PLC Paper No. FC 97
(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, 16 January 1998, at 2:30 pm

Members present:

Hon Ronald ARCULLI, JP (Chairman)
Hon Henry WU (Deputy Chairman)
Hon WONG Siu-yee
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 Selina CHOW, JP
Hon Mrs Peggy LAM, JP
Hon NGAI Shiu-kit, JP
Hon Henry TANG Ying-yen, JP
Hon MA Fung-kwok
Dr Hon Mrs TSO WONG Man-yin
Dr Hon LEONG Che-hung, JP
Hon Mrs Sophie LEUNG LAU Yau-fun, JP
Hon MOK Ying-fan
Hon HUI Yin-fat, JP
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 Andrew WONG Wang-fat, JP
Dr Hon Philip WONG Yu-Hong
Hon Kennedy WONG Ying-ho
Hon Howard YOUNG, JP
Hon YEUNG Yiu-chung
Hon IP Kwok-him
Hon Bruce LIU Sing-lee
Hon Mrs Miriam LAU Kin-yee, JP
Hon Ambrose LAU
Hon-chuen, JP
Hon CHOY Kan-pui, JP
Hon Paul CHENG Ming-fun, JP
Hon CHENG Yiu-tong
Dr Hon TANG Siu-tong, JP
Hon Timothy FOK Tsun-ting
Hon KAN Fook-yee
Hon LO Suk-ching
Hon TAM Yiu-chung, JP
Hon CHOY So-yuk

Members absent :

Hon James TIEN Pei-chun, JP
Hon David CHU Yu-lin
Hon HO Sai-chu, JP
Dr Hon David LI Kwok-po, JP
Hon CHEUNG Hon-chung
Hon LEUNG Chun-ying, JP
Hon Frederick FUNG Kin-kee
Dr Hon Charles YEUNG Chun-kam
Hon CHIM Pui-chung
Hon LAU Kong-wah
Hon LAU Wong-fat, JP
Hon NGAN Kam-chuen
Dr Hon LAW Cheung-kwok

Public officers attending :

Secretary for the Treasury

Mrs Carrie LAM, JP
Deputy Secretary for the Treasury

Principal Executive Officer (General), Finance Bureau

Mr HO Wing-him
Deputy Secretary for Health and Welfare

Mr Andrew LEUNG, JP
Director of Social Welfare

Assistant Director of Social Welfare

Miss Lilian FUNG
Senior Statistician, Social Welfare Department

Principal Assistant Secretary for the Civil Service

Assistant Director of Accounting Services

Principal Assistant Secretary for Transport

Mr MAK Chai-kwong
Government Engineer of Highways 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. 1 - FCR(97-98)88


The Committee approved the proposal.

Item No. 2 - FCR(97-98)89

Subhead 179 Comprehensive social security assistance scheme¨
Subhead 180 Social security allowance scheme

2. As the supplementary provision being sought for the Comprehensive Social Security Assistance (CSSA) scheme represented about 23% of the approved provision, members sought clarification on the reasons for the significant increase and asked if certain factors, such as the inflationary adjustment, had been included in the original estimate.

3. The Director of Social Welfare (DSW) advised that the level of supplementary provision for CSSA was comparable with that of 24% sought in the preceding year. It was difficult to assess accurately the provision required for paying CSSA as the trend of applications at the beginning of a year might not remain the same throughout the year. In the light of a surplus of $170 million after supplementary provision had been sought for 1996-97, the Administration had adopted a prudent approach for this year's exercise. The Deputy Secretary for the Treasury (DS/Tsy) added that provision for inflationary adjustments from 1 April 1997 was not included in the 1997-98 original estimate for CSSA as the rate of revision was not known when the Administration finalised the draft estimates for the year. Instead, in line with established accounting practice, provision for inflationary adjustments had been included under the "additional commitments" subhead. Thus, the portion of the supplementary provision sought attributed to inflationary adjustments was anticipated.

4. As regards the cause for a higher than anticipated average payment per case and whether this was attributed to the increase in unemployment cases, DSW said that the actual payment per case was dependent on the financial position of individual families. In general, the higher average payment per case was due to the increase in the number of applications with "more than one-person". The Senior Statistician, Social Welfare Department, supplemented that CSSA cases involving "more than one-person" family accounted for 30% of the total caseload and the number had increased by 30% in the past year as compared with the 15% increase in the "one-person" cases which accounted for the remaining 70% of caseload.

5. As regards cases with new immigrants and the unemployed attributing to the general increase, DSW said that as at December 1997, new immigrants made up about 1 to 2% of the cases, while the unemployed constituted about 9% of CSSA cases. But both were far fewer than elderly and sick applicants which accounted for about 70% of all CSSA cases. He pointed out that there was no direct correlation between unemployment and the number of unemployment CSSA cases as the latter had been on the increase even when unemployment was stable in mid-1997. DSW nevertheless acknowledged that the trend of cases under the unemployment category, which had risen from 3.2% in 1992 to 9% in December 1997, was a matter of concern to the Administration.

6. In view of the increase in the various types of applications, a member suggested that the Administration should conduct a review on the CSSA scheme. In response, DSW advised that an inter-departmental working group had already embarked on a review which would be due for completion within 1998. The review would examine a number of issues including the nature of unemployment cases, retraining requirements, and if there were tendencies of over-dependence on CSSA, etc. In addition, the Administration was also conducting a study to see how services to single parents could be improved while arrangements were being made in the meantime with the Housing Department for those experiencing difficulties in paying rent to move into public housing. DSW confirmed in response to the Chairman that the Administration would consult the Welfare Services Panel on any policy change arising from the review, and also on the recommendations of the review before these were finalised.

7. As for the number of elderly recipients who had chosen to take up permanent residence in Guangdong Province, DSW advised that out of the 600 approved cases, 500 were now living in Guangdong. It was as yet early for consideration to be given to extending the arrangement to other provinces as suggested by a member since Guangdong Province already covered an extensive area geographically and further details were still being worked out, but the Administration had pledged to conduct a review on the existing arrangement. DSW took note of the Chairman's request for account to be taken of medical expenses which were very expensive if the elderly were treated as non-locals in the Mainland.

8. The Committee approved the proposal.

Item No. 3 - FCR(97-98)90

Subhead 033 Home Financing Scheme

9. In response to members on the eligibility criteria and number of participants in the Home Financing Scheme (HFS), the Principal Assistant Secretary for the Civil Service (PAS/CS) advised that HFS was part of the conditions of service for officers on point 34 of the Master Pay Scale and above. There were currently about 8 000 participants in the Scheme. As regards the reason for 72 officers joining the Scheme despite a reduced entitlement period, PAS/CS reckoned that this was entirely the decision of the individual officers who might consider it an opportune time to acquire properties in view of the current property prices. The move was beneficial to the Government as this would reduce the requirement for Non-departmental Quarters.

10. On the amount of down-payment loan which an officer could get under HFS, PAS/CS explained that this was 30% of the property price or 24 months’ salary whichever was the less. As regards the interest rate for the loan, DS/Tsy advised that this was based on the principle of no-gain-no-loss to the Government. The interest rate was fixed at the mean of the monthly average of the yields of one-year and two-year Hong Kong Monetary Authority Exchange Fund Bills/Notes, and would be revised from the first day of the following month if the monthly mean showed a difference of 1% or more from the prevailing rate. The prevailing interest rate was 9.475%. In response to members’ interest on the different rates of allowances for officers on different salary bands, DS/Tsy advised that the initial rates were approved by the Finance Committee. At the request of the Chairman, PAS/CS undertook to provide the information in writing.Admin

11. The Committee approved the proposal.

Item No. 4 - FCR(97-98)91

Subhead 700 General other non-recurrent
New item "Second Railway Development Study"

12. Given that the First Railway Development Study (RDS-1) was completed in 1994 at a cost of $16 million, members queried the need for conducting the Second Railway Development Study (RDS-2), which appeared to be a supplementary study, within such a short period of time and at a significantly higher cost of $35 million.

13. In response, the Government Engineer of Highways Department (GE/HD) advised that RDS-1 had identified three priority railway projects for early implementation. At the same time, the study had provided a blueprint for the future development of the rail system in Hong Kong. However, as the aspects of transport planning and land use were always changing, and as rail projects were closely connected to developments relating to population and other infrastructure, it was not possible nor appropriate for firm recommendations on the other projects to be made at that stage. Recent changes in development, such as the revised projected population growth, the economic restructuring and the employment patterns, had affirmed the need for a second study in order to formulate a comprehensive railway development strategy and set out new rail proposals for coping with the changes. RDS-2 would also investigate other aspects related to railway development such as the methods for project implementation, ways to fast-track the railway development process, the means for the planning, construction and operation of the railways, the relationship between fares and passenger traffic, and the impact of population and employment level and distribution arising from high and extra high population growth situations on railway network expansion requirements.

14. With regard to cost, the Principal Assistant Secretary for Transport (PAS/T) highlighted the fact that the $16 million for RDS-1 was the commitment sought in 1991. If taking the inflation in the past six years into account, the cost of RDS-2 was not significantly higher that that of RDS-1. GE/HD supplemented that RDS-2 would have a considerably expanded scope. As opposed to RDS-1 where one single set of planning data was adopted, RDS-2 would adopt a scenario approach to cover a wide range of possibilities. It would also include a series of topical studies on key issues as well as a study of the institutional framework. All these had accounted for the increase in costs. In reply to a member on the consultant's cost for the specific aspect of environmental assessment, GE/HD advised that the cost for strategic environmental assessment was estimated at $2.37 million. However, at the project stage, further comprehensive environmental impact assessment would be carried out on those rail projects identified and that would be at separate cost.

15. A member drew attention to the fact that the $16 million was only for Phase I of RDS-1, whereas another $45 million was approved in 1995 for Phase II of RDS-1. The Chairman sought clarification on the purpose of Phase II of RDS-1 and whether there would be a similar need for Phase II of RDS-2.

16. GE/HD explained that Phase II of RDS-1 had two purposes, specifically, an independent assessment on Kowloon-Canton Railway (KCR) Corporation's proposal on the West Rail and the Mass Transit Railway (MTR) Corporation's on the Tseung Kwan O Extension, and a detailed engineering feasibility study for the Ma On Shan Rail and the KCR Tsim Sha Tsui Extension. The cost for Government's commissioned consultancies represented less than 1% of the estimated cost of the three rail projects of over $100 billion. He advised however that the costs for the detailed design of the West Rail, the MTR Tseung Kwan O extension, and the Ma On Shan/Tai Wai rail link and the KCR extension from Hung Hom to Tsim Sha Tsui would be borne by the railway corporations concerned. As regards the need for independent assessment studies on projects identified by RDS-2, GE/HD advised that this would be dependent on the implementation method of the projects, and that applications for funds would be made if there was a need for Government-funded feasibility studies. A member remarked that such assessments should best be undertaken by the Administration, rather than by the railway corporations, in order to be comprehensive and to avoid possible conflicts of interest. In reply to a member on the reliability of assumptions made by consultants, GE/HD advised that the Planning Department provided the basic set of reference data for planning on land use and transport matters. The reference data set would however have to be varied as there would invariably be changes even within the study time frame.

17. Regarding the appointment of consultants, members expressed grave concern about the Government's over-dependence on the service of consultants instead of developing its own expertise. Some members quoted the experience with the West Rail in which the Administration had engaged consultants to study the recommendations made by consultants. Members had serious reservations on the Government's policy in engaging consultants to undertake work which could be done in-house, particularly in respect of those studies where the subject areas might overlap. PAS/T responded by saying that it was necessary to engage consultants to provide independent assessment of railway proposals. Even if the assessment were to be made by Government, the relevant departments would need to seek funding for the necessary posts to be created. A member suggested the need for an overall review on the appointment of consultants by the Government, including the basis for consultancy costs which appeared outdated. Admin

18. In addressing a member's concern that only a few consultancy firms specialising in transport planning had monopolised the consultancy studies on RDS, GE/HD explained that such a situation would not apply to RDS-2 as this would be a multi-disciplinary task. The consultants would have to form themselves into consortiums, and the Administration had already shortlisted four out of eight such consortiums and intended to invite them for submissions of technical and fees proposals to undertake the study once the Committee approved the item under consideration. While the four consortiums included the consultancy firm which was responsible for RDS-1, relevant previous documents including planning data would be provided to all four consortiums for reference. On a member's suggestion for priority to be given to the appointment of local consultancy firms, GE/HD explained that there were established guidelines for the appointment of consultants. The consultants would have to be on the list of Government consultants and satisfy relevant requirements concerning ability and quality control. Assessments of the technical and fees proposals would then be made by an assessment panel formed by representatives from concerned departments. GE/HD emphasised however that due regard would be given to local experience.

19. Another major area of concern of members was the 18 months duration of RDS-2. Some members pointed out that the Government had taken a considerably long time to plan and construct railway projects. Taking the three priority railway projects as an example, by the time these projects were completed in 2003, 12 years would have elapsed since funds were approved for conducting the RDS-1. Members were concerned that the process for constructing the other railways under RDS-2 would similarly be prolonged. Members enquired if the 18-month period for the consultancy study for RDS-2 could be expedited. PAS/T said that one of the areas which the consultants of RDS-2 would look into was how to expedite the existing planning process of railway projects.

20. GE/HD explained that planning for the three priority railway projects which cost over $100 billion should not be rated as slow. These projects were identified in 1994 and by now were already in different stages of implementation. GE/HD said that enactment of the Railways Ordinance had enabled the Administration to speed up the land resumption process because the legislative framework required that any unresolved objections had to be referred to the Executive Council for decision within nine months after the objection period. This would help expedite the process. Notwithstanding these provisions, GE/HD stressed the importance of exercising caution in planning railway projects which were very costly. As for RDS-2, GE/HD said the scope of the study was broad and covered aspects of transport, engineering and environment. The proposed study period of 18 months for the consultancy study was already extremely tight. He assured members that the Administration was aware that the two railway corporations had conducted some studies on railway expansion, and due regard would be given to the findings of these studies. Representatives from the corporations would also be invited to join relevant working groups to solicit their views.

21. PAS/T also assured the Committee that the Administration would endeavour to expedite the process. She confirmed in reply to the Chairman that the RDS-2 consultants would be requested to provide the first and second interim reports in eight and 12 months respectively, and that the final report would be provided in 18 months. PAS/T said that the Administration had studied the schedule for RDS-2 and concluded that a period of 18 months was required in the light of the depth and scope of the study. As regards whether action would be taken upon the interim findings, PAS/T advised that consultation and other follow-up actions would be undertaken on urgent projects identified.

22. GE/HD also clarified three points raised by members related to railway developments, as follows:

  1. it was not possible to provide an estimate on the target completion date of the future railway projects, but excluding the project planning stage activities, a construction period of four to five years in a densely populated city such as Hong Kong would not be unreasonable;

  2. the suggestion of locating a Mass Transit Centre in Causeway Bay merited investigation and would require further examination by the consultants; and

  3. co-ordination and consultation with the Mainland authorities on cross-boundaries infrastructure was being made through relevant working groups under the Infrastructure Co-ordinating Committee.

In conclusion, PAS/T stressed that the $35 million sought for RDS-2 was an estimated figure and that the actual expenditure would depend on the fees required. She also assured members that the Administration would ensure that the study would be cost-effective and serve public needs.

23. The Committee approved the proposal.

24. The Committee was adjourned at 4:25 pm.

Provisional Legislative Council Secretariat
20 February 1998