Where is the change? Budget 2025

"The budget fails to provide the bold, transformative measures necessary to confront Hong Kong’s deep-rooted challenges."

Hong Kong, a global financial centre renowned for its dynamism and resilience, has long been a city that flourishes on innovation, adaptability, and forward-thinking policies. However, the recent budget announcement for the fiscal year has left many citizens, businesses, and analysts feeling underwhelmed. 

Financial Secretary Paul Chan’s budget, issued this week, lacks creativity and appears timid. While one could argue that we don’t require excessive creativity, insisting on prudence in financial matters, we still face a deficit many attribute to “structural” issues.

As Hong Kong urgently recovers from the effects of Covid and confronts a rapidly changing world with Trump in the White House, our traditional sources of income are at risk. Further, the city faces intense competition from other regional financial centres like Singapore and Shanghai.

Hong Kong has consistently been a service-oriented economy that capitalises on the broader Chinese market. A less flattering description is that Hong Kong clings to China, subject to the winds of crisis that affect its colossal host. 

Historically, Hong Kong lured foreign investment to encourage growth by positioning itself as a gateway to China. Excise duties apply solely to four commodities: tobacco, methyl alcohol, hard alcohol, and hydrocarbon oil, regardless of whether these items are produced domestically or imported. Furthermore, no quotas or anti-dumping laws are enforced.

Hong Kong raises funds through direct taxes, including salaries, property, and profits taxes, and indirect taxes, such as stamp duty, betting duty, and land premiums. Collectively, these sources constitute approximately 68% of the total government revenue. 

With our current sources of income declining, mainly from land sales, Chan has not taken any significant steps to identify and establish new revenue streams. This lack of innovation is concerning. Instead, he has merely been tinkering at the edges, complicating matters further. Hong Kong cannot keep kicking the can down the road. 

For instance, the government has invested time and resources in preparing the elderly for a reduction in the transport subsidy, which will cost us HK$5 billion in the forthcoming financial year.

Although saving a relatively small amount of money, the proposed reduction in the subsidy has created uncertainty and squandered the goodwill established with the scheme's introduction. The elderly, who rely on this subsidy for their daily travel, now face an increased financial burden. 

If the scheme's cost is deemed unsustainable and changes are needed, why not increase the standard usage cost from HK$2 per trip to, say, HK$4? It’s simple, easy to understand, and easy to implement. The last point is notable because the complications of the proposed changes mean a system upgrade that will take 18 months to implement. 

Additionally, allegations of cheating within the scheme have been made without substantial evidence to support these claims. How many cases have been prosecuted? The only data I could find indicates that 23 individuals were charged, presumably for using cards that did not belong to them. This hardly constitutes the widespread abuse that some claim is taking place. 

Moving on, unless I am mistaken, Chan has performed a sleight of hand in shuffling money between financial pots to reduce the deficit. The big pot received HK$62 billion from various endowment funds; without that, the deficit in 2025/26 would rise from an estimated HK$67 billion to HK$129 billion. 
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Furthermore, we will issue HK$150 billion in bonds next year and repay $54 billion in bonds. Therefore, without the bonds and endowment fund additions to the larger pot, we would be $225 billion in deficit! Did I understand that correctly?

Concerns about a few pensioners getting on and off buses with reduced fares appear trivial compared to these sums. 

While the government has tried to address some pressing issues, the budget fails to provide the bold, transformative measures necessary to confront Hong Kong’s deep-rooted challenges. From a lack of visionary economic policies to inadequate support for vulnerable groups, the budget appears more like a temporary fix than a strategic roadmap for the future. 

Hong Kong possesses immense potential, but realising this potential necessitates bold leadership and a readiness to embrace change. The budget signifies a missed opportunity to demonstrate this leadership and place Hong Kong on a course towards a more prosperous, inclusive, and sustainable future. Only then can Hong Kong truly reclaim its status as Asia’s world city.