XN000022-1990-03-07 — Page 28

15

WEDNESDAY, MARCH 7, 1990

"IN MAKING

THINGS, TO TAKE

THIS PFOVISION IT HAS BEEN NECESSARY,

AMONG OTHER

A VIEW OF THE COST OF SETTING UP THE HOSPITAL AUTHORITY. NOT AN EASY TASK.

"WHILST IT IS EXPECTED THAT THE HOSPITAL AUTHORITY WILL ASSUME ITS RESPONSIBILITIES LATER THIS YEAR, IT IS TOO EARLY TO ASSESS ACCURATELY THE FULL FINANCIAL IMPLICATIONS, OR THE EXTENT TO WHICH THE ADDITIONAL EXPENDITURE WILL FALL WITHIN 1990-91.

"CONSEQUENTLY, ALTHOUGH I HAVE MADE SOME PROVISION IN THE DRAFT ESTIMATES, IT MIGHT BE NECESSARY TO SEEK ADDITIONAL FUNDS LATER ON.

"THE EXPENDITURE FROM THE FUNDS, AT $25.7 BILLION, ALLOWS FOR A 30 PER CENT INCREASE IN EXPENDITURE ON PUBLIC WORKS AND FOR FURTHER EQUITY INVESTMENT OF $4 BILLION IN THE HOUSING AUTHORITY," HE SAID.

SIR PIERS SAID TRANSFERS TOTALLING $22.9 BILLION WOULD BE MADE FROM GENERAL REVENUE ACCOUNT TO THE VARIOUS FUNDS, INCLUDING $4.1 BILLION TO THE NEW CAPITAL INVESTMENT FUND.

THESE TRANSFERS WOULD BE IN ADDITION TO EXPENDITURE OF $65.3 BILLION PROVIDED FOR IN THE DRAFT ESTIMATES FOR THE GENERAL REVENUE ACCOUNT.

"TOTAL CONSOLIDATED PUBLIC SECTOR EXPENDITURE IS EXPECTED TO BE 24 PER CENT HIGHER THAN IN 1989-90 AND THIS, WHEN ADJUSTED FOR COST INCREASES, INDICATES A GROWTH IN REAL TERMS OF 9.4 PER CENT.

"'IN 1990-91, WE EXPECT RECURRENT AND CAPITAL EXPENDITURE TO INCREASE IN REAL TERMS BY APPROXIMATELY THE SAME RATE. THE RATE OF GROWTH GREATLY EXCEEDS THE EXPECTED RATE OF GROWTH IN THE ECONOMY IN 1990 OF ONLY THREE PER CENT.

"FURTHERMORE, AS I HAVE SAID, IN THE PERIOD TO 1993-94 THE AVERAGE ANNUAL REAL GROWTH IN CONSOLIDATED PUBLIC SECTOR EXPENDITURE IS ESTIMATED AT 6.6 PER CENT, WHICH IS ABOVE THE ASSUMED TREND GDP GROWTH RATE OF 5.5 PER CENT," HE SAID.

THE FINANCIAL SECRETARY SAID WITH CONSOLIDATED PUBLIC SECTOR EXPENDITURE EXPECTED TO GROW IN 1990-91 AT A RATE WHICH EXCEEDED THE GROWTH IN THE ECONOMY, EXPENDITURE WOULD REPRESENT 18.8 PER CENT OF GDP, WHICH WAS A HIGHER PROPORTION THAN THE 17 PER CENT EXPECTED IN 1989-90.

"IN THE LONGER TERM, THIS TREND IS UNACCEPTABLE. WE MUST NOT ALLOW THE PUBLIC SECTOR TO CONSUME AN INCREASING SHARE OF HONG KONG'S ECONOMIC RESOURCES INDEFINITELY, AND I SHOULD EXPLAIN WHY WE HAVE DEVIATED FROM OUR BUDGETARY GUIDELINES.

"FIRST, OUR BUDGET STRATEGY TAKES ACCOUNT OF SEVERAL YEARS, NOT JUST THE ESTIMATES YEAR, AND WHEN THERE IS A SHORT-TERM DIP IN ECONOMIC GROWTH IT IS NEITHER NECESSARY NOR DESIRABLE TO REDUCE PUBLIC EXPENDITURE BY A RIGID AND AUTOMATIC ADHERENCE TO OUR GUIDELINES. TO DO SO WOULD DISRUPT TO AN UNWELCOME EXTENT THE ORDERLY DEVELOPMENT OUR PUBLIC SERVICES.

OF

/"SECONDLY, WE