For discussion FCR(96-97)83
on 13 December 1996


Subhead 175 Child care centre fee assistance

Members are invited to approve supplementary provision of $69.43 million under Subhead 175 Child care centre fee assistance.


The approved provision for child care centre fee assistance is inadequate to meet increased expenditure in 1996-97.


2. We propose supplementary provision of $69.43 million under Subhead 175 Child care centre fee assistance.


3. Provision under Subhead 175 is for the payment of fee assistance, on a means-tested basis, to low-income parents who have a need to place their children in full day care. Initially, we provided fee assistance to children attending day nurseries but have extended this to day crèches since September 1994.

4. Under the Child Care Centres Ordinance, the Director of Social Welfare (DSW) approves the fees for all child care centres. On the basis of the approved fees, Social Welfare Department derives the general maximum fee assistance level (GMFAL) on a per child per month basis in respect of day nurseries and day crèches. The GMFAL then operates as the maximum limit for granting fee assistance to individual applicants who have satisfied the means test. The amount of fee assistance granted in each case is the difference between the relevant GMFAL or the actual fee charged, whichever is the less, and the amount of contribution payable by the parents under the Fee Assistance Scheme (FAS), determined by their family income.

5. The total approved provision for child care centre fee assistance in the 1996-97 Estimates is $196.987 million. Based on the actual expenditure from April to October 1996, DSW now estimates that expenditure in 1996-97 will exceed the approved provision by $69.43 million, calculated as follows -

($ million)




(a) Actual expenditure from 1 April 1996 to 31 October 1996




(b) Estimated expenditure from 1 November 1996 to 31 March 1997




(c) Total estimated expenditure for 1996-97 [(a)+(b)]




Less (d) Approved provision




(e) Estimated shortfall [(c)-(d)]




Day Nurseries

6. DSW proposes supplementary provision of $69.43 million for day nurseries. The increased expenditure is mainly due to three factors. First, there is a greater than anticipated increase in the number of fee assistance recipients. Up to the end of October 1996, the actual number of recipients per month is 12 650, 20% more than originally anticipated. Secondly, the GMFAL for day nurseries has increased from $1,965 per child per month by 10.2% to $2,165 per child per month for the academic year 1996-97 (i.e. September 1996 to August 1997), taking into account salary adjustment for child care workers and inflation in other recurrent expenses such as food, utility charges, fees for maintenance and minor repairs.

7. Thirdly, we have adjusted the no-contribution baseline1. In the academic year 1995-96, the no-contribution baseline or the net disposable family monthly income for a four-member household was $5,600. With the improvement to the Comprehensive Social Security Assistance (CSSA) rate in April 1996, we have adjusted the baseline in the academic year 1996-97 to $7,700. All the existing fee assistance recipients whose net disposable income were above the no-contribution limit before implementation of the improvement also receive a higher level of assistance and certain families which were previously not eligible will become so if they apply.

Day Crèches

8. As regards day crèches, the GMFAL per child per month has increased from $3,445 for the academic year 1995-96 to $3,835 for the academic year 1996-97, for the same reasons as set out in paragraph 6 above. As a result, parents with children in day crèches received similar benefits as outlined in paragraph 7 above. However, the utilisation of day crèches has declined in recent years, with the average enrolment rate dropping from 92% in 1993-94 to 69% in 1995-96. As the reduction in expenditure due to the decrease in the number of fee assistance recipients has offset the increase in expenditure due to higher fee assistance per child, it is not necessary to seek any supplementary provision for day crèches.

9. The decline in enrolment for day crèches could be the result of the interplay of various factors such as a decline in the overall birth rate, demographic changes in certain districts, locational problems with some day crèches set up some years ago, and some parents resorting to alternative child care arrangements. DSW and non-governmental organisations are working together on a series of measures to boost enrolment.


10. If Members approve the proposal, we shall provide supplementary provision of $69.43 million by deleting an equivalent amount under Head 106 Miscellaneous Services Subhead 251 Additional commitments.

1 -- Under the FAS, families are eligible for full fee assistance if their net disposable income (that is total family income after deduction of up to a maximum 30% for rent) is below the no-contribution baseline. The baseline is set at the level where the net disposable family income equals to one and one-third of the standard rate for an able-odies adult in a family under the CSSA Scheme, multiplied by the total number of members in the family. Where the net disposable family income is above this baseline, parents will be required to contribute, at a rate of $15 for each $100 above the baseline.

Health and Welfare Branch
December 1996

Last Updated on 5 August 1999