Budget 2025: Government proposes fiscal consolidation measures to cut expenses

The government has proposed to cut 7% of government recurrent expenditure from now to the 2027-2028 fiscal year, Financial Secretary Paul Chan Mo-po said in the budget address this morning.

A “reinforced version” of the financial consolidation programme is coming soon, with the purpose of restoring HK$6.2 billion of expenditure over the next five years.

“Strictly containing public expenditure is a must, but we should proceed in a steady and prudent manner and be careful to find a balance among the various impacts that may arise in the process,” Chan said.

In the 2024-2025 fiscal year, Hong Kong recorded a deficit of HK$87.2 billion, 60% higher than the forecasted deficit of HK$54.4 billion last year, according to the government.

In this year’s budget, the total estimated expenditure stands at HK$639.7 billion, an increase of 2% from the previous year.

Terence Chong Tai-leung, Professor of economics at the Chinese University of Hong Kong, said Hong Kong’s economic performance is not as bad as widely perceived.

“Hong Kong’s financial expenses have always been stable. It is normal to observe deficit fluctuation throughout the business cycle,” he said.

To reduce the deficit, Chong suggested the government can work on land sales and budget upper limits.

“I suggest further dividing large areas of land into smaller ones, and then selling more of them to small- and medium-sized enterprises and overseas companies, instead of strengthening the local monopoly,” he said.

Other proposals to reduce expenditure include increasing the rate of reduction of recurrent government expenditure from 1% to 2% in 2025-2026, under the premise of not affecting Comprehensive Social Security Assistance, Social Security Allowance and other statutory expenditures.  

The policy will be extended to 2027-2028 and is expected to save the government around HK$3.9 billion, HK$11.7 billion and HK$19.5 billion in the following three financial years respectively, said Chan. 

Chong said the government departments and bureaus should try to spend as much funding as they are allocated.

“The government spends a certain amount of budget every year with about 5% wasted, which is a problem that needs to be addressed to cut costs,” he added.

“Assuming a department does not spend all the budget allocated by the Financial Bureau in that year, the budget for that department will be reduced in the following year, and so on. Therefore, it is inevitable that departments may waste funds beyond their actual use,” Chong said.