Provisional Legislative Council

Welfare Services Panel
Meeting on 13 March 1998
Proposal on Social Welfare Services
Development Fund


This paper sets out the Administration's position on the proposal to establish a Social Welfare Services Development Fund.


2.The Hong Kong Council of Social Service, the Hong Kong Social Workers' Association and the Hong Kong Social Workers' General Union have jointly proposed the setting up of a Social Welfare Services Development Fund. This seeks to inject a capital grant of $3.4 billion into the Lotteries Fund, to provide a secure source of funding to meet the long-term growth of welfare services.

Principles of Public Financial Management

3.Within the permitted overall growth in government expenditure, welfare expenditure has grown in recent years to meet the rising aspirations of the community. The prudent financial management principles under which we operate have served Hong Kong extremely well over the years. This fiscal discipline is enshrined in the Basic Law which requires that Government keeps expenditure within the limit of its revenue and the budget commensurate with its overall economic growth. Under the budgetary principle, requests for recurrent expenditure to fund new or improved services must be considered within the recurrent expenditure guidelines. Capital funds are for the purpose of one-off expenditure items and should not be used to fund recurrent expenditure in order to circumvent the expenditure guidelines. The proposed Social Welfare Services Development Fund, which would allow for the financing of recurrent rather than capital items, would run counter to our fundamental principles of public financial management. In essence, it seeks to pre-empt and circumvent the Government's annual Resource Allocation Exercise. We therefore cannot support the establishment of such a Fund.

Social Welfare Development and Spending

4. Government has been, and will continue to be, fully committed to providing the best possible welfare services to the community. To this end, Government has invested considerable resources in welfare services in recent years. For example, whilst recurrent Government expenditure has grown by 65% over the past decade recurrent spending on social welfare has grown more than 200%. Indeed, this sector has continued to consume a large and ever increasing proportion of overall public expenditure. It has grown from 6% in 1992/93 to over 9% in 1998/99. In the current financial year, we are spending some $20.6 billion on recurrent funding for welfare services and, in 1998-99, we estimate spending $24.9 billion. This represents very significant growth at 13.6% which far exceeds the average for most sectors in the economy.

5. The share of welfare spending in a particular year reflects the provision of existing services and the introduction of new or improved services which best reflect the community's priorities. Other than the over-riding principle that government expenditure, over time, should not grow faster than the economy as a whole, we do not have any rigid pre-determined percentage growth figures for individual policy areas. To do so would curtail the flexibility to deploy available resources to the greatest benefit of the community.

Expenditure on Subvention to Direct Services and the Comprehensive Social Security Assistance (CSSA) Scheme

6. Even if social security payments are excluded, funding for the direct provision of welfare services has experienced very healthy growth in recent years. Subvention on direct services in 1992/93 was $1.8 billion. The corresponding figure in 1998/99 is estimated to reach $5.3 billion. Hence, there can be no question of the Government's commitment to providing sufficient resources to implement various policy objectives.

7.For the coming year, we are committed to providing recurrent resources to fund a number of new/improved direct services. In addition to the increase in provision of social security payments and the key initiatives under the strategic policy objectives on care for the elderly, we will also increase our expenditure on direct welfare services for people with disabilities, for needy families and the youth population.

Lotteries Fund for Capital Welfare Projects

8.The Lotteries Fund has been a useful source of funding for capital welfare projects as well as pilot projects. Welfare services supported by the Fund cover services for the family, the elderly, the young people, community development, offenders and people with disabilities.

9.The annual revenue of the Lotteries Fund is in the region of $900 million. This revenue level is considered satisfactory taking into account the existing rate of expenditure and new commitments for planned social welfare projects in the pipeline. By the end of 1997/98, the Lotteries Fund Account will show a closing balance of around $2.3 billion. We have been, and will continue to, make the best uses of the Fund for the benefit of the sector.

10.The welfare sector has always been a close partner of the Government in the delivery of welfare services. We will continue working with the Hong Kong Council of Social Services and welfare agencies to explore more innovative ways of serving the needy and the most vulnerable in the community. We will continue to secure, within the overall resource constraints, sufficient resources to implement new initiatives in the social welfare field.

Health and Welfare Bureau
March 1998