One-off subsidies are not the answer to Hong Kong’s economic downturn, experts suggest.
Photo: Victoria Harbour by Bernard Spragg
The unique political and economic circumstances have made handouts a highly-anticipated topic for Hong Kong’s annual budget address today.
Financial Secretary Mr Paul Chan will give the speech in person to the Legislative Council despite the ongoing COVID-19 outbreak, which has caused the government to postpone many usual functions.
The city has entered its first budget deficit in 15 years, as it has suffered from the impact of last year’s anti-extradition bill protests, the US-China trade war, and this year’s virus epidemic.
Mr Chan warns that it would be the largest deficit Hong Kong has ever faced, with unemployment rates recently recorded at 3.4 percent. The city’s HK$1.1 trillion fiscal reserves is enough to continue the provision of coronavirus relief measures, he notes.
As part of his speech, Mr Chan is expected to discuss the city’s deficit and address the calls from both businesses and individuals for cash handouts to offset the economic damage.
But not everyone is convinced handouts are the right approach. One group, the Concerning Public Spending Alliance, advocates a different approach to the budget. A survey conducted earlier this February found that 80 percent of 700 respondents would prefer the government boost spending in health, housing, and education.
Mr Ross Darrell Feingold, a political risk analyst, is pessimistic that handouts would be as helpful as those calling for them suggest.
“In the current environment, where sentiment towards the government is so negative, the handouts for the public are unlikely to generate much good will,” Mr Feingold says.
Mr Simon Lee, a political advisor and columnist, believes the government could consider a different approach, one that secure funding for ongoing projects.
“Instead of looking at the deficit or handouts, we should pay attention to how the government siphons the funds to off-balance-sheet (special purpose vehicles) such as the Science Park for massive infrastructure projects,” Mr Lee says. “Given there is a chance for the establishment camp to lose absolute control of LegCo, they might not rubber-stamp everything the government wants, giving this administration the incentive to put away the money in SPVs.”
“I’d say if there is a handout, it’s better for it to be a one-off and general, given to individuals rather than as corporate welfare for the few,” Mr Lee says.
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