Hong Kong Financial Secretary John Tsang (曾俊華) caved in to protests over plans to bolster residents’ pension funds, opting to hand out cash and tax rebates that a week ago he said would stoke inflation.
Tsang said he would give HK$6,000 (US$770) to permanent residents aged 18 or above, abandoning a Feb. 23 budget plan to inject the same amount into their pension fund accounts after polls showed the government’s popularity slumped. The government also plans to give the 38 percent of the workforce that pays income tax a 75 percent rebate capped at HK$6,000.
“The fact that half a year of hard work preparing the budget can be thrown away and started again shows populism and not rationality dictates the policy-making process,” said Ivan Choi, a lecturer at the Chinese University of Hong Kong’s government and politics department. “The government will pay for the damage done to its integrity.”
Political parties accused Tsang of failing to do enough to alleviate the impact of soaring food and housing costs.
Asian governments are grappling with inflation fueled by rising commodity costs and capital flows from developed economies drawn by the region’s faster economic growth.
Tsang said when he announced his budget a week ago that battling inflation and getting ahead of a property bubble were his government’s main tasks this year. The cash handouts and tax rebates will cost the government about HK$40.5 billion, government spokesman Patrick Wong said yesterday. The pension handout was to cost the government HK$24 billion.
The financial secretary said earlier that the pension plan was preferable because it benefited more workers and wouldn’t drive up prices. There was to have been no tax rebate for the first time in four years in the original budget.
Hong Kong Chief Executive Donald Tsang’s (曾蔭權) popularity “dropped sharply” and satisfaction with the budget “plummeted amid waves of public anger,” the University of Hong Kong said on its Web site, citing results from a poll conducted after the budget announcement.
Donald Tsang was assaulted on Tuesday at a public event by protesters who said he was ignoring the poor. He has come under pressure from Beijing’s top leaders over social discontent in the territory.
The Democratic Party said earlier it will hold a demonstration against the budget on Sunday and other parties, including the Democratic Alliance for the Betterment and Progress of Hong Kong, have said the government should have done more, including giving cash.
“We find this is the best way to respond to demands from residents and the most important thing for now is to strive for consensus,” John Tsang told reporters yesterday.
The fiscal reserve will probably rise this year to HK$591.6 billion, or 34 percent of GDP, he said.
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