LC Paper No. CB(2) 1087/98-99
(These minutes have been seen by the Administration)

Ref : CB2/PL/PS

LegCo Panel on Public Service

Minutes of Meeting held on Monday, 21 December 1998 at 10:45 am in Conference Room B of the Legislative Council Building

Members present:

Hon TAM Yiu-chung, JP (Chairman)
Hon Mrs Sophie LEUNG LAU Yau-fun, JP (Deputy Chairman)
Hon LEE Cheuk-yan
Hon LEE Kai-ming, JP
Hon CHAN Wing-chan
Hon Howard YOUNG, JP
Hon Ambrose LAU Hon-chuen, JP

Members absent:

Hon CHEUNG Man-kwong
Hon CHAN Kwok-keung
Hon Andrew WONG Wang-fat, JP

Public Officers attending:

Mr LAM Woon-kwong, JP
Secretary for the Civil Service

Head, Efficiency Unit

Mrs Carrie LAM
Deputy Secretary for the Treasury

Deputy Secretary (Civil Service)2

Ms Anissa WONG
Deputy Secretary (Civil Service)3

Mr Thomas CHAN
Principal Assistant Secretary for the Civil Service (Appointments)
Clerk in attendance:
Mr LAW Wing-lok
Chief Assistant Secretary (2)5
Staff in attendance:
Miss Mary SO
Senior Assistant Secretary (2)8
I. Confirmation of minutes
(LC Paper No. CB(2) 901/98-99 issued under LC Paper No. CB(2) 902/98-99 on 17 December 1998 and LC Paper No. CB(2) 890/98-99 tabled at the meeting)

1. The minutes of the meeting held on 16 November 1998 were confirmed.

2. The Chairman informed members that amendments had been made to paragraphs 28 to 31 of the minutes of the joint meeting of the Panel on Public Service and the Panel on Home Affairs held on 9 December 1998. Members agreed that the minutes of the joint meeting be confirmed subject to any amendments that might be made by the Panel on Home Affairs.

II. Date of next meeting and items for discussion
(LC Paper No. CB(2) 902/98-99(01))

3. Referring to the paper, members agreed to discuss the following two items at the next meeting to be held on 18 January 1999:

  1. Civil servants borrowing money from loan sharks; and

  2. Declaration of investments by civil servants;
and to defer discussion of the following two items to a later date:
  1. Briefings by the Post Office and the Electrical and Mechanical Services Department on the staff situation in these two departments since their establishment as trading fund departments; and

  2. Prevention of double housing benefits for civil servants and staff employed in Government-funded bodies.
4. Members agreed that the following papers be included on the agenda of the next meeting:
  1. a paper on "Employment of non-civil service contract staff" provided by the Civil Service Bureau; and

  2. a written submission regarding the dis-establishment of the Hospital Services Department from the Association of Hong Kong Nursing Staff.
(Post-meeting note: As the Panel on Health Services had discussed the dis-establishment of the Hospital Services Department on 14 December 1998 and the Administration had subsequently written to the Hong Kong Nursing Staff Association to address their concerns, the Chairman, having consulted Mr Michael HO Mun-ka (Chairman of the Hong Kong Nursing Staff Association) considered that there was no need for the Panel on Public Service to discuss this item further at this stage.)

III. Briefing by the Efficiency Unit on the implementation of the Enhanced Productivity Programme
(LC Paper No. CB(2) 902/98-99(02))

5. Head, Efficiency Unit (Head EU) briefly explained the Government's proposals on the second phase of the Enhanced Productivity Programme (EPP), which aimed at securing a sustained improvement in public sector productivity, as set out in the paper.

6. Mr Howard YOUNG enquired whether the performance pledge concept, which was one of the early initiatives of the "Serving the Community" Programme by the Government to achieve continuous improvement in the delivery of service to the public, was also applied in internal service departments. In reply, Head EU said that the performance pledge concept was extended to some departments which did not provide direct services to the public. But the real answer rested with the new target-based management process, which specified the outputs and deliverables that the departments would have to produce in support of delivering policy objectives. This had provided the real focus for those departments not providing direct services to the community.

7. In reply to Mr YOUNG's further enquiry as to whether EPP was an extension of the target-based management process, Head EU said that the Government had been pursuing improvements in the management and delivery of public services through the "Serving the Community" Programme launched in 1992. Some of the early initiatives of the Programme included customer performance pledges and customer liaison groups. Target-based management process came along with the Chief Executive's pronouncement on managing for results. EPP was a further extension of this process focusing on productivity. The current economic downturn had provided the driving force for the push on productivity.

8. Mr LEE Kai-ming referred to paragraphs 11 and 12 of the paper and said that no details were given as to which departments would be selected to operate under the new Agency framework. He also asked when the Government would release the implementational details on the introduction of the Agency framework in departments and whether staff had been consulted in this regard.

9. In reply, Head EU said that no departments had been selected as the Agency framework proposed was still at a conceptual stage. He stressed that staff would be fully consulted before the proposal was introduced. He pointed out that under the Agency framework approach, departments would be given greater flexibility in financial and staff management, thereby enabling them to focus on delivering outputs rather than concentrating on controlling inputs. The Agency framework approach was modelled on overseas developments where many countries, including Australia, Singapore, New Zealand, the US and the UK had introduced new management frameworks to reflect the different operational and managerial requirements within the executive arms of government. He added that the Government had not taken a decision as to how the Agency framework approach would be implemented. One-line vote and other arrangements such as multi-year budgets and budgets net of revenue would be considered.

10. In reply to the Chairman's enquiry about staff consultative machinery, Secretary for the Civil Service (SCS) said that there was a well-established consultative machinery within the civil service, comprising the Central Staff Consultative Councils and the Departmental Consultative Committees. Through this machinery, individual staff members, staff unions and staff groups could be consulted on a wide range of subjects such as conditions of service, working environment and various aspects of their work. Each Central Council and Departmental Consultative Committee comprised the Official Side and the Staff Side. It was the Government's policy to consult the Staff Sides of the Central Councils on any significant change to the terms and conditions of service of staff such as the annual pay adjustment. Civil Service Bureau representative also attended Departmental Consultative Committees to explain central government's policies and practices and acted as a bridge between central government and departments.

11. Referring to paragraph 13 of the paper, Mr CHAN Wing-chan suggested that in setting up the proposed call centres, consideration should be given to avoiding the current deficiency of the public telephone enquiry system where callers had to press several buttons before obtaining the information required.

12. In response, Head EU said that the proposed call centres were not push-button technology. The call centres would be manned by experienced and well-trained staff who would be able to deal with enquiries at the first point of contact. He added that the Efficiency Unit was currently carrying out a feasibility study on call centres.

13. Mr CHAN Wing-chan asked whether the developments on increased human resources flexibility for departments would lead to the hiring of non-civil service contract staff and temporary staff becoming the standard recruitment policy in future. In reply, SCS said that the Administration's proposal to allow Heads of Department or Heads of Grade to employ non-civil service contract staff at non-directorate level was announced last week. This proposal, which aimed at improving the existing arrangements for the employment of temporary and short-term staff, was merely one of the proposals to achieve the policy objective of the Civil Service Bureau to modernise the appointment system and make it more flexible to suit present day circumstances and departments' needs. He would brief members on other proposals to modernise the appointment system once they were drawn up.

14. Responding to Mr Ambrose LAU's enquiry about the timetable for implementing the various activities of the second phase of the EPP, Head EU said that it was important to adopt a patient and persistent approach in order to get lasting improvement. In regard to the proposal of setting up call centres, a pilot scheme was expected to be launched in early 2000. As regards transforming support services by bringing together support processes in one location using specialist managers and staff, recent work on records management had given a good indication of the potential benefits from this approach and similar opportunities occurred in many other areas, including personnel records, some financial processes and despatch services. In regard to institutional change such as adoption of the Agency framework approach, amendment to existing legislation or drafting new legislation would be required. In trying to implement the various activities within the second phase of EPP, it was necessary to look at the potential longer term gains and make a start now or they would remain out of reach.

15. At the request of the Chairman, Head EU agreed to provide members with a regular progress report on the implementation of the second phase of EPP. He further said that the "Serving the Community" Programme launched in 1992 took five years or so to make some fairly big improvement on the customer service side and instilled a customer-oriented culture in the civil service. It was therefore envisaged that the implementation of the second phase of EPP would also require similar timeframe to get the full benefits.

16. Mrs Sophie LEUNG referred to paragraph 15 of the paper and said that whilst increased human resources flexibility for managers would help to improve productivity, ways should also be devised to induce staff to improve their performance on their own initiatives. She was of the view that staff would welcome this as they would gain self-improvement through this process, which would enable them to take on more and higher responsibilities. Head EU echoed Mrs LEUNG's views.

17. Mr LEE Cheuk-yan expressed concern that there would be a reduction in service as a result of the fundamental expenditure reviews (FERs). He further asked whether the trading funds had a target rate of return, and if so, whether this would put pressure on the departmental management to increase prices to achieve the profit target. In response, Head EU said that the prime objective of the FERs was not to cut down on expenditure but to ensure that resources were deployed more efficiently and effectively to achieve the policy objectives. Inevitably some activities would be identified as no longer required after the review, but the resources saved would be diverted to other areas. He added that there was no evidence that the setting up of trading funds had forced price increases. In fact, most of the trading funds had kept price increases below the inflation rate. Although there was a target rate of return on the trading fund, this did not necessarily mean departments would increase the charges to achieve the profit target. One of the ways to meet the target rate of return was through improved productivity. Given the additional management flexibility, managers could hire temporary staff to suit their seasonal work requirement to achieve a saving on staff cost.

18. In reply to the Chairman's enquiry, Head EU said that internal service departments such as the Government Printer, the Government Supplies Department and the Architectural Services Department were potential candidates for transforming into organisations operated on a trading fund basis. None of these departments had been looked at in this context yet but the creation of additional trading fund departments was the direction which the Government was heading.

IV. Measures to achieve cost saving in Government departments and agencies
(LC Paper No. CB(2) 902/98-99 (03))

19. Referring to the paper, Deputy Secretary for the Treasury (Dep S for Tsy) said that the objective of the short term phase of EPP was to require all bureaux, departments and agencies, as well as non-government bodies financed by Government expenditure, to undertake new or improved services without additional financial resources in 1999-2000 and thereafter to deliver productivity gains or savings amounting to 5% of their operating expenditure by the year 2002-03. The Administration had already asked them to come up with a "menu" of new initiatives that they would implement in 1999-2000 by the end of December 1998. The Financial Secretary would announce these initiatives at the time of the 1999 Budget. It was imperative that Government-funded bodies should also be subject to EPP in order to achieve the 5% savings target in Government expenditure, having regard to the fact that subvention to Government-funded bodies accounted for 42% of the total Government expenditure for this financial year.

20. Out of the total recurrent Government expenditure for 1998-99 of $172 billion, it was estimated that about $110 billion were susceptible to productivity gains. Of the remaining $62 billion exempted from the tangible 5% savings target, about two-thirds were statutory or quasi-statutory expenditure such as payments under the various social security schemes, financial assistance schemes for students, legal aid, etc. The remaining one-third belonged to school expenditure, in view of the many demands placed on schools under the Quality Education initiatives. Dep S for Tsy also pointed out that organisations such as the Urban Services Department, the Regional Services Department, the Housing Department and the five Trading Fund departments, which were not operating on Government expenditure, had undertaken to support EPP and seek to achieve the 5% or higher productivity gains. She stressed that the Administration was committed to increasing government expenditure to meet community needs in line with economic growth. For example, Government expenditure for 1999-2000 was planned on an overall 4% growth basis with welfare spending expected to increase by some 12-13%.

21. Dep S for Tsy further said that EPP would seek to achieve continuous improvement through rationalisation of service, streamlining of procedures, simplifying managerial structure and clear accountability. Of these four areas, she was of the view that rationalisation of service, through the FERs to examine major areas of Government activity, had the biggest potential to contribute toward achieving the EPP targets. She illustrated this by referring to the area of youth services where some people had pointed out that the over 200 youth and children centres, which were set up in the late 1960s', no longer suited present day circumstances. It had also been suggested that the resources spent on these youth centres could be diverted to improving the provision of youth counselling services in schools. To facilitate bureaux, departments and non-government bodies to accomplish the 5% target and to achieve sustainable and long term improvement, the Administration was committed to providing a suitable enabling environment in terms of providing Controlling Officers with greater flexibility in the use of financial and human resources. In respect of non-government bodies, consideration would be given to relaxing the subvention rules.

22. In reply to Mr CHAN Wing-chan's enquiry as to whether the Hospital Authority (HA) would be exempted from EPP, Dep S for Tsy reiterated that apart from the over 1,000 Government as well as subsidised primary schools, secondary schools and special schools, all other government-funded organisations, including HA, the tertiary institutions and welfare agencies would be required to achieve the required reduction or savings in baseline expenditure by 2002-03. In reply to Mr CHAN's further enquiry as to whether there would be a deterioration in medical and health services as a result of the number of frontline staff of HA being cutback to meet the EPP targets, Dep S for Tsy said that that should not be the case as EPP was not about overall expenditure cuts or reduction in service or deterioration in standards or quality of the public service. She referred to her earlier comments about service rationalisation and said that in the case of HA, there was scope for scaling down the obstetrics services due to the fact that the overall birth rate in Hong Kong had dropped. This would provide considerable savings in resources and the staff would be re-deployed to other areas. Dep S for Tsy further said that the ways on how to achieve the EPP targets would rest entirely with the governing body of HA. Given that there would be an annual increase of 600-800 hospital beds in the next few years, it appeared that it would not be necessary for HA to redundant staff to achieve a 5% reduction in its baseline expenditure by 2002-03.

23. Mr CHAN Wing-chan also asked whether the 5% savings target could be relaxed for those departments, such as the Independent Commission Against Corruption, which had already undertaken efficiency drive well before EPP. In reply, Dep S for Tsy said that there was no dispute that some departments were more efficient than others and a uniform 5% target across the board might be seen as "rough justice". However, the Administration believed that a 5% reduction was achievable in all departments through process re-engineering, outsourcing, use of technology and service rationalisation. The Administration would look for bigger cost savings in those departments with greater scope for efficiency.

24. In reply to the Chairman's enquiry, Dep S for Tsy said that no bureaux, departments and agencies had indicated difficulties in adopting EPP. In fact, the Hong Kong Police Force, which was regarded by many to be a very efficient department, was very supportive of EPP. If the Police could achieve the 5% target, so could others. She pointed out, however, that a very small number of subvented bodies had asked for exemption from the application of EPP.

25. Mr LEE Kai-ming expressed concern that the 5% productivity gains taken away from departments instead of being kept in the departments' budget would discourage the departments concerned from striving for service improvement. He further said that if the Labour Department could keep the 5% productivity gains in their budget, the resources saved could be used to step up employment services to help those looking for jobs. In reply, Dep S for Tsy said that it was the Government's policy to allocate resources centrally. In view of the fact that the beneficial value of public services varied from department to department, it was necessary to require departments to return their productivity savings to the centre for re-allocation to new or improved services on a competitive basis, in order to best meet the community's aspirations. She further said that proposed incentive plans, such as allowing departments to keep savings in excess of the 5% productivity gains target and granting a one-off funding on any schemes which could prove to produce lasting improvement, which would encourage departments to improve their services were under consideration.

26. In reply to Mr Howard YOUNG's enquiry as to how the Administration could ensure that service quality would not be deteriorated as a result of EPP, Dep S for Tsy said that departments' performance was reported and monitored through targets and indicators in the Controlling Officers' Reports. The Legislative Council and the community could monitor whether there was any reduction in service quantity or deterioration in quality through those performance targets and indicators.

27. Mr LEE Cheuk-yan expressed concern that with the increased flexibility in resource management, organisations such as those of the HA would be proned to dismiss its frontline or junior staff to achieve the 5% productivity gains target. In reply, Dep S for Tsy said that there was no evidence that such a situation had occurred in HA. In fact, HA had been conducting a review to examine whether it was necessary for each hospital to have a separate senior management team. In order to achieve the 5% target, it was imperative that both the management and the supporting staff worked in tandem. SCS added that departments had been advised that they must fully consult their staff on the implementation of EPP through Departmental Consultative Committees.

28. In reply to Mr LEE's further enquiry as to whether providing non-government agencies with greater flexibility in human resources management would result in management hiring lower grade staff to perform duties normally carried out by staff of a higher grade, Dep S for Tsy said that the trend in public sector management was to move from rigid input control to secure output/outcome monitoring. In the latter, non-government bodies were bound by the service level agreement which laid down the standard of services they had to deliver and the people who were employed to deliver the services must meet certain professional standards and requirements. The Finance Bureau would monitor whether there was any irregularity in the employment of staff in the course of implementing EPP.

29. Mrs Sophie LEUNG asked whether under EPP, departments would be encouraged to put forward proposals to improve existing services or provide new services in order that savings achieved would be directed towards funding such proposals. She cited HA as an example. Since the establishment of HA, some hospitals had been able to achieve enhanced productivity of 8% and that new services implemented by HA represented some 40% of its services. She also asked whether some subvented organisations should be given a longer time to achieve the 5% productivity gains under EPP.

30. In reply, Dep S for Tsy reiterated that money saved would be re-invested to implement new services. She pointed out that despite the current economic downturn and before the 5% productivity gains target was achieved, the Government's estimated expenditure for the coming year would increase by 4%. The Government had considered the Member's suggested approach which was adopted by HA in its early year of efficiency drive. However, unlike HA which was a more homogenous body providing hospital services, different departments provided different services to the public. Both government departments and subvented organisations were required to achieve the 5% target within three years. The return of their productivity savings to the centre for re-allocation to new or improved services on a competitive basis would enable the Government to best meet the community's aspirations.

V. Policy on provision of passages and subsistence allowance for overseas duty visits by senior civil servants
(LC Paper No. CB(2) 902/98-99 (04) & (05)))

31. Referring to LC Paper No. CB(2) 902/98-99(04), Deputy Secretary for the Civil Service (Dep SCS) said that up to 30 June 1998, duty passages had to be purchased in accordance with an Air Passage Agreement which the Government had entered into with two airline companies. With effect from 1 July 1998, the Air Passage Agreement lapsed and new procurement arrangements came into force. The class of air passage for officers travelling by air on duty outside Hong Kong was last reviewed in 1992. Having regard to changing circumstances in airline practices, an overall review of the grading of duty passage and the regulations concerning upgrading and modification of passage arrangements was being conducted. Notwithstanding the review, the Civil Service Bureau had recently issued guidelines to departments to clarify that an officer might not upgrade his passages if he took leave prior to performing duty at the place of visit.

32. Mr LEE Cheuk-yan said that he saw no need for first class air passages to be provided to senior civil servants on overseas duty visits as there was little difference between first class and business class passages. In response, Dep SCS said that the provision of first class passage to senior civil servants travelling by air on duty outside Hong Kong was made with reference to practices in other governments. He pointed out that in some locations, particularly in the US where most of the domestic airlines did not have business class, provision must therefore be made for civil servants to travel first class. He further said that at the time when the existing grading of duty passages was last reviewed in 1992, business class was still a novelty and was not quite well established in all destinations. The overall review of duty passages currently being conducted would carefully consider whether it was still necessary to retain first class travel, having regard to the latest developments in airline practices.

33. Mr LEE referred to paragraph 9 of LC Paper No. CB(2) 902/98-99(04) and said that no details had been provided on the standard rates of subsistence allowance in different countries. He asked whether there were different standard rates of subsistence allowance for civil servants of different ranking. In response, Dep SCS confirmed that civil servants of different ranking would be entitled to different standard rates of subsistence allowance and undertook to provide members with more information on the standard rates of subsistence allowance in major overseas cities and countries.

34. In reply to the Chairman's enquiry, Dep SCS said that if hotel accommodation, meals, or transport within town were covered by sponsorship, the rates of subsistence allowance payable to civil servants would be reduced in accordance with the scale set out in paragraph 10 of LC Paper No. CB(2) 902/98-99(04).

35. Mr Howard YOUNG said that the upgrading of air passage on the basis of flying time was not scientific. He suggested that destinations in different time zones should be a factor in determining the upgrading of air passage. Dep SCS said that Mr YOUNG's views would be taken into account in the review of the grading of duty passage.

36. In response to Mr YOUNG's comments about taking due care in purchasing air tickets, Dep SCS said that the Government had strict guidelines on procurement of air tickets. Under the new procurement arrangements, departments were required to obtain at least two quotations from reputable travel agents for passages with a value not exceeding $20,000 and at least five quotations if the value was $20,000 or above. Departments were also advised to choose the offer which was the most cost effective and could best met their itinerary requirements.

37. Mrs Sophie LEUNG suggested that the Government should patronise airlines and hotels owned by Hong Kong firms when making arrangements for civil servants on overseas duty visits, particularly if the prices quoted by these firms were not higher than those quoted by foreign-owned firms. In response, Dep SCS said that cost saving was one of the reasons why the Government replaced the Air Passage Agreement with the procurement arrangements. Nevertheless, the Administration would consider Mrs LEUNG's proposal.

38. Mr CHAN Wing-chan asked why no disciplinary action had been taken against the Director of Social Welfare (DSW), despite the observations mentioned in paragraph 8 of LC Paper No. CB(2) 902/98-99(05). In response, Dep SCS said that as the Civil Service Regulations governing the upgrading of duty passages were not sufficiently clear, it was considered that there were insufficient grounds for disciplinary action to be taken against DSW. He added that guidelines had recently been issued to departments to clarify that an officer might not upgrade his passages if he took leave prior to performing duty at the place of visit.

39. In reply to Mr CHAN's further enquiry as to whether DSW had been given a verbal warning, SCS said that he had personally met with DSW to discuss the matter. DSW had accepted that it was not appropriate to upgrade the Hong Kong/London/Jerusalem trip to first class and had volunteered to refund Government the price differential.

40. The meeting ended at 12:47 pm.

Legislative Council Secretariat
15 January 1999