The Hong Kong Special Administrative Region government is poised for a more cost-effective operation to address its HK$87.2 billion ($11.21 billion) deficit, with major cuts to the civil service, university funds and transport concessions.

Delivering the 2025-26 Budget on Wednesday, Financial Secretary Paul Chan Mo-po said that the government will maintain public services’ efficiency through resources integration, streamlined procedures, and enhanced technology use.

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According to the budget, the government will double its reduction rate of recurrent expenditure from 1 percent to 2 percent for the next two years.

This will result in a total cut of 7 percent from 2024 to 2027, saving an estimated HK$62.4 billion during that period.

Up to 10,000 civil service positions will be reduced by April 2027, and the 2025-26 salaries for top officials, legislators, the judiciary and District Council members will be frozen.

As of March 31, the civil service employed about 173,100 people. Last year’s 3 percent salary increase for all civil servants cost HK$8.7 billion.

In response, the Hong Kong Chinese Civil Servants’ Association, the city’s largest civil service union, said it supported the measures, while expressing concerns over the potential financial pressures on lower-ranking civil servants.

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Lawmaker Jeffrey Lam Kinfung, who represents the business sector, said that the salary freeze for the city’s top administrators is just and in line with societal expectations, leading by example to ease the government debt.

Education funding changes include the projected HK$68.1 billion funding to the University Grants Committee-funded universities for the coming three years, representing a 2 percent annual reduction.

Starting in September, the HK$2,500 one-off subsidy for each primary, secondary and kindergarten student will end.

University Grants Committee Chairman Tim Lui Tim-leung expressed his appreciation for the government’s long-standing support of the higher education sector.

He encouraged the sector to show solidarity with the broader community in overcoming the fiscal challenges and to continue striving for excellence with valuable public resources.

The HK$2 public transport fare concession program will shift from a flat HK$2 rate for those aged 60 and older and disabled commuters, to an 80 percent discount for trips over HK$10, with a new monthly limit of 240 trips.

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Under the revised Public Transport Fare Subsidy Scheme, commuters will need to spend more than HK$500 on public transport per month — up from the HK$400 threshold — to qualify for the subsidy that covers one-third of the excess expenses.

The subsidy cap will remain at HK$400. Other income-increasing proposals include hikes in tunnel tolls, license fees for electric private cars, parking meter charges, and penalties for traffic offenses.

Tax relief measures will be reduced with salary and profits tax reductions now capped at HK$1,500, half of last year’s HK$3,000.

Property rate concessions will continue for the first quarter of 2025-26, subject to a ceiling of HK$500 — also half that of the last budget’s HK$1,000.

Ryan Ip Man-ki, vice-president and co-head of research at Our Hong Kong Foundation, said the HK$2 scheme adjustments might have a limited impact on expenses.

He suggested the government consider further reductions to the monthly trip cap, and increase the age threshold from 60 to 65 years old.

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The Society for Community Organization said that the revision to the HK$2 fare program may potentially affect the earnings of elderly laborers.

The organization proposthe ed that the government incentivize corporations to assume greater social accountability by providing alternatives like discounted fares or a tiered pricing structure to alleviate any repercussions.

Furthermore, the organization suggested that alongside a salary freeze for civil servants and downsizing positions, the government should optimize resources through technological integration to boost productivity, prevent disturbances to public services, and ensure operational efficiency.

Contact the writers at wanqing@chinadailyhk.com