on 12 December 1997
ITEM FOR FINANCE COMMITTEE
HEAD 46 - GENERAL EXPENSES OF THE CIVIL SERVICE
Subhead 014 Home purchase allowance
Members are invited -
- to change the annual adjustment date for Home Purchase Allowance from 1 January to 1 April, with the next adjustment due on 1 April 1998;
- to approve the basis for revising the Home Purchase Allowance rates on 1 April 1998 according to the average property price movements for the 15-month period from 1 October 1996 to 31 December 1997 but capped by the increase in the Consumer Price Index (A) in the same period; and
- to delegate to the Secretary for the Treasury the authority to approve revisions in the Home Purchase Allowance rates on 1 April 1998 based on (b) above and to adjust the rates annually thereafter using the same methodology but for a 12-month period.
At present, the different annual adjustment dates of 1 January for Home Purchase Allowance (HPA) and 1 April for Home Financing Allowance (HFA) have resulted in the two allowances being adjusted by different rates of increase in the past years and has caused confusion. This is unnecessary and undesirable.
2.We propose to -
- synchronise the annual revisions of HPA and HFS by changing the annual adjustment date of HPA from 1 January to 1 April;
- in the next annual revision of HPA on 1 April 1998, revise the rates according to the average property price movements for the 15-month period from 1 October 1996 to 31 December 1997 but capped by the movement of the Consumer Price Index (A) (CPI(A)) in the same period; and
- delegate to the Secretary for the Treasury the authority to approve the rates on 1 April 1998 based on (b) above and to adjust them annually thereafter on 1 April according to movements of average property prices for the 12-month period ending 31 December of the previous year but capped by the increase in the CPI(A).
3.Members approved the arrangements for the annual revisions in the HPA and the HFA in November 1993 and October 1994, vide FCR(93-94)98 and FCR(94-95)58 respectively. Under the approved arrangements, the HPA is adjusted from 1 January each year, based on the property price movements over the 12-month period ending 30 September of the previous year but capped by the movement of CPI(A) in the same period. The HFA is adjusted from 1 April each year based on the same methodology as used for the HPA but covering a 12-month period ending 31 December of the previous year.
4.As a result of variations in property price movements over the different periods, the percentage increases to HPA rates and HFA rates may differ. A table showing the rates of increase for HPA and HFA over the past three years is at the Enclosure. This has caused confusion to some staff who would expect similar adjustments to both HPA and HFA since both allowances are designed to allow staff to purchase property in Hong Kong. The Staff Councils have proposed that the annual adjustment dates for both allowances should be synchronised.
5.Besides, two other major civil service housing allowances, the Private Tenancy Allowance and the Accommodation Allowance for renting private accommodation, are also adjusted on 1 April each year. We consider it logical for the HPA also to be adjusted on the same date and therefore propose that in future the HPA rates should be increased annually on 1 April based on the existing methodology, that is, in accordance with the average property price movements for the 12-month period ending 31 December of the previous year but capped by the increase in the CPI(A) over the same period.
6.To implement this proposal, the next HPA revision originally scheduled to take effect from 1 January 1998 will be deferred for three months to 1 April 1998 to cover an extended period of 15 months. For this revision, we will revise the rates according to the average property price movements for the 15-month period from 1 October 1996 to 31 December 1997 but capped by the increase in the CPI(A) in the same period. One consequence of this is the likely difference in the rates of revision to the HPA and the HFA in the next adjustment on 1 April 1998 because of the different periods covered. Thereafter, the adjustment rates to both allowances will be the same as they will be based on the same adjustment methodology.
7.Since we are only changing the annual adjustment dates but not the methodology to determine the revised rates, we propose that Members continue to delegate to the Secretary for the Treasury the authority to approve the rates in the next revision on 1 April 1998 and to revise them annually thereafter on 1 April on the same basis.
8.Adjustments to the HPA rates will continue to be based on the average property price movements capped by the increase in the CPI(A) over the same period. We do not expect the proposed change of the annual adjustment date to give rise to any additional financial implications.
9.There are two major types of housing benefits available to assist civil servants to achieve home ownership - the Home Purchase Scheme (HPS) and the Home Financing Scheme (HFS). The HPS was introduced in 1981 for civil servants on Master Pay Scale (MPS) 33 and below or equivalent to purchase accommodation in Hong Kong. It is a discretionary benefit which is subject to an annual quota of 1 800 and the availability of funds. The HFS was introduced in October 1990 as a condition of service for local staff on or above MPS 34 or equivalent. Staff appointed before October 1990 may opt to join the HFS by giving up their entitlement to other housing benefits (i.e. the Private Tenancy Allowance or the Non-departmental Quarters).
10.We have consulted the four Staff Side Central Councils. They have no objection to the proposed change.
Civil Service Bureau
Enclosure to FCR(97-98)78
Table showing the rates of increase for Home Purchase Allowance and Home Financing Allowance
|Home Purchase Allowance
|Change of |
||1.10.93 - 30.9.94|
1.10.92 - 30.9.93
||1.10.94 - 30.9.95|
1.10.93 - 30.9.94
||1.10.95 - 30.9.96|
1.10.94 - 30.9.95
|Home Purchase Allowance
|Change of |
|1.4.95||1.1.94 - 31.12.94|
1.1.93 - 31.12.93
|1.4.96||1.1.95 - 31.12.95|
1.1.94 - 31.12.94
|1.4.97||1.1.96 - 31.12.96|
1.1.95 - 31.12.95
*Prior to 1.4.95, Home Financing Allowance was revised on 1.11.94. The adjustment of 3.4% represents the increase in Consumer Price Index (A) for five months on a pro-rata basis.