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infrastructure which only the Government can sensibly provide, (b) recognition of those social needs which have a moral rather than an economic justification and (c)
8.
a continuing emphasis on cost-effectiveness and cost efficiency (or, if you like, the value for money criterion).
This inter-play has to be resolved and this is done in Hong Kong by taking certain decisions in three areas:
first,
the relative size of the public sector, appropriately defined, secondly, the construction of the annual budget itself; and, thirdly, the rate at which the Government's policies and programmes are implemented over time.
9.
Theoretically, this inter-play could be resolved by the use of common-sense and value judgements. But that
is not precise enough when it comes to the management of the public finances and so we subject our thinking in each of these three areas to the discipline of certain guideline
ratios.
(a) Size of the public sector
10. To begin with, we keep a weather eye on the relative size of the public sector. Quite arbitrarily, but the important thing is to be consistent over time, we define the public sector to include all activities financed from public funds no matter by whom the expenditure is incurred. Thus, expenditure by institutions in the private or quasi- private sector is included to the extent of their subventions; and the activities of Government departments which are partly financed by charges raised on a commercial basis are also included (e.g. Kowloon-Canton Railway, Airport, Waterworks). But excluded are those organisations including even statutory organisations, in which the Government only has an equity position such as the Mass Transit Railway Corporation.
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11. In the four years 1973-74 to 1976-77, the public sector, so defined, represented 17.2% of the gross domestic product at current market prices, compared with 14.4% in the four years 1969-70 to 1972-73; and so the relative size of the public sector has been lifted by one fifth in the last four years compared with the four previous