Spark Deep Dive: Hong Kong’s 2026-27 budget plans

Deep Dive delves into hot issues in Hong Kong and mainland China. Our easy-to-read articles provide context to grasp what’s happening, while our questions help you craft informed responses. Check sample answers at the end of the page.

News: Hong Kong’s finance secretary outlines new budget

• City recorded a surplus of HK$2.9 billion last year

• Nine government departments will receive more money this year; others to see significant cuts

Financial secretary Paul Chan Mo-po announced in his annual budget address last month that the city’s recurrent spending would be cut by 2 per cent in 2026-27. This is happening as the city had about HK$2.9 billion of combined surplus for 2025-26.

The individual budgets of nine bureaus and departments will rise more than 10 per cent. These include Hong Kong’s innovation and technology (I&T), intellectual property and investment promotion departments, which will see increases ranging from 11 to 27 per cent.

The new spending covers initiatives such as expanding the use of artificial intelligence (AI) and pursuing measures to help mainland Chinese firms “go global”. It will also help launch a pilot programme to help businesses secure patents and financing for their products.

This year’s budget focused on I&T development and pledged significant support and investment in key areas such as AI and intellectual property.

The Housing Bureau recorded the largest overall budget increase. It rose from HK$1.96 billion in 2025-26 to HK$5.34 billion this financial year.

Of that amount, HK$4 billion was for the long-term resettlement of Wang Fuk Court residents who lost their homes in the deadly fire in November.

Funding for the Labour Department also rose by 33 per cent. This was because of higher cash flow needs after the abolition of the Mandatory Provident Fund (MPF) offsetting arrangement.

However, 11 departments significantly reduced their budgets, cutting spending by more than 10 per cent.

The Environment and Ecology Bureau had the largest reduction. Its budget was slashed by 70 per cent.

This stemmed from reduced cash flow requirements after the government extended the validity of unused relief balances under the electricity charges relief scheme.

RTHK, the city’s public broadcaster, and the Information Services Department will have their budgets cut by 28 per cent and 12 per cent, respectively.

Another of the government’s ways to control costs involved reducing the civil service establishment by 2 per cent in each of the next two financial years. This will bring the number of government posts down from 192,416 to 187,429 by next March, a reduction of 2.6 per cent.

The Home and Youth Affairs Bureau will expand from 194 to 225 posts, a 16 per cent increase. Its spending on salary will increase from HK$137 million in 2025-26 to HK$150 million in 2026-27.

A spokesman for the bureau said the larger workforce was mainly for time-limited posts to assist in the preparation of activities for the 30th anniversary of the city’s handover next year.

Staff writers

Question prompts

1. Which of the following statements is false, according to the information in the news?
(1) Hong Kong’s innovation and technology and investment promotion departments will have their budgets cut in the coming financial year.
(2) Nine government bureaus and departments will see their budgets increase by more than 10 per cent.
(3) In total, 10 departments tightened their budgets significantly, cutting expenditure by over 11 per cent.
(4) The Home and Youth Affairs Bureau needs a bigger workforce to prepare for the 30th anniversary of the handover.

A. (1), (2) only
B. (1), (3) only
C. (2), (3) only
D. (3), (4) only

2. Why did the Environment and Ecology Bureau have the largest reduction in budget? Explain using the news and your own knowledge.

3. To what extent do annual shifts in the budget reflect the government’s development goals? Explain using the news, glossary and your own knowledge.

Chart

Question prompts

1. Using the chart, note TWO observations about the budget increases in different departments.

2. Why might different departments be receiving different budget increases? Explain using the news, glossary and your own knowledge.

Glossary

• recurrent spending: the regular annual costs for running public services

• abolition of the Mandatory Provident Fund (MPF) offsetting arrangement: a change in how employers pay employees who have been dismissed or laid off from their positions. Every month, employers must put some money into employees’ MPF accounts, which employees can use for retirement. Now, employers cannot use this money to offset payments to dismissed employees for the years of service starting from May 1, 2025.

• unused relief balances: the unused money from a government subsidy for electricity bills. Authorities announced at the end of 2025 that the unused money from the subsidy could be used to pay electricity bills through the end of 2026.

Sample answers

News

1. B

2. The environmental branch under the Environment and Ecology Bureau experienced the largest reduction because the Hong Kong government previously allocated a large sum of money through the Electricity Charges Relief Scheme to help households pay their electricity bills. Yet, many residents hadn’t used up their credits yet, so the government extended the expiry date of those existing balances. With the unused credits and the old allocated money remaining, the government does not need to add as much money with this year’s budget, without actually cutting the benefit to the public.

3. From the new budget plan, it indicates that the Hong Kong government is prioritising innovation and technology (I&T), Artificial Intelligence (AI), and intellectual property. The difference in proportions of money allocation across sectors reflect the focus of the government’s goals in development as well as considering the recurrent spending, which includes the ongoing operating expenses for health services and education. This year, the Hong Kong government’s new spending includes initiatives aimed to improving the use of artificial intelligence (AI), and launching a pilot programme to help businesses securing patents and financing, and measures to help mainland Chinese firms to “go global”, which is to encourage firms across the border to use Hong Kong as a platform for expanding their businesses overseas.

Chart 1

1. First, the Housing Bureau recorded the largest overall budget increase, rising from HK$1.96 billion in 2025-26 to HK$5.34 billion this financial year, with a 172 per cent increase. Second, Hong Kong’s innovation and technology (I&T), intellectual property and investment promotion departments also see increases ranging from 11 to 27 per cent, which in total is approximately $73 million. (any two)

2. The variations in budget increases among different departments can be attributed to the government’s strategic focus on pressing sectors, such as housing and technology. As social problems and issues of the city are different every year, the government allocates funds accordingly to address the prioritised issues as recurrent spending. Consequently, this year the budget of the Housing Bureau reaches the highest as the government is targeting a total production of around 196,000 public housing units over the next five years and also to cover the long-term resettlement of Wang Fuk Court residents who lost their homes in the deadly fire in Tai Po; while more resources for IT, for developing the Northern Metropolis, and aligning with national 15th Five-Year Plan goals. (accept all reasonable answers)