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| Controlling Public Expenditure
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| Operating Expenditure |
60. To contain growth in public expenditure, we must reduce operating expenditure. We are particularly concerned about operating expenditure, as it comprises expenditure on the daily operations of the Government and the public sector, and is rather difficult to adjust. Over the long term, the Government aims to achieve surpluses in the Operating Account so as to provide funding to finance capital expenditure. For the time being, we are unable to achieve this goal, but we must strive to avoid operating deficits in the medium term.
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61. The Government has now set a target to reduce operating expenditure from $220 billion, as originally estimated, to $200 billion by 2006-07. In controlling expenditure, departments will, through reprioritisation of service provision, reorganisation of structure and reengineering of procedures, ensure that essential services are not affected. The Government is committed to ensuring administrative efficiency through optimal use of resources, reducing the rigidity of government prices, and controlling the size of the public sector workforce.
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| The Size and Pay of the Civil Service |
62. The Chief Executive in his Policy Address announced that the establishment of the civil service would be reduced by 10% to about 160 000 posts by 2006-07, the recruitment of civil servants would be frozen with effect from 1 April this year, and the second round of the Voluntary Retirement (VR) Scheme would be launched.
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63. In addition, the salary of civil servants will be reduced to the level in cash terms as at 30 June 1997. This pay reduction will be carried out in two phases. With the full implementation of the civil service pay reduction, the Government will save about $7 billion annually on salary expenses and subsidies to subvented
organisations.
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64. The Government will work out with civil servants an improved pay adjustment mechanism that better reflects the principle of broad comparability of civil service pay with the private sector. It is the Government's aim to complete this exercise, including a pay level survey, within 2004.
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