LettersHong Kong should prioritise revenue diversification over cost-cutting

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Over the past few days, Financial Secretary Paul Chan Mo-po has no doubt been working intensively to identify feasible government spending cuts in order to achieve a balanced budget, as mandated by Article 107 of Hong Kong’s Basic Law. A number of areas of government expenditure have come under scrutiny, with a variety of spending cuts being proposed, such as adjustments to the HK$2 public transport scheme, freezing of civil servant salaries, and even raising fees for non-urgent visits to public hospital accident and emergency departments.

Although these cost-cutting measures may provide some relief in the short term, they do not address the crucial issue of the government’s over-reliance on land sales and taxes for revenue generation. Revenue from land premiums, which used to constitute around 20 per cent of total government revenue pre-pandemic, was HK$3.7 billion between April and October 2024, representing 11.2 per cent of the target of HK$33 billion for the 2024-25 financial year.

Thus, to balance the budget in the long run, we should aim to explore a range of options for further revenue growth instead of cutting expenditure revolving around critical public services such as transport, education and healthcare. Initiatives by the government for long-term economic growth such as the Lantau Tomorrow Vision and the Northern Metropolis could help reach this goal. However, some of these infrastructure projects unfortunately face delays amid the current financial turmoil, alongside negative public sentiment.