Hong Kong Budget 2017-2018

Hong Kong government underspent on education and housing for past 20 years, study says

It finds city’s administration did not use up what was budgeted each year for such areas, seen as requiring service upgrades

PUBLISHED : Thursday, 30 March, 2017, 1:10pm
UPDATED : Thursday, 30 March, 2017, 1:54pm

The Hong Kong government spent less than what the budget allowed each year over a period of two decades on areas such as education, social welfare and housing – the very sectors in need of service boosts – according to a study.

In a research brief released on Wednesday, the Legislative Council Secretariat found the government – known for its strong fiscal discipline – had followed a general pattern of spending less than that was budgeted in each year for the past 20 years. The amount averaged at about HK$17 billion or 5 per cent of actual expenditure per annum.

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The pattern of continued underspending was seen in many policy areas, including education, social welfare and housing.

But the report highlighted that the public was increasingly concerned over service gaps in these very areas, including long queues for public rental housing, medical services and social welfare services, as well as insufficient subsidised undergraduate places. It also noted that about half of secondary school leavers who meet entry requirements were unable to pursue undergraduate studies at the city’s publicly funded universities.

Financial Secretary Paul Chan Mo-po forecast a fiscal surplus of HK$16.3 billion in his budget speech delivered in February. The accumulated fiscal reserves reached a record high of HK$936 billion this month, equivalent to 24 months of government expenditure, according to the brief.

Over the past 20 years, the Hong Kong government attained a fiscal surplus totalling HK$757 billion in 15 years, far more than the combined deficit of HK$196 billion seen in the other five years.

For those surplus years, the various financial secretaries had made a conservative forecast of a combined deficit of HK$49 billion. Upon closer analysis, 75 per cent of the projection discrepancy in the 15 years of surplus was attributable to “under-estimation of revenue”, and the remaining 25 per cent was due to “under-spending”.

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While the size of fiscal reserves has surged over the past 20 years, the annual rate of its investment yield has fallen steadily from 9.4 per cent to 3.3 per cent in recent years, resulting in a smaller contribution of investment income to overall government revenue.

But the study did note that the policy areas which saw underspending were also among the five major public spending items – infrastructure, education, social welfare, health and housing took up 68 per cent of the overall public expenditure in the financial year 2016-17.

Public expenditure has also increased by a cumulative 113 per cent in 20 years to HK$501 billion in 2016-17, faster than the 99 per cent growth in government revenue and overall consumer price inflation of 25 per cent, the report said.

The Legislative Council will resume the second reading debate on the Appropriation Bill 2017 during its meeting on April 12.