THE 2001-02 BUDGET - Appendices

APPENDIX A

MEDIUM RANGE FORECAST

2000-2001 TO 2004-2005

INTRODUCTION

The Medium Range Forecast (MRF) is a projection of expenditure and revenue for the forecast period based on the forecasting assumptions and budgetary criteria outlined in Section I of this Appendix.

2 The MRF is presented in three sections:

(I) Forecasting assumptions and budgetary criteria.

(II) The MRF for 2000-2001 to 2004-2005.

(III) Commentary on the MRF in relation to budgetary criteria.

3 An estimate of Government's contingent liabilities at 31 March 2001 and 31 March 2002 respectively is provided in Section IV of this Appendix as supplementary information to the MRF.

SECTION I - FORECASTING ASSUMPTIONS AND BUDGETARY CRITERIA

4 A number of computer based models are used to derive the MRF. These models reflect a wide range of assumptions about the factors determining each of the components of Government's revenue and expenditure. Some are economic in nature (the general economic assumptions) while others deal with specific areas of Government's activity (the detailed assumptions). These are supported by studies of historical and anticipated trends.

General Economic Assumptions

Growth in Gross Domestic Product (GDP)

5 There is a clear link between many of Government's major revenue sources and economic growth. For planning purposes the medium range assumption as to annual GDP growth for the current MRF has been set at 4% in real terms.

Inflation

6 Over the forecast period the average year on year inflation is assumed to be 2.5%. It is emphasised that this is a trend assumption related to the GDP deflator.

Methodology

7 In arriving at the yearly forecasts, account is taken of short-term fluctuations from the trend forecasts.

Detailed Assumptions

8 A wide range of detailed assumptions relating to developing expenditure and revenue patterns over the forecast period are taken into account. These include:

estimated cash flow of capital projects.
forecast completion dates of these capital projects and their related recurrent consequences in terms of staffing and running costs.
estimated cash flow arising from new commitments resulting from policy initiatives.
the expected pattern of demand for individual services.
the trend in yield from individual revenue sources.
new revenue measures in the 2001 Budget.

Budgetary Criteria

9 In addition to the above forecasting assumptions there are a number of criteria against which the results of forecasts are tested for overall acceptability in terms of budgetary policy. Any significant breach of these parameters results in a review of the underlying programmes and adjustments where necessary and appropriate.

10 The following are the more important budgetary criteria:

Total cash flow surplus/deficit

The Government aims to maintain adequate reserves in the long term.

Total expenditure growth

The general principle is that, over time, expenditure growth should not exceed the growth of the economy.

Capital expenditure growth

By its nature some fluctuations in the level of capital expenditure are to be expected. However, over a period the aim is to contain capital expenditure growth within overall expenditure guidelines.

Revenue policy

The projections reflect the revenue measures introduced in the 2001 Budget. Account is taken of the need to maintain over time the real yield from fees and charges, fixed duties etc. and to review periodically the various tax thresholds in the light of inflation.

SECTION II - THE MRF FOR 2000-2001 TO 2004-2005

11 The current MRF is summarised in the following three tables which indicate the forecast operating position, capital cash flow and consolidated reserves (Note a).

Operating Statement (General Revenue Account)

Table 1

	Revised Estimate	Forecast
	2000-2001	2001-2002	2002-2003	2003-2004	2004-2005
	$m	$m	$m	$m	$m
Revenue (Note b)	173,790	196,990	215,630	232,070	249,750
Less: Expenditure (Note c)	190,950	210,930	222,880	236,520	252,850
Operating surplus/(deficit) for the year (Note d)	(17,160)	(13,940)	(7,250)	(4,450)	(3,100)

Capital Financing Statement (The Funds)

Table 2

		Revised Estimate	Forecast
		2000-2001	2001-2002	2002-2003	2003-2004	2004-2005
		$m	$m	$m	$m	$m
Opening balances of the Funds		64,330	57,700	56,700	60,180	61,740
Add :	Revenue (Note e)	39,010	39,710	47,110	54,710	64,150
:	Transfers from/(to) General Revenue Account (Note f)	(2,380)	3,030	3,000	3,000	(12,000)
Less :	Expenditure on capital projects (Note g)	28,890	31,430	31,610	36,140	38,590
:	Loans and investments (Notes h and i)	13,950	11,420	12,860	17,750	12,250
:	Aid for disaster relief (Note j)	20	-	-	-	-
:	Expenditure for innovation and technology (Note k)	400	890	2,160	2,260	0
Closing balances of the Funds		57,700	56,700	60,180	61,740	63,050

Consolidated Reserves

Table 3

	Revised Estimate	Forecast
	2000-2001	2001-2002	2002-2003	2003-2004	2004-2005
	$m	$m	$m	$m	$m
General Revenue Account
Opening balance	379,930	375,210	373,240	362,990	355,540
Operating surplus/(deficit) (per Table 1)	(17,160)	(13,940)	(7,250)	(4,450)	(3,100)
MTRC privatisation proceeds (Note b)	10,060	15,000	0	0	0
Transfers from/(to) the Funds (per Table 2) (Note f)	2,380	(3,030)	(3,000)	(3,000)	12,000
Closing balance	375,210	373,240	362,990	355,540	364,440
The Funds-closing balances (per Table 2)	57,700	56,700	60,180	61,740	63,050
Fiscal Reserves at 31 March(Note l)	432,910	429,940	423,170	417,280	427,490

Notes on the Medium Range Forecast

(a) Accounting policies

The Medium Range Forecast, like Government's Accounts, is prepared on a cash basis and reflects forecast receipts and payments, whether or not they relate to recurrent or capital transactions.
The Medium Range Forecast includes the General Revenue Account and the Funds (the Capital Works Reserve Fund, the Loan Fund, the Capital Investment Fund, the Disaster Relief Fund, the Civil Service Pension Reserve Fund and the Innovation and Technology Fund). For the purpose of the Medium Range Forecast, the Land Fund is consolidated with the General Revenue Account.

(b) General Revenue Account - Revenue

This comprises all receipts to be credited to any of the following revenue heads, namely -

Duties
General Rates
Internal Revenue
Motor Vehicle Taxes
Fines, Forfeitures and Penalties
Royalties and Concessions
Properties and Investments
Loans, Reimbursements, Contributions and Other Receipts (excluding transfers from Funds)
Utilities
Fees and Charges

For the purpose of the Medium Range Forecast:

the investment earnings of the Land Fund are consolidated with the revenue of the General Revenue Account; and

exceptional receipts of $10 billion in 2000-2001 and $15 billion in 2001-2002 arising from the MTR Corporation Limited (MTR) Privatisation Share Offer, though they are to be credited to the General Revenue Account, are shown separately in Table 3.

(c) General Revenue Account - Expenditure

This comprises all expenditure to be charged to the General Revenue Account in accordance with the Appropriation Ordinance, with the exception of the transfers to Funds. It includes the day to day operational expenses of government departments together with minor capital purchases of a routine nature.

(d) Operating surplus/deficit for the year

The deficits in 2000-2001 to 2003-2004 are after provision for compensatory payments and commuted pension gratuity payments under the Voluntary Retirement Scheme and the Voluntary Departure Scheme introduced in 2000-2001. These payments are one-off in nature and forecast to amount to $1.3 billion in 2000-2001, $5.7 billion in 2001-2002, $2.6 billion in 2002-2003 and $0.6 billion in 2003-2004.

(e) Funds - Revenue

This comprises all revenue receivable by the Funds except the transfers from General Revenue Account. It includes -

Land premia
Loan repayments received
Recovery from MTR Corp Ltd
Recoveries from Trading Funds
Investment earnings and dividends
Donations towards capital projects

The breakdown of revenue to the various Funds is -

	2000-2001	2001-2002	2002-2003	2003-2004	2004-2005
	$m	$m	$m	$m	$m
Capital Works Reserve Fund	31,600	30,310	38,750	45,820	55,310
Capital Investment Fund	2,930	2,770	2,860	2,840	2,820
Civil Service Pension Reserve Fund	600	1,000	1,030	1,060	1,090
Loan Fund	3,590	5,230	4,140	4,810	4,840
Innovation and Technology Fund	290 _______	400 _______	330 _______	180 _______	90 _______
Total	39,010 _______	39,710 _______	47,110 _______	54,710 _______	64,150 _______

(f) Transfers between General Revenue Account and the Funds

The transfers between General Revenue Account and the Funds are assessed with regard to the commitments of the Funds and their forecast cash flow requirements. The breakdown of the transfers for 2000-2001 and 2001-2002 is -

	2000-2001	2001-2002
	$m	$m
General Revenue Account	2,380	(3,030)
Capital Works Reserve Fund	(6,000)	0
Loan Fund	0	3,000
Capital Investment Fund	3,600	0
Disaster Relief Fund	20	30
Civil Service Pension Reserve Fund	0	0
Innovation and Technology Fund	0	0

APPENDIX B

TRENDS IN PUBLIC EXPENDITURE 1996-1997 TO 2001-2002

INTRODUCTION

The purpose of this appendix is to present trends in public expenditure over the period 1996-1997 to 2001-2002. This analysis is expressed in public expenditure terms as defined in Table 4 of Appendix A and includes expenditure by the Trading Funds, the Housing Authority, the Lotteries Fund and the previous Provisional Urban Council and Provisional Regional Council (up to 31 December 1999). It shows the actual and estimated recurrent and total expenditure during this period and expresses this in terms of ten main policy area groups (an index showing the policy areas forming part of these ten main groups is provided at index of policy area groups):

Community and External Affairs
Economic
Education
Environment and Food
Health
Housing
Infrastructure
Security
Social Welfare
Support

Where appropriate, policy area groups are further analysed by policy areas.

2 Details of the individual heads of expenditure contributing to a particular policy area are provided in an index in Volume I of the 2001-2002 Estimates. This index further provides details by head of expenditure of individual programmes which contribute to a policy area.

3 The analysis provided in this appendix shows how resources have been and will, in 2001-2002, be allocated to different policy area groups. Where appropriate, historical figures have been adjusted to comply with the current classification of expenditure.

HISTORICAL PERSPECTIVE: THE MAJOR FEATURES

4 The changing share of expenditure on policy area groups from 1996-1997 to 2001-2002 is illustrated in Tables 1 and 2. Table 1 relates to recurrent public expenditure and Table 2 to total public expenditure.

Recurrent Public Expenditure by Policy Area Group 1996-1997 to 2001-2002

Table 1

Policy Area Groups	Actual				Revised Estimate (Note)	Draft Estimate (Note)
	1996-1997	1997-1998	1998-1999	1999-2000	2000-2001	2001-2002
	%	%	%	%	%	%
(A) Community and External Affairs
(1) District and Community Relations	0.7	0.7	0.8	0.8	0.8	0.8
(2) Recreation, Culture and Amenities	2.9	2.9	2.9	2.8	2.6	2.7
	3.6	3.6	3.7	3.6	3.4	3.5
(B) Economic	5.5	5.8	5.4	5.2	5.2	5.3
(C) Education	21.6	21.2	21.8	22.0	22.0	21.7
(D) Environment and Food	4.0	4.3	4.2	4.2	4.0	3.9
(E) Health	14.5	15.1	15.3	15.3	15.1	14.5
(F) Housing	6.8	6.6	6.3	6.0	6.6	6.4
(G) Infrastructure
(1) Buildings, Lands and Planning	1.5	1.4	1.4	1.4	1.4	1.7
(2) Transport	1.3	1.4	1.4	1.5	1.4	1.4
(3) Water Supply	2.7	2.6	2.6	2.6	2.6	2.5
	5.5	5.4	5.4	5.5	5.4	5.6
(H) Security
(1) Immigration	1.1	1.1	1.1	1.1	1.0	1.0
(2) Internal Security	10.8	10.1	9.7	9.4	9.2	8.8
(3) Other	1.7	1.6	1.7	1.8	1.8	1.7
	13.6	12.8	12.5	12.3	12.0	11.5
(I) Social Welfare	10.8	11.8	13.5	13.7	13.6	13.8
(J) Support	14.1	13.4	11.9	12.2	12.7	13.8
	100.0	100.0	100.0	100.0	100.0	100.0

Total Recurrent Public Expenditure	$m	$m	$m	$m	$m	$m
Total Recurrent Public Expenditure	156,159	172,419	187,857	195,272	202,685	219,415

Total Public Expenditure by Policy Area Group 1996-1997 to 2001-2002

Table 2

Policy Area Groups	Actual				Revised Estimate (Note)	Draft Estimate (Note)
	1996-1997	1997-1998	1998-1999	1999-2000	2000-2001	2001-2002
	%	%	%	%	%	%
(A) Community and External Affairs
(1) District and Community Relations	0.6	0.6	0.6	0.6	0.7	0.7
(2) Recreation, Culture and Amenities	3.0	2.8	2.7	2.8	2.3	2.2
	3.6	3.4	3.3	3.4	3.0	2.9
(B) Economic	5.5	7.3	8.0	4.6	4.6	5.4
(C) Education	17.9	20.0	18.2	18.7	18.6	19.0
(D) Environment and Food	5.4	5.6	5.0	4.6	4.1	4.1
(E) Health	11.9	11.9	11.8	11.8	11.6	11.7
(F) Housing	11.5	10.5	14.6	17.0	18.6	13.1
(G) Infrastructure
(1) Buildings, Lands and Planning	3.5	3.2	3.1	3.0	3.1	4.9
(2) Transport	4.3	3.1	2.5	2.4	2.2	2.2
(3) Water Supply	2.8	2.7	3.1	3.1	2.9	2.7
	10.6	9.0	8.7	8.5	8.2	9.8
(H) Security
(1) Immigration	0.9	0.8	0.8	0.8	0.8	0.9
(2) Internal Security	9.3	8.0	7.3	7.5	7.5	7.7
(3) Other	1.3	1.3	1.3	1.3	1.4	1.3
	11.5	10.1	9.4	9.6	9.7	9.9
(I) Social Welfare	8.5	9.3	9.9	10.2	10.2	10.8
(J) Support	13.6	12.9	11.1	11.6	11.4	13.3
	100.0	100.0	100.0	100.0	100.0	100.0

Total Public Expenditure	$m	$m	$m	$m	$m	$m
Total Public Expenditure	211,248	234,780	266,448	269,484	278,385	290,665

Note:

The percentage share of expenditure for Support has increased in 2001-02 due to the inclusion of the expenditure which is one-off in nature under the Voluntary Retirement Scheme and the Voluntary Departure Scheme. The percentage share for other policy area groups has therefore been correspondingly reduced.

5 Recurrent public expenditure and total public expenditure in 2000-2001 and 2001-2002, analysed by policy area groups, are shown in Tables 3 and 4 respectively together with details of the real growths in expenditure between the two years.

Analysis of Recurrent Public Expenditure by Policy Area Group

Table 3

Policy Area Groups	Revised Estimate	Draft Estimate	Increase	Increase In Real Terms(Note 1)
	2000-2001	2001-2002	Increase	Increase In Real Terms(Note 1)
	$m	$m	$m	%
(A) Community and External Affairs
(1) District and Community Relations	1,620	1,880	+260	+ 15.0
(2) Recreation, Culture and Amenities	5,340	5,835	+495	+8.9
	6,960	7,715	+755	+10.3
(B) Economic	10,450	11,680	+1,230	+10.6
(C) Education	44,565	47,550	+2,985	+ 5.5
(D) Environment and Food	8,030	8,635	+605	+ 7.1
(E) Health	30,540	31,810	+1,270	+ 3.2
(F) Housing	13,485	13,900	+415	+1.0
(G) Infrastructure
(1) Buildings, Lands and Planning	2,870	3,765	+895	+29.9
(2) Transport	2,845	3,015	+170	+ 5.5
(3) Water Supply	5,285	5,505	+220	+ 3.4
	11,000	12,285	+1,285	+10.9

(H) Security
(1) Immigration	2,095	2,250	+155	+ 6.3
(2) Internal Security	18,680	19,340	+660	+ 2.3
(3) Other	3,515	3,710	+195	+ 5.1
	24,290	25,300	+1,010	+ 3.1
(I) Social Welfare	27,555	30,230	+2,675	+ 9.3
(J) Support
(1) Central Management for the Civil Service (Note 2)	15,510	19,630	+4,120	+25.8
(2) Others	10,300	10,680	+380	+3.0
	25,810	30,310	+4,500	+16.8
Total Recurrent Public Expenditure	202,685	219,415	+16,730	+ 7.3

Note 1:	As the 2001-2002 draft Estimate has included assumptions on price changes for various expenditure components (e.g. salaries, operating expenses, plant and equipment, etc.), the % increase is calculated after adjustment to bring the expenditure figures for 2000-2001 and 2001-2002 to the same price level.
Note 2:	It includes total expenditure of $1,100 million in 2000-2001 and $4,100 million in 2001-2002 which is one-off in nature under the Voluntary Retirement Scheme and the Voluntary Departure Scheme introduced in 2000-2001.

Analysis of Total Public Expenditure by Policy Area Group

Table 4

Policy Area Groups	Revised Estimate	Draft Estimate	Increase	Increase In Real Terms(Note 1)
	2000-2001	2001-2002	Increase	Increase In Real Terms(Note 1)
	$m	$m	$m	%
(A) Community and External Affairs
(1) District and Community Relations	1,875	2,020	+ 145	+ 6.9
(2) Recreation, Culture and Amenities	6,450	6,490	+ 40	+ 0.2
	8,325	8,510	+ 185	+ 1.7
(B) Economic	12,890	15,570	+ 2,680	+ 19.4
(C) Education	51,670	55,330	+ 3,660	+ 5.9
(D) Environment and Food	11,360	11,825	+ 465	+ 3.6
(E) Health	32,355	33,935	+ 1,580	+ 3.9
(F) Housing	51,905	37,950	- 13,955	- 27.6
(G) Infrastructure
(1) Buildings, Lands and Planning	8,585	14,225	+ 5,640	+ 64.7
(2) Transport	6,285	6,490	+ 205	+ 2.9
(3) Water Supply	8,045	7,870	- 175	- 2.9
	22,915	28,585	+ 5,670	+ 24.1
(H) Security
(1) Immigration	2,110	2,500	+ 390	+ 17.0
(2) Internal Security	20,910	22,375	+ 1,465	+ 5.8
(3) Other	3,860	3,980	+ 120	+ 2.8
	26,880	28,855	+ 1,975	+ 6.3
(I) Social Welfare	28,445	31,375	+ 2,930	+ 9.9
(J) Support
(1) Central Management for the Civil Service (Note 2)	16,685	23,115	+ 6,430	+ 37.4
(2) Others	14,955	15,615	+ 660	+ 3.7
	31,640	38,730	+ 7,090	+ 21.5
Total Public Expenditure	278,385	290,665	+ 12,280	+ 3.5

Note 1:	As the 2001-2002 draft Estimate has included assumptions on price changes for various expenditure components (e.g. salaries, operating expenses, plant and equipment, etc.), the % increase is calculated after adjustment to bring the expenditure figures for 2000-2001 and 2001-2002 to the same price level.
Note 2:	It includes total expenditure of $1,300 million in 2000-2001 and $5,700 million in 2001-2002 which is one-off in nature under the Voluntary Retirement Scheme and the Voluntary Departure Scheme introduced in 2000-2001.

INDEX OF POLICY AREA GROUPS


Policy Area Group	Description by Policy Area	Reference (Note)
Community and External Affairs	District and Community Relations	19
Community and External Affairs	Recreation, Culture and Amenities and Entertainment Licensing	18

Economic	Air and Sea Communications	3
	Commerce and Industry	6
	Employment	8
	Financial Services	1
	Information Technology, Telecommunications and Broadcasting	17
	Posts, Power and Competition Policy	4
	Public Safety	7
	Travel, Tourism and Consumer Protection	5

Education	Education	16

Environment and Food	Environmental Hygiene	32
	Environmental Protection and Conservation	23
	Food Supply and Food Safety	2

Health	Health	15

Housing	Housing	31

Infrastructure	Buildings, Lands and Planning	22
	Transport	21
	Water Supply	24

Security	Immigration Control	10
	Internal Security	9
	Administration of Justice	12
	Anti-Corruption	13
	Legal Administration	11
	Legal Aid	20

Social Welfare	Social Welfare	14
	Women's Interest	33

Support	Central Management of the Civil Service	26
	Complaints Against Maladministration	30
	Constitutional Affairs	28
	Intra-Governmental Services	27
	Revenue Collection and Financial Control	25
	Support for Members of the Legislative Council	29

Note:

The Policy Area Reference corresponds with that used in the Index of Policy Areas in the Estimates of Expenditure.

APPENDIX C

GROWTH IN RECURRENT PUBLIC EXPENDITURE IN 2001-2002 IN MAJOR POLICY AREA GROUPS

The key improvements contributing to the growth in recurrent public expenditure in Education, Health, Security and Social Welfare are detailed below:

Education (+$2,985 million)

Upgrading 145 teaching posts in primary schools to provide leadership in developing the English curriculum and in the teaching of English
Implementing curriculum reform
Implementing various Education Reform initiatives, including
providing more training in early childhood education;
strengthening the support for students with special educational needs;
introducing the Composite Furniture and Equipment Grant for aided schools with effect from the 2001/02 school year;
developing the Basic Competency Assessments; and
implementing the District Teacher Network Scheme
Operating 46 more primary schools on whole-day basis
Upgrading a further 1 640 teaching posts in primary schools to graduate status
About 100 additional teaching posts in secondary schools to enhance the use of Chinese as the medium of instruction
About 170 additional teaching posts in primary schools to coordinate library services and support the Extensive Reading Schemes
Providing training in connection with proficiency assessment
Additional schools joining the Direct Subsidy Scheme

Health (+$1,270 million)

145 additional hospital beds
40 additional day hospital places
Introducing family medicine practice in 5 General Out-patient Clinics
3 additional Community Psychiatric Teams
2 500 patients provided with new psychiatric drugs
Assessing 1 400 young persons to identify psychotic problems for early treatment
A new Public Health Laboratory Centre in Shek Kip Mei

Security (+$1,010 million)

138 additional police officers to strengthen operational front-line capabilities and traffic enforcement in new towns and new infrastructure
104 additional staff in Fire Services Department for new fire stations and additional ambulances
5 additional staff in Fire Services Department for implementation of the Railway Development Strategy
11 additional staff in ICAC for establishment of a Quick Response Team
26 additional staff in Customs and Excise Department for customs facilities at Container Terminal No.9
54 additional staff in Correctional Services Department for the commissioning of the redeveloped Tai Lam Correctional Institution
117 additional staff in Immigration Department to strengthen manpower at Lo Wu Control Point
45 additional staff in Immigration Department and additional briefing-out provision for Department of Justice to expedite the handling of judicial review cases arising from right of abode litigation

Social Welfare (+$2,675 million)

An additional 2 541 residential places, 7 social centres, 3 multi-service centres, 60 day care centre places and enhanced home and community care services for elders
An additional 540 residential places, 100 day places, 500 sheltered workshop places and 180 supported employment places for the disabled　
An additional 500 day nursery places
An additional team for the community support service scheme and expansion of 8 integrated teams for young night drifters
Additional care assistants and programme assistants in various service units for elders, rehabilitation and youth
2 additional child custody workers, 20 child protection workers and 2 clinical psychologists to assist victims of sexual and domestic violence and people with marital problems
6 additional medical social workers at new medical facilities
4 additional school social workers for new schools

APPENDIX E

GLOSSARY OF TERMS

Note: Terms shown in bold italic are defined elsewhere in the glossary.

Capital expenditure.

All expenditure charged to the Loan Fund, the Disaster Relief Fund, the Capital Works Reserve Fund and the Innovation and Technology Fund plus expenditure from General Revenue Account on plant, equipment and works and capital subventions, excluding transfers to Funds. It does not include advances and equity investments made from the Capital Investment Fund.

Capital revenue.

All revenue credited to the Funds and the exceptions listed under recurrent revenue.

Cash surplus/deficit.

The difference between total Government revenue and total Government expenditure.

Consolidated surplus/deficit.

Cash surplus/deficit after advances and equity investments from the Capital Investment Fund.

Fiscal reserves.

The accumulated balances of the General Revenue Account (including the Land Fund) and Funds. They are also known as Government reserves.

Funds expenditure.

Expenditure charged to the Capital Works Reserve Fund, the Loan Fund, the Disaster Relief Fund, the Capital Investment Fund and the Innovation and Technology Fund. Transfers to or from the Funds are not relevant to the level of expenditure.

Funds revenue.

All receipts, except transfers from General Revenue Account, which are credited directly to the Funds. These comprise -

Capital Works Reserve Fund

donations for projects
land premia
investment income
recovery from MTR Corp Ltd
recoveries from Trading Funds

Loan Fund

loan repayments received
interest on loans
interest on balances

Capital Investment Fund

repayments received
dividends
interest
interest on balances

Disaster Relief Fund

investment income

Civil Service Pension Reserve Fund

investment income

Innovation and Technology Fund

loan repayments received
investment income

For the purpose of the Medium Range Forecast, investment income of the Land Fund is classified as General Revenue Account revenue.

　

General Revenue Account expenditure.

All expenditure charged to General Revenue Account in accordance with the Appropriation Ordinance, excluding transfers to Funds.

General Revenue Account revenue.

All receipts credited to any of the revenue heads, excluding transfers from Funds. For the purpose of the Medium Range Forecast, the investment earnings of the Land Fund are consolidated with the General Revenue Account revenue. In 2000-2001 and 2001-2002, this excludes exceptional receipts arising from the MTR Privatisation Share Offer (see note (b) under Appendix A paragraph 11).

Government expenditure.

The aggregate of operating expenditure and capital expenditure. It is not the same as public expenditure.

Government revenue.

The aggregate of Funds revenue and General Revenue Account revenue, including exceptional receipts in 2000-2001 and 2001-2002 arising from the MTR Privatisation Share Offer.

Operating expenditure.

All expenditure from General Revenue Account charged to any of the subheads listed in the Estimates under 'Recurrent Account', plus Other Non-Recurrent expenditure.

Operating surplus/deficit.

The difference between General Revenue Account revenue and General Revenue Account expenditure.

　

Public expenditure.

Government expenditure plus -

expenditure (recurrent and capital) by the Trading Funds and the Housing Authority ; and payments from the Lotteries Fund.　

Recurrent revenue.

All revenue credited to General Revenue Account, excluding transfers from Funds and the following -

disposal proceeds of government quarters
estate duty
taxi concessions
recovery from Housing Authority under current financial arrangement
donations
repayment of loans and advances

which are treated as capital revenue.

Exceptional receipts in 2000-2001 and 2001-2002 arising from MTR Privatisation Share Offer are also treated as capital revenue.

Taxation

earnings and profits tax
estate duty
duties
general rates
bets and sweeps tax
hotel accommodation tax
stamp duties
air passenger departure tax
motor vehicle taxes
royalties and concessions

	Revised Estimate	Forecast
	2000-2001	2001-2002	2002-2003	2003-2004	2004-2005
	$m	$m	$m	$m	$m
Operating expenditure	188,800	207,830	220,040	233,470	249,570
Capital expenditure	37,300	44,840	46,810	49,290	47,900
Total government expenditure	226,100	252,670	266,850	282,760	297,470
Add: Other public bodies	52,290	38,000	35,700	38,600	36,920
Total public expenditure	278,390	290,670	302,550	321,360	334,390
Gross Domestic Product (calendar year) (Note 2)	1,271,700	1,355,630	1,445,100	1,540,480	1,642,150
Growth in GDP
Money terms	3.1%	6.6%	6.6%	6.6%	6.6%
Real terms	10.5%	4.0%	4.0%	4.0%	4.0%
Growth in public expenditure
Money terms	+3.3%	+4.4%	+4.1%	+6.2%	+4.1%
Real terms	+3.8%	+3.5%	+1.5%	+3.7%	+1.4%
Public expenditure as a percentage of GDP (at current prices)(Note 3)	21.9%	21.4%	20.9%	20.9%	20.4%

Note 1	Public expenditure comprises government expenditure (i.e. all expenditure charged to the General Revenue Account and financed by the Government's statutory Funds excluding Capital Investment Fund), and expenditure by the Trading Funds, the Housing Authority and the Lotteries Fund. Expenditure by institutions in the private or quasi-private sector is included to the extent of their subventions. But not included is expenditure by those organisations, including statutory organisations, in which the Government has only an equity position, such as the Airport Authority, the MTR Corp Ltd and the Kowloon-Canton Railway Corporation. Similarly, advances and equity investments from the Capital Investment Fund are excluded as they do not reflect the actual consumption of resources by the Government.
Note 2	For years beyond the current year, the GDP figures are based on trend assumptions.
Note 3	Caution should be exercised in interpreting these percentages as the public expenditure is estimated on a fiscal year basis while the GDP is estimated on a calendar year basis.

Components of expenditure and revenue		Appropriation	Government expenditure and revenue			Public Expenditure
Components of expenditure and revenue		Appropriation	Operating	Capital	Total	Public Expenditure
		$m	$m	$m	$m	$m
Expenditure General Revenue Account:
Recurrent account		202,985	202,985	-	202,985	202,985
Capital account
Plant, equipment and works		1,695	-	1,695	1,695	1,695
Other non-recurrent		4,845	4,845	-	4,845	4,845
Subventions		1,405	-	1,405	1,405	1,405
		210,930	207,830⁽¹⁾	3,100	210,930	210,930
Transfers to Funds		3,025	-	-	-	-
Capital Works Reserve Fund		-	-	31,430	31,430	31,430
Load Fund		-	-	9,420	9,420	9,420
Innovation and Technology Fund		-	-	890	890	890
Trading funds		-	-	-	-	3,375
Lotteries Fund		-	-	-	-	1,010
Housing Authority		-	-	-	-	33,610
		213,955	207,830	44,840	252,670	290,665
Revenue (before Budget revenue measures)
General Revenue Account:
Taxation			131,900	1,260	133,160
Other revenue			38,380	4,460	42,840
			170,280	5,720	176,000
MTR Privatisation proceeds			-	15,000	15,000
Land Fund ⁽²⁾			21,020	-	21,020
			191,300	20,720	212,020


Capital Works Reserve Fund			-	30,310	30,310
Capital Investment Fund			-	2,770	2,770
Civil Service Pension Reserve Fund			-	1,000	1,000
Disaster Relief Fund			-	-	-
Load Fund			-	5,230	5,230
Innovation and Technology Fund			-	400	400
			191,300	60,430	251,730
Cash surplus/(deficit) before Budget revenue measures			(16,530)	15,590	(940)
Less:	Effect of Budget revenue measures		(30)	-	(30)
Cash surplus/(deficit) after Budget revenue measures			(16,560)	15,590	(970)
Less:	Advances and equity investments from the Capital Investment Fund⁽³⁾		-	(2,000)	(2,000)
Consolidated Deficit			(16,560)⁽¹⁾	13,590	(2,970)

	2000-2001	2001-2002
	$m	$m
Guarantee to the Hong Kong Export Credit Insurance Corporation for liabilities under contracts of insurance	7,100	7,500
Litigation	300	300
Possible capital subscriptions to the Asian Development Bank	1,900	1,900
Guarantees provided under the Special Finance Scheme for Small and Medium Enterprises	4,700	1,900
	_________	________
Total	14,000	11,600
	_________	________

(1)	The consolidated operating deficit is after the provision for compensatory payments and commuted pension gratuity payments under the Voluntary Retirement Scheme and Voluntary Departure Scheme introduced in 2000-2001. These payments are one-off in nature and amount to $5.7 billion in 2001-2002.
(2)	For the purpose of the Medium Range Forecast, investment earnings of the Land Fund are consolidated with the General Revenue Account recurrent revenue.
(3)	Advances and equity investments from the Capital Investment Fund are excluded from government expenditure (see also Note 1 to Table 4).

2000-2001	2001-2002	2002-2003	2003-2004	2004-2005
$m	$m	$m	$m	$m
8,110	2,000	2,660	9,910	6,220