Analysis of Public Expenditure by Policy Area Group

Commentary on the Changes in Recurrent Public Expenditure in 2000-01

Recurrent public expenditure is expected to grow by 4.8% in real terms over the revised estimate for 1999-2000. Within this overall growth, Recurrent government expenditure will increase by 5.7% in real terms over the revised estimate for 1999-2000. This level of year-on-year growth in recurrent government expenditure is partly attributable to expenditure in 1999-2000 lower than the original estimate reflecting significant efforts on the part of Controlling Officers to control costs in the light of the overall financial position and in preparation for the savings required under the Enhanced Productivity Programme. Recurrent government expenditure in 2000-01 is planned to increase by only 2.5% in real terms over the spending plans for 1999-2000 published a year ago. This growth of 2.5% over the original estimate for 1999-2000 is lower than the forecast trend growth rate of GDP in order to redress the imbalance between the cumulative growth in government expenditure and the cumulative growth in GDP as shown in  chart 1.

The major improvements in services in 2000-2001 in the Health, Social Welfare, Education and Security policy areas groups are detailed on Growth in Recurrent Public Expenditure in 2000-01 in Major Policy Area Groups .

The significant changes in recurrent public expenditure in other policy area groups are:

Community and External Affairs (-1.6%)
The reduction reflects efficiency gains in the delivery of leisure and cultural services arising from the reorganisation of municipal services from 1 January 2000. This is partly offset by increased spending on district and community relations.

Economic (+3.9%)
The increase largely arises from the recurrent requirements of the implementation of the first phase of the Electronic Service Delivery scheme, the general expansion of computer facilities, the provision of a recurrent grant to the Applied Science and Technology Research Institute and increased expenditure on the enforcement of intellectual property rights. These increases are offset, in part, by a reduced subvention to the Trade Development Council reflecting the reduced yield from declaration charges in respect of domestic imports and exports on which the level of subvention is calculated.

Environment and Food (+2.2%)
Compared to previous years, the definition of this Policy Area Group has been expanded to include expenditure on environmental hygiene and food safety undertaken previously by the two provisional municipal councils, previously included under the Recreation, Culture and Amenities Policy Area Group, and expenditure on food supply hitherto reflected under Economic Policy Area Group. Comparative figures for 1999-2000 have been accounted for in accordance with the revised definition. Within the overall growth of 2.2%, expenditure on environmental protection and conservation in 2000-01 will grow by 7.6% over the revised estimate for 1999-2000. This reflects additional resources for commissioning and operating new sewage treatment plants, increased payments for the disposal of waste due to the commissioning of new facilities, additional staff for implementing air quality initiatives and additional resources for new barging points and for sorting facilities for construction and demolition waste. This growth in expenditure on environmental protection is partly offset by reduced expenditure on environmental hygiene (-2.0%) and on food supply and food safety (-0.5%) reflecting efficiency gains in these areas arising from the reorganisation of municipal services.

Housing (-0.3%)
The decrease reflects the reduced recurrent expenditure of the Housing Authority.

Infrastructure (+3.8%)
The increase reflects the additional spending required to maintain the enhanced road network, the operation and maintenance of the expanded water supply infrastructure and the provision of additional resources for stepping up the removal of unauthorised building structures.

Support (+10.7%)
Within this Policy Area Group there is an increase in the expenditure on Central Management of the Civil Service of 13.8%. This arises largely as a result of increases in statutory pension payments reflecting the full cost in 2000-01 of retirees in 1999-2000 together with provision for further retirements in 2000-01. Expenditure on Constitutional Affairs rises by 33.2% as a result of the additional resources required for the 2000 Legislation Council Elections.

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