Chapter 12
Financial Procedure
12.1In common with legislative bodies in other jurisdictions, one of the primary functions of the Hong Kong Legislature is control of public expenditure. "Control" includes the process of examination, approval and monitoring. The powers and functions of the HKSAR Legislature in this respect are set out in Article 73(2) and (3) of the Basic Law, which cover the examination and approval of the budgets introduced by the government as well as approval of taxation and public expenditure. To understand how this primary function of the Legislature is carried out in a coherent manner within the structure of the Council and its committees, it is useful first to examine the conventions in the management of public finance which have been practised in Hong Kong in the last century and how these conventions have shaped the mechanism currently adopted in the management of public finance in the HKSAR, as reflected in the Basic Law, relevant legislation of Hong Kong and in the Rules of Procedure of the Legislature.
12.2This Chapter provides an overview of the philosophy and principles underlying the current financial system in the HKSAR, the financial procedure to provide checks and balances on the power of the government to spend public money and the role played by the legislature in scrutinizing, approving and monitoring the use of public funds. Details of the budget cycle and the role of the Finance Committee in approving changes to the approved Estimates of Expenditure are also explained.
12.3In this Chapter, there is also a general overview of the various stages in the implementation of capital works projects, with particular reference to the planning and approval mechanism involving the Legislative Council and the part played by committees of the Council to ensure the projects are planned according to the needs of the community and implemented according to the Council's approval, including any relevant conditions. In this respect, the different roles played by the Finance Committee, Public Accounts Committee, Panels and select committees undertaking inquiries on issues relating to the use of public funds are also explained. The detailed operation, practice and procedure of these committees will be further elaborated in Chapter 13.
The financial procedure
The respective roles of the government and the legislature under the Basic Law
12.4The financial procedure of the HKSAR follows the pre-1997 principle that proposals to incur public expenditure, to raise taxation and to impose charges upon people may only be initiated by the Government and approved by the legislature. This relationship between the government and the legislature is laid down in the Basic Law as follows:
(a)The government of the HKSAR shall exercise the power and function to draw up and introduce budgets and final accounts (Article 62(4)); and it shall obtain approval from the Legislative Council for taxation and public expenditure (Article 64);
(b)The Chief Executive of the HKSAR shall have the power and function to approve the introduction of motions regarding revenues or expenditure to the Legislative Council (Article 48(10));
(c)The Legislative Council shall exercise the power and functions to examine and approve budgets introduced by the government (Article 73(2)) and to approve taxation and public expenditure (Article 73(3));
(d)If the Legislative Council refuses to pass a budget introduced by the government, and if consensus still cannot be reached after consultations, the Chief Executive may dissolve the Legislative Council (Article 50);
(e)If the Legislative Council refuses to pass the budget introduced by the government, the Chief Executive may apply to the Legislative Council for provisional appropriations; and if such appropriation cannot be approved due to dissolution of the Legislative Council, the Chief Executive may, prior to the election of the new Legislative Council, approve provisional short-term appropriations according to the level of expenditure of the previous fiscal year (Article 51); and
(f)When, after the Legislative Council is dissolved because it refuses to pass a budget, the new Legislative Council still refuses to pass the original budget, the Chief Executive must resign (Article 52(3)).
The budget
12.5The financial procedure used in Hong Kong has existed for over 170 years since 1843 and has remained unchanged after the establishment of the HKSAR in 1997 under the "one country, two systems" principle. [1] The financial procedure is set out primarily in the Public Finance Ordinance (Cap. 2)[2], in the Legislative Council's Rules of Procedure and the Government's internal working mechanism in the management of public finance. This procedure, which shares many similarities with British public and parliamentary financial procedure [3], has undergone significant changes in past decades to enable the legislature to examine the detailed requirements presented by the government and to authorize the relevant expenditure set out in the estimates of expenditure through the passage of an Appropriation Bill, as well as approving the raising of taxation and imposition of charges upon the people through separate legislative proposals. It has been the convention that at the meeting where the Appropriation Bill is introduced into the Council, the Financial Secretary presents the "budget" which includes both the estimates of expenditure and revenue as well as new revenue proposals for the next financial year (from 1 April to 31 March in the following year).
Appropriations and supplementary appropriations
12.6Any bill containing the estimated financial requirements for expenditure on all the services of the Government of HKSAR for the current or succeeding financial year is known as an Appropriation Bill. [4] As explained in Chapter 6 [5], the Appropriation Bill seeks the Legislative Council's authorization of an appropriation from the general revenue account up to a specified amount for the services of the government in the upcoming financial year. The Bill is introduced into the Council for its approval before or as soon as practicable after the commencement of the financial year to which it relates. [6] According to Erskine May, appropriation was originally "a system of attributing sums advanced to particular services of the Government (i.e. showing what sums were appropriated to what services) for the purpose of establishing whether the estimates presented to Parliament were reflected in the eventual pattern of expenditure".[7] Hong Kong still maintains this system and has followed the same precepts of financial practice under this system, i.e. the amount appropriated for a particular service is a maximum amount and it cannot be used for another service unless with the authorization of the legislature or authorities with delegated powers.[8]
12.7The Public Finance Ordinance (Cap. 2) requires that the estimates of expenditure are to classify expenditure under heads and subheads with the ambit of each head described.[9] In respect of each head, the estimated total expenditure for all the programme areas listed under the head should be shown with provision sought in respect of each subhead, the establishment of posts and the limit to any non-recurrent commitments. [10]
12.8Where certain expenditure cannot be anticipated at the time when the Appropriation Bill for a financial year was approved by the Legislative Council, the financial system provides that the Finance Committee of the Legislative Council may, upon a proposal of the Financial Secretary, make changes to the approved estimates of expenditure during the financial year.[11] These changes include the approval of supplementary provision in approved or new subheads, variation in the establishments of posts [12] and increase in the limit to the commitments in capital items.[13] The Finance Committee may delegate to the Financial Secretary its power to approve changes subject to such conditions, exceptions and limitation as are specified in the delegation.[14] This delegated power may be further delegated to any public officer. [15] The power of the Finance Committee and the delegation of its power are set out in section 8 of the Public Finance Ordinance (Cap. 2).
12.9The expenditure resulting from the changes approved by the Finance Committee is charged to the general revenue account under the respective heads of expenditure. If at the close of account for any financial year, the expenditure charged to any head is in excess of the sum originally appropriated for that head by an Appropriation Ordinance, a Supplementary Appropriation Bill must be introduced into the Legislative Council as soon as practicable after the close of the financial year to which the excess expenditure relates.[16]
Revenue proposals
12.10The revenue of Hong Kong comes from various sources. Generally speaking, about 80% of the Government's revenue is operating revenue which comprises profits tax, stamp duty, salaries tax, rates, fees and charges, as well as excise duties collected on some commodity items. Profits tax alone brings about 28% of Government's total revenue. The remaining 20% is capital revenue such as land premium, loan repayment from funds, and recovery of land costs from the Hong Kong Housing Authority for flats sold under its Home Ownership Schemes. The actual revenue collected in the 2014-2015 financial year was $478.7 billion, with $393.9 billion from operating revenue (82.3%) and $84.7 billion from capital revenue (17.7%).[17]
12.11Under the Basic Law [18], the HKSAR shall follow the principle of keeping expenditure within the limits of revenues in drawing up its budget, and strive to achieve a fiscal balance, avoid deficits and keep the budget commensurate with the growth rate of its Gross Domestic Product. Following this principle, it has been the government's policy to develop the estimates of expenditure against the background of a medium-range forecast [19] to ensure that full regard is given to the longer-term trends in the economy. [20]
12.12Where it is anticipated that additional revenue needs to be raised having regard to the medium-range forecast, such revenue proposals are announced in the budget speech delivered by the Financial Secretary when he moves the motion for the second reading of the Appropriation Bill. Taxation proposals are put to the Legislative Council through enactment of laws. Where a revenue proposal is considered necessary to take immediate effect by the Government, it will be so brought into effect by way of an order made by the Chief Executive under section 2 of the Public Revenue Protection Ordinance (Cap. 120). As any revenue collection is subject to the Legislature's approval through enactment of a piece of relevant legislation, an order made under Cap. 120 will expire or cease to be in force under section 5(2) of the Ordinance upon rejection by the Legislative Council or withdrawal by the Government or expiry of 4 months from the day on which the order came into force, whichever of the above events first happens. Should such an event happen, any excess payment made under the order shall be repaid to the person who paid the same; or if the order has the effect of lowering any item of revenue and the order ceases to be in force and is not replaced, such item which was payable immediately before the relevant order came into force shall again become payable in full. [21]
Charges upon public revenue or upon public funds
12.13"Charges upon the revenue" or "upon public moneys" impose an obligation to make a payment out of public funds to cover an item of expenditure. [22] There may be proposals to the Council to impose such charges in the course of considering a new policy or a legislative proposal. To recognize that the financial initiative should rest with the government, there is a requirement in the Rules of Procedure (based on the pre-1997 Standing Orders) that any motion or amendment to a motion or to a bill, the object of which may, in the opinion of the President or Chairman of the committee of the whole Council, be to dispose of or charge any part of the revenue or other public moneys of Hong Kong shall be proposed only by the Chief Executive, a designated public officer, or a Member provided that the Chief Executive consents in writing to the proposal. [23]
Control of finances
12.14Under the Public Finance Ordinance (Cap. 2) the Financial Secretary is responsible for the management of the finances of the Government and the supervision, control and direction of all matters relating to the financial affairs of the Government. [24] Cap. 2 also provides that any moneys raised or received for the purposes of the Government form part of the general revenue except where otherwise provided by any ordinance or enactment. [25] Any refund to be made by the Government comes from the general revenue. [26] Cap. 2 also stipulates that the Director of Accounting Services is responsible for the compilation and supervision of the Government's accounts and for ensuring that all regulations, directions or instructions made or given under Cap. 2 are complied with. [27]
Controlling Officers
12.15In the estimates of expenditure presented to the Legislative Council, there are a number of Heads of Expenditure. [28] Each Head of Expenditure usually corresponds to a government bureau, a branch of a bureau or a department, [29] and is supported with a report by the respective controlling officer. The controlling officer designated for a Head of Expenditure is responsible and accountable for all expenditure from any subheads under the respective Head, and for all public moneys and Government property in respect of the department or service for which he is responsible. [30] Every controlling officer is required to obey all regulations made and directions or instructions given by the Financial Secretary under section 11 of the Public Finance Ordinance (Cap. 2) and, if so required, account to the Financial Secretary for the performance of his duties as controlling officer. [31] In the controlling officers' reports in the Estimates, the effectiveness or cost-effectiveness of the results from the resources proposed to be spent on a specific programme area is measured where possible in terms of unit costs or productivity indicators. [32]
12.16The provision of each Head of Expenditure is typically broken down into various expenditure components and standard subheads, such as Subhead 000 Operational expenses which covers all expenditure of a recurrent nature of a department, unless otherwise shown in separate subheads. Since April 1999, the financial provision under this subhead has been operated as a one-line vote, such that the controlling officer is given autonomy and flexibility in deploying the funds among various conventional subheads [33] within this Subhead 000. [34]
General Revenue Account
12.17The Government controls its finances through the General Revenue Account, which is the main account for the day-to-day departmental expenditure and revenue collection, and acts as the central funding device with resources transferred as appropriate to and from the 9 purpose-specific funds established under section 29 of the Public Finance Ordinance (Cap. 2) with the approval of the Legislative Council.[35] Upon the coming into operation of an Appropriation Ordinance or the making by the Legislative Council of a resolution under section 7 of Cap. 2 to authorize expenditure in advance of an Appropriation Ordinance, the Financial Secretary authorizes the Director of Accounting Services by general warrant or vote on account warrant respectively under his hand to pay from the General Revenue Account such sums as may be required to meet expenditure in accordance with the Ordinance or resolution. [36] Where the Finance Committee has made a change to the approved estimates of expenditure for a particular Head in accordance with section 8 of Cap. 2, the Financial Secretary shall authorize the Director of Accounting Services by supplementary warrant to pay from the general revenue such sum as is in excess of the sum appropriated for that Head by the Appropriation Ordinance for meeting the requirement arising from the change.[37] Every appropriation by the Legislative Council from the General Revenue Account for the service of any financial year and every warrant issued under the provisions of Cap. 2 shall lapse and cease to have effect at the close of that financial year. [38]
12.18The Financial Secretary may in his discretion authorize the investment of any deposit in such manner as he may determine, and any interest or dividend received in respect of any deposit so invested shall form part of the general revenue. [39]
Funds
12.19The Legislative Council may by resolution establish funds for specific purposes. Moneys appropriated for such funds or moneys received for such purposes as may be specified in the resolution may be credited into the relevant funds. The Financial Secretary may issue a funds warrant to incur expenditure for the purposes for which the funds were established subject to such conditions, exceptions and limitations as may be specified in the resolution.[40] The purpose-specific funds established are:
(a)the Capital Works Reserve Fund for financing the Government's public works programme and consequential equipment, development, purchase and installation of major systems and equipment, capital subventions, acquisition of land, etc.; [41]
(b)the Capital Investment Fund for financing loans, advances and investments (including investments by way of waived land premium, donated works or other benefits (other than cash)) to or in such persons as may be approved by the Finance Committee; [42]
(c)the Civil Service Pension Reserve Fund for meeting the liabilities for payment of pensions, gratuities or other allowances for civil servants and judges under the various relevant pension ordinances if the Financial Secretary believes that having taken into account all anticipated receipts and payments, the balance in the General Revenue Account will be in deficit at the end of that financial year; [43]
(d)the Disaster Relief Fund for providing aid in relief of disasters that occur outside Hong Kong; [44]
(e)the Innovation and Technology Fund for financing projects that contribute to the upgrading (including innovation and technology upgrading) and development in the manufacturing and service industries; [45]
(f)the Land Fund for receiving and holding all of the assets upon the establishment of the HKSAR Government transferred from the HKSAR Land Fund established by a Declaration of Trust of the HKSAR Government Land Fund Trust made on 13 August 1986 to the HKSAR Government; [46]
(g)the Loan Fund for assuming the liabilities of the Student Loan Fund, Development Loan Fund and other schemes under Part II of the Schedule to Cap. 2C;
(h)the Lotteries Fund administered by the Financial Secretary and invested in such securities as may be approved by him; [47] and
(i)the Bond Fund for repaying or, if appropriate, paying the principal of, interest on, and expenses incurred in relation to, any sums that have been borrowed under section 3 of the Loans Ordinance (Cap. 61) for the purposes of the Fund. [48]
12.20The total revenue and expenditure of the General Revenue Account and 8 of the above Funds (excluding the Bond Fund) represent government revenue and government expenditure, and the total balance makes up the Government's fiscal reserves.[49]
Fiscal reserves
12.21As it is required under Article 107 of the Basic Law that HKSAR's expenditure should be kept within the limits of revenues in the budget striving to achieve a fiscal balance, the level of fiscal reserves that the Government should maintain has been a subject of discussion in the Council. It has often been viewed by Members that the level of fiscal reserves that needs to be maintained has great bearing on the level of government expenditure proposed in the budget, hence affecting the extent of services that may be provided for the community in particular those in need of Government's support.
12.22Fiscal reserves are the total amount of resources that the Government may use to meet its day-to-day operational expenses and public works expenditure. It is the Government's cash balance. Since 1976, the bulk of the Government's fiscal reserves has been placed with the Exchange Fund [50] managed by the Hong Kong Monetary Authority to generate investment income. Since the establishment of the HKSAR, there have been changes in the policy of the Government over the level of fiscal reserves that should be maintained.
12.23The purposes of the fiscal reserves were explained in detail in the Budget Speech made by the then Financial Secretary, Mr Donald TSANG, when he presented the Appropriation Bill in the Provisional Legislative Council on 18 February 1998. [51] Mr TSANG stated that, in the light of the 1997-1998 Asian financial crisis, it would be necessary for the Government to hold substantial public funds in reserves for the following three purposes:
(a)the operating requirement to meet the cash flow requirement of the operation of the Government;
(b)the contingency requirement to reserve funds for the Government's unexpected and urgent uses; and
(c)the monetary requirement to maintain the stability in the exchange rate of the Hong Kong dollar.
12.24On the basis of the Government's assessment of the amounts of cash that needed to be maintained for each of the above purposes, the Financial Secretary stated that the level of fiscal reserves should stay between 15 months of government expenditure plus 125% of Hong Kong dollar supply under the M1 definition (i.e. the upper limit) and 9 months of government expenditure plus 75% of Hong Kong dollar money supply under the M1 definition (i.e. the lower limit). [52]
12.25In his Budget Speech on 6 March 2002, the then Financial Secretary Mr Antony LEUNG announced that in view of the accumulated surplus of the Exchange Fund at $300 billion, there was no further need to link the level of fiscal reserves to money supply. He considered that it should be sufficient to keep fiscal reserves at around 12 months of government expenditure to meet operation and contingency requirements.[53] Statistics show that the fiscal reserves dropped from 24 months of government expenditure in 1998-1999 to 16 months in 2002-2003.
12.26The target level of fiscal reserves was further adjusted in the Budget Speech on 5 March 2003. In the light of deficits and economic uncertainties, Mr Antony LEUNG, the then Financial Secretary, announced that in the next 5 years (from 2003-2004 to 2007-2008), HKSAR's fiscal reserves would be maintained at a level equivalent to 9 to 11 months of government expenditure. [54] The actual levels of fiscal reserves kept in these 5 years rose from 16 months in 2003-2004 to 25 months in 2007-2008.
12.27In the 2007 Budget Speech, the then Financial Secretary, Mr Henry TANG who took up office on 2 August 2003, stressed that there was no need for the reserves to keep expanding. The fiscal reserves should be maintained at an appropriate level with a view to providing adequate resources to meet the needs of the community. In view of the divided views on the target level, the Government would listen to the views of the community before making a decision. [55] Mr TANG's successor, Mr John TSANG who became Financial Secretary on 1 July 2007, emphasized the need for the budget to be drawn up based on the Medium Range Forecast and for adequate fiscal reserves to be maintained in the long run. The same criterion was used in the subsequent budgets for the years 2009-2010 and 2010-2011. At the briefing for Members at the meeting of the Finance Committee on 25 February 2010, the Financial Secretary stated that there was no need to prescribe a target level of fiscal reserves. His forecast of fiscal reserves for the next 5 years (i.e. up to 2014-2015) was a gradual decrease from 20 months of government expenditure to 18 months. [56]
12.28In his reply to a written question at the Council meeting of 4 December 2013, the Secretary for Financial Services and the Treasury advised that "in view of the multiple functions of fiscal reserves and uncertainties in the external economy, it serves little purpose to determine an 'appropriate level' of fiscal reserves". [57]
The Budget Cycle and related financial procedures
12.29As the Appropriation Bill containing the financial requirement for all services of the Government needs to be passed before or as soon as practicable after the commencement of the financial year to which it relates [58], an annual planning cycle has been adopted by the Government for drawing up the estimates of expenditure and revenue which will keep the Government's expenditure in line with Hong Kong's economic performance based on a Medium Range Forecast. This planning cycle has also undergone changes over the years but the fundamental steps in the process remain largely the same. The major changes in recent years include the adoption of the "envelope" approach [59] in 2002 and the allocation of additional resources mainly to designated initiatives in the Policy Address starting from 2014.[60]
Resource Allocation Exercise
12.30The budget cycle starts shortly after the passage of an Appropriation Bill, with an internal circular issued by the Financial Services and the Treasury Bureau to all policy bureaux and departments setting out the internal resource allocation procedures for the preparation of the estimates of expenditure for the coming financial year. The exercise covers both recurrent and capital expenditure. [61] In the meantime, Controlling Officers are required to conduct a review of their baseline expenditure as allocated under the approved Estimates of Expenditure and where possible, identify savings [62] and state how such savings are to be redeployed. All bids for recurrent, capital works and non-works capital expenditure are considered by the 'Star Chamber'[63] which makes reference to the projected expenditure ceiling derived from the Medium Range Forecast announced in the Financial Secretary's Budget Speech made that year.[64] The Resource Allocation Exercise for a financial year is usually completed between October and December.
Consultation on the budget
12.31Prior to 1999, there was a standing arrangement (since 1995) for the Financial Secretary to consult Legislative Council Members in the course of drawing up the budget. The consultation on expenditure proposals took place in June before the Star Chamber met to decide on new spending. Consultation on revenue proposals took place towards the last quarter of the year, by which time bureaux and Controlling Officers were about to submit the revenue estimates under their respective purview. This consultation timeframe had enabled the Financial Secretary to examine all relevant proposals at the appropriate junctures in the course of drawing up the budget for the next financial year.
12.32In 1999, in the wake of the Asia financial crises and its impact on public finances, the Financial Secretary decided to adopt a more integrated approach by seeking Members' views on both expenditure and revenue proposals in the same consultation exercise in October. This practice has continued up to the present. In parallel with the consultation with Members, the Government has consulted academics, experts, representatives of the business sector and local districts, and subsequently the general public, on the budget since 2003. [65] In October 2015, consultation with the public on the budget was carried out together with the consultation on the Policy Address. According to the Government, it was to enable more comprehensive discussion with the community.
Introduction of an Appropriation Bill to the Legislative Council
Contents of an Appropriation Bill
12.33An Appropriation Bill seeks to authorize the appropriation of a sum from the general revenue for the services of the Government in a financial year in a manner as set out in the schedule to the Bill. The Bill itself normally comprises only 2 clauses and a schedule. [66] In the schedule, the amounts of appropriation for all heads of expenditure are individually set out. Details of the appropriation for each head are provided in the Estimates of Expenditure which is published at the same time as the Appropriation Bill but is not part of the Bill.
Approval for presentation to the Legislative Council
12.34By January/February of each year, the Financial Secretary should have finalized the Estimates of Expenditure and revenue proposals for the coming financial year. Under Article 48(10) of the Basic Law, the introduction of motions regarding revenues or expenditure to the Legislative Council requires the approval of the Chief Executive. The Chief Executive, on the other hand, also needs to consult the Executive Council under Article 56 before introducing bills including the Appropriation Bill to the Legislative Council. It is a long-standing convention that a meeting of the Executive Council is held to endorse the introduction of the Appropriation Bill in the same morning shortly before the Financial Secretary presents the Bill to the Legislative Council and delivers his budget speech.
12.35By convention, the Appropriation Bill is presented to the Council in February and is expected to be enacted before or shortly after the commencement of the next financial year on 1 April. While there is little change in the timing for the introduction of the Appropriation Bill, completion of the proceedings on the Bill is becoming less likely to be before the commencement of the next financial year. This is explained in the latter part of this Chapter.
Historical background on the tabling of the Estimates of Expenditure
12.36Under Rule 67(1) of the Rules of Procedure, estimates containing the details of the financial requirements for expenditure on all the services of the Government for the current or succeeding financial year shall be presented to the Council not later than the commencement of the meeting at which the Appropriation Bill is placed on the Agenda of the Council for first reading. The current practice which started in 2002 is to provide the estimates of expenditure for Members of the Council at the start of the meeting at which the Appropriation Bill is presented and immediately before the Financial Secretary rises to deliver the budget speech.
12.37To understand why certain procedural arrangements exist in the legislative process of the Appropriation Bill but not in other bills it is necessary briefly to examine the historical development of the method of presentation of Appropriation Bills to the Legislative Council for approval. The financial procedure in Part L of the Rules of Procedure of the HKSAR Legislative Council first appeared in the 1968 Standing Orders of the pre-1997 Legislature. Before 1969, the Appropriation Bill was introduced to the Legislative Council through various means depending on what the then Government considered suitable at the time. For many decades before 1956, the budget exercise commenced with an address in Council by the Governor [67] in early March on the global economic development, Hong Kong's economic performance and financial needs, followed by the introduction of an Appropriation Bill by the Financial Secretary, giving an account of his revenue and expenditure proposals according to the heads in the Draft Estimates of Revenue and Expenditure which were tabled at the same Council sitting. The Draft Estimates were referred to a select committee which was chaired by the Colonial Secretary and composed of the Financial Secretary and all Unofficial Members. At the next sitting (which took place about 2 weeks later), the select committee tabled its report. The Financial Secretary moved the motion for the second reading of the Bill and a debate took place, during which reference was made to the report of the select committee in which proposals to amend the Bill might have been recommended. There then followed committee stage and third reading.
12.38In 1956, a new procedure was adopted. Following an address made by the Governor, a resolution was moved to refer the Draft Estimates of Revenue and Expenditure to a select committee. At the next Council sitting which was held about 2 to 3 weeks later, usually shortly before the end of March, the report of the select committee was tabled and a resolution was proposed to adopt the report. A debate then took place on the motion. The debate could cover all aspects of the Governor's address and the revenue and expenditure proposals in the Draft Estimates. The debate could last for 2 to 4 sitting days and upon approval of the resolution the Appropriation Bill was read for the first time with all remaining proceedings of the 3-reading process completed at the same sitting. This procedure was followed for over a decade.
12.39In February 1969, following a major review of the Standing Orders in 1968, the Council followed the financial procedure set out in those Standing Orders. The Governor, for the last time, addressed the Council on the budget and notified Members that his Address in future would take place at the start of a new session in October. The Financial Secretary, who moved the motion for the second reading of the Appropriation Bill at the same sitting, said in his speech [68].
"Under our previous budget procedure, I would be moving today that the Estimates of Revenue and Expenditure be referred to a Select Committee, the budget debate would then be held on the report of the Select Committee and the Appropriation Bill would be rapidly passed through all its stages on the last day of the session. Our new Standing Orders introduce a rather more parliamentary procedure. We begin today with the Appropriation Bill, my motion today relates to its second reading and the main debate will be on this motion and, by virtue of Standing Order 54(2), should strictly speaking be "confined to the financial and economic state of the Colony and the general principles of Government policy and administration as indicated by the bill and Estimates". At the same time the Estimates having been already referred by Your Excellency to Finance Committee, Finance Committee's report will be tabled prior to the committee stage of the bill, and at the committee stage the various heads of expenditure will be taken separately, as for clauses of a bill, and there will be opportunity for further debate in detail on these separate heads as they are taken. One of the incidental effects of the new procedure is that it is necessary to publish the Appropriation Bill, with its details of proposed expenditure under each head, the week before. This is normal procedure elsewhere and does not infringe the secrecy of the Budget which relates to tax proposals, and not to the expenditure estimates."
12.40According to this financial procedure [69], the Appropriation Bill and the Estimates of Expenditure were presented to the Council at the same time, though in practice the Bill and Estimates were published in the gazette on the Friday before the sitting at which the Financial Secretary moved the motion for the second reading of the Bill in Council. After the Financial Secretary's Budget Speech, the second reading debate on the Bill was adjourned, and the Estimates were referred by the President to the Finance Committee for examination. The completion date of all proceedings on the Appropriation Bill was targeted for the end of March. In 1990-1991, this arrangement was formalized and the relevant Standing Order was amended accordingly. The revised financial procedure was adopted by the Provisional Legislative Council and the First Legislative Council in their Rules of Procedure. It had also been a practice for the then Secretary for the Treasury to brief the Finance Committee on the expenditure part of the Budget on the day when the Estimates were gazetted, i.e. on the Friday before the first reading of the Appropriation Bill. This procedure was reflected in the Finance Committee Procedure determined by the Finance Committee in 1994 and adopted by the Finance Committee of the First Legislative Council.[70]
12.41In 2002, the Government noted Members' comments that the practice mentioned above was less than ideal and responded by deciding to test out a new arrangement. In order that Members and the public could consider the Estimates of Expenditure alongside other essential information which was only available in the Budget, the Government considered it more helpful to gazette the Appropriation Bill on the day the Financial Secretary announced his Budget. Copies of the Estimates and other Budget-related documents would also be distributed to Members on the same day. The briefing for the Finance Committee on the Budget and the Estimates would be conducted by the Financial Secretary and the Secretary for Financial Services and the Treasury on the following day, followed by a series of special meetings a few weeks later to examine the details of the Estimates before the Council resumed to deal with the remaining proceedings on the Bill. [71]
Schedule of Budget meetings
12.42The schedule of Budget meetings in the Council is determined before the start of a new session. By convention [72], there are three Budget meetings to deal with an Appropriation Bill:
(a)1st Budget meeting for the Financial Secretary to present the Appropriation Bill and to deliver his Budget Speech when moving the motion for the second reading of the Bill;
(b)2nd Budget meeting for Members to speak at the resumption of the second reading debate on the Appropriation Bill; and
(c)3rd Budget meeting for completing the remaining stages on the Bill, including public officers to respond to the speeches made by Members, the Financial Secretary to make his reply and for the Council to vote on the second reading of the Bill, for the committee of the whole Council to deal with all proposed amendments to the Bill and vote on clauses and schedule(s) standing part of the Bill, and for the Council to vote on the third reading of the Bill.
12.43Prior to 1996, it was the convention to complete all proceedings of the Appropriation Bill before the commencement of the financial year to which the Bill related. In 1996, the 3rd Budget meeting was scheduled for the first time to be held in April. Since then, the three Budget meetings were scheduled in such a way that they spanned over a period of 5 to 7 weeks, usually from end of February or early March up to but not later than end of April.
12.44By 2007-2008, to facilitate Members to have more time to raise written questions on the Estimates and Controlling Officers to forward their written replies before the special meetings of the Finance Committee, a longer time gap was provided between the 1st and 2nd Budget meeting. As a result, from 2007 onwards, the 3rd Budget meeting has been scheduled to be held about 2 months after the 1st Budget meeting.
12.45In 2013, to dispose of 710 Committee stage amendments admitted to the Appropriation Bill 2013, the proceedings on the second reading debate, Committee stage and third reading of the Bill lasted for a total of 121 hours with the Bill finally being passed on 21 May 2013[73] after President Jasper TSANG ordered the setting of a timeframe to complete the remaining proceedings of the Bill before the meeting of 22 May 2013. See Appendix 8-B. For the Appropriation Bill 2014, the number of proposed amendments to the Bill was increased to 1 917 of which 1 192 were subsequently admitted by the President for consideration under 5 joint debates.[74] The 1st joint debate alone continued for 45 hours until the President finally ordered on 21 May 2014 that the remaining proceedings were to be completed on the first day of the meeting of 4 June 2014. See Appendix 8-C. It took a total of 148 hours to complete all the proceedings on the Bill before it was read for the third time on 4 June 2014.
12.46In 2015, the number of proposed amendments to the Appropriation Bill 2015 surged to 3 904, of which 618 were ruled admissible. The second reading debate on the Bill was resumed on 15 April 2015 and lasted for 19 hours. It took another 101 hours to complete the committee stage of the Bill. The Bill received its third reading on 28 May 2015.
Examination of the Estimates by the Finance Committee
12.47The Estimates (comprising Volumes I and II) contain the details of the financial requirements for expenditure on all the services of the Government sought under an Appropriation Bill. Volume I provides an analysis of the General Revenue Account including the controlling officers' reports, details of expenditure by subheads and commitments under each head of Expenditure. Volume II provides the statutory background, purposes and details of the 9 purpose-specific funds. In accordance with Rule 71(11) of the Rules of Procedure, the Estimates may be referred by the President to the Finance Committee for their examination before the Bill is considered in committee of the whole Council. The purpose of the examination is to ensure that the provision sought is no more than is necessary for the execution of approved policies.[75] It has been a practice that the President's referral will be made and a special meeting of the Finance Committee is held on the day immediately after the delivery of the Budget Speech. Both the Financial Secretary and the Secretary for Financial Services and the Treasury are invited to the special meeting to brief members on the general aspects of economic forecast, policy on fiscal reserves and to respond to general questions on the revenue and expenditure proposals in the Budget. The detailed examination of the Estimates of Expenditure takes place at a series of special meetings of the Finance Committee which are usually held about 3 to 4 weeks after the introduction of the Bill.
Written questions prior to special meetings
12.48Prior to the special meetings, Members are invited to submit written questions on the Estimates before a deadline set by the chairman of the Finance Committee. Controlling Officers are expected to provide written replies to those questions to the Finance Committee before the special meetings held by the Committee for the examination of the estimates. All written questions should be directly related to the Estimates and raised for the purpose of examining the appropriateness of the provision under each head or subhead in the Estimates. Members may raise questions on the amount of the provision requested, justification for such a provision, key performance targets, etc. The questions are vetted by the chairman of the Finance Committee according to the guidelines set out in Appendix 12-A, and forwarded to the Government for written replies. Questions which are not directly related to the draft Estimates may still be referred to the Administration for reply by letter outside the context of the draft Estimates exercise. [76]
12.49The submission of written questions on the Estimates was formalized in the consideration of the Appropriation Bill 2001. At that time, the Government for the first time agreed that it would handle with priority 1 200 written questions on a first-come-first-served basis, which in its view was the optimum level manageable for providing written replies in both the Chinese and English languages before the deadline for written replies (one day before the relevant sessions of the special meetings to be held in a week's time). With the extension of the period for the asking and answering of written questions to about 3 weeks in 2015, the quota for written questions with priority was raised to 3 300. [77] Questions received after the deadline will not be forwarded to the Government for replies, but Members may forward such questions to the Clerk to the Finance Committee as supplementary questions during the special meetings for the Government to provide written replies before the 3rd Budget meeting. [78]
Schedule of special meetings
12.50The Finance Committee holds 8 half-day special meetings to examine the Estimates of Expenditure normally over 5 days (with 3 full days and 2 half days). Each meeting is made up of a number of sessions respectively scheduled for dedicated policy areas. Although the number of special meetings has remained constant over the years, the number of sessions has increased from 18 in 2001 to 20 since 2007 and 21 in 2015 with the creation of the Innovation and Technology Bureau, and the duration of each session has also been lengthened to provide more time for discussion. These meetings are open to the public. Directors of Bureaux and Controlling Officers without a Director of Bureaux are invited to attend sessions dedicated to their policy portfolios. Each Director of Bureau or Controlling Officer may bring along any public officers who are in the best position to assist in responding to questions on the Estimates in relation to the heads and subheads under his or her portfolio.
12.51At the start of each session, the Director of Bureaux responsible for the relevant policy area may make a short introductory speech to highlight the Bureau's priorities for the year ahead and the provisions being sought. Members may ask questions on points made in that speech, the written replies to members' initial questions and the Estimates of Expenditure. The presence of a quorum is required at the start of each meeting, i.e. the chairman and 8 other members, within 15 minutes after the time appointed for the meeting.[79] Members are only summoned if the attention of the chairman is drawn to the lack of a quorum. If after 15 minutes have expired and a quorum is still not present, the chairman must adjourn the meeting. [80]
12.52A report of the special meetings containing minutes of the proceedings and key points of the questions and answers raised at the meetings will be printed in both the Chinese and English languages for tabling at the Legislative Council after the special meetings. [81]
Debate on the second reading of the Appropriation Bill
12.53According to Rule 67(2) of the Rules of Procedure, the second reading debate on the Appropriation Bill is confined to the financial and economic state of Hong Kong and the general principles of Government policy and administration as indicated by the Bill and Estimates. As the Financial Secretary announces the revenue proposals in his speech for moving the motion for the second reading of the Bill, the President normally allows Members to speak on matters which are related to these proposals. Each Member may only speak once in the debate.
Procedure in the committee of the whole Council
12.54In the Appropriation Bill, the estimate for each Head of Expenditure and the amount to be transferred to each fund are set out in the Schedule. During committee stage, consideration of the clauses of the Bill is postponed until after the Schedule has been considered.[82] The Chairman of the committee of the whole Council shall propose "That the sums for the following heads stand part of the schedule" and direct the Clerk to call the numbers of the Heads. When the number or numbers of any Head or group of Heads are called, the question that the sums in that Head or group of Heads stand part of the schedule is deemed to have been moved. [83] A debate will then take place unless an amendment is allowed to be moved by the Chairman under Rule 69 of the Rules of Procedure. After the amendment or amendments to a head or group of heads are moved, the committee of the whole Council will debate each of the amendments or hold a joint debate on the original estimate and the amendments.
Amendment to heads of expenditure in the Estimates
12.55Following the principle that financial initiative should rest with the Government, any amendment which, in the opinion of the Chairman, would increase the sum allotted to any head of expenditure shall only be moved by a designated public officer. [84] Such an amendment, whether in respect of any item or subhead or in respect of the head itself, will take precedence over an amendment to reduce the head in the same respect. If the amendment to increase the sum allotted to a head is carried, no amendment to reduce the head or any item or subhead of the same head shall be moved.[85] Any amendment to increase expenditure tabled by a Member not being a designated public officer, is out of order and inadmissible.
12.56As regards amendments to reduce the sum allotted to a head of expenditure, a specified form is provided in Rule 69(3) of the Rules of Procedure for the motion, which is "That head ….. be reduced by $ ….. in respect of (or by leaving out) subhead ….. item …..". In proposing the amendments, the following rules shall apply:
(a)It is out of order to propose an amendment to leave out a head; [86]
(b)Where a head is not divided into subheads, it is in order to propose an amendment to reduce a head without reference to a subhead; [87] and
(c)Where a subhead is not itemized, it is in order to propose an amendment to reduce a head in respect of the subhead or by leaving out the subhead. [88]
12.57The order of the amendments in respect of the items and subheads of a head on the Agenda of the Council will follow the order in which the items or subheads stand under that head in the Estimates.[89] If two or more amendments are to be proposed to reduce the same item, subhead or head, such amendments must be placed on the Agenda in the order of the magnitude of the reductions proposed, the amendment proposing the largest reduction being placed first in each case. [90]
12.58After an amendment to an item or subhead has been disposed of no amendment or debate on a previous item or subhead shall be permitted. [91]
12.59When all amendments in respect of any particular Head of Expenditure have been disposed of, the Chairman shall again propose the question "That the sum for head ….. stand part of the schedule", or if any amendment has been carried, propose the amended question "That the (increased or reduced) sum for head …. stand part of the schedule". [92]
12.60When all the Heads in a schedule have been disposed of, the Chairman shall put forthwith, without amendment or debate, the question "That the schedule (as amended) stand part of the bill." [93] When every schedule has been disposed of, the Chairman shall propose "That the following clauses stand part of the bill" and direct the Clerk to call the numbers of the clauses. On the calling of the number of a clause, the question that the clause stands part of the bill shall be deemed to have been proposed. The same procedure also applies to a clause being amended.[94]
12.61No clause of an Appropriation Bill may be amended except by a designated public officer consequent on an alteration in the total sum appropriated by any schedule. Such an amendment may be moved without notice, and the question thereon shall be put forthwith without amendment or debate. When the question on the last of any such amendments to a clause has been decided, the Chairman shall put the question "That the clause as amended stand part of the bill" and that question shall then be decided without amendment or debate. [95] When every clause has been dealt with, the Council resumes and a Member shall report the Bill to the Council with or without amendment, as the case may be. [96]
Contents of debates at Committee Stage
12.62As for contents of debate at Committee stage, the debates on the original question and the question after amendments have been disposed of are subject to the same limitations as specified in Rule 68(3) of the Rules of Procedure, i.e. any such debate shall be confined to the policy of the service for which the money is to be provided and shall not deal with the details of any item or subhead but may refer to the details of revenue or funds for which that service is responsible. [97] Debate on every amendment shall be confined to the item, subhead, or head to which the amendment refers. [98]
Third reading of the Appropriation Bill
12.63No debate shall be held on the motion for the third reading of the Appropriation Bill, which is also not subject to any amendment.[99] In recent years, the President has adopted the practice of allowing Members to speak on whether they support the Bill in its entirety in the debate on clauses standing part of the Bill before the Council proceeds to the third reading of the Bill.
Procedure relating to refusal to pass the budget
12.64It has been mentioned in Chapter 5 [100] that Rule 51 of the Rules of Procedure was amended by the First Legislative Council in June 2000 to provide for an arrangement to implement Article 50 of the Basic Law. Article 50 states that if the Legislative Council refuses to pass a budget introduced by the government, and if consensus still cannot be reached after consultations, the Chief Executive may dissolve the Council. In considering a procedure to enable consensus to be reached in the process of consultations after an Appropriation Bill has been rejected, the Committee on Rules of Procedure recommended that the Council should allow another Appropriation Bill to be introduced to the Council within the same session. This would provide another opportunity for the Government to consider presenting a bill which is more acceptable to the Legislature and for the Legislature to reconsider if the Appropriation Bill, whether revised or not, should be passed before the Chief Executive proceeds to dissolve the Council. This arrangement is now reflected in Rule 51(7A) of the Rules of Procedure.[101]
12.65In the event that no Appropriation Bill is passed, Article 51 provides that the Chief Executive may apply to the Legislative Council for provisional appropriations. The procedure for the moving of a Vote on Account Resolution under section 7(1) of the Public Finance Ordinance (Cap. 2), as described below, may deal with this situation. It is only in the case when the Legislative Council has been dissolved that the Chief Executive would have to approve provisional short-term appropriations according to the level of expenditure of the previous fiscal year. If the original Appropriation Bill is re-submitted to the new Legislative Council and the new Council still refuses to pass the Bill, the Chief Executive must resign.[102]
Vote on Account Resolution
12.66To ensure that the Government is given the legal authority to incur expenditure during the period from the start of the financial year to the enactment of the Appropriation Ordinance, section 7(1) of the Public Finance Ordinance (Cap. 2) provides that a resolution may be made by the Council to make such authorization subject to such limitations and conditions as may be specified in the resolution. As mentioned in Chapter 6 [103], this Vote on Account Resolution is usually moved after the tabling of the Estimates of Expenditure and before the start of the financial year to which the Estimates relates. No maximum provision has been stipulated in the Public Finance Ordinance in respect of the expenditure to be charged on the general revenue provided that the expenditure is charged in accordance with heads and subheads shown in the Estimates as though they were the approved Estimates, subject to such conditions and limitations as may be specified in the resolution.[104]
12.67In February 2008, a subcommittee under the House Committee was formed to study a proposed Vote on Account Resolution to seek authorization for the Government to incur expenditure up to 20% of the recurrent expenditure account and not more than 100% of the capital account shown in the Estimates for 2008-2009. The Subcommittee noted that the arrangement adopted in Hong Kong were different from those in other jurisdictions as the amount sought was based on the "Draft" Estimates instead of the "Approved" estimates as in the case of other jurisdictions. Hence the proposed Vote on Account Resolution could only be moved after the Estimates for the next financial year were published and the notice period for the proposed Resolution had been reduced to 7 days, with limited time given to the Legislature for scrutiny. There was also the question concerning the need for seeking 100% of all capital expenditure shown in the Estimates. In its report, the Subcommittee put forward a series of recommendations to improve the arrangement. [105]
12.68In February 2009, another subcommittee was formed to study a proposed Vote on Account Resolution for the 2009-2010 financial year. The subcommittee noted that in the light of the recommendations made by the previous Subcommittee, some improvements had been made, including the giving of 14 days' notice instead of 7 days for the Resolution and the lowering of the amounts sought under capital expenditure. [106]
12.69Prior to 2009, there had been an understanding among Members that should a subcommittee be formed to study a Vote on Account Resolution, the House Committee would not require the notice to be withdrawn so that the Resolution would be able to be considered by the Council before the start of the next financial year. [107] With the giving of a longer notice for the Vote on Account Resolution in 2009, the Government was requested to withdraw the notice when House Committee decided to form a subcommittee to study the proposed Resolution. As the Vote on Account Resolution is to seek authorization for the Government to incur expenditure in the next financial year prior to the passage of the Appropriation Bill, the Resolution has to be passed before the end of the current financial year.
Procedure relating to changes to the approved estimates
12.70As mentioned in paragraph 12.8 above, under section 8(1) of the Public Finance Ordinance (Cap. 2), changes to the approved estimates of expenditure shall only be proposed by the Financial Secretary for the approval of the Finance Committee.
Role of the Finance Committee
12.71The Finance Committee comprises all Members other than the President. [108] Its functions are those conferred upon it under the Public Finance Ordinance (Cap. 2), any other law, the Rules of Procedure of the Legislative Council and those from time to time conferred on it by the Council. [109] Apart from examining the Estimates of Expenditure referred to it by the President in accordance with Rule 71(11) of the Rules of Procedure, the Finance Committee also has the function to approve proposals to change the approved Estimates of Expenditure presented by the Financial Secretary in accordance with section 8(1) of Cap. 2.[110] Such proposals include:
(a)the creation of new heads or subheads [111];
(b)supplementary provision in approved or new subheads [112];
(c)variations in the establishments of posts [113]; and
(d)increases in the limit to the commitments which may be entered into in respect of expenditure which is not annually recurrent [114].
12.72In addition to the above, various resolutions made by the Council under the Public Finance Ordinance (Cap. 2) have also stipulated certain circumstances where approval of the Finance Committee is required. For example, in accordance with paragraph (e) of the resolution for the establishment of the Disaster Relief Fund (Cap. 2L), the Finance Committee may amend the limit in respect of which the Financial Secretary is required to obtain its consent. Pursuant to this provision, in its submission FCR(2013-14)3 to the Finance Committee on 24 April 2013, the Administration sought the Committee's approval to delegate to the Financial Secretary the authority to make grants each in excess of $8 million for the purpose of providing emergency relief to earthquake victims in Sichuan Province in the Mainland. The proposal was approved.
12.73According to section (c) under paragraph 4 of the resolution passed by the Provisional Legislative Council in December 1997 on the administration of the Capital Works Reserve Fund (Cap. 2A), the Financial Secretary may expend moneys from the Fund for a number of purposes "in accordance with such conditions, exceptions and limitations as may be specified by the Finance Committee". Proposals to expend moneys from the Capital Works Reserve Fund are submitted from time to time to the Finance Committee for its approval. Such expenditure items are approved on a project-by-project basis. The resolution enables the Finance Committee to stipulate any conditions, exceptions and limitations it considers appropriate on any of the proposals. [115] On 9 March 1983, the Finance Committee approved the proposal to delegate powers to the Financial Secretary to approve Category D projects in the Public Works Programme with a project estimate not exceeding $1.5 million each. The financial ceiling has been revised by the Finance Committee on a number of occasions and the latest was the approval to raise the ceiling to $30 million on 13 July 2012 to preserve the real value of delegated authority. [116]
12.74Paragraph 5 of the resolution for the establishment of the Capital Investment Fund (Cap. 2B) also provides that the Financial Secretary may expend moneys from the Fund for the purpose of –
(a)meeting the liabilities assumed under paragraph 4 (i.e. liabilities of the Mass Transit Fund, Development Loan Fund and the promissory notes issued to the Asian Development Bank for share subscription) under terms and conditions already approved by the Finance Committee as at 31 March 1990;
(b)financing loans, advances and investments to or in such persons as may be approved by the Finance Committee, in accordance with such terms and conditions as may be specified by the Finance Committee [117]; or
(c)repaying or, where appropriate, paying the principal and interest of and expenses incurred in relation to sums borrowed under section 3 of the Loans Ordinance (Cap. 61) where the sums have been credited to the Fund.
12.75Similar provisions have also been made in the resolutions for the establishment of the Loan Fund (Cap. 2C) and the Innovation and Technology Fund (Cap. 2Q) regarding the need for Finance Committee's approval by way of specifying terms and conditions in respect of proposals to expend moneys from the respective Funds.
Finance Committee Agenda Items
12.76For proposals to be considered by the Finance Committee, a public officer designated by the Government under Rule 9(2) of the Rules of Procedure or any member may give notice to the Clerk for an item of business to be included in the agenda of the Committee. These designated public officers include the Financial Secretary, the Secretary for Financial Services and the Treasury, the Permanent Secretary for Financial Services and the Treasury (Treasury) or a Deputy Secretary for Financial Secretary and the Treasury (Treasury). [118] The notice should be given at least 6 clear days before the meeting concerned. [119] The discussion papers in relation to the agenda items should be dispatched to members at least 5 clear days before the meeting unless, on grounds of urgency, the chairman directs otherwise. [120]
Motions to impose conditions, exceptions or limitations
12.77The motions mentioned in Paragraph 21 of the Finance Committee Procedure may include motions to amend procedures of the Committee and/or its subcommittees, and motions to impose conditions, exceptions or limitations on the Financial Secretary's power delegated to him under section 8(3) of the Public Finance Ordinance (Cap. 2) or to specify terms and conditions in respect of expenditure proposals under the relevant resolutions that established the various funds under section 29 of Cap. 2. During a review of the Finance Committee Procedure in 2007-2008, it was considered that for those motions which were dependent on other agenda items of the same meeting, e.g. a motion to impose conditions in respect of a Capital Works Reserve Fund item on the agenda of a meeting of the Finance Committee, it would not be likely that a notice of 6 clear days for the motion could be given. The Finance Committee therefore amended Paragraph 21 of the Finance Committee Procedure at its meeting on 2 November 2007 to provide a shorter notice to cater for these circumstances, i.e. not less than 2 clear days before the meeting to consider the proposed conditions, exceptions or limitations.
12.78As regards the proceedings in dealing with motions, Paragraph 37 of the Finance Committee Procedure provides that subject to the decisions of the Committee made from time to time, Rules 29 to 35 of the Rules of Procedure shall apply, with necessary modifications considered appropriate by the chairman. These Rules cover the manner in giving notice of motions and amendments, restrictions, motions on previous decisions, manner in debating motions and amendments and withdrawal of motions and amendments. Among the restrictions on motions and amendments is the requirement to obtain consent from the Chief Executive for motions or amendments which will give rise to a charging effect.[121] Details about charging effect are given in Chapter 10. [122]
Role of subcommittees of the Finance Committee
12.79The Finance Committee may appoint subcommittees for the purpose of assisting the Committee in the performance of its functions.[123] The practice and procedure of the subcommittees are determined by the Finance Committee, and are subject to the Rules of Procedure. There are two subcommittees appointed by the Finance Committee: the Establishment Subcommittee and the Public Works Subcommittee. These two Subcommittees existed in the pre-1997 Legislature. They assisted the Finance Committee in examining specific types of proposals and making recommendations to the Finance Committee for its approval. They had no independent functions or powers.[124] The Finance Committee of the First Legislative Council adopted the same working mechanism as existed in the pre-1997 Legislature and appointed the same two Subcommittees. Any member of the Finance Committee may elect to join either or both of the subcommittees by submission of a return to the Legislative Council Secretariat before a specified deadline at the commencement of a session.[125]
Establishment Subcommittee
12.80The Establishment Subcommittee deals with requests for variations in the establishment of the civil service. An establishment ceiling is specified in the first paragraph of each Controlling Officer's Report in the Estimates. It is expressed in terms of a notional annual mid-point salary value, calculated on the basis of pay scales in force on 30 January of the year in which the Estimates are submitted.[126] Any variations to the establishment ceiling require the approval of the Finance Committee. The role of the Establishment Subcommittee is to examine any such proposed variations and to put forward its recommendation to the Finance Committee on whether the proposals should be approved. These proposals also include changes to the organizational structure of a department and changes to the civil service ranks and grades. Creation of supernumerary posts held against permanent posts in ranks with a lower notional annual mid-point salary value is also examined by the Establishment Subcommittee.
12.81The current terms of reference of the Establishment Subcommittee also include the examination of submissions relating to permanent and supernumerary posts remunerated at the directorate pay scales. The establishment of directorate officers, including existing and new posts to be created under a head of expenditure, is specified in the Controlling Officer's Report in the Estimates. Any creation, redeployment and deletion of directorate posts as well as retention of supernumerary directorate posts are also considered by the Establishment Subcommittee before the proposals are submitted to the Finance Committee for approval. In July 1997 the scope of posts to be examined by the Subcommittee was extended to cover the creation of individual consultancy positions at directorate level lasting more than one year.[127]
Public Works Subcommittee
12.82The Public Works Subcommittee examines public works expenditure proposals. Its terms of reference are to recommend to the Finance Committee the upgrading of projects to or downgrading from Category A of the Public Works Programme, approval of new commitments for capital subvention works projects under Head 708 [128] of the Capital Works Reserve Fund and changes to the scope and/or approved project estimates of these projects. Any proposals which have been approved to be upgraded to Category A of the Public Works Programme will be included as public works projects under the Capital Works Reserve Fund. Notwithstanding the amount of project estimate approved by the Finance Committee, the fund that is to be included in the Capital Works Reserve Fund for a project for the next financial year is determined in accordance with the projected cash flow and the actual progress of works completed. The total amounts of the funding for all the projects are included as part of Head 184 in the Schedule of the Appropriation Bill "Transfer to Funds" (which covers the total sum to be transferred from the General Revenue Account to the various funds).
Capital Works Reserve Fund
12.83The Capital Works Reserve Fund (Cap. 2A) was established with effect from 1 April 1982 by resolution of the Legislative Council made on 20 January 1982 for the purpose of financing the Public Works Programme and the acquisition of land. Amendments have been made to the Resolution on various occasions, each replacing the previous one, in subsequent years. These amendments include that passed on 15 May 1985 to give effect to arrangements, i.e. the sharing of premium, for implementing paragraph 6 of Annex III to the Joint Declaration of the Government of the UK and the Government of the PRC signed in December 1984.[129] These provisions became obsolete following the reunification on 1 July 1997 and the Resolution was amended on 17 December 1997 to take effect on 1 January 1998. In accordance with the terms of the Resolution, all revenue from land transactions has been paid into the Fund from this date onwards.
Capital Works Programme
12.84Capital Works Programme comprises the Public Works Programme under Heads 702 to 707, Head 709 and Head 711 and capital subvention works projects under Head 708. Projects under Head 708 include school buildings for the aided sector and private schools, university teaching and research facilities, public hospitals, and other works projects of subvented organizations.
Public Works Programme
12.85Public Works Programme is a list of all public works projects of a non-recurrent nature and they are arranged according to the following categories:
Category C:projects which are accepted in principle to enable client departments[130] to plan their requirements such as providing a conceptual design, a broad order of costs and advising on the technical feasibility of the projects;
Category B:projects which are earmarked resources in the latest Resource Allocation Exercise for site investigation, detailed planning, detailed design, environmental impact assessment, traffic impact studies and for tender preparation to be carried out [131];
Category A:projects which are in all aspects ready for the award of contract and for construction works to proceed;
Category D:projects estimated to cost up to the prevailing financial ceiling for Category D projects (which is currently set at $30 million) on which work may proceed and expenditure may be incurred, subject to the availability of funds in the block allocation provided for the purpose.
12.86While a Category B project may be provided with a subhead in the Public Works Programme, no expenditure may be incurred unless the project is upgraded to Category A by the Finance Committee. For all Category A projects, the approved project estimate of each project was that approved by the Finance Committee or the Financial Secretary acting under delegated authority. The total commitment incurred for each project must not exceed the approved project estimate which may not be altered without the approval of the Finance Committee.
Block allocations
12.87If the expenditure for site investigation, feasibility study and detailed design for projects in Categories B and C is exceptionally required, this would be achieved either by upgrading part of the project to Category A with the approval of the Finance Committee or by charging the expenditure to the appropriate block allocation if available.
12.88Block allocations under the Capital Works Reserve Fund refer to subheads approved by the Finance Committee for funding minor works projects and studies, land acquisition, capital subventions and computerization projects. Under these block allocations subheads (with the exception of the four subheads mentioned below), the Finance Committee has delegated to the Financial Secretary the power to approve minor works items or standalone studies funded at a cost not exceeding $30 million each. The four exceptions are:
-Subhead 1004CA and Subhead 1100CA under Head 701 – Land Acquisition and Subhead 5001BX (landslip preventive measures) under Head 705 – Civil Engineering in which the authority delegated by the Finance Committee does not impose a financial limit per project;
-Subhead A007GX under Head 710 – Computerization for funding computerization projects in which the Finance Committee has delegated to the Financial Secretary the power to approve items not exceed $ 10 million each.[132]
12.89For the block allocations subheads created to fund works-related items, the Finance Committee approves the funding for these block allocations on a lump-sum basis once every year.[133] For this purpose, the Government submits to the Public Works Subcommittee the proposed annual funding requirement for the block allocations, including details of the funding to be sought and a full list of items to be included under each block allocation for the next financial year. These items include all Category D items as well as pre-construction work, such as technical feasibility studies, for major items under the Public Works Programme. During discussion of the funding for block allocations, questions are often raised on the extent of public consultation conducted in respect of these projects, land resumption process and related compensation, progress of road infrastructure and noise mitigation measures for existing roads, etc.
Consultation on public works projects
12.90To facilitate the effective processing and scrutiny of a financial proposal relating to a public works project by the Legislative Council, there is a convention agreed between the Government and the Legislative Council for the proposal to be submitted to the relevant Panel for initial discussion on the policy aspects of the proposal. The policy bureau responsible for the project is required to notify the relevant Panel when a proposal is scheduled to be submitted to the Public Works Subcommittee for its recommendation and to the Finance Committee for its approval. For this purpose, it has been the practice for the Government to submit to the Public Works Subcommittee a list of potential capital works projects at the start of a new session. The list is discussed by the Subcommittee and then circulated to Panels for an indication whether any of the projects on the list would require discussion by the Panels beforehand. On average, except for the very controversial projects for which strong objections from the community were received, the normal processing period from the time notice is given to the relevant Panel Clerk up to decision made by the Finance Committee is about 3 months. A notice of 7 weeks is expected to be given for the inclusion of any of these items on the agenda of a Panel meeting. Where needed, the relevant Panel may consult any parties or stakeholders that are likely to be affected by the project.
12.91During the Panel meeting, deliberation on the project will normally focus on its merits (i.e. the need, purpose, and effectiveness of the proposal for achieving the stated purpose) and the policy aspects of the proposal. The Panel should, however, avoid detailed discussion on the technical aspects of the proposal, unless these have a bearing on the merits of the proposal. At the end of its deliberation, the Panel will indicate if the proposal is ready for submission to the Public Works Subcommittee. Where feasible, the record of the deliberations at the Panel meeting will be made available to members of the Public Works Subcommittee before considering the project. Since December 2010, on the advice of the then chairman of the Public Works Subcommittee, a written report on the gist of the Panel discussion prepared by the Panel clerk and agreed by the Panel chairman is tabled at the Subcommittee's meeting. This is to ensure that discussion on matters which have already been considered at Panel is not unnecessarily repeated at the Subcommittee's meeting. When a proposal is supported by the Public Works Subcommittee, a paper with the Subcommittee's recommendation is submitted to the Finance Committee usually at a meeting no sooner than one week after the meeting of the Subcommittee. [134] The records of the deliberations of the Subcommittee are also available at the meeting of the Finance Committee.
12.92Any project which has been submitted to the Public Works Subcommittee or to the Finance Committee is usually not subject to further public consultation. However, on some occasions, it may be considered necessary by members of the Public Works Subcommittee that the Finance Committee may need to take into account further views from the public or stakeholders on certain matters before deciding whether approval may be given to the project. In such cases, the relevant Panel may be requested to hold a special meeting before the Finance Committee meets to consider the proposal.
Procedure for the re-submission of a rejected financial proposal
12.93There is nothing in the Rules of Procedure or in the Procedures of the Finance Committee or its Subcommittees to prevent proposals being submitted to the Finance Committee direct. After a proposal is rejected by a subcommittee, it may be re-submitted to the subcommittee for re-consideration or, if there is an urgent need to do so, re-submitted to the Finance Committee direct for its approval.[135] Thus, it is entirely at the discretion of the Director of Bureau concerned to decide how to deal with a proposal after it has been rejected by a subcommittee of the Finance Committee. It is not uncommon that the Director of Bureau seeks to meet the relevant Panel again with a view to addressing any concerns raised. All members of the Finance Committee are invited to take part in the discussion. Any new arrangements agreed between members and the Government may be set out in a revised proposal or in a supplementary paper alongside the original proposal for submission to the Subcommittee for re-consideration or, where time is critical, to the Finance Committee for approval.
Role of the Public Accounts Committee over the control of public funds
12.94The Public Accounts Committee was set up in 1978 as a standing committee to examine the Director of Audit's reports on the Government's annual accounts, accounts of statutory and other organizations which are required to be laid before the Legislative Council and on serious irregularities which may come to the notice of the Director. In performing his duties, the Director of Audit is required, among other things, to satisfy himself that all issues and payments of public moneys were made in accordance with proper authority [136], all payments were properly chargeable and are supported by sufficient vouchers or proof of payment or otherwise properly accounted for [137], the rules and procedures applied to the issue and payment of public moneys are sufficient to secure an effective control over expenditure and such rules and procedures have been duly observed by the public officers concerned [138], and any public moneys appropriated by the Legislative Council for a specified purpose and expended by a public officer have been expended in the due application of that purpose and in accordance with the authority under which the appropriation was made. [139]
Annual accounts of the Government
12.95Under the Audit Ordinance (Cap. 122), the Director of Accounting Services is required to, within 5 months (or any longer period as determined by the Chief Executive) after the close of a financial year, transmit to the Director of Audit a statement of the assets and liabilities of the Government and each statutory fund (except the Lotteries Fund) and an annual statement of receipts and payments by the Government and each statutory fund (except the Lotteries Fund).[140] The Director of Audit is then required to submit to the President of the Legislative Council a report of his examination and audit of the statements within 7 months (or any longer period as determined by the Chief Executive) after the close of the financial year.[141] This report, since 1987, has been submitted to the President of the Legislative Council in October each year. The report also covers any other accounts required to be laid before the Legislative Council. Nevertheless, the Director may submit to the President at any time a special report on any matter incidental to the performance of his duties under the Ordinance.[142]
12.96Upon receipt of the Director of Audit's report, the President must table the report in the Council within one month (or such longer period as determined by the President) [143] and require a report of the Public Accounts Committee to be tabled in the Council within 3 months (or any longer period as determined by the President) after the tabling of the Director of Audit's report in the Council.[144] Outstanding subjects raised in previous reports are followed up annually in the next October report, if needed.
Serious irregularities
12.97Section 13 of the Audit Ordinance (Cap. 122) provides that the Director of Audit shall report to the President of the Legislative Council any matter which in his opinion constitutes a serious irregularity in the accounting for the receipt, expenditure or custody of public moneys in the accounts or funds, or the receipt, issue, custody, sale, transfer or delivery of any stamps, securities, stores or any other Government property, or anything which comes to his notice in the performance of his duties. The President will arrange to table the relevant report in the Council and require a report of the Public Accounts Committee to be tabled in the Council within the same timeframe as the report on the Government's accounts. [145]
Value-for-money audits
12.98Since 1987, the Director of Audit has been carrying out examinations into the economy, efficiency and effectiveness with which any Government or public body discharges its functions. The purpose of these examinations, which are known as value-for-money audits, is not to question the merits of the policy objectives or the methods by which such policy objectives have been sought, but to question the economy, efficiency and effectiveness of the means used to achieve them. As an administrative arrangement, the Director of Audit submits the value-for-money audit reports twice each year. Originally, the first value-for-money audit report was combined with the annual report on the accounts of the Government, while the second was submitted in April, both being subject to such longer period as might be determined by then Governor. In 1995, following a review of the practices adopted by national audit offices of other common law jurisdictions, the Director of Audit proposed and the Public Accounts Committee agreed that the report on the accounts should be separate from the value-for-money audit report.[146] From then onwards, two separate reports have been tabled in the Council in November each year. The Government will report in the Government Minutes the follow up actions taken on matters outstanding from these value-for-money audits.
12.99According to the Director of Audit [147], for the purpose of value-for-money audits, "economy" is concerned with the acquisition of resources of appropriate quality and quantity at minimum cost; "efficiency" is concerned with the relationship between goods, services or other results (outputs) and the resources used to produce them; and "effectiveness" is concerned with the relationship between the intended goals and the outcome. Thus, value-for-money audit views a public organization in its entirety and tries to measure the extent to which it is meeting its objectives. This is where value-for-money audit differs from financial audit which focuses on the financial performance of the organization. The then Director of Audit considered that under this value-for-money concept, an organization is required to fully account for all its activities, not just its financial conduct, and that this greatly promotes and enhances public accountability.
Procedures of the Public Accounts Committee
Pre-hearing arrangements
12.100As soon as the report of the Director of Audit has been tabled in the Council, the Public Accounts Committee will examine, at a closed meeting and with the assistance of the Director of Audit, all subjects in the Director's report and decide which subjects it wishes to consider in detail. A programme of the detailed examination in public hearings is then drawn up and the Controlling Officers concerned are notified of the schedule of hearings and the persons required to attend the hearings.
12.101Summoning of witnesses is not normally required in the case of the Public Accounts Committee although it has the power to do so. It is normally up to the Controlling Officer or the respective Director of Bureau to decide who should be present at the hearings to answer questions from the Committee. On some occasions, the Committee may indicate, after studying the Director of Audit's report, the person(s) who should be in the best position to respond to the questions which the Committee would wish to ask. The Committee may also consider requiring attendance of a person by issuing a summons.[148]
12.102The Director of Audit and the Secretary for Financial Services and the Treasury (or his representative) are in attendance at all hearings. They may also be invited to attend the internal deliberations of the Committee.
Hearings
12.103Hearings of the Public Accounts Committee are normally held in public. The main aim of the hearings is to establish the circumstances surrounding the matters reported on by the Director of Audit and to recommend remedial measures. The primary concern of the Committee is not with the details but with the principles and systems. It is common practice that the Committee meets in private shortly before the public hearing to review any documents which have been produced to the Committee prior to the hearing and to agree on the line of questioning on such documents. During the hearing, the members who have been assigned responsibility to raise questions will first be invited to ask questions, followed by others. The meeting may be adjourned to enable the Committee to deliberate in private if there is a need to do so. Where necessary, the chairman may invite the Director of Audit or a representative from the Financial Services and the Treasury Bureau to give their comments, and invite the Controlling Officer or the Director of Bureau to respond to such comments if they wish to do so.
12.104Members have always been reminded that the Public Accounts Committee is not a commission of enquiry. On 10 May 1978, when the Chief Secretary proposed amendment to the Standing Orders for the establishment of the Public Accounts Committee, he said, "the Committee would not take the form of a commission of enquiry to judge or discipline individual officers of the public service who were at fault, although it might wish to know what action including disciplinary measures had been taken to prevent a repetition of the faults involved." [149] To give the Committee a suitable degree of flexibility in the conduct of its business, the Standing Orders allowed the Committee to regulate its own proceedings which were expected to be reasonably informal. These provisions have been retained to date.
12.105After the meeting, the Committee may meet in private to deliberate on the evidence and to consider whether further hearings are required on the same subject.
The Committee's report
12.106When all the hearings are completed, the Public Accounts Committee proceeds to internal deliberations and compile its report which is required to be tabled in the Council within 3 months after the tabling of the Director of Audit's report. It is then for the Government to consider the comments and recommendations in the report as the Committee has no power to order any particular action to be taken.
12.107Where a Government Minute has been tabled in the Council, the Public Accounts Committee may re-convene its meetings and record its views at a meeting of the Council. Nevertheless, the common practice is that the Director of Audit is requested to conduct a follow-up review on the subject if necessary so that the Public Accounts Committee may give a further report to the Council if considered appropriate.
Government Minutes
12.108It has been a standing practice that where the Government considers it appropriate to comment on the action Government proposes to take to rectify any irregularities which have been brought to notice by the Public Accounts Committee or by the Director of Audit and, if necessary, to explain why it does not intend to take action, a Government Minute will be tabled in the Council within 3 months after the laying of the report of the Committee to which it relates.[150]
Progress reports on subjects not selected for detailed examination
12.109On matters outstanding in previous Government Minutes, the Government submits to the Public Accounts Committee an annual progress report in September each year. The Committee will then give its views on the progress report in its report normally issued in the following February. On subjects not selected for detailed examination by the Committee, the Director of Audit will call for separate progress reports from bureaux and departments concerned on a half-yearly basis (ending June and December).
Relationship between the Public Accounts Committee and the Director of Audit
12.110Although the Director of Audit is appointed by the Chief Executive, he is required under the Audit Ordinance (Cap. 122) to submit his reports, at least twice a year, to the President of the Legislative Council who in turn is required to table the reports in the Council and to have the Public Accounts Committee to table its reports on the Director of Audit's reports. Unlike select committees, the procedure to be followed by the Public Accounts Committee for conducting its examination of the Director of Audit's reports is not set out in the Rules of Procedure but the Committee has the power to determine its own procedure and practice. The current procedure adopted by the Committee is primarily based on long established conventions and these conventions have been developed having regard to the conventions adopted by the legislatures in other common-law jurisdictions where officers performing a function similar to that of the Directors of Audit are required to report to the legislature concerned.[151] In other words, procedurally, the Public Accounts Committee of the HKSAR Legislature undertakes its examination of the Director of Audit's reports independently with the assistance from the Director of Audit, but it does not make its recommendations solely on the basis of the Director's presentation.
12.111Extensive discussions have taken place both before and after 1997 between the Government and the Public Accounts Committee over the role of the Director of Audit to ensure that he remains an independent and impartial examiner holding the right of reporting directly to the President of the Legislative Council. Even outside the proceedings of the Committee, it has also been a practice for the Committee to hold informal meetings with the Director of Audit to enable the Committee to suggest areas for value-for-money audits for the Director's consideration. It is in this manner that the Committee and the Director of Audit can each work independently to perform their respective roles under the Basic Law [152] and the Audit Ordinance for the proper and effective use of public funds.
- [1]
- Chapter 2, para.2.10 – 2.11.
- [2]
- Public Finance Ordinance (Cap. 2) is one of the ordinances adopted by the Standing Committee of the NPC on 23 February 1997 to continue to be in force after the establishment of the HKSAR on 1 July 1997.
- [3]
- See Erskine May's Treatise on The Laws, Privileges, Proceedings and Usage of Parliament, 24th Edition, p. 711.
- [4]
- Rule 67(1) of the Rules of Procedure.
- [5]
- Chapter 6, para. 6.30.
- [6]
- Sections 5(1) and 6(1) of the Public Finance Ordinance (Cap. 2).
- [7]
- Erskine May, 24th Edition, p. 714.
- [8]
- Erskine May, 24th Edition, p. 714; Hong Kong Fact Sheet (December 2014).
- [9]
- Section 5 of the Public Finance Ordinance (Cap. 2).
- [10]
- Section 5 of the Public Finance Ordinance (Cap. 2)
- [11]
- Section 8(1) of the Public Finance Ordinance (Cap. 2); Hong Kong Fact Sheet (December 2014).
- [12]
- According to the Introduction in the annual Estimates of Expenditure, the "establishment" mechanism in the Government has been used since 1980. Under this mechanism, controlling officers are authorized to create or delete posts in existing non-directorate ranks provided that the net additional notional annual mid-point salary value of the posts created does not exceed the departmental establishment ceiling shown in the estimates. Any changes to the departmental establishment ceiling during the year will require the approval of the Finance Committee.
- [13]
- Section 8(2) of the Public Finance Ordinance (Cap. 2).
- [14]
- Section 8(3) of the Public Finance Ordinance (Cap. 2).
- [15]
- Section 8(4) of the Public Finance Ordinance (Cap. 2).
- [16]
- Section 9 of the Public Finance Ordinance (Cap. 2).
- [17]
- Major Sources of Government Revenue published by Research Office, Legislative Council Secretariat. (updated 7 September 2015).
- [18]
- Article 107 of the Basic Law.
- [19]
- According to Hong Kong Fact Sheet (December 2014), a medium-range forecast is a five-year forecast of expenditure and revenue which focuses on the consolidated financial position of the Government.
- [20]
- Hong Kong Fact Sheet (December 2014).
- [21]
- Sections 6 and 7 of Public Revenue Protection Ordinance, Cap. 120.
- [22]
- Erskine May, 24th Edition, p. 712.
- [23]
- Rules 31(1) and 57(6) of the Rules of Procedure.
- [24]
- Section 10 of the Public Finance Ordinance (Cap. 2).
- [25]
- Section 3(1) of the Public Finance Ordinance (Cap. 2).
- [26]
- Section 3(2) of the Public Finance Ordinance (Cap. 2).
- [27]
- Section 16 of the Public Finance Ordinance (Cap. 2).
- [28]
- The number of Heads of Expenditure in the 2015-2016 Estimates was 83.
- [29]
- Estimates of Expenditure 2015-2016, Volume I, Introduction, para. 3.
- [30]
- Section 12(1) and (2) of the Public Finance Ordinance (Cap. 2).
- [31]
- Section 13 of the Public Finance Ordinance (Cap. 2).
- [32]
- Estimates of Expenditure 2015-2016, Volume I, Introduction, para. 4.
- [33]
- Conventional subheads under Subhead 000 Operational expenses include Personal Emoluments (staff salaries and allowances); Personnel Related Expenses (Mandatory Provident Fund Contribution, etc.); Departmental Expenses (day-to-day operation costs); Other Charges; and Recurrent Subventions (payments to external or subvented bodies).
- [34]
- Estimates of Expenditure 2015- 2016, Volume I, Introduction, para. 6 and 9.
- [35]
- Estimates of Expenditure 2015-2016, Volume I, Introduction, para. 1.
- [36]
- Section 19 of the Public Finance Ordinance (Cap. 2).
- [37]
- Section 19 of the Public Finance Ordinance (Cap. 2).
- [38]
- Section 31 of the Public Finance Ordinance (Cap. 2).
- [39]
- Section 23(2) of the Public Finance Ordinance (Cap.2) provides that any moneys deposited under subsection (2) shall not form part of the general revenue, but if the deposit is unclaimed for 5 years, it may be treated as moneys received for the purposes of the Government under subsection (4) and shall then form part of the general revenue.
- [40]
- Section 29(1) of the Public Finance Ordinance (Cap. 2).
- [41]
- Cap. 2A is a Resolution passed by the Legislative Council on 20 January 1982 under section 29(1) of the Public Finance Ordinance (Cap. 2) to establish the Capital Works Reserve Fund for the purpose of financing the Public Works Programme and the acquisition of land. The Resolution took effect from 1 April 1982. It was amended from time to time to incorporate changes such as the transfer of the financing of capital subventions and major systems and equipment from the General Revenue Account to the Fund with effect from 1 April 1988.
- [42]
- Cap. 2B.
- [43]
- Cap. 2E.
- [44]
- Cap. 2L.
- [45]
- Cap. 2Q.
- [46]
- Cap. 2O.
- [47]
- Cap. 2D.
- [48]
- Cap. 2S.
- [49]
- Hong Kong Fact Sheet (December 2014).
- [50]
- The Exchange Fund (EF) was established in 1935 by the Currency Ordinance (later renamed the Exchange Fund Ordinance (Cap. 66) to back the issue of banknotes in Hong Kong. The primary statutory function of the Exchange Fund, as defined in Section 3(1) of Cap. 66, is to affect, either directly or indirectly, the exchange value of the currency of Hong Kong. In 1992, its statutory function was extended through inclusion of section 3(1A) in Cap. 66 to enable it to assume a secondary and subsidiary role of maintaining the stability and the integrity of the monetary and financial systems, with a view to maintaining Hong Kong as an international financial centre.
- [51]
- Council meeting of 18 February 1998. See Hansard, pp. 45 – 49.
- [52]
- Fact Sheet on "Management of the Exchange Fund and fiscal reserves" published by the Research and Library Services of the Legislative Council Secretariat on 18 March 2010 (updated on 19 March 2010), para. 6.5.
- [53]
- Council meeting of 6 March 2002, see Hansard, p. 4155.
- [54]
- Council meeting of 5 March 2003, see Hansard, p. 4338.
- [55]
- Council meeting of 28 February 2007, see Hansard, pp. 4763 – 4765.
- [56]
- http://www.legco.gov.hk/yr09-10/english/sec/library/0910fs16-e.pdf, p. 6.
- [57]
- http://www.info.gov.hk/gia/general/201312/04/P201312040318.htm
- [58]
- Sections 5(1) and 6(1) of the Public Finance Ordinance (Cap. 2).
- [59]
- The Government announced in August 2002 that for recurrent expenditure in the Resource Allocation Exercise that year, an "envelope" approach would be used. Under this approach, each Director of Bureau was tentatively allocated an envelope of operating expenditure and given the flexibility to deploy resources among his/her various policy areas when preparing the Estimates of Expenditure. Bids for capital expenditure were processed in the usual manner.
- [60]
- See http://www.fstb.gov.hk/tb/en/docs/pr20141203a_e.pdf.
- [61]
- See http://www.fstb.gov.hk/tb/en/docs/pr20141203a_e.pdf.
- [62]
- For the 2015 Resource Allocation Exercise, bureaux were requested to deliver 1% savings on their respective operating expenditure in 2016-2017 and 2017-2018.
- [63]
- The Star Chamber is chaired by the Chief Secretary for Administration, and comprises the Financial Secretary, Secretary for Financial Services and the Treasury and the Secretary for the Civil Service.
- [64]
- For practice before and after 2002, refer to http://www.legco.gov.hk/yr02-03/english/fc/fc/papers/f02-9e.pdf, para. 7 – 10.
- [65]
- http://www.legco.gov.hk/yr02-03/english/counmtg/hansard/cm0305ti-translate-e.pdf
- [66]
- An example is at http://www.legco.gov.hk/yr14-15/english/bills/b201502251.pdf
- [67]
- There was no Policy Address at the commencement of a new session before 1948. See Chapter 5, para. 5.15 – 5.18.
- [68]
- Financial Secretary's speech at the sitting on 26 February 1969 at http://www.legco.gov.hk/1969/h690226.pdf.
- [69]
- Standing Order 54(1) of the 1968 Standing Orders.
- [70]
- Paragraph 49 of the Finance Committee Procedure.
- [71]
- In response to a Member's question on whether this would depart from the arrangement set out in the Finance Committee Procedure, the Clerk to the Finance Committee explained in her letter dated 22 February 2002 that having regard to the historical background of Paragraphs 49 to 55 of the Finance Committee Procedure, Paragraph 49 could only be regarded as a description of the then practice. It did not impose a procedural obligation on the Financial Secretary. (http://www.legco.gov.hk/yr01-02/english/hc/papers/hc0222let-cfc.pdf)
- [72]
- The convention of scheduling 3 separate meetings to deal with the various stage of the Appropriation Bill can be dated back to 1969 (although from 1973 to 1990, the "3rd meeting" was usually held at two sittings) and the same arrangement was adopted by the First Legislative Council of the HKSAR.
- [73]
- The Appropriation Bill 2013 was passed at the Council meeting of 15 May 2013 which were held on 4 days on 15, 16, 20 and 21 May 2013.
- [74]
- After the passage of the second reading of the Appropriation Bill 2014, the President adjourned the Council to enable him to have more time to consider the large number of Committee stage amendments.
- [75]
- Paragraph 49 of the Finance Committee Procedure.
- [76]
- Paragraph 50 of the Finance Committee Procedure.
- [77]
- The quota of 3 300 questions was determined after a review conducted in 2011 when the number of questions raised by Members had exceeded 4 000. Since the 2012 exercise, the Government has undertaken to provide written replies to the first 3 300 questions before the relevant sessions of the special meetings of the Finance Committee.
- [78]
- Paragraph 50 of the Finance Committee Procedure.
- [79]
- Paragraphs 14 – 15 of the Finance Committee Procedure.
- [80]
- Paragraphs 14 – 15 of the Finance Committee Procedure.
- [81]
- Paragraph 53 of the Finance Committee Procedure.
- [82]
- Rule 68(1) of the Rules of Procedure.
- [83]
- Rule 68(3) of the Rules of Procedure.
- [84]
- Rule 69(1) of the Rules of Procedure.
- [85]
- Rule 69(2) of the Rules of Procedure.
- [86]
- Rule 69(6) of the Rules of Procedure.
- [87]
- Rule 69(5) of the Rules of Procedure.
- [88]
- Rule 69(4) of the Rules of Procedure.
- [89]
- Rule 69(7) of the Rules of Procedure.
- [90]
- Rule 69(8) of the Rules of Procedure.
- [91]
- Rule 69(9) of the Rules of Procedure.
- [92]
- Rule 69(10) of the Rules of Procedure.
- [93]
- Rule 68(4) of the Rules of Procedure.
- [94]
- Rule 68(5) of the Rules of Procedure.
- [95]
- Rule 68(6) of the Rules of Procedure.
- [96]
- Rule 68(7) of the Rules of Procedure.
- [97]
- Also Rule 69(10) of the Rules of Procedure.
- [98]
- Rule 69(9) of the Rules of Procedure.
- [99]
- Rule 70 of the Rules of Procedure.
- [100]
- Chapter 5, para. 5.79 – 5.80.
- [101]
- Rule 51(7A) of the Rules of Procedure provides that where the motion for the second or third reading of an Appropriation Bill is negatived, another Appropriation Bill containing the same or substantially the same provisions may be presented within the same session.
- [102]
- Article 52(3) of the Basic Law.
- [103]
- Chapter 6, para. 6.32 to 6.33.
- [104]
- Section 7(2) of the Public Finance Ordinance, Cap. 2.
- [105]
- Refer to paragraph 25 of Report of the 2008 Subcommittee at http://www.legco.gov.hk/yr07-08/english/hc/papers/hccb1-981-e.pdf.
- [106]
- Refer to Report of the 2009 Subcommittee at http://www.legco.gov.hk/yr08-09/english/hc/papers/hccb1-1010-e.pdf.
- [107]
- Members agreed at the House Committee meeting on 22 February 2008 not to request the Government to withdraw the notice. However, at the House Committee meeting on 27 February 2009, Members requested the Government to withdraw the notice when they agreed that a subcommittee under the House Committee should be formed to study the proposed Vote on Account Resolution.
- [108]
- Rule 71(1) of the Rules of Procedure.
- [109]
- Rule 71(4) of the Rules of Procedure.
- [110]
- Paragraph 1 of the Finance Committee Procedure.
- [111]
- Examples are the creation of a new head "Government Secretariat: Innovation and Technology Bureau" in FCR(2014-15)37 considered by the Finance Committee in February 2015; and creation of a new non-recurrent subhead "Contribution to the Tenth Replenishment of the Asian Development Fund" under Head 106 Miscellaneous Services in FCR(2012-13)69 approved on 8 February 2013.
- [112]
- Examples are the proposals in FCR(2014-15)39 approved on 16 January 2015 which include the application for a supplementary provision in 2014-15 under Head 141 Labour and Welfare Bureau for implementation of the Low-income Working Family Allowance Scheme.
- [113]
- Examples are the proposals in FCR (2012-13)54 and 54A, approved on 7 December 2012, which include the proposal for an increase of 90 non-directorate civil service posts in the Social Welfare Department for implementing the Old Age Living Allowance scheme.
- [114]
- An example is the proposal in FCR (2013-14)16, approved on 14 June 2013, which involves an increase in commitment by $120 million for the one-off grant scheme to encourage owners of Euro II diesel commercial vehicles to replace their vehicles with new models that comply with the prevailing statutory emission standard.
- [115]
- See Government's information paper to the Finance Committee FCRI(2013-14)15, at http://www.legco.gov.hk/yr13-14/english/fc/fc/papers/fi13-15e.pdf.
- [116]
- See LC Paper No. PWSC33/13-14(01).
- [117]
- An example is the Government's proposal in November 1999 for a commitment to inject funds as equity, to provide a loan from the Capital Investment Fund to Hongkong International Theme Parks Limited and to approve an investment in subordinated equity by the Capital Investment Fund representing land premium for the Phase I site to allow the company to proceed with the development and operation of Hong Kong Disneyland. To safeguard Government's interest in the project, the Government stated in the proposal that apart from the various project agreement entered into, the Government would have a majority on the Board of Directors which would have a supervisory role. Two non-executive independent Directors mutually agreed by both parties would also be appointed to the Board. The proposal and the terms attached to the project were approved by the Finance Committee on 26 November 1999.
- [118]
- Paragraph 21 of the Finance Committee Procedure.
- [119]
- Paragraph 21 of the Finance Committee Procedure. Shorter notice may be given if the chairman so directs.
- [120]
- Paragraphs 21 and 22 of the Finance Committee Procedure.
- [121]
- Rule 31(1) of the Rules of Procedure.
- [122]
- Chapter 10, para. 10.45 – 10.46.
- [123]
- Rule 71(5) of the Rules of Procedure.
- [124]
- Paragraph 1 of the Establishment Subcommittee Procedure and Paragraph 2 of the Public Works Subcommittee Procedure.
- [125]
- Paragraph 3 of the Establishment Subcommittee Procedure and Paragraph 4 of the Public Works Subcommittee Procedure.
- [126]
- See Footnote 11.
- [127]
- Paragraph 2 of the Establishment Subcommittee Procedure.
- [128]
- Projects under Head 708 include school buildings for the aided sector and private schools, university teaching and research facilities, public hospitals, and other works projects of subvented organizations.
- [129]
- http://www.cmab.gov.hk/en/issues/jd5.htm.
- [130]
- A client department is the department which will ultimately have control over the facility to be constructed.
- [131]
- In November 2001, the Administration introduced a number of measures to shorten the lead time from inception to commencement of construction of a typical engineering and building project from six years to less than four years. One of the measures was to allow Controlling Officers the option to initiate works-related tendering and consultant selection procedures before funding is secured. The award of any contract or bid must still be subject to funding approval.
- [132]
- This ceiling was raised from $8 million to $10 million at the Finance Committee on 25 October 1996.
- [133]
- Prior to 1982, provisions for block allocation were sought in the context of the Estimates. After the Capital Works Reserve Fund Resolution came into force on 1 April 1982, it has been the practice that the Government seeks the Finance Committee's approval for provisions for the block allocation on an annual basis.
- [134]
- The time gap between a meeting of the Public Works Subcommittee and the meeting of the Finance Committee at which its recommendations will be considered is usually 3 weeks, or 2 weeks for urgent items.
- [135]
- Examples of public works and establishment proposals submitted directly to the Finance Committee without being considered by the relevant subcommittees for consideration include FCR(94-95)51 and FCR(94-95)52 approved on 8.7.1994, FCR(95-96)84 approved on 1.12.1995 and FCR(97-98)115 approved on 27.3.1998.
- [136]
- Section 8(2)(b) of the Audit Ordinance (Cap. 122).
- [137]
- Section 8(2)(c) of the Audit Ordinance (Cap. 122).
- [138]
- Section 8(2)(d) of the Audit Ordinance (Cap. 122).
- [139]
- Section 8(2)(e) of the Audit Ordinance (Cap. 122).
- [140]
- Section 11 of the Audit Ordinance (Cap. 122).
- [141]
- Section 12(1)(b) of the Audit Ordinance (Cap. 122).
- [142]
- Section 12(3) of the Audit Ordinance (Cap. 122).
- [143]
- Section 12(2) of the Audit Ordinance (Cap. 122).
- [144]
- Section 12(2A) of the Audit Ordinance (Cap. 122).
- [145]
- Section 13(2) of the Audit Ordinance (Cap. 122).
- [146]
- Second Revised Codicil to the Paper "Scope of Government Audit in Hong Kong – 'Value for Money' Studies" tabled by the Chairman of the Public Accounts Committee at the sitting of the Council on 26 July 1995. The Paper was an Agreement which set out the scope of work and guidelines for the Director of Audit to carry out value-for-money audits and was tabled in the pre-1997 Legislative Council sitting on 19 November 1986. By a report of the Chairman of the Public Accounts Committee to the Provisional Legislative Council on 19 November 1997, the Council noted that the 1986 Agreement and its Codicil would continue to be adopted as the basis on which the Director of Audit submits his reports on value-for-money audits from 1 July 1997.
- [147]
- Meeting of the Panel on Constitutional Affairs on 16 February 1995 and meeting of the Public Accounts Committee on 19 May 1995.
- [148]
- Mr LEUNG Chin-man, former Director of Buildings, and Mr Timothy TONG, former Commissioner of the Independent Commission Against Corruption, were summoned to give evidence to the Public Accounts Committee. Mr LEUNG was summoned because the Committee found it necessary to compel his attendance at the hearing to answer questions. In the case of Mr Timothy TONG, the issue of a summons was to ensure that he enjoyed the privileges under sections 14 and 16 of Cap. 382.
- [149]
- Council sitting on 10 May 1978, Hansard p. 903.
- [150]
- An example is the Government Minute in response to the Public Accounts Committee Reports No. 63A (tabled in the Council on 3 June 2015) and No. 64 (tabled in the Council on 8 July 2015) was tabled in the Council on 28 October 2015.
- [151]
- In October 1994, having regard to the parliamentary practice in the UK, Standing Order 60A of the pre-1997 Standing Orders was amended to specify that all matters for the decision of the committee should be decided by a majority of the members voting and that the chairman or any member presiding should have no original vote bur only a casting, vote which should be exercised in accordance with the Westminster convention of keeping the matter open or not altering the status quo.
- [152]
- Article 58 of the Basic Law provides. "A Commission of Audit shall be established in the Hong Kong Special Administrative Region. It shall function independently and be accountable to the Chief Executive."