THE ECONOMY
Management of the Budget
The government manages its finances against the background of a rolling five-year Medium Range Forecast of expenditure and revenue. This models the consolidated financial position of the General Revenue Account and of all the funds except the Lotteries Fund.
The most important principle underlying the government's management of public expenditure is that the growth rate of public expenditure should over a period be close to that of gross domestic product.
The Budget presented by the Financial Secretary to the Legislative Council each year is developed against the background of the Medium Range Forecast to ensure that full regard is given to these principles and to longer-term trends in the economy.
Public Expenditure
Public expenditure in 1990-91 was $95.2 billion. The government itself accounted for $79.1 billion excluding grants to the Regional Council, and equity injections in the Mass Transit Railway Corporation, the Housing Authority, the Provisional Airport Authority and other bodies. The growth rate over the preceding year was 16.2 per cent in nominal terms or 2.3 per cent in real terms. Some $26.7 billion or 28 per cent of the public expenditure in 1990-91 was of a capital nature. An analysis of expenditure by function is at Appendix 8.
The growth rate of public expenditure is compared with the rate of economic growth at Appendix 9. Public expenditure has been around 15 to 17 per cent of the gross domestic product since 1987-8. It is estimated that this will rise to about 19 per cent in 1991–2.
Total government revenue in 1990-91 was $89.5 billion and the consolidated cash surplus was $4 billion. Details of revenue by source and of expenditure by component for 1990-91 and 1991-2 (estimate) are at Appendix 10.
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 payments to be made to subvented organisations and estimates of transfers to be made to the statutory funds. They also provide for the repayment of public debt.
With the exception of only five years (1974-5, 1982-3, 1983-4, 1984–5 and 1990–91) in the past 20 years, the General Revenue Account has shown a surplus of 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 Council area (New Territories). Additonal income derives from fees and charges for the services the councils provide.
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