Budget ︱ Sending money to nothing, "culprit" Deconstruction scholar: the situation will be difficult to reverse within two to three years

Political situation

Written by: Lin Jian

2021-02-25 06:30

Last update date: 2021-02-25 06:30

[Budget 2021] The Financial Secretary, Chen Maobo, announced a new budget yesterday (February 24). This year’s deficit will reach 257.6 billion yuan, which will break the previous record; the overall reserve will fall to 902.7 billion yuan, about It is the "SARS level" of the government's 13-month expenditure.

As expected, this year's Budget did not include all people's money, but only in the form of electronic consumer vouchers for relief, and even the usual sugar relief measures in the past have to be reduced.

According to government estimates, at least until the 2025/26 fiscal year, Hong Kong will have a deficit.

Although it is still too early to judge that Hong Kong will have a "structural deficit", since this year's treasury reserves have been greatly depleted and the government is conservative about the fiscal situation in the next few years, it is unavoidable to worry about whether the government will have to do so for a long time in the future. "Tighten your pants" to cross the day?

Will the "sweet sugar reduction" situation continue for a long time?

Zhuang Tailiang, executive director of the Liu Zuode Institute of Global Economics and Finance of CUHK, believes that since the government has spent nearly 300 billion yuan to save the economy and people’s livelihood this year, under the principle of “striving to balance payments and avoid deficits” in Article 107 of the Basic Law, the government may It is necessary to freeze the fiscal scale for a period of time and avoid increasing expenditures until the economy returns to normal and government revenues rebound. This situation is expected to last at least two to three years.

▼Budget 2021 Benefits Measures Lazy Package▼

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Increase in stamp duty revenue is difficult to break record deficit

The budget announced last year estimated that the fiscal deficit for 2020/21 would reach 139.1 billion yuan, a record-breaking year, and it had already attracted public attention at that time.

However, since the government has launched four rounds of anti-epidemic funds, together with other relief measures announced last year, such as the distribution of money, it has spent nearly 300 billion yuan. Therefore, the fiscal deficit announced this time is 257.6 billion yuan, which is within the normal range.

Chen Maobo mentioned in December last year that due to the fact that taxes and land sales revenues are lower than in previous years, but expenditures have increased at the same time, it is inevitable to record a huge deficit this year.

Although, due to the delay in tax entry in the previous year, some taxes have fallen to this year, and the stock stamp tax revenue has increased due to the booming stock market, the fiscal deficit of 257.6 billion yuan is better than the originally expected 300 billion yuan.

However, it is an ironclad fact that the warehouse has "shrunk greatly."

This year the government "makes a big deal" will naturally affect its ability to open positions in the future.

Chen Maobo started the budget consultation period at the end of last year, and until the last blog before the budget was published, he blew the "light wind", indicating that the budget deficit must be broken, and it is necessary to "watch food", like doing a good job of "expectation management" for the society. ".

According to the news received by the major media last week, it even mentioned that the budget for this year’s budget has been finalized and there is no hope, and the traditional "sugar delivery" should also be reduced. The CSSA and fruit grants have been implemented for 14 consecutive years since 2007. Waiting for "double pay", it is likely to "disappear."

In the end, CSSA and fruit grants were also given extra sugar, which was not completely "sweetened", but the rate was cut by half, only half a month.

What's more, according to the "medium-term forecast" of this year's Budget, there will be a consolidated deficit ranging from 11.9 billion to 101.7 billion yuan in the four years from 2021/22 to 2024/25; it is expected to end March 2026. , The fiscal reserve is 775.8 billion yuan, which is 12 months of government expenditure.

Of course, this figure is still not enough to infer that Hong Kong will have a "structural deficit", but this may also obviously affect the government's attitude towards public finances in the future.

Political research and judgment: fiscal expenditure is easy to increase and hard to reduce, and the government is cautious in the future bailout

As Hong Kong implements a low tax rate and a simple tax system, the main income comes from land sales, profits tax, salaries tax, and stamp duty. It is vulnerable to external factors and the local economic cycle, and income is relatively unstable.

The political risks faced by tax increases are also very large, and it is difficult to open up new sources of income in disguise. In the end, the stock stamp duty can only be slightly increased from 0.1% to 0.13% this year.

However, government expenditures, especially current expenditures, cannot be reduced once they increase.

From the contents of the Budget announced by Chen Maobo this time, it can also be seen that the government will be more cautious in its attitude towards public finances and strictly control fiscal discipline, including requiring all policy bureaux and departments to reduce their own expenditures.

Some politicians who are familiar with public finances told me that the government has never set a hard target. The reserve must not fall below the number of months of expenditure. It is only for reference purposes. The so-called 13-month "SARS level" is at best a "psychological threshold".

However, in the past few years, the government has "catch up behind" in many social welfare policies and responded to the demands of all sectors of society. Therefore, social welfare expenditures have grown very rapidly in recent years (Note: recurrent social welfare expenditures increased from 63.5 billion yuan in 2016/17 , Increased to 105.7 billion yuan in 2020/21, an increase of 66% in four years), but as the current fiscal deficit has broken a record, from the perspective of the government, future welfare expenditures should be more prudent to avoid "big heads and hard to recover." .

Zhuang Tailiang said that before the economy recovers and government revenues rebound, the government may need to freeze the fiscal scale, which is expected to take at least two to three years.

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Zhuang Tailiang: It is inevitable to freeze the financial scale in the short term

Zhuang Tailiang said that the current unstable government revenue is a fact.

He said that fiscal deficits are a common phenomenon in the world. Hong Kong has about 900 billion yuan in reserves, which is not a small amount in the world. It is just that the Hong Kong government is subject to the requirement of "avoid deficits" in Article 107 of the Basic Law, and it is difficult for the Hong Kong government to increase in the long term. Spending money may even need to fill the fiscal black hole and maintain a "balance of payments" for a period of time, otherwise there is a risk of being accused of violating the Basic Law.

Speaking of future prospects, Zhuang Tailiang expects that it is not so easy to fill in the deficit of more than 200 billion yuan. Therefore, the government may continue to freeze the fiscal scale in the short term and remain cautious in financial management until economic activities gradually return to normal and government revenues rebound. This attitude has a chance to change, but it will always take time for the economy to recover. It is expected that the frozen fiscal scale will last at least two to three years.

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