Provisional Legislative Council
Panel on Public Service
Meeting on 24 November 1997
Review of School and Leave Passage
Arrangements for Civil Servants
PURPOSE
The purpose of this paper is to inform Members of the outcome of the Administration's recent review of school and leave passage arrangements.
(A) SCHOOL PASSAGE
Air Passage Agreement
2.Since 1958, the Government has acquired passages for duty, leave, school, training and other purposes under an Air Passage Agreement (APA). The current agreement covers tickets for all duty and school passages. It may be terminated at six months' notice.
3.School passages under the APA are provided at published fare rates (i.e. fares approved by the Civil Aviation Department). In his 1996 Report, the Director of Audit pointed out that " the provision of school passages under the APA had resulted in substantial additional expenditure to the Government because cheaper fares available in the market could not be used " . At its meeting in November 1996, the Public Accounts Committee accepted the Director's findings and recommended that the Administration should critically review possible arrangements to achieve cost saving.
Current Provision of School Passages
4.Officers who were offered appointment on or after 1 August 1996 are no longer eligible for Overseas Education Allowance and school passages. Those who were offered appointment before that date may continue to be eligible for school passages for up to four dependent children who are in full time education at recognised overseas educational establishment. The children of local officers must be aged 9 or over and receive education in the UK in order to be eligible for school passages. For each 12-month cycle, a child aged under 19 is eligible for two direct Economy Class return tickets, and a child aged between 19 and 21 one return ticket. About 98% of the school passages are on the UK route, 85% of which are taken within a short period during peak seasons in September, December and July.
Proposed School Passage Allowance
5.We propose to replace the current provision of air tickets with a fully accountable allowance. Staff may use the allowance to purchase tickets for their children from any source. Indirect flights with stopovers may be used. Any unspent allowance not exceeding the child's total entitlement for the cycle may be carried forward to the next cycle. The allowance will be set at 75% of the published student fare, or, if unavailable, at 75% of the lowest applicable Economy Class fare for the respective routes. This rate has been determined having regard to the normal price differential between published fares and market fares, as well as the need for most students to travel at peak seasons. For a child below the age of 12, the allowance will be further reduced by 25% in line with the normal discount rate for young passengers. A list of the initial School Passage Allowance (SPA) proposed is at Annex A. The allowance will be adjusted annually in April, according to changes in air fare prices as reflected in the Composite Consumer Price Index (CCPI) for the 12-month period ending February of the year. Annex B shows the relevant CCPI figures since 1992/93.
(B) LEAVE PASSAGES
Pegging of Economy Class Leave Passage to the Discounted Business Class Contract Fare
6.Officers on overseas terms are entitled to leave passages in the form of air tickets if they take standard passages (Annex C refers), or a Leave Passage Allowance (LPA) if they take non-standard passages. Their LPA rates are pegged to the published air fares of the routes between HK and their country of origin in a class of travel appropriate to their eligibility. Local directorate officers and overseas officers from UK who are eligible for Economy Class travel have their rates pegged to the discounted Business Class contract fares under the APA. A background note on developments in the provision of leave passages and the current rates of LPA are at Annexes C and D respectively.
7.The Director of Audit commented in his 1996 Report that the pegging of LPA for local directorate and UK officers to the discounted Business Class contract fare provided officers concerned with passage benefits which were in excess of their entitlement. The Public Accounts Committee at its November 1996 meeting recommended that the pegging should be reviewed and that direct flights on the UK route should not be used as the sole basis for determining LPA.
Change in the Use of LPA
8.Prior to 1992, LPA could be used to meet passage costs only. Since July 1992, we have permitted LPA recipients to use the allowance to cover holiday-related expenses on accommodation, package tours, car hire and airport tax. This is to take account of the increasing availability of package holidays, to maximize the value of the benefit by providing greater flexibility to staff, and to bring the benefit more into line with private sector practice. To reflect the use of LPA in present day circumstances, air fares alone are no longer an appropriate base for adjustment. In 1995, we proposed to the Finance Committee to adopt the movement of package tour prices within the Hang Seng Consumer Price Index (HSCPI) to adjust the LPA of local directorate officers (adjustment of LPA for overseas officers to continue to be pegged to published fares). However, the paper was subsequently withdrawn in view of Members' concern about the disparity in benefits for local and overseas officers and possible increase in passage benefits when package tour prices become higher than prevailing air fares. Today, about 95% of the recipients use LPA to meet package tour expenses.
Proposed Leave Passage Arrangements
9.To remove the pegging to discounted Business Class contract fares and to adopt a more appropriate base for adjusting LPA, we propose to sever the linkage between LPA (for both local and overseas officers) and contract published fares, and to revise the rates in April every year with reference to price changes of package tours, as measured by the year-on-year change in such prices within the HSCPI for the 12-month period ending February of the year. The initial rates of the proposed LPA will be pitched at the prevailing rate payable to officers at the time of implementation of the revised arrangements. At Staff Side's request, we will undertake to provide an overseas officer with an air ticket if the entire amount of LPA for a full cycle is insufficient to allow the officer to buy a direct passage of his entitled class between HK and his country of origin. This is in line with the officer's terms of employment.
10.We have compared the changes to package tour prices and air fare prices. Annex E shows a comparison of the LPA for Economy Class passage for the UK route and changes in package tour prices within the HSCPI since 1990/91. The year-on-year adjustment rates since 1990/91 are different although the average rate of increase of the package tour prices is lower than that of the air fare.
CONSULTATION
11.The Staff Sides and the advisory bodies on civil service pay and conditions of service have been consulted on the proposed changes to the school and leave passage arrangements. They support the proposals.
FINANCIAL AND STAFFING IMPLICATIONS
12.We expect that the implementation of the proposed SPA, which is 25% lower than the published student fare or lowest Economy Class fare, will result in immediate saving estimated at $17 million per annum. As regards the LPA, since these will be pitched at the prevailing rates for eligible local directorate and overseas officers, the implementation of the new scheme will not have any immediate financial implications. As for the future adjustments of the SPA based on air fare prices reflected in the CCPI and of the LPA on package tour prices reflected in the HSCPI, it is difficult to estimate whether the new rates of adjustments will be higher or lower than the existing adjustments based on contract airfares. The Treasury will retain its accounting responsibility and make reimbursement to civil servants in the procurement of leave and school passages under the new arrangements. It will maintain its staff resources for this function.
WAY FORWARD
13.Subject to the approval of the Finance Committee, we shall give six months' notice at the end of 1997 in order to terminate the APA (which cover school passages) by mid-1998. This will enable us to implement the revised school passage arrangements in July 1998, but bookings made under the APA will be honoured during the tickets' validity period. The revised leave passage arrangements will be made in January 1998.
14.Upon the termination of the APA, the purchase of tickets for duty related passages will be dealt with under normal procurement procedures.
ADVICE SOUGHT
15.Members are requested to note the proposed school and leave passage arrangements as detailed in paragraphs 5 and 9 above respectively.
Civil Service Bureau
17 November 1997
