Spark Deep Dive: Hong Kong announces cuts to education spending to fight budget deficit

The Hong Kong government will cut an annual HK$2,500 grant for nearly 800,000 students and reduce public university funding by HK$2.8 billion over three years. It will also reclaim HK$4 billion from the reserves of eight public universities.

Paul Chan Mo-po, the city’s financial secretary, announced the cost-saving measures in his budget address last month. They are meant to help the city ease its deficit of HK$87.2 billion.

The amount spent on education will drop by 2.3 per cent to HK$102.9 billion in the 2025-26 financial year, saving HK$2 billion annually.

A government source defended the student grant cut. They said it had been given indiscriminately, and other financial aid programmes were available for those in need.

Chan’s budget allocated HK$68.1 billion to the eight universities, HK$2.8 billion less than the HK$70.9 billion proposed by the University Grants Committee (UGC). The UGC confirmed an average 4 per cent reduction in funding over three years.

Committee Chairman Tim Lui Tim-leung said he understood the government’s financial situation. He added that the universities would continue striving for excellence with the resources available.

An Education Bureau paper revealed that funding cuts would be phased in over three years. They will start with a 2 per cent reduction in 2025-26, repeated in 2026-27 and 2027-28. Universities must operate within their revised budgets and return HK$4 billion of their HK$11 billion reserves. This money was originally meant for general and developmental purposes.

Parents have expressed disappointment over the removal of the HK$2,500 grant. “It surely will cause some inconvenience for some families,” said Ray Hau Hon-shek, chairman of the North District Federation of Parent-Teacher Associations. However, he said he understood the financial need for the cut.

Ngai Shan-ting, president of the Federation of Parent-Teacher Association of Kowloon City, said underprivileged families would be affected. Still, the grant was originally considered a bonus rather than an essential aid.

Observers think that Hong Kong may enter an era of structural deficit. There are questions about whether the situation will reach a tipping point that affects the city’s credit rating. This, in turn, could impact Hong Kong’s efforts to find new drivers for growth.

Observers said Chan must demonstrate strong political will and embrace bold reforms to address funding challenges.

They said it would also require a delicate balancing act that avoided frustrating those already in financial hardship while instilling faith in the city’s long-term development.

Staff writers

1. What is the main reason given by the government for cutting the HK$2,500 student grant?

(1) The grant was no longer needed.

(2) It was given indiscriminately, regardless of financial background.

(3) Parents requested a different form of support.

(4) There are existing schemes to help students in need.

A. (1), (3) only

B. (2), (3) only

C. (3), (4) only

D. (2), (4) only

2. How much will public university funding be reduced over three years?

3. Do you agree with the government’s decision to cut the student grant? Explain using the news, glossary and your own knowledge.

1. Based on the illustration, what challenges did finance chief Paul Chan face regarding the budget for this year?

2. Using the news, glossary and your own knowledge, explain what factors contributed to the challenges faced by Chan.

deficit: when a business or country spends more money than it receives

indiscriminately: done in a way that does not show careful choices or planning

structural deficit: the portion of a government’s budget deficit that would continue even when the economy is operating at its full potential

credit rating: a measure of the ability of a business or government to meet its financial obligations by looking at its history of borrowing and repaying loans

1. D

2. HK$2.8 billion

3. I do not agree with the Hong Kong government’s decision to cut the HK$2,500 student grant. The grant provided financial relief to nearly 800,000 students. Removing it will cause difficulties for many families, particularly those from underprivileged backgrounds.

Parents have expressed disappointment over the decision, with many feeling that the government is unfairly tightening its budget at the expense of students. Although some acknowledge the government’s financial difficulties, the grant provided crucial support for families. Removing it could increase the financial burden on parents, affecting students’ access to educational resources.

Instead of cutting the grant entirely, the government could have implemented a more targeted approach, ensuring that those who truly need assistance continue to receive it. The decision ultimately prioritised cost-cutting over student welfare, which is not the best approach to supporting education. (accept all reasonable answers)

1. Balancing between the fiscal reserve – the amount of money the government has – and reviving the economy

2. Hong Kong needs to save money to battle its budget deficit while still giving its citizens the services they need. Cutting education funding could affect students, universities, and Hong Kong’s broader financial landscape. For students, the removal of the annual HK$2,500 grant may create financial strain, especially for families who rely on it, though the government argues that other aid programmes are available.

For universities, the HK$2.8 billion funding reduction over three years and the requirement to return HK$4 billion in reserves will likely force institutions to adjust their budgets. This may affect research capabilities, academic resources, and overall operations. (accept all reasonable answers)