THE ECONOMY
The Public Sector
59
Consolidated public expenditure in 1985-6 was $43.4 billion, of which the government itself accounted for $40.7 billion. The growth rate in public expenditure over the preceding year was 8.9 per cent in money terms, or 2.7 per cent in real terms after discounting the effect of inflation. In 1985 the Gross Domestic Product grew by six per cent in money terms or 0.6 per cent in real terms, these actual growth rates being lower than forecast.
A comparison of the growth rate of consolidated public expenditure with that of the Gross Domestic Product is at Appendix 8. The ratio of consolidated public expenditure to the Gross Domestic Product fell from a high of 19.1 per cent in 1982-3 to 15.9 per cent in 1984-5. It rose to 16.3 per cent in 1985-6 as a result of the low economic growth in that year, and is expected to remain at about the same level in 1986-7.
The government's consolidated revenue and expenditure were $43.7 billion and $40.7 billion respectively in 1985–6. The consolidated surplus of $3 billion comprised an increase of $1.4 billion in the surplus on General Revenue and of $1.6 billion in the balances of the other funds. The surplus reflected exceptional capital receipts in the year which are not expected to be repeated in 1986–7. Details of the revenue sources and expenditure components for 1985-6 and as estimated for 1986-7 are at Appendix 7. An analysis of expenditure by function is at Appendix. 9.
Some $10.9 billion (or 27 per cent) of the consolidated expenditure in 1985-6 was of a capital nature. The operating surplus for the year was sufficient to finance 61 per cent of this capital expenditure. The remainder was financed from capital revenue including revenue from land sales. The principle that at least half of the capital expenditure should be met from the operating surplus was, therefore, adhered to. It is expected to be maintained in 1986-7.
There was no recourse to borrowing in 1985-6, and the balance of the government's outstanding borrowings at the end of the year was $1.4 billion.
Public Expenditure
The estimated expenditure on General Revenue is set out in the draft Estimates of Expenditure which are presented by the Financial Secretary to the Legislative Council when he delivers his annual Budget speech. It is the total estimated expenditure on General Revenue for which appropriation is sought in the Appropriation Bill introduced into the Legislative Council at the same time.
The Estimates of Expenditure contain details of the estimated recurrent and capital expenditure of all government departments, including estimated payments to subvented organisations and estimated transfers to the statutory funds. They also provide for the repayment of public debt.
With only four exceptions, General Revenue has shown a surplus of income over expenditure at the end of each year in the past 20 years. The exceptions were 1974-5 when there was a deficit of $380 million, 1982-3 when there was a deficit of $3,500 million, 1983-4 when there was a deficit of $2,993 million, and 1984–5 when there was a deficit of $1,563 million of which $1,004 million was financed by the issue of Government Bonds. The accumulated net surpluses on General Revenue form the government's fiscal reserves. These secure the government's contingent liabilities and ensure that it is able to cope with any short-term tendency for expenditure to exceed revenue.
The Urban Council and Regional Council, operating through the Urban Services Department and Regional Services Department respectively, draw up their own budget and expenditure priorities. The expenditure of the Urban Council and of the Regional Council