Letters | Hong Kong’s bloated civil service could do with more than a spending trim

The issue was ignored during the fat surplus years but with deficits looming amid an economic downturn, it’s time to take a good hard look at public expenditure

Hong Kong budget 2021-2022

Letters

Published: 6:30am, 8 Mar 2021

Why you can trust SCMP

According to Hong Kong’s latest budget for 2021-2022, the government will require all policy bureaus and departments to cut their spending. The aim is to trim recurrent expenditure by 1 per cent in 2022-23 without affecting livelihood-related spending, to achieve an estimated saving of HK$3.9 billion (US$503 million).

Solving the structural deficit is a priority for a government that wants to maintain fiscal balance for the long-term needs of Hong Kong’s public finances. Other than promoting the local economy and increasing government revenue, controlling government expenditures is key. The short-term, 1 per cent departmental spending cut is not enough if the government wants to tackle the issue fundamentally.

With reference to the report prepared by the Working Group on Long-Term Fiscal Planning in 2014, there are several recommended principles that the government should consider again for future budgets, including:

1) that the operating expenditure should not exceed 90 per cent of the operating revenue. Surpluses in the operating account may help meet shortfalls in the capital account or may be retained as a reserve, rather than being spent right away;

2) that the capital account (primarily funding capital works expenditure) should be segregated from the operating account and should strive to stay within the limits of capital revenue (primary revenue from land disposals); and

3) that the government should contain overall government expenditure growth within the forecast nominal gross domestic product growth rates and keep the public expenditure at or around 20 per cent of GDP.

With Hong Kong’s solid financial reserves, it is able to address medium-term fiscal challenges. But we are not immune to pressures and threats, including but not limited to the pressure to increase spending and run down reserves, and the threat of a slowdown in revenue growth.

In particular, the pressure of coping with an ageing population aggravates concerns about Hong Kong’s fiscal sustainability.

Reducing the administration, reorganising government functions, cutting unnecessary intervention, streamlining and reorganising its structures and processes, and reprioritising public services are common measures to reduce public expenditure. The government has so far ignored the problem as the budget had been recording surpluses for more than a decade.

I am not saying that the Hong Kong government should ruthlessly cut public expenditures, but at least those options should be tabled for consideration while the fiscal deficit and economic downturn are still a reality. The government should act before the problem worsens.

Louis Yim, Shau Kei Wan

Post