THE ECONOMY
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is on ensuring that expenditure priorities are set at key points in the planning process, on focussing line managers' attention more directly on the results they intend to achieve with public funds and on clearly delegating the responsibility for value for money to the line managers in departments who are best placed to achieve improvements.
The Public Sector
Consolidated public sector expenditure in 1987-8 was $53.6 billion, of which the govern- ment itself accounted for $47 billion. The growth rate of public expenditure over the preceding year was 11.9 per cent in money terms, or 3.5 per cent in real terms.
The growth rate of consolidated public sector expenditure is compared with the rate of economic growth at Appendix 12. Consolidated public sector expenditure has been kept stable at around 16 per cent of the Gross Domestic Product since 1984–5.
Total government revenue and expenditure in 1987-8 were $60.9 billion and $48.4 billion respectively. The consolidated surplus of $12.5 billion comprised $11.6 billion in the balance on the General Revenue Account and $0.9 billion in the balances of the other funds. The surplus reflected higher than anticipated profits tax yields and increased stamp duty yields resulting from high levels of activity in the stock market. Details of revenue by source and of expenditure by component for 1987-8 and revised estimates for 1988-9 are at Appendix 11. An analysis of expenditure by function is at Appendix 13.
Some $13.6 billion (25 per cent) of consolidated account expenditure in 1987-8 was of a capital nature. The operating surplus for the year ($16.1 billion) represented more than 110 per cent of this capital expenditure. The principle that at least half of the capital expenditure should be met from the operating surplus was adhered to, and this is expected to be the case also in 1988–9.
There was no additional borrowing in 1987-8. The balance of the government's outstanding borrowings at the end of the year was $1 billion.
Public Expenditure
The draft Estimates of Expenditure on the General Revenue Account are presented by the Financial Secretary to the Legislative Council when he delivers his annual Budget speech. In the Appropriation Bill introduced into the Legislative Council at the same time the administration seeks appropriation of the total estimated expenditure on the General Revenue Account.
The Estimates of Expenditure contain details of the estimated recurrent and capital expenditures of all government departments, including estimates of the payments to be made to subvented organisations and estimates of the transfers to be made to the statutory funds. They also provide for the repayment of public debt.
With the exception of only four years (1974–5, 1982–3, 1983-4 and 1984-5) in the past 20 years, the General Revenue Account has shown a surplus income over expenditure at the end of each year. The accumulated net surpluses on the General Revenue Account 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 fluctuations in expenditure relative
to revenue.
The Urban Council and Regional Council, which operate through the Urban Services Department and Regional Services Department respectively, are financially autonomous. They draw up their own budgets and expenditure priorities. The expenditures of the two councils are financed mainly from a fixed percentage of the rates from property in the Urban Council area (Hong Kong, Kowloon and New Kowloon) and in the Regional