Government's push for increased social spending commended

But more information on Future Fund needed.

Besides the items that routinely receive attention in the Budget – fiscal projections and the relief package – Budget 2015 gave special focus to healthcare and social retirement programmes.

According to a research note from Hang Seng Bank, the government is continuing with its drive to increase
social spending.

Operating expenditure in FY2019/20 will exceed HKD410.4 billion, up from HKD317.7 billion in FY2014/15.

Bearing in mind Hong Kong’s aging population and a lower growth rate as the return of capital declines, it is encouraging to see that the government has made a good start in working to address future financing needs.

A Future Fund, comprising the Land Fund and a proportion of future budget surpluses, has been established to tackle future challenges.

Here's more from Hang Seng Bank:

That said, as we have previously noted, pre-funding in and of itself does not generate additional revenue.

For pre-funding to have a significant influence on the security of welfare spending, one of the following three requirements has to be satisfied:

1) the Fund will increase gross national savings;
2) the Fund will produce higher levels of wealth creation compared with the long-established Exchange Fund; and/or
3) such savings can be invested so as to boost worker productivity.

The government has thus far shed little light on how the Future Fund will meet such requirements and we expect more information on how it plans to finance the proposed welfare programmes.