Government bureaus must cut growth in spending by 1pc for two years

Two-year scheme beginning in 2016 will save HK$6 billion and avert fiscal crisis, advisers say

PUBLISHED : Saturday, 02 August, 2014, 3:38am
UPDATED : Saturday, 02 August, 2014, 3:38am

Government bureaus and departments have been asked to cut their growth in spending on existing programmes by 1 per cent a year for two years from 2016 in a move expected to save as much as HK$6 billion, government sources say.

The request by the Financial Services and the Treasury Bureau was circulated on Wednesday. It came four months after the government's fiscal advisers warned the city could face a structural deficit in seven years if nothing was done to curb the growth in spending and to cope with the needs of the ageing population.

Without action, Hong Kong's reserves of HK$734 billion could dry up in 2027, the advisers warned.

Money saved on recurrent spending will be returned to agencies when they plan new public services, sources close to the financial secretary say.

"We are not cutting expenses but [seeking] to contain spending growth," a government spokesman said. "It will help departments to be financially disciplined and will encourage them to re-prioritise resources for new public services."

Big-spending agencies would also be required to undergo "check-ups" of their financial health, and a "financial sustainability" test would be carried out on big projects, the sources said.

An effort is also being made to bring new services in line with the chief executive's policies.

Agencies that were previously encouraged to submit their funding requests in the summer will now be asked to wait until proposals are invited in the lead-up to the policy address.

"For departments and bureaus that are spending mostly on manpower and giving out subsidises to others, like education and social welfare departments, there will be room for further discussion on how they can attain the financial target," one source said.

Agencies with the biggest financial challenges will reportedly be given three years to achieve the target.

According to official statistics and calculations by the Post, the Social Welfare Department and the Food and Health Bureau topped the list of spenders in 2013/14 - spending HK$51 billion and HK$46 billion respectively on recurrent items.

The Social Welfare Department also had the biggest growth in recurrent spending due to a rise in social security payments. It was followed by the Transport Department, which launched fare concessions for the elderly and disabled.

Marcellus Wong Yui-keung, a member of the working group on long-term fiscal planning, which issued the March warning, said the new measure could not be called drastic.

"Departments have been allowed to increase their expenditure by 1 per cent each year. The government is just taking back the small growth," he said.

"These kinds of fiscal checks have been carried out by private companies annually. I support the move as it signifies a mentality change, and giving up services that are no longer necessary."

Wong said 60 per cent of the government's expenditure went on civil servants' salaries.

The working group recommended a more drastic measure in its report. It said operating expenditures should be locked in at 90 per cent of operating revenues, in contrast to the average figure of 97 per cent since 1997.

Executive councillor Fanny Law Fan Chiu-fun said the measure was mild.

Secretary for Food and Health Dr Ko Wing-man said the 1 per cent spending cut should be made without undermining the quality of government services.


Cash hungry

Biggest spenders in 2013/14*

Social Welfare Department HK$51 billion

Food and Health Bureau HK$46 billion

Education Bureau HK$44 billion

Police force HK$15 billion

Water Supplies Department HK$6.8 billion


Biggest spending increases from 2012/13 to 2013/14*

Social Welfare Department 20.7%

Transport Department 20.5%

Security Bureau 18.8%

Housing Department 18.4%

Environment Bureau 17.7%

*Figures refer to recurrent spending