FINANCE COMMITTEE

Record of Meeting held on 9 February 1996 at 2:30 p.m.
in the Legislative Council Chamber

Present:

Dr Hon YEUNG Sum (Chairman)
Hon Mrs Elizabeth WONG CHIEN Chi-lien, CBE, ISO, JP (Deputy Chairman)
Hon Allen LEE Peng-fei, CBE, JP
Hon Mrs Selina CHOW LIANG Shuk-yee, OBE, JP
Hon Martin LEE Chu-ming, QC, JP
Dr Hon David LI Kwok-po, OBE, LLD, JP
Hon NGAI Shiu-kit, OBE, JP
Hon SZETO Wah
Hon LAU Wong-fat, OBE, JP
Hon Edward HO Sing-tin, OBE, JP
Hon Ronald ARCULLI, OBE, JP
Hon Mrs Miriam LAU Kin-yee, OBE, JP
Dr Hon Edward LEONG Che-hung, OBE, JP
Hon Albert CHAN Wai-yip
Hon CHEUNG Man-kwong
Hon CHIM Pui-chung
Hon Frederick FUNG Kin-kee
Hon Michael HO Mun-ka
Dr Hon HUANG Chen-ya, MBE
Hon Emily LAU Wai-hing
Hon LEE Wing-tat
Hon Eric LI Ka-cheung, JP
Hon Fred LI Wah-ming
Hon Henry TANG Ying-yen, JP
Hon James TO Kun-sun
Dr Hon Samuel WONG Ping-wai, MBE, FEng, JP
Dr Hon Philip WONG Yu-hong
Hon Howard YOUNG, JP
Hon Zachary WONG Wai-yin
Hon Christine LOH Kung-wai
Hon James TIEN Pei-chun, OBE, JP
Hon LEE Cheuk-yan
Hon CHAN Kam-lam
Hon CHAN Wing-chan
Hon CHAN Yuen-han
Hon Andrew CHENG Kar-foo
Hon Paul CHENG Ming-fun
Hon CHENG Yiu-tong
Dr Hon Anthony CHEUNG Bing-leung
Hon CHEUNG Hon-chung
Hon CHOY Kan-pui, JP
Hon David CHU Yu-lin
Hon Albert HO Chun-yan
Hon IP Kwok-him
Hon Ambrose LAU Hon-chuen, JP
Hon LAW Chi-kwong
Hon LEE Kai-ming
Hon LEUNG Yiu-chung
Hon Bruce LIU Sing-lee
Hon LO Suk-ching
Hon MOK Ying-fan
Hon Margaret NG
Hon NGAN Kam-chuen
Hon SIN Chung-kai
Hon TSANG Kin-shing
Dr Hon John TSE Wing-ling
Hon Lawrence YUM Sin-ling

Absent:

Hon LAU Chin-shek
Dr Hon LAW Cheung-kwok

In attendance for specific items:

In attendance:

---

Item No. 1 - FCR(95-96)120

RECOMMENDATIONS OF THE ESTABLISHMENT SUBCOMMITTEE

The Committee approved this item.

Item No. 2 - FCR(95-96)121

RECOMMENDATIONS OF THE PUBLIC WORKS SUBCOMMITTEE ON NON-AIRPORT CORE PROGRAMME

2. The Committee approved this item.

Item No. 3 - FCR(95-96)124

HEAD 173 - STUDENT FINANCIAL ASSISTANCE AGENCY
Subhead 156 Kindergarten - fee assistance

3. The Committee approved this item.

Item No. 4 - FCR(95-96)125

HEAD 173 - STUDENT FINANCIAL ASSISTANCE AGENCY
Subhead 275 Student travel scheme

4. In reply to a Member’s question, the Controller, Student Financial Assistance Agency said that the number of successful applications was originally estimated at 181 633 when preparing the 1995-96 draft Estimates. As the actual figure turned out to be about 4 000 less than the earlier estimate, the present estimate was revised downward to 176 972, showing a slight decrease of 2.6%.

5. The Committee approved this item.

Item No. 5 - FCR(95-96)123

HEAD 148 - GOVERNMENT SECRETARIAT: FINANCIAL SERVICES BRANCH
Subhead 001 Salaries

6. A Member pointed out that the existing proposal had been put to the Establishment Subcommittee (ESC) for consideration but had been withdrawn by the Administration unilaterally without voting on it. The Administration had now bypassed the ESC and submitted the proposal to the Finance Committee (FC) direct. She queried whether this move was permissible under the provisions of the Standing Orders.

7. Senior Assistant Legal Adviser advised that there was no requirement in the Standing Orders for a proposal to go through a subcommittee before it could be considered by the main committee. According to Standing Order 4B(2), “A public officer so designated by the Governor may give notice to the Clerk of items of business be included in the Order Paper or the agenda of the Finance Committee or a subcommittee of the Finance Committee.” There was no provision requiring that a funding proposal had to go through a subcommittee before it could be considered by the FC. In other words, by having the present proposal withdrawn from the ESC and submitting it to the FC direct was not incompatible with the provisions of the Standing Orders. However, as FC could determine the practice and procedures of the committee and its subcommittees under Standing Order 60(11), it could decide on how this item of business should be handled.

8. As regards the current practice, the Clerk to FC confirmed that the two subcommittees of the FC were appointed for the purpose of assisting FC in the performance of its functions. It had been a practice for funding proposals to come before the relevant subcommittees for support before they were forwarded to the FC for consideration. There were precedents in which papers were presented to the FC direct on grounds of urgency, but in the case of withdrawal of papers by the Administration for direct submission to the FC, no such precedent could be recalled.

9. The Chairman advised that despite his personal views on the Mandatory Provident Fund (MPF) Scheme which were known to Members of the Committee, he, as Chairman, had agreed to the inclusion of this item on the agenda of this meeting owing to the urgency of the matter.

10. At the invitation of the Chairman, the Secretary for Financial Services (SFS) explained why he put the proposal to the FC direct. Subsequent to the ESC Meeting on 13 December 1995, the Financial Services Branch (FSB) had been in dialogue with LegCo Members with a view to identifying a mutually acceptable solution. Until lately, having exchanged views with some Members on several occasions, FSB did not see it possible to secure their agreement. In view of the urgent need to set up the MPF Office and the fact that the existing supernumerary posts would lapse on 29 February 1996, FSB had no alternative but to go to FC direct. He would have liked to put this revised proposal to ESC first, but time did not permit this because the FC would not be able to deliberate the proposal until March 1996 if it was routed through ESC.

11. Members of the Liberal Party asked the Administration to confirm whether the Government would agree to any changes to the Scheme which would alter the present pegged contributing rates of 5% of salary by the employer and 5% by the employee, or the present provision of allowing employers’ contributions to offset long service and severance payments. They considered these elements to be fundamental in nature and crucial for their continued support of the MPF Schemes; changes to any of these elements would render the MPF Scheme different from the one passed by LegCo in the previous session and which the Liberal Party had supported. If the Administration would allow changes to these fundamental elements, resulting in greater financial burden on the part of employers, Members of the Liberal Party would find it difficult to support the present paper. A Member also stressed that any further changes to the Scheme which brought about a greater financial burden for small business operators would also not be acceptable as small businesses were already having a difficult time surviving.

12. In response, SFS assured Members that the contributing factors, the pegging of the employers’ and employees’ contributions and the offsetting of long service and severance payments were key elements of the MPF Scheme. As a Policy Secretary representing the Government, he had the responsibility to preserve and uphold the fundamental principles and key elements of the Scheme. He confirmed that should any of the above-mentioned elements be changed, the Scheme would no longer be the Scheme which this Government had originally proposed, and, under the circumstances, the Government would not continue to proceed with the MPF Scheme.

13. Members of the Democratic Party were dissatisfied with some Members imposing conditions as prerequisites to supporting the staffing proposal and asked for the following points to be recorded:

1. allowing funding proposals to bypass the ESC was totally unacceptable; the Democratic Party therefore expressed its strong protest against the Administration’s action;
2. the Democratic Party was extremely concerned about the high administrative costs for running the MPF Scheme which might erode the contributions of the low-income employees; and the fact that the Administration had not been able to address this point positively; and
3. if the funds contributed to any individual schemes were not large enough for diversification of investments, the funds in question might not be adequately hedged against risks and the Democratic Party might be compelled to seek legislative amendments to reduce the risks.

In view of the above reasons, Members of the Democratic Party would not support the proposal.

14. Some Members remarked that the MPF Scheme would not solve the current problem of inadequate support for the elderly. The present Scheme would also not be able to provide adequate support to the contributors upon their retirement. It was therefore necessary to amend the present Scheme. In response, SFS pointed out that Members should not confuse the MPF Scheme with welfare assistance. The two were not mutually exclusive.

15. In response to a Member’s questions, the Deputy Secretary for Financial Services said that there would not be any overlapping of duties between the four directorate officers and the consultants as the latter would only offer assistance to the technical aspects of the work. Duties such as policy formulation, consultation with interested organisations and the public, liaison with other departments and monitoring of monetary and insurance institutions would be the responsibilities of the government officials. Altogether, there would be 21 non-directorate posts providing various support services to the MPF Office. The Principal Executive Officer of FSB added that $5 million would be required in the coming financial year for a consultancy on the technical specifications of a computerised management information system.

The total running cost of the MPF Office for the coming twelve months including personal emoluments, office rental, consultancy fees would be in the region of $63 million.

16. The proposal was put to vote and approved : 33 Members voted for the proposal, 23 against and none abstained.

Ayes:

(33 Members)

Nos:

(23 Members)

Item No. 6 - FCR(95-96)122

LOTTERIES FUND
HEAD 341 - NON-RECURRENT GRANTS
Subhead 182 Nursing homes

17. A Member pointed out that there was inadequate consultation with local residents on the project and the choice of site was far from satisfactory because it was located in a highly polluted and noisy area. The Administration should have looked for better sites for the building of nursing homes.

18. The Principal Assistant Secretary for Health and Welfare (Elderly Services) (PAS/HW) responded that the Administration had already strengthened the consultation process with local residents. More than two meetings had been held with the local residents in respect of this project and she herself had personally attended a meeting of the Social Services Committee of the Tuen Mun District Board to explain the proposal to their members. On 4 January 1996, the Committee formally supported the project.

19. Regarding the choice of site, the Assistant Director of Health said that the Administration had done its best to locate a site of 3 000 square metres to meet its target in the building of nursing homes. The site in question was conveniently located and easily accessible by public transport. Besides, the 24-hour air-conditioning would provide steady temperature and humidity level for the elderly people.

20. Regarding the long waiting list for residential care homes, PAS/HW explained that the Government’s pledge to provide a total of 1 400 beds by 1997 was only a target set in 1993 aiming at alleviating the need for residential care places for the elderly. The Administration was already doing its utmost to meet this target although there might be some delays in the construction of nursing homes e.g. the one in Kowloon Bay because of local opposition. At present, the Social Welfare Department had a waiting list of 13 000 applicants for care-and-attention homes, and the Hospital Authority was keeping a list of 3 000 to 4 000 elderly people waiting for admission into infirmaries. She could not give an undertaking as to when the waiting list would be cleared but the Government would carry out reviews on the need for nursing homes from time to time.

21. The Chairman said that to facilitate the FC in approving funding proposals of this nature in future, the Administration where possible should provide tables listing out the total demand, the current provision, shortfall and the projected provision of services and facilities.

xx

22. In reply to a Member’s question, PAS/HW said that in order to obtain a naming right for projects such as a nursing home, the donor would normally be required to contribute 20% of the capital cost of the project.

23. Regarding concerns about fire-prevention measures, the Project Director of Architectural Services Department assured Members that for nursing homes, special fire services regulations would be followed. Sprinklers would be installed and sufficient staff would be available to evacuate the elderly people in case of fire. As far as the proposed site was concerned, the Fire Services Department had carried out inspections and had provided advice.

24. A Member from the Hong Kong Association for Democracy and People’s Livelihood stated that their Members could not support the proposal because they considered it inappropriate for the Government to choose whatever site which became available for the nursing home just to meet its target.

25. The proposal was put to vote and was approved.

Item No. 7 - FCR(95-96)126

HEAD 28 - CIVIL AVIATION DEPARTMENT
Subhead 002 Allowances

26. A Member pointed out that the rationale used to justify the granting of the flight allowance was already outdated. The demand and supply of pilots in 1988 was different from that in 1996. The salaries for overseas pilots had come down. For example, the minimum salary point for a fresh scale B Captain was only about $850,000 a year, instead of $1.7 million per annum plus other allowances as quoted in the paper.

27. In response, the Assistant Director of Civil Aviation (AD of CA) said that Flight Operations Inspectors (FOIs) were different from run-of-the-mill pilots who freshly joined an airline. The FOIs were required to possess extensive operational experience. They needed to have no less than 5 000 hours flight experience as pilot in command and must possess a current airline transport pilot license. They were also required to have training and management experience as a pilot instructor. Therefore the job and qualification requirements were quite different from those for an average airline pilot.

28. In reply to a question, AD of CA said that the Civil Aviation Department had always advertised the FOI vacancies internationally but most of the applicants had come from the United Kingdom.

29. Responding to a Member’s question on the department’s long-term plan to solve the problem, the Deputy Director of Civil Aviation (DD of CA) remarked that at the present stage the department was unable to recruit this type of pilot locally because there was no qualified local airline captains. He expected overseas recruitment to continue until such time when local pilots had gained the requisite qualifications and experience through working for the local airlines.

30. In answer to some Members’ suggestion to upgrade the posts to D1 level to save the trouble of granting the flight allowance, DD of CA said that this would pose a relativity problem with comparable grades in other divisions of the department and there would also be pension implications.

31. The Committee approved this item.

Item No. 8 - FCR(95-96)127

HEAD 170 - SOCIAL WELFARE DEPARTMENT
Subhead 179 Comprehensive social security assistance scheme
Subhead 180 Social security allowance scheme

32. A Member pointed out that the 7% increase in the standard payments under the Comprehensive Social Security Assistance (CSSA) scheme and the Social Security Allowance (SSA) scheme was just sufficient to cover inflation. He asked whether any increase in real terms in the CSSA would be expected in the near future. The Director of Social Welfare (DSW) replied that the purpose of the present proposal was for catching up with inflation. The Department would shortly propose to FC again on increases in real terms in the CSSA rates in accordance with the Governor’s Commitment in the October Policy Address. The Department was at present carrying out a comprehensive review of the CSSA scheme and a report would be submitted to the Secretary for Health and Welfare by Chinese New Year 1996.

33. As regards the formula for calculating the adjustment, DSW said that the computation was based on the forecast increase in the Social Security Assistance Index of Prices (SSAIP). The Secretary for the Treasury supplemented that the proposed increase of 7% for adjusting the CSSA and SSA payments was generally in line with inflation. The SSAIP had excluded items such as rent which was paid through special grants and was therefore different from the Consumer Price Index. DSW added that SSAIP was adopted as CSSA recipients were eligible for other special grants to cover expenditure such as rent. The Department was looking at all aspects of special grants including rent in the context of the overall review of the CSSA scheme and any recommendations for change would be included in the review report.

34. The Committee approved this item.

Item No. 9 - FCR(95-96)128

CAPITAL WORKS RESERVE FUND
HEAD 703 - BUILDINGS
New Subhead “Purchase and fitting-out of office accommodation for the Legislative Council”

35. The Chairman informed the meeting that this item was discussed at the Public Works Subcommittee on 7 February 1996 and was endorsed by the subcommittee.

36. A Member queried as to why it was necessary to purchase office accommodation at the present moment when the Administration was considering the question of long-term purpose-built accommodation for LegCo. The Deputy Director of Administration (DD of A) explained that the housing of all facilities of LegCo under one roof was a long-term plan. But to build such a purpose-built accommodation would not be achievable within a short span of time. In the interim, it was necessary to purchase office accommodation to meet LegCo’s demand.

37. Referring to a Member’s question on whether the leases for the offices in Swire House and the Club Lusitano Building would automatically be terminated once the new accommodation was purchased, DD of A said that it would be more cost-effective to terminate the leases of these offices if the facilities therein could be grouped together in the new accommodation. However, the Administration was aware of Members’ wish that staff offices in the LegCo Building should first be vacated to make room for more conference facilities. DD of A assured that detailed relocation arrangements would be worked out in consultation with the LegCo Secretariat.

38. A Member drew to Members’ attention that the present proposal was much more expensive than the original plan of building a new annex at Chater Garden to which the Town Planning Board (TPB) objected because of the need to preserve a few trees. He regretted that the TPB had failed to look at LegCo’s original proposal from an economic angle.

39. In response, DD of A said that while the TPB might accept a fully underground annex at Chater Garden, it would incur higher construction cost. The Legislative Council Commission at the time had also expressed concern about putting the entire annex, including staff offices, underground and decided not to pursue the annex proposal. As a result the Government decided to purchase accommodation instead.

40. The Committee approved this proposal.

41. The Committee was adjourned at 4:35 p.m.

Legislative Council Secretariat
26 March 1996

---