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The main features of the 2002-03 Budget include -
(1) Hong Kong Economy
* GDP grew by 0.1% in real terms in 2001 (as compared with 10.5% in 2000)
* Deflation continued in 2001. GDP deflator was -0.5% and the Composite Consumer Price Index fell by 1.6%
* In 2002, GDP forecast to grow by 1% in real term and GDP deflator to be -1.5%
* A trend annual growth of 3% in real terms is forecast for the medium term (2002-2006). The trend GDP deflator for that period is forecast to be 0.4% per year
(2) Strategies for Development
* Capitalise on Hong Kong's strengths, develop high-value-added economic activities, particularly financial services, logistics, tourism and producer and professional services
* Enhance flows of people, goods, capital, information and services to and from Mainland, seize opportunities from Mainland's WTO accession
* Upgrade quality of manpower and increase number of talented individuals, by improving education and attracting outside talent
* Promote development of local community economy closely linked to daily life, e.g. small traders and personal services, to help employment
* Seek to excel by using quality, speed and creativity to produce and deliver services and products
(3) Public Finances : Medium-term Targets
The Financial Secretary sets three targets to be achieved by 2006-07 -
(a) restoring balance in Consolidated Account;
(b) attaining a balanced Operating Account; and
(c) reducing public expenditure to 20% of GDP or below
To achieve these targets, the Government will contain the growth of government expenditure to below that of the economy from 2003-04 to 2006-07 and suitably raise additional revenues
(4) 2002-03 Budget: Expenditure
* Total expenditure amounts to $259.8 billion. Revenue amounts to $214.6 billion
* Expenditure estimates for 2002-03 assume a 4.75% civil service pay cut from 1 October 2002 and a corresponding reduction in the salary-related portions of subvention to various organisations
* Total government expenditure is higher than the revised estimate of 2001-02 by 7.7% in real terms (much higher than the 1% forecast economic growth in real terms for 2002), and by 6.2% in money terms
* Funds have been earmarked for all initiatives announced in the Chief Executive's Policy Addresses, including improving education, enhancing employment, investing in infrastructure and helping the disadvantaged and those in hardship
* The Financial Secretary proposes to allocate an additional $400m for implementing a two-year Youth Work Experience and Training Scheme to provide on-the-job training for about 10 000 young people
* Expenditure estimates and key spending initiatives for education, health, social welfare, security are summarised at Annex
(5) 2003-04 to 2006-07 Government Expenditure
* Growth of government expenditure in 2003-04 to 2006-07 will be contained at below the trend growth of the economy, so as to contain public expenditure at 20% of GDP or below
(6) 2002-03 Budget: Revenue
Two very modest revenue-raising measures with no bearing on livelihood are proposed for 2002-03 -
* Duty on wine increased from 60% to 80%
* Duty-free tobacco allowance for local residents cut by 40% to 60 cigarettes or 15 cigars or 75 grammes of tobacco; duty-free still wine cut by 25% to 750 millilitres, equivalent to the standard size of a bottle of wine
(7) 2003-04 to 2006-07 Government Revenue
* The Financial Secretary proposes to introduce a Boundary Facilities Improvement Tax in 2003-04
The Financial Secretary also notes that further revenue-raising measures may need to be introduced to redress the fiscal deficits by 2006-07. The Government will consider the recommendations of the Advisory Committee on New Broad-based Taxes and other views
(8) Relief Measures to Help the Community Ride Out the Storm
The Budget proposes a package of one-off relief measures, costing $6.4 billion in total -
* Reduce rates payments, by raising the level of waiver from $2,000 to $5,000. About 85% or 2.3 million ratepayers will pay no rates for one year
* Waive water and sewage charges for one year, subject to maximum amounts set at $800 and $200 respectively for domestic households, and at $3,200 and $800 respectively for non-domestic consumers. About 80% of households and business consumers will pay no water and sewage charges for one year
* Reduce trade effluent surcharge by 30% for one year
* Each of the 15 000 or so businesses now paying this surcharge will on average pay $4 000 less
* Waive business registration fee for one year. Over 600 000 business operators will be exempted from paying this fee for one year
* Extend duty concession for ultra low sulphur diesel for one year to 31 March 2003
* Freeze government fees and charges for one year
(9) Financial Position
* Outturn for 2001-02 shows a substantial increase in estimated consolidated deficit, from $3 billion to $65.6 billion (equivalent to 5.2% of GDP). The operating deficit is estimated to be $50.7 billion
* Consolidated and operating deficits for 2002-03 forecast to be $45.2 billion and $49.3 billion respectively
* Consolidated and operating deficits will decrease from 2002-03 onwards as expenditure-control and revenue-raising measures are implemented
* Our forecast shows that consolidated and operating balances will be restored in 2006-07
* Public expenditure will come down to 20% of GDP in 2006-07
* Fiscal reserves forecast at $369.8 billion, equivalent to 19 months of government expenditure at the end of 2001-02, and forecast to drop to $325.6 billion, or 15 months of government expenditure, by the end of 2002-03. As at the end of 2006-07, fiscal reserves forecast to be $271.2 billion, equivalent to 12 months of government expenditure
Annex
Recurrent Spending on Major Policy Area Groups and
Capital Expenditure in 2002-03
Recurrent Expenditure
Recurrent government expenditure in 2002-03 will grow by $6.9 billion, or 5% in real terms over the latest estimated spending for 2001-02.
Education
Recurrent spending on education amounts to $49.3 billion, an increase of 8% in real terms over the latest estimated spending for 2001-02.
Some of the key improvements are :
* Additional resources to support curriculum reform, including 249 additional primary school teachers for five years to serve as curriculum leaders
* Native-speaking English Teachers and English Language Teaching Assistants for primary schools
* IT Co-ordinators for primary and secondary schools in the next two school years
* Cash grants to strengthen student guidance service in primary schools
* Operating about 40 more primary schools on whole-day basis
* Improving and rationalising various student financial assistance schemes
* Implementing financial assistance schemes for students to support the expansion of post-secondary education
* Enhancing the Kindergarten Subsidy Scheme to encourage kindergartens to recruit more qualified kindergarten teachers
* Additional training places for serving kindergarten principals and child care centre supervisors
* Enhancing school-based educational psychology service for primary schools
* Extending the Smart Teen Challenge Project to more students for four school years
* Strengthening the support for subject-related teacher organisations
Health
Recurrent spending on health amounts to $32.4 billion, an increase of 4% in real terms over the latest estimated spending for 2001-02. Some of the additional funding will provide for :
* Opening net 166 additional hospital beds
* Opening 80 additional day hospital places
* Employing 1 000 additional care assistants to strengthen extended care service in hospitals
* Introducing an intensive rehabilitation and treatment programme for psychiatric patients to facilitate their early integration into the community
* Launching an adolescent health programme, developing a cervical screening programme, piloting a men's health programme, and implementing a parenting programme
* Opening a Primary Health Care Centre in Fanling with a maternal and child health centre, a child assessment centre, a school dental clinic, and an integrated day treatment centre
Social Welfare
Recurrent spending on social welfare amounts to $32.1 billion, an increase of 9% in real terms over the latest estimated spending for 2001-02.
Some of these additional services include :
* An additional 2 702 subsidised residential places, 10 social centres (including 6 in multi-service centres), 3 multi-service centres, 280 day care centre places and enhanced home and community care services for the elders
* An additional 185 residential places, 135 day places, 40 early education and training centre places, 40 special child care centre places and 13 additional home-based training teams for the disabled
* An additional 500 day nursery places, 2 occasional child care units, 90 foster care places and 1 refuge centre for women
* An additional 12 integrated teams for young people
* 47 additional speech therapists for pre-school disabled children
* 3 additional school social workers for new schools, 150 peer counsellors and 154 Understanding the Adolescent Projects in secondary schools
* Additional time-limited jobs to strengthen various services including those under the Promoting Self-reliance Strategy, services for the elders, family and child services and rehabilitation services
Security
Recurrent spending on security amounts to $24.8 billion, an increase of 2% in real terms over the latest estimated spending for 2001-02. Some of the improvements are :
* 133 additional police officers for strengthening operational front-line capability and traffic enforcement in new towns and new infrastructures
* 19 additional police officers for strengthening crime detection capability
* 127 additional fire fighting and ambulance officers for manning new fire stations, ambulance depots and fire motorcycles
* 50 additional ambulance officers for implementing full paramedic ambulance service
* 11 additional staff in Fire Services Department for implementing the Railway Development Strategy and formulating the fire services requirement for Hong Kong Disneyland
* 33 additional staff in Independent Commission Against Corruption for enhancing investigative capability, strengthening information technology support services and improving the handling of case properties
* 121 additional customs officers for manning customs facilities at Container Terminal No. 9 and for facilitating cross boundary traffic at Lok Ma Chau and Lo Wu Control Points
* 10 additional staff in Correctional Services Department for implementing the new Rehabilitation Centres Programmes for young offenders
* 10 additional correctional services officers for strengthening escort service to implement the proposal of shortening the maximum remand period from eight to three days
* 93 additional immigration officers for strengthening immigration control at boundary control points
* 30 additional staff in Immigration Department for implementing the new Registration of Persons System which supports the issue of smart identity card
* 32 additional staff in Immigration Department for implementing Phase I of the updated Information Systems Strategy
Capital Expenditure
On capital expenditure, total government spending for 2002-03 will amount to $49.4 billion, an increase of $8.0 billion or 21% in real terms, over the latest estimated spending for 2001-02. Spending under the Capital Works Reserve Fund alone next year will reach $34.4 billion.
Expenditure on capital works is estimated to be $28.5 billion, an increase of 15% in real terms over the revised estimate for 2001-02. From 2002-03 to 2006-07, expenditure on capital works projects will be in the range of $25 billion to $30 billion. Some new major public works projects to start in 2002-03 are:
Tsuen Wan Road upgrading
Central Reclamation phase III - engineering works
School Improvement Programme, Final Phase
International Wetland Park and Visitor Centre-phase 2
Establishment of a Radiotherapy Centre and redevelopment of the Accident and Emergency Department in Princess Margaret Hospital
End/Wednesday, March 6, 2002
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