Motion： “Comprehensively reviewing the SAR Government’s use of resources to optimize its fiscal structure”
Deputy President, with the changes in the economic environment and increasing social demands in recent years, fiscal expenditure has continued to grow. However, as the increase in revenue has not been able to keep pace, the fiscal reserves are constantly under downward pressure. I thank Mr Edmund WONG for proposing this motion. It gives us the opportunity to discuss once again the efficiency of the Government’s use of resources and the enhancement of fiscal structure, which is not only a necessary step to address the current fiscal challenge, but also crucial for Hong Kong’s sustainable competitiveness in the future.
In 2023-2024, expenditure on the three major areas of education, social welfare and healthcare accounted for nearly 60% of the recurrent expenditure, and the increase over the past few years has been quite significant. Society has already raised questions about a number of expenditure items. For instance, a think tank has recently pointed out that there are flaws in the way the lump sum grant for education is spent; the assistance provided under the Traffic Accident Victims Assistance Scheme is also said to be severely abused; people who have emigrated to other countries may return to Hong Kong for treatment of serious illnesses and receive subsidies for expensive drugs; the $2 transport fare concession scheme for the elderly lacks regulation, etc. These expenditure items show that the Government attaches importance to people’s livelihood, but with the decrease in the number of school-age children, ageing population and rising healthcare costs, the Government should reassess the proportion of expenditure on various areas, optimize their resource allocation and explore more cost-effective modes of service delivery.
Meanwhile, according to the Director of Audit’s report, some government works projects have encountered problems such as cost overruns and serious delays, reflecting the shortcomings of the existing mechanism which emphasizes inputs over benefits. The Government should establish a full-cycle performance control system that incorporates cost-benefit analysis starting from the project-planning stage, and regularly release the achievement levels of key performance indicators.
Moreover, there is room for improvement in the existing resource allocation mechanism. Some government departments have low budget execution rates, indicating a gap between resource allocation and actual needs. It is essential to conduct performance evaluation to comprehensively assess the effectiveness of the use of financial resources, so as to ensure that the resources allocated to each department correspond with its actual needs, thereby avoiding waste and inefficient use of resources. The Government should continue to promote resources sharing and cross-departmental resource integration, including their IT systems and logistics services, so as to achieve economies of scale.
The expenditure on civil service remuneration, as mentioned by Honourable colleagues just now, accounts for more than 20% of the total expenditure. It is a significant component of the Budget, but the public only focus on the controversy over the annual pay adjustment for civil servants. In fact, the civil service establishment has remained relatively “stable” over the years, and the number of outsourced jobs has been on the rise. With the widespread adoption of AI, many traditional roles can now be replaced. It is believed that some existing roles in the civil service can be replaced by high-tech means. If procedures and efficiency can be optimized to reduce the civil service establishment by 5% to 10%, it is expected that we can save over $10 billion of expenditure. Besides, salary increments are non-performance-based pay rises, which can be even higher than the annual pay adjustment. If salary increments are linked to performance and not systematically granted to everyone, I believe that the expenditure on civil service will become more cost-effective.
In terms of fiscal structure, land sale proceeds and stamp duty have always accounted for a large proportion of the SAR Government’s revenue, making public finances susceptible to market fluctuations. In the past two years, land sale proceeds have been significantly lower than expected, resulting in an increase in the deficit and highlighting the lack of stability in the revenue structure. The Government should actively explore diversified sources of revenue, such as introducing new tax types or broadening the existing tax base, so as to enhance the stability of the Government’s revenue.
To address the rapid growth in public expenditure, the Government set up the Task Force on Review of Public Finances in 2000. I hope that the task force can be reactivated as soon as possible. We can learn from Singapore’s experience in zero-based budgeting and mandate departments to conduct a comprehensive review on the necessity of recurrent items every five years, with a view to enhancing fiscal effectiveness.
Deputy President, fiscal structural reform is like installing a new engine for the development of our city. Hong Kong is currently at a critical juncture of economic transformation. We must adopt innovative thinking and break away from our reliance on traditional mindset. Only through the three-dimensional reform approach of “diversifying revenue sources, optimizing expenditures and enhancing supervision transparency” can we maximize the benefits of our limited resources.
I support the original motion and the amendment. I so submit.