PLC Paper No. FC 96
(These minutes have been
seen by the Administration)

Ref : CB1/F/1/2

Finance Committee of the Provisional Legislative Council

Minutes of the meeting
held at the Legislative Council Chamber
on Friday, 9 January 1998, at 2:30 pm

Members present:

Hon Ronald ARCULLI, JP (Chairman)
Hon Henry WU (Deputy Chairman)
Hon WONG Siu-yee
Hon James TIEN Pei-chun, JP
Hon HO Sai-chu, JP
Hon Edward HO Sing-tin, JP
Dr Hon Raymond HO Chung-tai, JP
Hon NG Leung-sing
Prof Hon NG Ching-fai
Hon Eric LI Ka-cheung, JP
Hon LEE Kai-ming
Hon Allen LEE, JP
Hon Mrs Elsie TU, GBM
Hon Mrs Peggy LAM, JP
Hon NGAI Shiu-kit, JP
Hon Henry TANG Ying-yen, JP
Hon MA Fung-kwok
Hon CHEUNG Hon-chung
Dr Hon Mrs TSO WONG Man-yin
Hon LEUNG Chun-ying, JP
Dr Hon LEONG Che-hung, JP
Hon Mrs Sophie LEUNG LAU Yau-fun, JP
Hon MOK Ying-fan
Hon CHAN Choi-hi
Hon CHAN Yuen-han
Hon CHAN Wing-chan
Hon CHAN Kam-lam
Hon TSANG Yok-sing
Hon CHENG Kai-nam
Hon Frederick FUNG Kin-kee
Hon Andrew WONG Wang-fat, JP
Dr Hon Philip WONG Yu-Hong
Hon Kennedy WONG Ying-ho
Hon Howard YOUNG, JP
Dr Hon Charles YEUNG Chun-kam
Hon YEUNG Yiu-chung
Hon IP Kwok-him
Hon Bruce LIU Sing-lee
Hon LAU Kong-wah
Hon Mrs Miriam LAU Kin-yee, JP
Hon Ambrose LAU
Hon-chuen, JP
Hon CHOY Kan-pui, JP
Hon CHENG Yiu-tong
Dr Hon TANG Siu-tong, JP
Hon Timothy FOK Tsun-ting
Hon NGAN Kam-chuen
Hon LO Suk-ching
Dr Hon LAW Cheung-kwok
Hon TAM Yiu-chung, JP

Members absent :

Hon David CHU Yu-lin
Dr Hon David LI Kwok-po, JP
Hon Mrs Selina CHOW, JP
Hon HUI Yin-fat, JP
Hon CHIM Pui-chung
Hon LAU Wong-fat, JP
Hon Paul CHENG Ming-fun, JP
Hon KAN Fook-yee
Hon CHOY So-yuk

Public officers attending :

Secretary for the Treasury

Mrs Carrie LAM, JP
Deputy Secretary for the Treasury

Principal Executive Officer (General), Finance Bureau

Mr Joseph LAI, JP
Deputy Head, Efficiency Unit

Mr Stephen FISHER
Deputy Director of Administration

Mr Peter H C LAU
Government Records Service Director

Principal Management Services Officer of Management Services Agency

Principal Assistant Secretary for Economic Services (A)

Mr Albert LAM
Deputy Director of Civil Aviation

Mr Norman LO
Assistant Director of Civil Aviation

Ms Miranda CHIU
Principal Assistant Secretary for Health and Welfare

Assistant Director of Social Welfare

Mr CHEUNG Koon-nam
Chief Housing Manager of Housing Department

Ms Sandy CHAN
Deputy Secretary for Housing

Ms WONG Chiu-ying
Principal Assistant Secretary for Housing

Mr Victor SO, JP
Executive Director,
Hong Kong Housing Society

Mrs Julia WONG
Assistant Director (Estate Management),
Hong Kong Housing Society

Mr Stephen IP, JP
Secretary for Economic Services

Deputy Secretary for Economic Services

Principal Assistant Secretary for Economic Services (B)

Mrs Lessie WEI, JP
Director of Agriculture and Fisheries

Miss Vera SO, JP
Assistant Director (Administration and Markets), Agriculture and Fisheries Department

Assistant Director (Agriculture and Regulatory), Agriculture and Fisheries Department

Ms Esther LEUNG
Principal Assistant Secretary for Education and Manpower

Mr TSANG Kin-woo
Assistant Com

Missioner for Labour

Deputy Director (Environmental Health), Urban Services Department

Assistant Director (Environmental Health Services), Regional Services Department

Mr CHENG Chok-man
Chief Social Security Officer, Social Welfare Department

Clerk in attendance :

Ms Pauline NG
Assistant Secretary General 1

Staff in attendance :

Mrs Vivian KAM
Chief Assistant Secretary (1)5

Mr Matthew LOO
Senior Assistant Secretary (1)7

Item No. 2 - FCR(97-98)83


The Committee approved the proposal.

Item No. 2 - FCR(97-98)83

Subhead 700 General other non-recurrent
Records Management Strategy Phase III

2. The Committee approved the proposal.

Item No. 3 - FCR(97-98)84

Subhead 002 Allowances

3. Members noted that the flight allowance which was originally a temporary arrangement to improve on the pay package for Flight Operations Inspectors (FOI) had been granted since 1989. Some members questioned the Administration for not finding a longer term solution to address the retention and recruitment difficulties. They also observed that so long as no qualified candidates were available in the local market, the need to enhance the pay package would persist. They pointed out that the Administration should either upgrade the FOI posts to D1 level or make conscious efforts to develop Hong Kong's local expertise in this area.

4. The Deputy Director of Civil Aviation (DD/CA) said that consultation made with civil aviation authorities overseas had confirmed that the pay and conditions of service of FOIs still lagged behind those offered to pilots with comparable flying time in the private sector. The Civil Aviation Department would examine the problem in conjunction with the Civil Service Bureau with a view to arriving at a solution within the next two years following the extension of the allowance. DD/CA reiterated that discontinuation of the granting of the allowance would give rise to recruitment and retention difficulties and hence would have significant impact on aviation safety. FOIs were specialised in monitoring different types of aircraft and they were so deployed under the present arrangement. Should any vacancy arose, it would not be possible for the inspection and surveillance of a particular type of aircraft to be taken up at short notice by another FOI, and this might result in non-compliance with the standards laid down by the International Civil Aviation Organisation.

5. In view of the need for a long term solution to the problem, the Chairman advised that the Economic Services Panel should be asked to follow-up on the outcome of the Administration's review in six to nine months time.

6. The Committee approved the proposal.

Item No. 4 - FCR(97-98)85

Subhead 787 Grant to the Emergency Relief Fund (block vote)

7. A member sought clarification on why cases of fire, for which insurance could be purchased, were included alongside other types of natural disasters under the Emergency Relief Fund (ERF). The Assistant Director of Social Welfare (AD/SW) explained that this arose from the history of the Fund. Formerly known as the Community Relief Trust Fund, the Fund was established in the 1960's when Hong Kong had a large number of squatters which were subject to fire, typhoon, flood and other natural disasters. Upon the renaming of the Fund as ERF and a change in the source of finance from community donations to general revenue, the types of disasters covered had essentially remained the same. AD/SW nevertheless assured members that the Fund was monitored closely by the ERF Committee and that the

Administering departments had a set of eligibility criteria to ensure that financial assistance was provided only to the needy.

8. A member enquired about the basis for the revised rates of the Re-accommodation Grant such as those to victims moving to full-built interim housing, as compared to those to victims allowed to resite. In response, the Chief Housing Manager of Housing Department explained that the rates of the Re-accommodation Grant were formerly pegged to two obsolete domestic removal allowances for those moving to non full-built temporary housing areas. The present rates were calculated on the basis of costs associated with the removal of telephones, domestic removal and basic fitting out cost adjusted by Housing Department's tender price index. Some members considered that the proposal should first be discussed by the Panel on Welfare Services so that Members would have the chance to understand the background of the various revised rates.

9. In response, the Principal Assistant Secretary for Health and Welfare explained that the proposal was a follow-up to the submission to the Finance Committee in June 1996 and only sought to change the basis for annual adjustment to those types of assistance under ERF which were pegged to rates under the Domestic Removal Allowance that had since June 1996 became obsolete, and that the estimated additional expenditure of $54,100 was relatively small. Moreover, the proposal related more to the housing aspect rather than welfare services as such. Some members however pointed out that without any background information on the operations of the ERF, it would be difficult for Members to understand how the Fund actually worked and whether the present proposal was appropriate. The Administration was therefore requested to ensure that the relevant panels were briefed on similar proposals in future.

10. The Committee approved the proposal.

Item No. 5 - FCR(97-98)86

Hong Kong Housing Society¨
New Subhead "Home Starter Loan Scheme"

11. In response to members’ questions on the manner in which financial assistance was provided under the Home Starter Loan Scheme (the Scheme) which would have impact on the number of beneficiaries in view of the fluctuating property market, the Administration provided the following information:

  1. The Administration was seeking a sum of $18 billion over a period of five years to provide loans to first-time home buyers at $600,000 or up to 30% of the purchase price of the property, whichever was the lower. The target of 6 000 loans per annum was indicative only as, according to experience with the Sandwich Class Housing Loan Scheme, the actual loan amounts were normally less than the loan ceiling in which case the number of loans to be approved each year could exceed 6 000. While the upper ceiling per loan was fixed at $600,000, the annual quota of 6 000 would be flexible and the amount to be expended each year might vary slightly depending on circumstances.

  2. The loan amount would be drawn from Loan Fund in five annual instalments of $3.6 billion each starting from 1998-99. If the number of applications were to exceed 6 000 or the total loan amount applied for were to exceed $3.6 billion in a given year, priority would have to be assigned to the applications. Details of how the order of priority would be determined were being worked out by the Housing Bureau (HB) and the Hong Kong Housing Society (HKHS). To facilitate monitoring, HKHS would be requested to furnish quarterly reports to HB.

  3. Any unspent provision in a year would be carried forward to the following year. Thus, the amount available for the second and subsequent years could exceed $3.6 billion.

12. Members were gravely concerned with the lack of operational details about the Scheme presented to the Committee. Members noted that the method, which would be used to determine the order of priority when the number of applications exceeded 6 000 or when the aggregate value of loan applications exceeded $3.6 billion in a particular year, had yet to be worked out. Without information on how the priority system would work, it was difficult for the Committee to assess whether the loans would be given out in a fair and effective manner especially when the number of applications received might fluctuate from year to year. A member pointed out that it was possible that the $18 billion would not be used up after the five-year period and asked whether the Scheme would continue to operate after the five-year period.

13. In response, the Secretary for the Treasury (S for Tsy) stated that the proposal which the Administration was putting to the Committee was as stated in the Preamble of the paper. The five-year period only referred to the planned draw down of the loan from the Loan Fund at $3.6 billion each year from 1998-99. It did not mean that the Scheme would have to rigidly stop extending further loans to individuals under the Scheme after five years even if funds were still available under the approved commitment in the Loan Fund.

14. On this point, the Chairman pointed out the inconsistency between the statement given in the "Preamble" and that in the "Proposal". It was clearly stated in the "Proposal", which the Committee was asked to endorse, that the sum of $18 billion was to be provided over the next five years to establish and operate the Scheme. S for Tsy replied that the Administration had no objection to deleting the phrase "over the next five years" to provide for the flexibility to utilise the remaining funds after five years. It also had no strong views on coming back to the Finance Committee for continuation of operation of the Scheme after five years should this be so decided by the Committee. As some members held the view that a specified period was necessary to monitor and review the effectiveness of the Scheme, the Chairman asked members to indicate their preference. Of the members then present, sixteen were in favour of retaining the "five-year period" in the proposition while nine indicated otherwise. The Administration was requested to confine the operation of the Scheme to five years. Any plans to utilise the remaining funds after the five year period would require the approval of the Finance Committee.

15. Miss CHAN Yuen-han, Chairman of the Panel on Housing, pointed out that the Administration had indicated at the briefing on the subject two months ago that the Scheme would not have a significant impact on the property market, and that applicants in the Scheme would only take up a maximum of 17% of the 35 000 flats in the private sector. She stressed that with the drastic drop in property prices in recent months, the 17% assessment would no longer be realistic. As opposed to other home ownership schemes, applicants under the Scheme would be buying flats from the private sector and it would be incorrect to say that the scheme would not have significant impact. Some members echoed this view and advised that there was a need to establish a mechanism to monitor the impact of the Scheme on property prices. In response, the Deputy Secretary for Housing (DS/H) said that properties to be acquired under the Scheme would include various categories including those from the secondary market. As such, the Scheme should not have any major impact on the market.

16. As to whether priority could be accorded to families in private tenements with household income below $30,000 a month as was available under the Home Purchase Loan Scheme, DS/H advised that various housing assistance schemes were in place to help low-income families. Over 90% of Government's resources for housing had already gone to families with monthly income of below $30,000. For the Scheme under consideration, a low interest rate of 2% had been proposed for families earning less than $30,000 per month as against that of 3.5% for families earning between $30,001 and $70,000 a month. Due regard had also to be given to the capability of the applicants in repaying the mortgage loans on the properties.

17. In response to members’ questions on the types of assets which would be included in the assets limit of $1.2 million per household, the Assistant Director (Estate Management) confirmed that these would be inclusive of assets such as ownership of non-residential premises, motor vehicles, and investments such as stocks and shares. Other assets such as jewellery and gold bars would not be taken into account. She also affirmed that changes in family circumstances subsequent to the applications would not affect the applications nor change the interest rates applicable. DS/H said in reply to the Chairman that loan recipients would not be requested to make annual declarations of income on account of the significant workload involved and in consideration of the fact that increases in income might not necessarily bring about real increases in the level of income. The Chairman nevertheless urged the Administration to consider seriously the need to require loan recipients to make income declarations in view of the different interest rates applicable under the Scheme.

18. Some members sought clarifications on the accounting arrangements , in particular the profits from the resale of properties and the payment of

Administrative charges. The Executive Director, HKHS, (ED/HKHS) affirmed that HKHS would only act as the implementation agent for the Scheme and that HKHS would set up a fund for the Scheme separate from its other accounts. All interest and profits obtained from the Scheme would accrue to the separate account. DS/H explained that HKHS would invest monies not required for use in accordance with guidelines issued by the Hong Kong Monetary Authority and that these would be low-risk investments.

19. S for Tsy added that the loan would be paid by the Government into the independent account for the Scheme, and HKHS could make investments, before the first round of payment was made, with Government's approval. Any income or loss from investment and the repayment of loans from the fourth year onwards would also be paid into the account. Administration expenses incurred by HKHS in connection with the Administration of the Scheme and which were considered reasonable by the Government would also be met from the account. In addition, Government might require HKHS to return any unspent balance in the Fund after the Government had given it reasonable notice. S for Tsy confirmed in response to a member that the Loan Fund accounts were subject to audit by the Audit Commission and would be tabled in the Council together with other audited Government accounts, and that the account would also be regulated by provisions in the Public Finance Ordinance.

20. Noting that there would not be any minimum income requirement for the Scheme, a member expressed concern on the repayment of loans and asked if restrictions would be applied to the value of properties to be acquired commensurate with the applicant's repayment ability. ED/HKHS advised that the security was in the properties. If the loan recipients were to run into financial difficulties, the banks would be the first party to get back the money, and the remainder would go to HKHS acting on behalf of the Government. To address members’ concern on bad debts, DS/H assured members that the experience with the Sandwich Class Housing Loan Scheme showed that there had not been any bad debt for the past two years. S for Tsy also advised that bad debts in connection with owner-occupied residential properties were low, and that HB should be able to make reports to the Housing Panel in this respect if necessary.

21. Referring to the part on "Financial Implications" in the paper, a member pointed out that information had been omitted on the interest forgone and hence the subsidy by the public purse as a result of the low interest rate of the Loan. The Chairman requested the Administration to state, in future submissions of a similar nature, the amount of interest forgone if a notional interest rate were to be applied over a certain period of time for reference by members. S for Tsy agreed with such a need.

22. The Chairman invited members to vote on the paper on the understanding that the commitment of $18 billion was to provide loans under the new Home Starter Loan Scheme over the next five years. The proposal was voted on and endorsed.

Item No. 6 - FCR(97-98)87

Recurrent Account¨
Subhead 149 General departmental expenses
Capital Account¨
Subhead 700 General other non-recurrent

New item "Compensation and ex gratia payments to affected poultry farmers and operators"

New Subhead "Kadoorie Agricultural Aid Loan Fund - loans to poultry farmers"¨
New Subhead "Loans to poultry wholesalers and retailers"

23. Members generally welcomed the compensation and financial assistance package which was an improvement over that outlined at the meeting of the Economic Services Panel on 5 January 1998. Members however pointed out that their concerns about the protection of the interests of workers and the compensation to a group of poultry traders in the New Territories had not been adequately addressed in the paper.

24. Members pointed out that there was nothing in the paper to indicate that the compensation would actually go to the workers. They were worried that despite the compensation given to the operators, some irresponsible employers might evade their statutory obligation of paying wages to affected workers. They asked if the Administration could ensure that the workers would get their due share by, for example, withholding part of the financial assistance until wages to workers had been paid or attaching this as a condition for the low-interest loan.

25. The Secretary for Economic Services (SES) advised that the package was drawn up within a short period of time after due consultation with parties concerned and had reasonably addressed the needs of different parties. It was the Administration's target to release the compensation and ex gratia payments before the Lunar New Year. He stressed that employers had the legal responsibility under the Employment Ordinance to pay wages to their workers, and could make use of the payments and the loan for meeting such obligations. The Assistant Commissioner for Labour (AC/L) added that workers could approach the Labour Department for assistance in case of disputes. As regards the proposal for withholding part of the financial assistance, SES explained that the purpose of the payments was to cater for a number of factors related to the bird slaughter operation and it would not be fair to withhold part of the payment. The Deputy Secretary for Economic Services assured members that the Administration would remind employers of their legal responsibilities when issuing the notice on the package, while AC/L also confirmed that the Labour Department would redeploy adequate manpower resources to expedite the handling of any complaints and employment claims and to accord priority to such cases.

26. Referring to the protection of part-time and daily-rated workers, a member highlighted the fact that some of the workers affected might not satisfy the conditions on the hours of work for establishing their employer-employee relationship under the Employment Ordinance. If no separate arrangement was made for this group of workers, it was possible that they would not be able to get the wages due to them. AC/L explained that the Employment Ordinance made no distinction between part-time and full-time workers and both categories were equally protected so long as an employee had worked for the employer for four weeks or more for at least 18 hours a week. As regards daily-rated workers, it would depend on the actual employment relationship with the employers and the circumstances of individual cases might be different. The Chief Social Security Officer, Social Welfare Department, supplemented that affected persons who ran into financial difficulties could apply for assistance under the Comprehensive Social Security Assistance Scheme.

27. Some members pointed out that there was disparity in treatment between poultry wholesalers in Government wholesale poultry markets and those traders keeping the poultry in transit stations in the New Territories. Despite the negotiation with the Administration after the compensation package was first announced, those in the latter case were only given payment for birds slaughtered but not the ex gratia payment or loans as in the case of other wholesalers and chicken farmers. A member said that these transit stations were issued with proper licences issued by relevant authorities, including the Environmental Protection Department.

28. SES stressed that the Administration was aware of the position of these traders. However, it was necessary for the Administration to draw a line for the compensation package as public money was being spent. He advised that registered chicken farmers and poultry wholesalers in Government markets were required to comply with the hygiene and cleanliness requirements stipulated by the Government. The Director of Agriculture and Fisheries (DAF) added that existing legislation provided for premises with 20 chickens or more to be licensed as farms and subject to monitoring by the Agriculture and Fisheries Department (AFD). As the transit stations in question were keeping a total of about 200 000 chickens at the time of the bird slaughter operation, the group of traders would be compensated for the birds slaughtered. But if they wished to be eligible for the low-interest loan, they should apply for farm licences.

29. In response to the Chairman, the Assistant Director (Agriculture and Regulatory), AFD, (AD(A&R)/AFD) confirmed that so long as there were 20 or more chickens in such stations, the traders concerned could apply for farm licences irrespective of whether the chickens were raised on the spot and irrespective of the chickens’ length of stay in the stations. Staff from AFD would contact these traders in the following week in connection with the applications for farm licences and for the low interest loan. Some members urged the Administration to expedite the processing of such applications and to continue to provide assistance to affected parties.

30. Referring to the compensation for birds slaughtered, a member asked if special rates would apply to chickens specifically for breeding purpose as such chickens were more costly to raise. He understood that there were about 40 000 to 50 000 such chickens in over ten farms in the New Territories, and that they should cost between $100 to $120 each. AD(A&R)/AFD said in reply that it was difficult to differentiate between such chickens and others at the time of slaughtering and no such records were kept. Moreover, the revised rates of compensation from $30 per chicken to $38 had already compensated for such losses.

31. In response to a member's enquiry about the compensation for losses in connection with chicken food, DAF advised that farm operators normally kept one month's stock and the losses had already been covered in the compensation for each bird slaughtered.

32. As some loans would be granted on an unsecured basis, a member expressed concern on actions which would be taken if repayments were not made. DAF advised that when granting the loans to the applicants, the Government would have to be satisfied that the applicants were genuine commercial operators and had the ability to repay. In the event of delayed repayment or bad debts, the sums due would be recovered according to the established practices.

33. On the additional expenditure incurred by AFD in the operation, a member enquired about the expenditure of $7.9 million for hire of services, and $3.5 million for transport and travelling. DAF explained that the former was for paying for the salaries and overtime allowances for staff of the Regional Services Department who assisted in the removal of the chickens slaughtered, the hire of services for the cleansing of markets and farms, and the employment of part-time staff for slaughtering and disposing the chickens. The transport costs were mainly for the hire of refuse lorries and other vehicles. DAF undertook to provide further details on the above in writing.

34. A member said that the Administration should have regard to the experience overseas in handling similar situations and work out a comprehensive compensation package. In particular, he pointed out that when dealing with the mad cow disease incident, the United Kingdom Government had included in their package compensation for families of the dead and had also set aside funds for research to prevent similar occurrences. He said that such information should be readily available on the Internet. SES said in response that Hong Kong had its unique features and that overseas situations were not directly applicable. Mr Frederick FUNG said that as the needs of some sectors were not addressed and that the package was not a perfect one, members of the Hong Kong Association for Democracy and Peoples Livelihood would abstain from voting.

35. The Committee approved the proposal.

36. The Committee was adjourned at 5:35 pm.

Provisional Legislative Council Secretariat
19 February 1998