$10.5 billion reserve to fund works

PUBLISHED : Saturday, 27 February, 1993, 12:00am
UPDATED : Saturday, 27 February, 1993, 12:00am

THE Government is expected to invest heavily in non-airport capital works projects in the 1993-94 financial year by setting aside at least $10.5 billion in a special reserve to carry out new plans.

The massive investment was unveiled yesterday amid expectation of another windfall surplus, which is expected to exceed $20 billion for the year ending March 1993.

Detailed plans for investing the funds will be announced by the Financial Secretary, Mr Hamish Macleod, in his second budget speech, due to be delivered next Wednesday.

Soaring land income and serious underspending on capital works projects are expected to contribute about half of the windfall in the 1992-93 financial year.

Government spending estimates published yesterday showed that land income in the current financial year would rise by $3.6 billion to top $17.7 billion, while about $7 billion earmarked for capital works projects for 1992-93 remained unspent.

The year's bonanza has prompted Mr Macleod to channel a massive $24.5 billion to government funds, including the Capital Investment Fund, which finances investment in public bodies such as the Provisional Airport Authority and the Mass Transit Railway.

Of the $24.5 billion, about 43 per cent, or $10.5 billion, will be forwarded to the Capital Investment Fund, with $3 billion earmarked for implementing the long-awaited sewage strategy and $7.5 billion, categorised as additional commitments, set aside for unspecified purposes.

The Secretary for the Treasury, Mr Yeung Kai-yin, noted that additional commitments was a new spending category under the Capital Investment Fund but declined to divulge details of how the $7.5 billion would be spent.

''I know what it is for. I can't say at this point because it will be the subject that will be announced by the Financial Secretary,'' said Mr Yeung.

The budget spending estimates released yesterday also revealed little, except to say that the additional commitments would include possible increases in existing investments in the Capital Investment Fund, as well as requirements that may be identified in the course of the year.

It is expected that the $7.5 billion will be reserved for financing the $2 billion sandwich class housing scheme and as extra capital for the controversial airport and its associated railway projects as well as the sewage strategy.

According to the budget, a new sewerage development trading fund will be set up in 1993-94 under the Capital Investment Fund, subject to the Legislative Council's approval, to enable the implementation of the first phase of the multi-billion sewage strategy by 1997.

The first injection into the fund is at least $3 billion, as promised by Governor Mr Chris Patten in his October 7 policy address.

It is understood Mr Macleod prefers to invest the surplus in one-off capital works projects, as spending the funds on the recurrent accounts would have serious recurrent implications for future years' budgets.

A contributor to the windfall is the impressive land income generated in the current financial year, and the healthy trend is expected to continue in 1993-94.

According to the budget estimates, the revised estimate for the year's land income will be more than $17.7 billion, about 26 per cent more than the original estimate of $14.1 billion announced by Mr Macleod last March.

Despite the uncertainty prompted by the Sino-British row over Hongkong's future democratisation plan, Mr Macleod still forecasts that land income in the next financial year will hit a record to top $24.5 billion, a jump of more than 38 per cent from the revised estimate of the current year.

Land premiums shared by the future Special Administrative Region (SAR) will therefore soar correspondingly, with $11.4 billion set to be channelled to the Land Fund in the 1993-94 year, representing an increase of about 50 per cent over the revised estimate of $7.6 billion for the current year.

Underspending on capital works projects also contributed to the year's windfall surplus.

Mr Yeung said that the spending in 1992-93 would be $17.6 billion against the original estimate of $24.9 billion, resulting in total underspending of about $7 billion.

Mr Yeung said very little of the unspent amount was due to the airport core projects, adding that about $2 billion of the $7 billion had resulted from delays in expenditure on land acquisition, which had been held up as a result of court cases.

He stressed that the underspending problem was confined to capital works and said the Government was always on target on recurrent spending.

Mr Macleod would be announcing a range of measures to tackle the problem in his budget speech.

At a press conference yesterday, Mr Yeung also announced that total government expenditure, including expenditure for the funds, for the new financial year would rise to $132.5 billion, an increase of 15 per cent over that planned for the current year.

Of the $132.5 billion, $99.3 billion would cover the cost of providing existing and new services, while the remainder would be spent on capital projects.

Mr Yeung explained that with a projected trend economic growth rate of five per cent a year, it was possible to increase recurrent expenditure by about five per cent in real terms, that is, over and above the rate of inflation.

''This means significant improvements in key programme areas where additional resources are most needed,'' he said.

For instance, recurrent spending on social welfare will increase by 7.8 per cent in real terms to $9 billion. The same percentage real-term growth rate is recorded on the health front, which has total spending of $14.8 billion in the 1993-94 year.

On education, recurrent spending will rise in real terms by 7.3 per cent to $22.2 billion.

The most significant increase is recorded in the environmental protection budget, which leaps by 42.8 per cent in real terms to top $1.3 billion.

The programme areas where there is a lower real-term growth rate include security, whose increase stands at 1.6 per cent, and water supplies, at 3.2 per cent.

Despite a lower growth in the police budget, Mr Yeung pledged that there would be more police on the beat in the new financial year.