Government departments will get a budget increase of 3 per cent this year with an existing cost-cutting scheme shelved, Hong Kong’s leader revealed on Thursday, as she pledged to improve the welfare of workers in outsourced public sector jobs. Chief Executive Carrie Lam Cheng Yuet-ngor agreed that the wages of 38,000 workers – mainly cleaners and security guards – should be reviewed, and that government departments had not been given sufficient financial resources by the previous administration. Lam, who took office in July last year, made these remarks after a successful 10-day strike by cleaners at a West Kowloon public housing estate where their employer, a cleaning contractor, finally agreed to give them salary increases and severance payments. Lawmaker Michael Luk Chung-hung, who represents the trade unions, urged the government on Thursday during Lam’s question-and-answer session at the Legislative Council to improve its outsourcing processes or even reduce the practice to ensure that low-income workers would not be exploited. Critics had previously told the government, the city’s biggest employer, that outsourcing low-income and low-skilled jobs was worsening poverty in the city. A government survey six years ago found that over 80 per cent of departments awarded tenders to companies offering the lowest price, with 75 per cent of service providers saying there was little room to negotiate rates when they bid for contracts. Responding to Luk, Lam referred to the cost-cutting programme launched by former financial secretary John Tsang Chun-wah , based on a “0-1-1” formula that required each bureau and department to trim their expenses by 2 per cent over three financial years beginning in 2015/16. Carrie Lam to ask for more policy ‘goodies’ in Beijing to ease life for Hongkongers in mainland China As a result, she said, the department that had hired the cleaning contractor “not only failed to secure an annual adjustment [for their budget] based on inflation, they even had to cut the budget based on the formula,” she said. “It is indeed a bit difficult for the departments to fix these contracts [with the service providers] when they do not have sufficient resources.” In the run-up to the chief executive election last March, Lam had a fierce televised debate with Tsang, who also contested the top post. Lam slammed the initiative for leading to a drop in investment in education, while Tsang defended the cost-cutting programme and said it did not remove necessary expenditure but enhanced efficiency. More money for Hong Kong to splash out with ‘considerably high’ HK$57.2 billion budget surplus, finance chief writes On Thursday, Lam effectively shelved the savings plan when she said that every department in the coming financial year would see a 3 per cent budget increase – with details to be unveiled next month by Financial Secretary Paul Chan Mo-po . It is such an out-of-touch suggestion Lee Cheuk-yan, Confederation of Trade Unions The chief executive said she believed the extra resources would help the departments implement a new tender process in future and eventually better protect the welfare of low-income workers. But Lam ruled out Luk’s suggestion to eliminate the outsourcing of public service jobs, saying it was crucial and gave the government “flexibility”. Confederation of Trade Unions secretary Lee Cheuk-yan was dismissive of Lam’s announcement and said the additional budget for government departments would not solve the problem of labour exploitation. Lee, a veteran unionist and former lawmaker who has been helping the unhappy workers from Hoi Lai Estate, said: “The extra 3 per cent of budget would not fall into the hands of workers as long as the ‘lowest bid wins’ principle remains. Hong Kong civil servants offered higher pay rise than study recommended “It is such an out-of-touch suggestion,” Lee said, in reference to Lam’s announcement. The government should instead introduce a “living wage” that would be higher than the statutory minimum wage of HK$34.5 per hour for workers in outsourced public sector jobs, a practice adopted in Britain , Lee said. Lee said his group would suggest this to Secretary for Labour and Welfare Dr Law Chi-kwong when they meet him next Monday.