Budget deficit last thing on Lam's mind

Editorial | Mary Ma 16 Jan 2020

Yet again, Chief Executive Carrie Lam Cheng Yuet-ngor jumped the gun to announce a further multi-billion-dollar relief package that normally would have been reserved for the financial secretary to reveal in his budget speech.

She is claiming the credit by leaping ahead of Paul Chan Mo-po's budget which he will deliver next month.

Yet her astonishing move to increase recurrent expenditure by HK$10 billion a year is a cause for serious concern.

It may be argued that there have been plenty of precedents of government rolling out special policies to ease the public's financial burden. These dated back several years to Lam's former boss, Donald Tsang Yam-kuen.

The problem is that the current package is of a very different nature. Once approved by the Legislative Council, Lam's measures would involve large recurrent spendings that might be sustainable during sunny days but would immediately contribute to structural deficits if government revenues fall short of expenses in difficult times.

All the special relief measures over the years were one-offs, so why is Lam dropping financial prudence so suddenly to drastically increase recurrent expenses?

The departure from the Basic Law-required financial prudence cannot be justified.

The Democratic Party yesterday proposed a cash handout of HK$10,000 for everyone - that is just a repeat of former security minister Regina Ip Lau Suk-yee's call for a cash payment of the same amount.

If it's irresponsible for the Democrats to renew the HK$10,000-for-each appeal in the midst of a recession, it would still be somewhat better than the measures announced by Lam on Tuesday.

That's because the cash handout would be a one-off and would not create an ongoing financial liability, especially as our population is aging.

Once spendings are made regular, it is impossible to cut back -and that is why governments over the years have been extremely careful to avoid committing such a drastic mistake.

Lam is familiar with the rationale behind a cautious fiscal approach. Indeed, she strongly opposed populist calls to break away from financial prudence. So, I find it incomprehensible why she is reversing that long-standing policy approach.

The reversal is so sudden, with no warning.

In February last year, Lam recklessly introduced the extradition bill and insisted on going ahead with it despite repeated warnings in this column and other sectors - including some of her supporters - which eventually plunged Hong Kong into disaster.

Departing from the sound policy of maintaining financial prudence is no less dangerous than attempts to press ahead with the now-withdrawn extradition bill.

The SAR's gross domestic product dropped almost 3 percent in the third quarter from a year ago. The financial secretary went further to indicate that the current financial year may well end up with a huge deficit of HK$80 billion.

Foolhardily spending won't salvage one's popular support or mend social rifts that can only be cured by political answers.

So, Carrie Lam, stop inflicting new harm on Hong Kong.

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