Impact of 2% Budget Cut on Ministries and Agencies from Financial Year 2017

Mr Louis Ng Kok Kwang asked the Minister for Finance whether the 2% cut in the budget caps for all Ministries and agencies from FY2017 onwards will result in hiring freezes or headcount reductions in the Public Service.

The 2% downward adjustment is applied on the budget caps of Ministries and Organs of State to reinforce the importance of spending prudently and effectively. Ministries and Organs of State are provided with (a) budget caps for ongoing functions under the block budget, and (b) budget for specific projects on top of the block budget. The budget adjustment applies to the budget caps.

Even with the budget adjustment, the total budget of Ministries and Organs of States will continue to grow partly due to the budget for specific projects funded on top of the block budget. Some savings from the budget adjustment will be channeled to projects that enhance service delivery to citizens and businesses.

Agencies can decide for themselves how best to meet their objectives under the adjusted budget. The Ministry of Finance does not prescribe specific measures, such as cutting particular programmes, hiring freezes or headcount reductions, because each agency faces a different operating context.

Agencies are expected to prioritise and deliver their programmes and projects in the most effective manner. To manage the budget adjustment, some agencies may expand certain programmes while phasing out programmes which are no longer relevant. Other agencies may maintain the same programmes but use less resources.