Tom Holland, the incisive Monitor commentator in the South China Morning Post, nails it in the following piece:
Why HK's Brits aren't going to return home any time soon
May 05, 2010
Tomorrow, the people of Britain will go to the polls for the country's most finely balanced general election in years.
"So what?" you might well ask, given Britain's much-diminished role on the world stage over recent years.
But downsized or not, Hong Kong's 25,000 Brits are the city's third-largest expatriate population behind the Filipinos and Indonesians.
And they tend to punch above their weight in the business community, especially given recent high-profile additions including HSBC Holdings chief Michael Geoghegan and Fidelity's fund management star Anthony Bolton.
Both have recently quit Britain for Hong Kong. And no matter who wins tomorrow's election, the number of similar defections is likely to increase over the coming years.
Like Geoghegan and Bolton, most of the migrants will cite the superior business opportunities in Asia as the reason behind their moves. But although they may not admit it, for many of them, the lamentable state of Britain's public finances will be an important factor behind their move.
All three of the main party leaders have done their best to avoid the topic during the campaign, but Britain's financial position is scarcely better than Greece's.
Although when he was chancellor, Gordon Brown liked to portray himself as prudence personified, in reality he oversaw government profligacy on a monstrous scale. State spending rocketed on everything from civil servants' pay to free swimming pool access for the elderly, despite the government's commitment to fighting two ruinous wars.
As a result, state spending shot up from about 35 per cent of gross national product at the beginning of the past decade to almost 50 per cent in 2009.
To put that number into perspective, it is as high as the ratio of government spending to gross domestic product at the very height of the First World War, when the whole economy was geared to warfare. The last time the ratio approached anywhere near its current level, in the mid-1970s, Britain was forced to go cap in hand to the International Monetary Fund for emergency assistance.
Even so, stratospheric government spending did not appear to be an immediate problem during the boom years of the past decade, when tax revenues, especially from the City of London's thriving financial centre, poured in torrents into the government's coffers.
But when the crisis hit, corporate tax revenues dried up just as unemployment soared, pushing up government welfare spending sharply higher. As a result, the government's deficit jumped from a manageable 2.8 per cent of GDP in 2007 to hit a Greek-style 11.5 percent last year, driving government debt to a thumping 68 per cent of national income.
To paraphrase the great Saki, the British government is now living so far beyond its income that they may almost be said to be living apart.
Whatever the hue of the government that takes office on Friday, it is going to have to do something about the situation.
The obvious solution is to cut spending, but that's more easily said than done. About 80 per cent of current expenditure consists of interest payments on debt, which cannot be cut, together with "untouchable" commitments like health and welfare spending, which could only be reduced with by a government with an unassailable parliamentary majority, and only then with great difficulty.
Given the closeness of the campaign polls, such a strong majority appears out of the question. As a result, the bulk of the cuts will fall on discretionary spending on defence, transport and environmental protection.
Unfortunately, that won't be nearly enough to do the trick. The candidates talk boldly about making up the difference from efficiency savings, but this is hardly realistic. Waste is certainly endemic in the public sector; as government spending has grown, state-sector productivity has slumped. But wringing efficiency gains will mean sacking large numbers of civil servants, something few governments have ever achieved.
The alternative solution - raising taxes - is unlikely to help. British taxes are already so high that any further increases would crush economic activity, reducing revenues not lifting them.
About the only hope is a vigorous recovery in the developed world economy, but that appears unlikely. As a result, Britain looks set to remain a deeply indebted country with a lacklustre economy and crippling tax levels, whoever wins tomorrow's election. Expect more Brit economic migrants to head this way.