Q13.What are the main areas of government expenditure?

• The main areas are as follows (figures in brackets represent percentage share of spending in the area in the 2000-01 Budget):

education (22.3 )

health (13.8 )

social welfare (12.3 )

security  (11.7 )

infrastructure (10.8)

internal administration and support  (13.9)

Q14. How do government decide the share of expenditure among different areas? Has there been a growth of expenditure over the past three years?

• The government's decision reflects the needs of the community for services. Each year, government decides on the resources to be allocated to various services in the following fiscal year through the Resource Allocation Exercise. The exercise is overseen by a committee chaired by the Chief Secretary. Bureau Secretaries submit expenditure proposals to the committee to bid for allocation of resources. In the course of the exercise, the Financial Secretary also consults legislators on expenditure proposals. The final expenditure proposals are eventually reflected in the annual budget presented by the Financial Secretary to the legislature. The government expenditure has seen real growth in the past three years ([a growth of 8% in expenditure as compared with a growth of 2.5% in GDP over the past three years 1997-98 to 1999-2000] ).

Q15. Is there any control on growth of government spending?

• The key budgetary principle is that the percentage growth in government spending should not exceed the percentage growth in GDP.

Q16. But why do we need to tie our own hands with this principle? What if there is a genuine need to spend more to meet the needs of the community?

• This principle helps ensure that the public sector does not consume too much of the community's resources, thus allowing the private sector to function as the engine of wealth of creation. It also ensures that the Government is not over spending at the expense of tax increases.
• That said, if there is a genuine need to spend more in a particular year, the Government does exercise flexibility when determining the level of expenditure, provided that the gap between GDP growth and expenditure growth is reduced in the medium term. 1998-99 and 1999-00 are cases in questions .

Q17. What has been done by the government to contain the size and the spending of government departments?

• To enhance efficiency and cost-effectiveness of public service, we have embarked on the Enhanced Productivity Programme through which we aim to deliver productivity gains amounting to 5% of our operating expenditure by 2002-03. We are also implementing plans under the Civil Service Reform to invigorate the civil service. We have also taken steps to contain the size of the civil service, with a view to reducing the civil service establishment by 10,000 over a three-year period up to 2002-03.

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