specialized account to receive their allowances. As a result, every Hong Kong resident would have several separate accounts in relation with public finance and public services. It would be cumbersome and repetitive, when compared to the single “Citizen’s Account” approach we have proposed earlier.

5.      Lack of an All-rounded Mechanism on Tackling Global Climate Change

The provision of tax concessions on Euro V diesel and on environment-friendly commercial vehicles is unlikely to bring significant reduction in air pollution. Such a move is outright trivial, when compared to the increasingly severe effects caused by global climate change, which requires an immediate implementation of relief measures. Not only has the respective budgetary measures failed to formulate a more macro paradigm in the arena of environmental protection and sustainable development, it indirectly exacerbates the worsening of the climate, due to the provision of subsidies on electricity charges, as it would encourage the excessive use of electricity, and the creation of further carbon dioxide emissions.

The Hong Kong SAR Government should be more forward-looking in formulating measures on tackling global climate change. It should promote environmental protection and energy saving measures in a multi-angle and a multi-dimensional manner, through the application of the internationally recognized “low carbon development mode”, and the establishment of a “Climate Challenge Fund”.

6.      Concluding Remarks

Having adopted a stopgap approach, the Financial Secretary did not provide concrete measures to tackle long-term issues that have been haunting the general public. It is then inevitable that the Government is putting itself in a state of straitened circumstances.

In order to formulate a thorough and forward-looking set of proposals in tackling those issues, and to add light to the creation of a harmonious environment for Hong Kong, the Government should accord great importance to these issues, and to tackle them through institutional building, after going through a thorough consideration and analysis.

Note: Please go to the following websites to download the Fairness, Forward looking and Development Research Report on the Better Use of Fiscal Surplus of the Professional Commons published in January 2008.

www.procommons.org.hk/documents/Budget%20Report%20Chi.pdf (Chinese Version)

www.procommons.org.hk/documents/Budget%20Ex%20Sum%20Chi.pdf (Executive Summary of the Chinese Version)

www.procommons.org.hk/documents/20080204_report_eng_final.pdf (English Version)