Legislative Council

LC Paper No. CB(2)2906/98-99
(These minutes have been
seen by the Administration)

Ref : CB2/BC/23/98

Bills Committee on
Provision of Municipal Services (Reorganization) Bill

Minutes of Meeting
held on Friday, 25 June 1999 at 8:30 am
in Conference Room A of the Legislative Council Building

Members Present :

Hon Andrew WONG Wang-fat, JP (Chairman)
Hon Kenneth TING Woo-shou, JP
Hon HO Sai-chu, JP
Hon Cyd HO Sau-lan
Hon LEE Wing-tat
Hon Fred LI Wah-ming
Hon Ronald ARCULLI, JP
Hon James TO Kun-sun
Hon Ambrose CHEUNG Wing-sum, JP
Hon CHAN Wing-chan
Hon Howard YOUNG, JP
Hon YEUNG Yiu-chung
Hon FUNG Chi-kin
Dr Hon TANG Siu-tong, JP

Members Absent :

Hon CHAN Kam-lam
Hon Jasper TSANG Yok-sing, JP
Hon CHOY So-yuk

Public Officers Attending :

Mrs Maureen CHAN
Deputy Secretary for Constitutional Affairs

Deputy Secretary for Home Affairs 5

Principal Assistant Secretary for Constitutional Affairs

Mr Johnny WOO
Assistant Director of Urban Services (Leisure Management)

Mr Tony MA
Assistant Director of Regional Services (Culture & Entertainment)

Assistant Director of Regional Services
(Environmental Health Policy)

Miss Olivia CHAN
Senior Staff Officer of Urban Services (Leisure Policy)

Senior Assistant Law Draftsman (Department of Justice)

Miss Selina LAU
Government Counsel (Department of Justice)

Clerk in Attendance :

Mrs Constance LI
Chief Assistant Secretary (2) 2

Staff in Attendance :

Mr LEE Yu-sung
Senior Assistant Legal Adviser

Miss Connie FUNG
Assistant Legal Adviser 3

Miss Flora TAI
Senior Assistant Secretary (2) 2

I. Meeting with the Administration

Fee-setting mechanism [Paper Nos. CB(2)2085/98-99(01), CB(2)2204/98-99(01) and CB(2)2374/98-99(01)]

At the invitation of the Chairman, Deputy Secretary for Home Affairs 5 (DS(HA)5) briefed members on the paper setting out the Administration's proposed broad principles for setting fees and charges for leisure and cultural services after the re-organization of municipal services [Paper No. CB(2)2374/98-99(01)]. With reference to paragraph 2(b) of the paper, Mr Fred LI sought clarification on the intention of the fee alignment exercise. DS(HA)5 said that the review was to reconcile the different charging principles and fee setting mechanisms between the Provisional Urban Council (PUC) and the Provisional Regional Council (ProRC). It was not the intention to standardize the actual fee levels for all municipal services in the urban areas and the New Territories. Mr Fred LI also asked about the Government's position on the Consultant's recommendation to reduce or discontinue subsidies for hire of venues to district organizations for organizing district cultural and entertainment activities. DS(HA)5 advised that Government would review those district programmes with a low participation rate and low cost-effectiveness and would consult the districts in due course. However, the review was not related to the policy of rental subsidies to district organizations for hire of venues, and the policy would continue after re-organization.

2. Mr Fred LI said that the Administration had not responded to his suggestion of a "Consumer Price Index (CPI) - x" model for fee-setting. DS(HA)5 responded that the Administration's paper had discussed the principles of Mr LI's suggestion. The Administration was of the view that the it would be a departure of existing policy if fees and charges were tied to subsidy levels. He explained that the Administration aimed to improve the provision of municipal services through rationalisation of resources and adoption of a market-driven approach, particularly for the provision of leisure and cultural activities. In this respect, some flexibility would be required for the setting of fees and charges for various leisure and cultural activities to cater for changes in market conditions and to facilitate cost control. Given the large volume of fees and charges involved and the need for frequent revision, it would be difficult to involve Legislative Council (LegCo) in the vetting and approval of individual fee levels. DS(HA)5 said that Mr Fred LI's "CPI-x" model would undermine the flexibility required for setting fees to maximize usage rates and to adapt to changes in market situations.

3. Mr Fred LI disagreed with DS(HA)5's arguments. He said that his model also aimed at increasing cost effectiveness of the leisure and cultural services and there was no conflict with the Administration's policy. He explained that under his model, the Administration could still vary individual fee levels subject to the overall subsidy levels as determined by LegCo. In his opinion, the "CPI-x" model would encourage management incentives in cost control and proactive marketing. DS(HA)5 remarked that the model could only set out very general principles which would not serve Mr LI's purpose of effective monitoring. Nonetheless, he would further consider Mr LI's suggestion and provide a response.Adm

4. Mr Ambrose CHEUNG inquired about the charging policies and monitoring mechanism for municipal services. Deputy Secretary for Constitutional Affairs (DS(CA)) said that the Administration's papers and the Bill had described the proposed arrangements for setting the regulatory fees such as permits and licences, and for other fees and charges relating to leisure, recreation and cultural services. In general, the fee-setting and monitoring mechanism would depend on the statutory provisions for individual fees and charges as specified in the relevant legislation.

5. As regards the existing mechanism for setting fees and charges in the two municipal councils, Assistant Director of Regional Services (Environmental Health Policy) informed members that most fees related to environmental hygiene services were full cost recovery. For fees within the jurisdiction of ProRC, Regional Services Department would submit fee revision proposals based on annual cost computation to the ProRC for approval. As for market stall rentals, they were based on commercial principles and set at the current market rental level. As for leisure and cultural services, Assistant Director of Regional Services (Culture & Entertainment) said that Regional Services Department had been delegated the power to determine most of these fees. For example, admission fees for cultural and recreational programmes and hire charges of venues were largely determined on the basis of operating costs and market situation. Nonetheless, for historical reason, some nominal fees such as the charge for cloakroom service in public libraries would require LegCo approval as prescribed in the legislation. However, no fee increases had been proposed for cloakroom service in recent years. Assistant Director of Urban Services (Leisure Management) supplemented that any changes to admission charges of recreational venues, e.g. swimming pools and tennis courts, were submitted to the relevant Select Committee of the two municipal councils for approval and LegCo approval was not required.

6. Responding to Mr Ambrose CHEUNG's further enquiry, Assistant Director of Regional Services (Culture & Entertainment) said that as ProRC had delegated most of its powers on fee-setting to Regional Services Department, it was not necessary for ProRC Select Committees to meet frequently to approve fee revisions. However, PUC had not made similar delegation to its department, and fee revisions would have to be approved by its relevant Select Committees. Assistant Director of Urban Services (Leisure Management) added that proposals on fee revisions were often consolidated for submission to the relevant Select Committee of PUC for approval five to six times a year.

7. Referring to paragraph 4 of the Administration's paper undertaking to submit pricing policy to the LegCo Panel for discussion before any major fees and charges review, Mr CHAN Wing-chan asked whether the Administration would also consult the relevant LegCo Panel on changes to fee and charge level. DS(HA)5 replied that the new framework would provide flexibility for setting individual fee levels. The Bill has proposed that Director of Leisure and Cultural Services be delegated the authority to determine these fee levels, which would be based on existing charging policies. However, the Administration in general would always consult the relevant Legislative Council (LegCo) Panel on changes to fee-setting policies.

8. Mr CHAN Wing-chan remarked that the LegCo Panel could not effectively monitor the fee changes if the Administration was only to "consult" the Panel on pricing policies. Mr CHAN Wing-chan further inquired whether LegCo would have a role in monitoring the fees and charges of those corporatization schemes and contracted-out services. DS(HA)5 said that if the management of venues was to be contracted out, the operators must be allowed some autonomy in setting the fees and charges and the Administration would consult the Panel on such arrangements. However, the Panel would not be involved if there was no change to existing pricing policies. The Chairman commented that the crux of the problem was that a LegCo Panel did not have power to veto the Administration's proposals if the Panel could only discuss policies and principles.

9. Mr James TO said that it was the practice of overseas countries to vest the powers on the legislature to determine fees and charges, particularly those related to the livelihood of the people. He pointed out that the Finance Committee of LegCo also had the authority to approve Government's budget and public expenditure. He therefore questioned the arrangement that the Financial Secretary would be given powers to determine fees and charges under the Bill, while LegCo, being an elected council with public mandate, would have no role to play in the fee-setting process. Mr TO reminded the Administration that the provision of municipal services had all along been subject to the monitoring of the municipal councils which comprised members elected by the public, while the Chief Executive was only returned by an 800-member Election Committee. He expressed strong objection to Government's proposal to abolish the municipal councils and to centralize all powers relating to the provision of municipal services including the power to determine fees and charges. He stressed that with the proposed abolition of municipal councils, the public was worried about the absence of monitoring over the provision of municipal services especially if some of these services were to be contracted out. There was also public concern that Government or contractors would then unilaterally decide on substantial fee increases. He therefore urged the Administration to consider ways to address such concern and to enable LegCo participation in the vetting of fees and charges for leisure and cultural services.

10. DS(HA)5 responded that the proposal of empowering the Director of Leisure and Cultural Services to determine fees and charges for leisure and cultural services, subject only to the approval of the Financial Secretary, was based solely on practical considerations. He reiterated that under the future framework for the delivery of relevant services, a "market-oriented" approach would be adopted in order to provide better and more services. Flexibility would be required with a view to encouraging management incentives in cost control and proactive marketing. A flexible price-setting mechanism was therefore necessary for implementation of the "market oriented" approach. DS(HA)5 stressed that the Administration recognized that LegCo has a monitoring role in the setting of fees and charges, but it would be too complicated if LegCo was to be involved in the vetting of individual fees. To strike a balance between over-monitoring and absence of control by LegCo, the Administration had undertaken to submit the pricing policy to the LegCo Panel for discussion before any major fees and charges review. Mr TO disagreed with the argument, considering that LegCo should be the ultimate approving authority, under the existing constitutional framework, for determining all fees and charges. He was of the view that it would give the public more confidence if LegCo as an elected body would retain the power to veto fee increases and corporatization schemes.

11. DS(HA)5 reiterated that it would not be feasible for LegCo to vet over 800 types of fees and charges. The Administration had proposed that fees for the regulation and control of environmental hygiene would be made by regulations subject to the negative vetting of Lego. As for admission fees and charges for the uses of leisure and cultural facilities, these would be determined by the future Director of Leisure and Cultural Services, subject only to the approval of Financial Secretary. For the latter category, the Administration would discuss with the relevant LegCo Panel the pricing policy before any major review on fees, and changes to the fee-setting mechanism.

12. Dr TANG Siu-tong asked whether the Administration would consider giving District Councils the power to determine fees and charges for leisure and cultural services as these fees were related to the livelihood of people in the District. DS(HA)5 replied that District Councils were only advisory bodies which would not have the statutory power to determine fees and charges. However, the Administration would certainly give heed to the views of the District Councils which would have an enhanced role in the future framework for the delivery of relevant services. Referring to Dr TANG's concern, the Chairman advised that the question was whether it was feasible under the Bill to empower the Director of Leisure and Cultural Services to further delegate to District Councils the power to determine fees and charges for leisure and cultural services. In this connection, Senior Assistant Law Draftsman (SALD) advised that the proposed section 124J of the Public Health and Municipal Services Ordinance (Cap. 132) did not provide for sub-delegation of power by the Director of Leisure and Cultural Services. SALA further clarified that section 142 of the Ordinance only provided for any public officer or public body to delegate any power conferred upon him or it by the provisions of the Ordinance to any public officer, and that District Councils could not be categorized as public officers. SALD confirmed the views of SALA.

13. Mr LI Wah-ming said that he did not agree with the Administration's argument that the negative vetting procedure of LegCo would render the fee-setting mechanism inflexible. He stressed that it was administrative inefficacy, not the vetting procedures, that caused inflexibility. Mr LEE Wing-tat and Mr Ambrose CHEUNG also shared the concern that the proposed consultative mechanism in which LegCo would have no veto power in the determination of fee-setting was totally unacceptable. These members maintained the view that determination of subsidy and fee levels often involved value judgement which should not be left to the discretion of government officials. To give a better indication on the workload involved in vetting fee revisions by the municipal councils, Mr Ambrose CHEUNG requested the Administration to provide information on the fee revisions in respect of leisure and cultural services approved by the municipal councils in the past three years. Adm

14. Referring to members' concerns, the Chairman asked why the Administration considered the proposal of negative vetting by LegCo too rigid for determining fees and charges for leisure and cultural activities. He pointed out that it was already the present practice for PUC to determine the relevant fees and charges. DS(HA)5 responded that pricing policies and issues involving value judgement could be discussed by the LegCo Panel, but vetting individual fee levels was a different matter. He remarked that it would not be meaningful to make reference to the existing vetting mechanism, as it was the policy intention to adopt a flexible and market-oriented approach to determine fees and charges under the new structure in order to improve the delivery of leisure and cultural services.

15. Mr Ambrose CHEUNG further suggested the Administration to consider modelling on the Finance Committee's procedures by vesting the power to determine fees and charges on LegCo which could then delegate to the Financial Secretary or Director of Leisure and Cultural Services the power to determine individual fees. The Chairman advised that such arrangements would have to be specified in law, and he had doubts on its feasibility since it would change the functions of LegCo to an executive authority. Senior Assistant Legal Adviser (SALA) advised that based on legal principles, no sub-delegation could be made by the designated authority. He advised that if members were only concerned about retaining the power to vet the fee levels, this could be made by way of subsidiary legislation. DS(HA)5 said that it would need legislation to vest the power of determining fees and charges on LegCo, and such arrangement would be incompatible with the provisions in the Bill.

16. Having considered the views of members, the Chairman advised that there were three options for the future fee-setting mechanism which could be further considered by the Bills Committee -

  1. positive vetting by LegCo in the form of resolution;

  2. negative vetting by LegCo in the form of regulations; and

  3. Director of Leisure and Cultural Services to determine such fees subject only to the approval of the Financial Secretary.

17. Mr Fred LI stated that he would prefer the option of negative vetting. He said that while LegCo Members would not be concerned about the admission fees for individual entertainment programmes, LegCo should have the power to decide on certain fees for "basic" facilities and services such as swimming pools, tennis courts and public libraries. His views were shared by Mr James TO and Mr LEE Wing-tat. In view of members' strong reservations over the Administration's proposed fee-setting mechanism for leisure and cultural services, the Chairman advised the Administration to seriously re-consider the proposal of putting in place a mechanism to enable the LegCo to vet and approve certain fees and charges by way of subsidiary legislation. He also remarked that the Administration could consider the trading fund option for such services so that a composite account of revenue and expenditure could be forwarded to LegCo annually for scrutiny.

18. DS(CA) noted the suggestions of the Chairman and members. She said that the Administration had explained the difficulties for LegCo to vet and approve all types of fees and charges for leisure and cultural services. She also noted the legal advice that one possible option to address members' concern was to enable LegCo to vet certain fees by way of subsidiary legislation, and that "a middle road" approach as suggested by Mr Ambrose CHEUNG was technically not feasible. She undertook to examine these suggestions and provide further proposals to address members' concerns. Adm

Discussion of delegation of statutory powers to public officers
[Paper Nos. CB(2)2088/98-99(01), Appendix II to CB(2)2204/98-99(01) and Appendix III to CB(2)2387/98-99(01)]

19. Members noted that the Administration had provided a table showing the statutory powers and categories of authorized officers under different sections of the Public Health and Municipal Services Ordinance (Cap. 132) [Appendix III to Paper No. CB(2)2387/98-99(01)]. The Chairman advised that members could refer to the table when examining Schedule 3 of the Bill.

The Administration's response to members' questions raised at the meeting on 4 June 1999
[Paper No. CB(2)2374/98-99(02)]

20. Members noted that the Administration had provided a written response addressing members' concerns about the validity of contracts and liabilities of the Government after the transfer [Paper No. CB(2)2374/98-99(02)]. Mr Howard YOUNG informed members that there was a recent court case relating to failure to recover rental arrears after transfer of ownership. He expressed concern about its implication on the validity on contracts and liabilities after the transfer of authority from the municipal councils to Government. SALD undertook to obtain the relevant information on the court case for members' reference. Adm

21. Notwithstanding the Administration's written response, Mr James TO said he was still very concerned about the effects of various provisions in the Bill which sought to vest property, rights and liabilities of the municipal councils in Government. He asked whether it was possible for a party to rescind contract upon the transfer of the contractual rights and liabilities to the Government. For example, a donor might want to withdraw his agreement to donate certain antiquities items or artistic works to an existing municipal council. DS(CA) reiterated that the Bill sought to preserve the validity of the contracts as the terms and conditions of the contract were not affected by the substitution of the Government in place of the Council. However, it did not prevent parties from varying or rescinding the contract by agreement. Mr TO said that the provisions involved very complicated issues, and that some contracts might contain provisions against transfer of rights. He therefore urged the Administration to re-examine whether the relevant provisions had provided adequate legal effect for the transfer, and possible impact of the transfer on other contractual party. Adm

22. Mr James TO also requested the Administration to provide response to the following concerns -

  1. whether contracts or agreements signed by committees of the municipal councils would have the same status as contracts signed by the councils;

  2. whether any of the existing contracts signed by the municipal councils contained provisions against transfer of rights and liabilities; and

  3. whether the Bill could adequately deal with contractual relationship between the councils and other territories or governments after the transfer.

DS(CA) noted the request and undertook to provide a written response to these concerns. Adm

23. Ms Cyd HO asked whether the Administration had information on the number of intellectual property owners who currently had contracts with the municipal councils but did not wish to continue the contract after the transfer. DS(CA) responded that the Administration did not have such information.

II. Date of next meeting

24. The Chairman reminded members that the meeting originally scheduled for 2 July 1999 had been cancelled and the next meeting would be held on Tuesday, 6 July 1999 at 2:30pm.

25. The meeting ended at 10:35am.

Legislative Council Secretariat
27 September 1999