Budget 2025: As Hong Kong logs another deficit, residents question why civil servants spared from pay cuts

Sitting outside a wet market in Sham Shui Po, a 73-year-old retiree questioned why the government decided to limit the elderly’s transport subsidy, but not cut civil servants’ salaries in their bid to control government spending.

“With their coffers in the red, the government should take the lead. How much can be cut from the elderly anyway?” Wong, a former repairman, told HKFP on Thursday, a day after Financial Secretary Paul Chan unveiled the 2025-26 budget.

Speaking at the Legislative Council, Chan said Hong Kong logged an estimated HK$87.2 billion deficit in the 2024-25 fiscal year – the third shortfall in a row after the city recorded deficits of HK$122 billion in 2022-23, and HK$101.6 billion in 2023-24.

The HK$87.2 billion deficit cited by Chan took into account the net proceeds from issuing bonds. Excluding those proceeds, the consolidated deficit for the current fiscal year reached up to HK$195 billion, according to the finance minister’s budget.

Chan also announced cost-cutting measures, including a pay freeze for all public servants. It would apply to not only the rank-and-file members of the civil service, but also the chief executive and other top officials, judges, judiciary officers, lawmakers, and district councillors. He also unveiled plans to lower tax cuts and to place caps on the HK$2 transport subsidy scheme, which would affect the elderly and people with disabilities.

Wong said that reducing the pay of the civil service would be a more practical solution to restore fiscal balance in the budget. “It’s only right that their salaries should be cut – civil servants are paid a lot anyway,” he said.

The septuagenarian was one of several people interviewed by HKFP in the days following Chan’s budget speech.

Keung, a 36-year-old in the catering sector, echoed a similar sentiment. He found it ironic that while the budget cuts would affect the middle class and the elderly, a civil service pay cut was not included in the financial plan.

However, he said that he had no expectation that the authorities would slash government employees’ salaries. “It’s very rare for the civil service to see pay cuts, it just keeps going up,” he told HKFP.

Less sweeteners

Until recently, the Hong Kong government maintained a good fiscal balance and was long renowned for its massive fiscal reserves, allowing it to spend on tax cuts and welfare handouts.

Chan announced on Wednesday that he expected fiscal reserves to hit HK$647.3 billion by March 31 this year, down from the HK$1.2 trillion in fiscal reserves it had in January 2020, before the economy was hit by the 2019 pro-democracy protests and unrest and then by the Covid-19 pandemic.

With the city logging its third consecutive year in the red, the amount of “budget sweeteners” has declined, from HK$11.5 billion in 2024-25 to HK$8.3 billion in the new fiscal year.

While the government retains some sweeteners, such as the HK$2 transport subsidy scheme and tax reductions, it also offers less.

The transport subsidy scheme cost the government almost HK$4 billion in the previous fiscal year. Under the new budget, the use of the HK$2 flat public transport fare will be capped at 240 trips per month.

For fares above HK$10, the beneficiaries will need to pay 20 per cent of the original fare.

Labour minister Chris Sun said on Thursday that only around 360 people eligible for the HK$2 transport subsidy took more than 240 trips each month, and only around 25 per cent of the beneficiaries took trips that cost more than HK$10 last year.

Wong is among those who will be affected by the adjustments. He will have to pay an extra dollar for the MTR ride from Fanling to Sham Shui Po, originally priced around HK$15.

“I live in Fanling, but I come here every day to buy groceries. The market near home is double the price,” he said.

Wong shrugged off the extra costs, saying it would affect him marginally. “It’s just a little bit more,” he said. However, he questioned how effectively the government could cut costs by placing limits on the HK$2 public transport subsidy.

According to the government’s estimates, the new adjustments could save around HK$680 million per fiscal year.

Under a struggling economy, Wong said he was still self-sufficient. Apart from a public housing unit in Fanling he bought some 20 years ago, he said he did not rely much on government welfare.

“I don’t have a lot of demands, nor do I expect much from the government,” he said. “If I have money, I’ll eat more. If I don’t have much, I’ll eat less.”

Meanwhile, residents like Mary did not even bother to look into the new budget measures. She said she had just moved into public housing, and did not have access to news channels as their TV had not been set up.

One thing was on her mind, however. “Is the government giving out money?” she asked HKFP in Mong Kok.

The Hong Kong government scrapped consumption vouchers last year as it racked up bumper deficits. But to the 63-year-old, cash handouts would have been the most useful budget measure.

Saving, by spending up north

Keung, meanwhile, considers himself lucky, even in the city’s struggling economy. He lives with his parents in a public rental housing flat, and only has his insurance premiums to worry about.

But his livelihood has taken a hit. Aside from working in the catering sector, he also makes a living from doing odd jobs such as being an extra in films and TV.

“It’s been terrible. Two, three years ago, the day rate was HK$1,000,” he said. “Now, it’s down to HK$500 or HK$600.”

He said he had saved a lot of money by spending his money up north across the border. “Now and then, I’ll head up to Shenzhen because it is a lot cheaper there,” he said.

He said a grilled fish in Shenzhen cost him only RMB 60 (HK$64), in contrast to HK$200 to HK$300 he would spend in Hong Kong.

The government also announced it would be increasing the airport departure tax to HK$200. However, the finance minister ruled out a land departure tax, which would target those in Hong Kong crossing the border into mainland China.

Responding to suggestions that implementing a land departure tax of HK$10 or HK$20 would generate a significant revenue, Chan said that the government would avoid doing so because it would affect students and people who worked across the border.

Under the new budget, salaries tax, as well as tax under personal assessment, will still be reduced by 100 per cent, but the cap will be halved to HK$1,500. Those set to pay under that amount will not pay anything, while those set to pay over HK$1,500 in tax must still pay the remainder.

Keung said that the lower tax reductions would not affect him much because he did not need to file tax declarations for many of his side jobs.