Commentary: Singapore, Hong Kong budgets show hongbao mentality must be quelled

SINGAPORE: When I asked a taxi driver the other day what he thought about the 2018 Singapore Budget, he seemed confused and then with a ray of realisation, clarified: “Do you mean the SG Bonus hongbao?”

It seems commonplace for most people to think of the Budget in terms of the measures that most directly benefits them.

The taxi driver uncle is not alone in this.

In Hong Kong, permanent residents aged 18 and above similarly received a hongbao of HK$6,000 (S$1,000) in 2011 after the Hong Kong government announced its budget measures. 

It might have created expectations of more handouts when the Hong Kong government rolled out its 2018 budget on Wednesday (Feb 28) – it’s first since Chief Executive Carrie Lam took over last July.

Where it was lauded for its tax breaks, allowances and a subsidy for poor students – it seems many had nonetheless expected a repeat of the HK$6,000 scheme and were sorely disappointed.

This is notwithstanding that the Hong Kong government is planning to share 40 per cent of new fiscal surplus (HK$138 billion) with the public in the form of sweeteners.

Public interest in benefits and handouts when a government budget is announced is understandable – but shouldn’t citizens also have an interest in how its government sets national priorities, spends to achieve these, and enhances its fiscal capacity for the longer term?

READ: A commentary on Hong Kong’s cautionary tale for Singapore.

HANDOUTS OR SOCIAL PROGRAMMES – A DIFFICULT CHOICE

Hong Kong newspapers since the start of the year had fanned the flames – culminating in political heavyweight Jasper Tsang, former president of the Legislative Council of Hong Kong, asking “why not distribute money (to the public)?” in a local newspaper column. 

“Cash handouts … ensures that everyone benefits,” he wrote, noting that these directly assisted low-income households.

The bulk of recurring spending, as Tsang pointed out, had been used for regular expenditure on longer-term government programmes including those to spur economic development, education, public housing and social assistance. 

Therefore, extra resources resulting from the government surplus should be used to directly aid low-income households, thereby lifting the spirit of society, his argument went.

Yet, where some have said a cash handout can help defray the cost of living, this is where the benefits stop. 

We would be mistaken if we think they can be direct substitutes for long-term investments in education and healthcare provision for instance –  areas in which improvements to the social safety net can make a difference to lower-income households.

To be sure, the fiscal constraints on government budget suggest competing interests must be prioritised. Policymakers need to balance different needs of its constituents.

In some years, the emphasis of redistributive policy in Hong Kong has been to help low-income families. One in five live below the poverty line. This has been exacerbated by its ageing population – where a third of the poor are 65 and above.

But middle-income families also feel squeezed and left out. Those in this segment have demanded for more public spending to aid them. 

Where experts have pointed out that middle-income households spend at least one third of their families’ incomes on their children’s education, some have said the Hong Kong government should offer aid in supporting extra-curricular activities.

So the subsidies for poor students and some waived exam fees announced on Wednesday no doubt came as a relief to this group of Hong Kong residents.

READ: A commentary on arresting the painful decline in Hong Kong’s financial centre status.

INCLUSIVE SOCIETY A GOAL EVERYONE CAN AGREE ON

If there’s one budgetary policy objective Hong Kong residents can agree on, it’s how government expenditure can be channelled to foster a caring and inclusive society.

So it’s no surprise in recent years, the Hong Kong government has shifted to emphasising helping the working and middle classes, even as it continues to spend more on addressing poverty and inequality.

No doubt whether taxes and benefits are levied and disbursed equitably and fairly is a key issue deserving of greater public debate – this is true both for Hong Kong and Singapore.

A maelstrom was raised in Singapore when a media outlet covered news of a five-figure income family describing their situation as “suffering”. 

Where comments online have urged them to adopt a more frugal lifestyle, surely tempering one’s own expenditure cannot be a viable national solution to the problem of families feeling squeezed.

MORE DEBATE NEEDED, DON’T JUST REACT

We need to view Budget 2018’s hongbao and other forms of government assistance to households and businesses more holistically.

No doubt there are political ramifications after a budget is announced. In Hong Kong, the budget speech is widely regarded as one of the most important public events of the year. It makes headlines for weeks and teahouses are filled with debate about the budget.

One recalls also the protests sparked off after Hong Kong’s 2011 budget, where sharp reactions about the lack of social welfare aid led to the HK$6,000 handout being rolled out, which in turn caused outrage by those who wouldn’t receive it – including many immigrant workers.

This tells me maybe what we need most is to discuss and debate the government budget before it’s put together, instead of just reacting to it.

The government budget is necessarily one of competing needs but we as a society need to discuss and agree on the challenges it should seek to address each fiscal year, whether those of an ageing population in Singapore, support for education, or ways to help small businesses innovate and expand capabilities.

We need to pay greater attention to the budget and the governing philosophy beneath. Where government revenue and expenditure impact us, the importance of the government budget is indisputable.

We also need to acquaint ourselves with the nuances, mechanisms and effectiveness of government programmes and policies. This will enhance the quality of public debate about how government monies are spent.

Where the GST hike has captured the most attention, a healthy debate has arguably clarified the reasons behind the rate hikes and timing, and generated greater consensus over its implementation.

READ: A commentary on re-examining our mindsets regarding the GST hike.

Conversely, if the general public is lukewarm towards the Singapore Government’s budget, the role of annual budgeting, public finance and its discussion in Parliament will be limited. 

The Government too has a role to play in stimulating debate about the budget beforehand.

Robert Gordon Menzies, an ex-Prime Minister of Australia, noted in 1948: “Politics is both a fine art and an inexact science. We have concentrated upon its scientific aspects – the measurement and estimation of economic trends, the organisation of finance, the devising of plans for social security, the discovery of what to do.”

“We have neglected it as an art, the delineating and practice of how and when to do these things and above all, how to persuade a self-governing people to accept and loyally observe them,” he continues.

This is true in today’s complicated and constantly-changing world, where attention spans are limited. 

A careful design of fiscal policy that tackles urgent issues and long-term concerns, must be coupled with an effort to engage and stimulate debate among the governed.

Alfred M Wu is associate professor at the Lee Kuan Yew School of Public Policy, National University of Singapore. His research interests includes public finance and redistributive policy.