Pay Up
It is natural for all organisations – commercial, NGOs, governments – to want to paint as positive an image of themselves and their activities as possible. In the business world, it can help draw customers and investors, for charities it can assist in attracting donations, for governments it can establish credibility which brings benefits in terms of smooth governance.
But there can also be a downside. When the PR has been too good it can create an overly rosy picture which can have adverse repercussions. A company making a big profit might be expected to lower prices or pay higher taxes, a charity attracting too much money might lose donors, a government setting expectations too high can lose credibility when reality falls short.
We may have seen an example of this last week when the Transport and Logistics Bureau issued a paper to the Legco transport panel outlining a way forward for legalising ride-hailing services like Uber. Initial reaction and headlines were quite positive, but closer reading of the small print left some observers disappointed. While other places, such as the mainland and ASEAN countries, managed to sort this subject out years ago, we are going to study the situation for another year and bring forward a draft bill by the end of next year. In other words, no proper Uber until 2026 at the earliest so don’t hold your breath.
I worry we may be heading into similar territory with the growth forecasts for our economy and the consequent effects on public finances. As a result, we may have left local citizens psychologically unprepared for the fee increases for public services which are on the way. Now I make no bones of the fact that I am an unashamed bull on Hong Kong. I have every confidence in the long-term future of our economy and the solidity of our public finances provided we continue to behave prudently. But we need to be careful how we present the information to the community at large.
Take the economy for example. The forecast for the current year is for GDP growth of 2.5 – 3.5 per cent which is good. But these numbers need to be seen in the context of the equivalent figures for the last five years. From 2019 to 2023 the growth figures were -1.7, -6.5, +6.3, -3.5, +3.2. At the end of last year, our GDP was smaller than it had been in 2018. Professor Ho Lok-sang of Lingnan University quoted these numbers in a radio discussion about the prospects for the civil service pay rise after the annual pay trend survey produced private sector figures justifying an increase of up to 5.47 per cent. The state of the economy is one aspect Exco takes into account in finalising the pay award. In the event, the Council approved an increase of 3 per cent.
As regards public finances, the government says they are sound, and I agree. We must keep them that way. The deficit figures the government quotes for the last two financial years are $122 and $100 billion respectively. As I have point out before, this is after taking into account bond sales which are a debt, not income. Stripping these numbers out, the actual figures are $188 and $171 billion respectively. The equivalent forecasts for 2014-25 are $48 billion and $168 billion. Taking these three years together we will have dipped into our accumulated savings by $527 billion, albeit cash in hand will have been bolstered by total bond sales of $258 billion. The government has promised to restore fiscal balance over the next three years.
What this will mean for the man in the street is limited scope for new initiatives involving greater spending, and higher charges for services. Several areas have already been highlighted, including hospital Accident and Emergency charges, university tuition, water supplies, public housing rents etc.
Health secretary Lo Chung-mau said in January he was looking at increasing A & E fees, last revised in 2017, in order to push non urgent cases to the private sector. Chief Secretary Eric Chan Kwok-ki said in June university tuition charges, which had not been adjusted for 20 years, would rise by 17.6 per cent over the next three years. Also in June, Director of Water Supplies Roger Wong Yan-luk said he was looking at increasing water charges, which at present cover only 79 per cent of the costs and had not been adjusted for 30 years, in a “gradual and orderly” way. Public housing rents are reviewed every two years, and the Housing Authority has informed Legco rents will rise by 10 per cent starting 1 October, but with a grace period of three months. Secretary for Housing Winnie Ho Wing-yin said the increases would be affordable for most tenants.
Are there any other candidates for fee revision? The post office must surely be a strong contender. The Audit Commission recently reported the department, which operates as a trading fund which should mean according to prudent commercial principles, had made a loss for seven of the last 10 fiscal years and had a negative return on its fixed assets. The situation is clearly untenable.
No doubt there is a whole raft of other fees and charges due, or overdue, for revision. Hong Kong people are not stupid. They know there is no magic “money tree” and the government needs to balance the books to pay its way. But it would be much more palatable if modest increases were introduced every few years rather than having to contemplate substantial rises after decades of neglect. And much better if the full scale of our deficits were presented in the open, rather than being masked by proceeds of borrowing.