TNAG-2470-FCO40-3594-Budget-of-Hong-Kong-1992 — Page 127

expenditure.

d) guidelines on the growth of the civil service

establishment.

e) Real tax yields to be maintained and review tax thresholds in light of inflation.

8. The 1991/92 budget presentation provides a fairly detailed presentation of the methodology employed in the Medium Range Forecast. As tax revenues are closely linked to the performance of the economy the starting point for the Medium Range Forecast is the expenditure forecast subject to the discipline that public sector expenditure growth should not exceed forecast trend GDP growth. Trend GDP growth for the 1991/92 forecast was assumed to be 5.5 per cent. Within this ceiling expenditure forecasts are built up in components. The starting point is the cost of maintaining the existing level of public services and meeting the demand over the forecast period. The second step is to add the cost of operating already agreed additional

agreed additional facilities. The balance of funds left over after subtracting existing commitments from the planning ceiling is allocated to new projects and services in an annual resource allocation exercise undertaken by a Star Chamber of the Chief Secretary, Financial Secretary and Policy Secretaries. Arguments for new projects should include current cost implications where relevant. Prior to 1990/91 financial year new projects were agreed in a more ad hoc manner.

9.

In order to increase the efficiency of baseline current expenditure an initiative started in 1990 commissioned value for money studies on

on items/departments of current

current expenditure to identify areas of expansion,

of expansion, zero growth and cutbacks in the current budget.

10. Revenue strategy is determined by the level of expenditures and reserve position. As the Financial Secretary's 1990/91 Budget Speech argued;

'Turning to revenue.... my strategy is that we should raise enough to meet government expenditure and to maintain adequate reserves'.