According to the 2011 Index of Economic Freedom recently published jointly by the Heritage Foundation and the Wall Street Journal, Hong Kong is ranked as the world’s freest economy for the 17th consecutive year. While Hong Kong is commended as one of the world’s most competitive financial and business centers, the Heritage Foundation is of the view that Hong Kong could still do better by reducing its massive fiscal surplus and excessive monetary reserves. Hugo Restall, the Wall Street Journal Asia editorial page editor, warned that Hong Kong’ ranking might drop if the Government insisted on sitting on its reserves and he urged that half of it should be given back to the community.
The Financial Secretary is due to announce his coming Budget on February 23. Recently, speculations run high that our surplus for this year may reach $70-80 billion and there is much discussion within the community as to how the Government should use this sizeable amount. Whether the Financial Secretary will accept the advice of the Heritage Foundation remains to be seen. However, because of the expected windfall surplus, public expectations of handouts this year are high and the wish lists are long.
While other economies are troubled by debt problems and seemingly perennial deficits, Hong Kong is indeed fortunate to have huge reserves and sizeable surpluses almost every year over the past 5-6 years. Our foreign currency reserve assets now stand at over $2 trillion. Our fiscal reserves amount to over $500 billion, more than two years of Government’s recurrent expenditure. Last year, our economy grew at 6.5% and the International Monetary Fund predicts that this year, Hong Kong’s economy will continue to grow at 5.5%.
With public coffers swelling and economic prospects looking good, the Government is certainly endowed with adequate resources to target some of our longstanding deep-rooted problems such as poverty, old age and housing. The Government is also in a position to offer relief to many sectors of the community who are suffering from mounting inflationary pressures. Indeed the Liberal Party believes that the Government should share the fiscal surpluses with the community with a view to tackling our deep-rooted problems, addressing immediate needs as well as providing for the further economic development of Hong Kong.
The Liberal Party has submitted a package of 59 measures to the Financial Secretary. Our package is premised on four themes. The first relates to addressing livelihood issues with particular reference to inflation. The second relates to combating poverty and narrowing the gap between the rich and the poor. The third relates to stabilizing the property market and ensuring property prices are within the means of the middle-low income group. The fourth relates to measures to enhance economic development and create jobs.
Inflation strikes at all sectors of the community but the pressure is highest on the grassroots and middle-low income group. The prices of basic food commodities have increased substantially. We advocate the Government to enhance the functions of the food bank and to consider issuance of food stamps to the needy, particularly children of poor families, to ensure that they get proper nutrition in times of high food prices. Apart from some public housing rental relief and additional allowance for CSSA recipients and the elderly, we support rates relief and tax refund both capped at levels that will ensure maximum benefits to the middle-low income group. These measures will to a certain extent ameliorate the pressures that rampant inflation brings. The Financial Secretary contends the handouts may over-stimulate consumption and further increase inflationary pressure. We disagree. We believe that the relief measures that we propose would at most offset part of the inflationary pressures leaving little for greater consumption. In a jurisdiction where we do not expect the Government to control prices, how else can we help our people combat inflation?
With our high reserves and healthy surplus, the Liberal Party is of the view that Government should adopt more vigorous measures to narrow the gap between the rich and the poor. Apart from repeating our call for a work-incentive income subsidy (similar to Singapore’s Workfare Income Supplement Scheme) for the working poor (i.e. those families with income under 50% of the median household income), we advocate additional allowance for needy old people above 65 who are not eligible for old-age CSSA but pass the basic means test. We also feel that opportunity should be taken to offer some tax relief to the middle-low income group. By widening the marginal tax band from $40,000 to $45,000 and by reducing the marginal tax rates by one percentage point, we will reduce the tax burden of those earning between $20,000 and $30,000 a month by around 10%. Additionally, we propose tax allowances be given for rented properties, children’s tuition in private/DSS schools and medical insurance as well as additional allowances for supporting children and parents. In our view, these measures will afford much welcome relief to the low income middle class whose welfare has long been slighted by Government. They will also prevent further deterioration of the living standards of the low income middle class, and slow down the emergence of what some describe as the “M-shape society”.
The Liberal Party is concerned that property prices have escalated beyond the means of the middle low income group. We believe that the root problem lies in land supply and have called on the Government to carry out regular land sales to ensure that there will be adequate supply of modest size flats to meet the needs of genuine users. Further we propose that more rented flats should be made available by the Hong Kong Housing Society and the Urban Renewal Authority to cater to the needs of low-income middle class families which are not eligible for public housing.
Finally, for the economic well-being of Hong Kong and for the purpose of avoiding inter-generational poverty, the Liberal Party is of the view that we must direct more resources to education and training of our young people, encourage entrepreneurship activities as well as kick-start our six new industries with advantages. Education and training must be with a view to equipping our young people with the necessary skills so that they may climb up the social ladder. Entrepreneurship should be encouraged to enable our young people to seize greater opportunities in life. It is noted that according to the Global Entrepreneurship Monitor, early stage entrepreneurship activities in Hong Kong have dropped from 10% in 2007 to 3.6% in 2009. This shows that our young people are losing confidence in starting their own business. Something must be done to reverse this trend. In this regard, we have proposed training and incubation programs as well as setting up of funds to promote entrepreneurship for the benefit of our young people and small medium size enterprises. Lastly, as we have said on many occasions, we feel that the Government must facilitate and support the development of our traditional pillar industries as well as the six new industries with advantages to ensure job opportunities for all. In these lie not only the continued economic prosperity of Hong Kong, but also the hopes and aspirations of our young people for a brighter and better future.
In putting forth these proposals, the Liberal Party takes to heart the current and long term needs of society and all the people. We believe that by alleviating the poverty issue, by affording relief to the low-income middle class, by promoting economic development for the wellbeing of all, Hong Kong will become a more equitable and harmonious society.
