Let’s pretend it’s not structural, part 2.
According to the Basic Law, the Hong Kong government should balance its budget. Instead, for many years, it reported vast surpluses. And these days, it’s vast deficits. (I suppose you could try arguing it balances out over a 27-year time span. Then again, the Basic Law says lawmakers can reject a budget, while the NatSec court says they can’t – so who knows?)
The SCMP reports the Hong Kong government’s latest shortfall…
At a meeting of the Legislative Council’s financial affairs panel on Monday, Paul Chan Mo-po revealed the deficit was substantially worse than what he estimated at the beginning of this year as the soft property market had taken a heavy toll on the government’s income generated by land sales, stamp duty and corporate taxes.
“The government’s income was far lower than expected,” the financial secretary said. “Before September, property transactions were very slow, which affected our stamp duty income.”
…The government has also recently downgraded its full-year gross domestic product to 2.5 per cent year-on-year growth based on weaker global demand and local consumption.
RTHK story…
The government has doubled its estimated deficit for the current financial year to around HK$100 billion, citing lower revenue mainly due to poor asset market performances.
When Financial Secretary Paul Chan announced his budget in February, he forecast a shortfall of a little more than HK$48 billion.
But he told lawmakers on Monday that as well as relatively poor asset market performances, revenue from profits tax is lower because firms aren’t doing too well at present.
…The secretary also reassured lawmakers that they need not worry too much about the government’s dwindling fiscal reserves, saying the key is “taking care of our own business”.
How will that help?
But wait! There’s more! David Webb expands on the FS’s numbers, which count HK$86 billion in proceeds from bonds as revenue rather than liabilities…
The situation is actually worse than the headline, because Mr Chan includes net cash from bond issues. Who will repay those, the tooth fairy? So the real deficit should be over HK$195bn, even worse than 2023-24 ($173bn)…
…Bond proceeds are not revenue or expenditure, they are a form of finance which must be repaid by future taxpayers. If we include them in the calculation, then any deficit could be neutralised just by borrowing the same amount of money!
The Standard op-ed notes the discrepancy and calls for cuts to the bureaucracy – citing Elon Musk – adding…
It is small wonder that some lawmakers have complained that the government is living on debt. Is this why the administration is desperately looking to the private sector for funding to bail out mega development projects, including the Northern Metropolis, to which the government is committed?
Beijing’s officials have urged property tycoons to bid for land, though the developers are clearly reluctant. No-one wants to consider the possibility/reality that the model is broken, and things will not somehow go back to the way they used to be.
“property transactions were very slow, which affected our stamp duty income.”
And here I thought scrapping the stamp duty would affect the stamp duty income?
“No-one wants to consider the possibility/reality that the model is broken, and things will not somehow go back to the way they used to be.”
There’s a lot of that going around. Wait until 20 January.
Good to know from David Webb that the Financial Secretary is at least being economical with one thing, even if it turns out to be the truth.
It’s almost as if spending a fortune on gassing, arresting and jailing all the opposition and all the youth actually cared about the city, then even more on making the place a police state and destroying any veneer of rule of law (in the process scaring away the middle classes and international business) was a bad idea for the economy. Who knew?
I’m sure it’s just a coincidence that “Paul Chan” sounds like the Cantonese for “bankrupt”.
In the year 210 BCE, the emperor Qin Shi Huang, after years of ingesting dubious immortality elixirs, died on the road, many miles from the capital. Fearing a coup if the news got out, his top ministers hushed it up. They continued to visit his palanquin as if to consult with His Majesty, delivered meals and changes of clothing. Within a few days, the stench became noticeable, so they ordered carts of rotting fish to precede and follow the royal procession. They kept this up for two months, which is how long it took to walk back to Xianyang, Whereupon two treacherous advisers conspired to kill one son to elevate the other. The lucky prince lasted all of three years.
Any parallels with current events are purely coincidental.
Just a suggestion: the government could save an awful lot of projected expenditure by doing away with the unnecessary East Lantau Environmental Disaster mega project, or whatever Carrie Lam’s legacy bad idea is currently called.
@Low profile
Loss of face. No can do.
Where did, does all the money go?
Do I hear the big sucking sound from up North?
Do only I have the feeling that Hong Kong is getting plundered like a colony?
(Is the Pope catholic….)?
Is the „allocation“ for “National Security“ even in the budget? Or is that under „Miscellaneous Expenditures“ and/or „ Tea Money“?
@reductio – John Lee on the news tonight dismissed the government’s plan to resume parts of the Fanling golf course for public housing – after a court decision put a spoke in it – as “the previous government’s plan”. Surely it could use the same approach as regards the Lantau scheme.
@True Patriots: back in the late 90s through the early 00s, Guangdong folks used to grumble about the sucking sound from the north going to prop up and beautify the princesses called Shanghai and Beijing all while Guangzhou had to remain the backwater sister for many more years awaiting her turn.
Hongkeys now have that privilege of “doing their part for the glory of…” yada yada.
Of course if civil servants were allowed to crack on with the duties they were employed to carry out instead of having to spend their days engaged in studying the three this and the four thats and how to avoid transgressing all the nebulous ‘red lines’ then Hong Kong might again take a functioning and focussed direction.