Public Expenditure

In accounting terms, public expenditure is taken to include expenditure
by the Housing Authority, the two Municipal Councils, the Lotteries Fund
and government trading funds, all expenditure charged to the General
Revenue Account and expenditure financed by the government's statutory
funds other than the Capital Investment Fund. Government grants and
subventions to institutions in the private or quasi-private sectors are
included, but not spending by organisations in which the government has
only an equity stake (such as the Mass Transit Railway Corporation, the
Kowloon-Canton Railway Corporation and the Airport Authority).
Similarly, debt repayments and equity payments are excluded as they do
not reflect the actual consumption of resources by the government.

Public expenditure in 1996-97 totalled $211.2 billion. The government
itself accounted for $173.6 billion. The growth rate over the preceding
year was 10.4 per cent in nominal terms or 3.1 per cent in real terms.
Some $55.1 billion, or 26.1 per cent of the public expenditure in 1996-97,
was of a capital nature. An analysis of expenditure by function is at
Appendix 10.

Public expenditure has remained below 20 per cent of the gross domestic
product for the last decade. The growth rate of public expenditure is
compared with the rate of economic growth at Appendix 12.

Total government revenue in 1996-97 amounted to $208.4 billion. The
consolidated cash surplus for the year was $25.7 billion. Details of
revenue by source and of expenditure by component for 1996-97 and
1997-98 (Revised Estimate) are at Appendix 13.

The draft estimates of expenditure on the General Revenue Account are
presented by the Financial Secretary to the legislature when he delivers his
annual Budget speech. In the Appropriation Bill introduced to the
legislature 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 expenditure 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.

The government's consolidated account recorded a surplus of $25.7
billion in 1996-97. The accumulated surpluses at the end of 1996-97
stood at $173.6 billion. These surpluses form the government's fiscal
reserves and are available to meet any calls on its contingent liabilities
and enable it to cope with any short-term fluctuations in expenditure
relative to revenue.

The two Municipal Councils, which operate through the Urban Services
Department and Regional Services Department, 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 their respective areas. Additional
income is derived from fees and charges for the services the councils
provide.

The Housing Authority, operating through the Housing Department, is
also financially autonomous. The government provides the authority with
capital and land on concessionary terms to build public housing for rent
and for sale. Part of the authority's recurrent expenditure, for clearances
and squatter control, is financed from the General Revenue Account.

A trading fund is a department - or part of one - providing services on a
commercial or quasi-commercial basis through the operation of a separate
accounting system. Unlike a vote-funded department, trading funds are
allowed to retain revenue generated to meet expenditure in providing the
services and to finance future expansion. 

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