FINANCE COMMITTEE

Record of Meeting held on 24 November 1995 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
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 LAU Chin-shek
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 Ambrose LAU Hon-chuen, JP
Dr Hon LAW Cheung-kwok

In Attendance for specific items:

In Attendance:

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Item No. 1 - FCR(95-96)75

RECOMMENDATIONS OF THE ESTABLISHMENT SUBCOMMITTEE

The Committee approved this item.

Item No. 2 - FCR(95-96)76

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

2. In response to Miss Emily LAU’s request, the Committee agreed that PWSC(95-96)58 be considered separately.

3. The Committee approved Item FCR(95-96)76, except PWSC(95-96)58.

PWSC(95-96)58 24LJ Conversion of the French Mission Building into the Court of Final Appeal

4. Members noted the supplementary information provided by the Administration and the revised layout plan which had taken into account the views of the Members and the legal profession. On the revised layout plans, Members made the following comments:-

1. Two consultation rooms might not be sufficient as some cases involved more than two parties.
2. Visiting lawyers and members of the public should also be able to use the lift in the building.
3. Consideration should be given to allowing the lawyers appearing before the Court of Final Appeal to make use of the library service in the Building, if necessary.

5. The Judiciary Administrator noted the above comments and agreed to examine the feasibility of further improvements. The Committee approved the item.

Item No. 3 - FCR(95-96)77

HEAD 190 - UNIVERSITY GRANTS COMMITTEE
Subhead 496 Refund of rates - UGC-funded institutions

6. Mr CHEUNG Bing-leung declared an interest as an employee of a university.

7. In response to a Member’s question, the Secretary-General, University Grants Committee explained that the original provision in the annual Estimates was insufficient for the reimbursement of rates as recently assessed for properties owned and leased by the UGC-funded institutions. As to the reason why the necessary recurrent expenditure was not included in the original request for capital grant for the new buildings, the Secretary for the Treasury (S for Tsy) advised that it was normal practice to seek approval for recurrent expenditure in the annual Estimates.

8. The Committee approved the item.

Item No. 4 - FCR(95-96)81

HEAD 148 - GOVERNMENT SECRETARIAT: FINANCIAL SERVICES BRANCH
Subhead 700 General other non-recurrent

9. In response to a Member’s enquiry on whether Members involved in banking, insurance or other financial services should declare their interests, the Chairman advised that the approval sought in this item concerned a commitment of $22 million for engaging consultants to provide the necessary professional support for the preparation of the subsidiary legislation of the Mandatory Provident Fund (MPF) Schemes Ordinance. Declaration of interest would only be required if the Member had a direct pecuniary interest in the proposal. After confirming with the Secretary for Financial Services (S for FS) that the procedures to select the consultants would only commence after the Committee had approved this item, the Chairman considered that no Member could have any pecuniary interest at this stage and that all Members could vote on this proposal.

10. Referring to Members’ concern about the possibility of high administrative costs in operating the MPF Schemes, the Deputy Secretary for Financial Services (DS/FS) explained that there were already similar provident fund schemes in the market, and the administrative fees per scheme were about $500 per annum. Compared to the growth of savings and investment returns in the long term, the administrative costs should be insignificant. As for investment risks, DS/FS advised that there would be prudential supervision of the industry. Apart from the legislation which would prescribe standards for the proper operation of the MPF Schemes, there would also be rules and regulations for regulating the functions of trustees and fund managers. There were provisions under the MPF Schemes Ordinance to allow losses due to fraud and misfeasance to be recovered from a compensation fund. Besides, the Government would also be monitoring the operation of the MPF Schemes. DS/FS considered that these regulatory measures should be able to reduce substantially the investment risks.

11. On the engagement of consultants, DS/FS admitted that the arrangement was to allow the Government to have the immediate service of a group of professionals with the requisite expertise, but without the need to carry the posts after the task was completed. As to whether the consultants would actually be delegated the responsibility of legislative preparation without Government supervision, DS/FS clarified that the Government had insufficient resources and expertise to deal with the detailed preparatory work for the MPF subsidiary legislation, and the consultants would be engaged to advise on the highly technical and complex issues such as trustee management, investment guidelines, fund transfers and withdrawals, and the regulatory and monitoring systems. The concept was that the consultants should work with government officers as an integral team and the team as a whole would be responsible for the quality and progress of the project.

12. On the timetable for the legislative work, S for FS advised that the target would be to complete the subsidiary legislation for examination by the Legislative Council by the end of 1996, aiming at implementation in April/May 1997. Members would be briefed on the progress in mid-1996 and, where necessary, further briefings could be held for the relevant Panels on the progress at different stages.

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13. As regards the selection of the consultants, some Members considered the daily rates for consultants given in the supplementary information paper for the Financial Affairs Panel very much on the high side. In response, the Principal Executive Officer of Financial Services Branch explained that the rates quoted were for reference only. He briefed Members on the annual rates for consultants obtained from some consultancy firms and said that these were only rough estimates subject to actual bidding process. The consultants would be selected through the Central Consultants Selection Board procedures. In response to a Member’s request, DS/FS agreed to provide the costs of the consultancy studies on Old Age Pension Scheme (OPS) and the concept of an MPF for Hong Kong.

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14. Some Members stated their objection to the MPF Schemes as those who had already retired would not be able to benefit from the Schemes, and these were the persons who might be in desperate need for immediate assistance. They asked whether the Government would consider including the OPS and the Central Provident Fund Scheme (CPF) in the study. S for FS replied in the negative. He however agreed that in drafting the subsidiary legislation, the Government would take into account the interests of the low-income group and the self-employed, as well as the implications on severance and long service payments. He also noted some Members’ concern about the possible adverse consequences for Hong Kong of a large outflow of funds arising from overseas investment of the contributions made under the Schemes, and the suggestion to carefully evaluate the consultancy fees to ensure cost-effectiveness.

15. As to whether Government would be prepared to inject into the MPF the $50-$100 billion funding previously proposed for the OPS, S for Tsy advised that the MPF was a different scheme which would be privately managed with market competition. It would thus be inappropriate for Government to underwrite its operations. Nevertheless, he would be prepared to consider the possibility of providing initial funding for the MPF Authority.

16. Some Members also urged the Government to raise the rate of the Comprehensive Social Security Assistance (CSSA) as part and parcel of the current proposal. On this issue, S for Tsy advised that the CSSA review would be completed in early 1996 and any increase in the CSSA rates should be considered outside the current proposal.

17. Members also noted that the Chinese Government had not given any official views on the MPF, and the Administration would continue to keep the Chinese Government informed of the details of the proposal.

18. Members of the Democratic Party stated their objection to the proposal as the MPF Schemes could not provide immediate benefits for the elderly and the retired. The Party therefore had to vote against the proposal as a matter of principle. They also had doubts on the potential benefits for the low income group in view of the small amounts of contribution such people would put into the fund.

19. Members of the Association for Democracy and People’s Livelihood stated that they could not support the proposal in the absence of a complete picture of the scheme.

20. Members of the Confederation of Trade Unions also objected to the proposal since the implementation of MPF would put an end to the consideration of the other retirement protection schemes such as the OPS or CPF. Besides, the elderly could not benefit from the MPF, and there were also implications on severance payments.

21. Members of the Democratic Alliance for the Betterment of Hong Kong considered that although MPF was far from ideal, and required a lot of fine-tuning, the proposal was nevertheless a first step towards improving Hong Kong’s social security system. They would still urge the Government to enhance other welfare provisions for the old people without prejudice to the current proposals.

22. Members of the Federation of the Trade Unions (FTU) said they had always been in support of an adequate protection scheme for the aged, which should include immediate benefits to the elderly. FTU was disappointed with Government’s decision to shelve the OPS. In view of the fact that the Administration would not defer or withdraw the proposal on MPF, FTU could only support the MPF on the understanding that the Government would carefully examine the adequacy of protection for the low-income group, as well as the implications on severance and long service payments.

23. Members of the Liberal Party stated that they had been pressing for a retirement protection scheme for Hong Kong for a long time. As Hong Kong’s socio-economic conditions had changed since the 1980’s, Hong Kong now had the ability and the need to launch the MPF. This was particularly important in view of an ageing population, re-structuring of industries and the short-term economic recession now experienced by Hong Kong. They considered that the MPF would at least address the needs of the current members of the workforce.

24. The Committee voted on FCR(95-96)81: 30 Members voted for, and 26 voted against the proposal.

Ayes:

(30 Members)

Nos:

(26 Members)

25. The proposal was approved.

Item No. 5 - FCR(95-96)78

HEAD 106 - MISCELLANEOUS SERVICES
New Capital Account Subhead “Grant to the Samaritan Fund”

26. Members were in support of the proposed grant to the Samaritan Fund. However, some Members expressed reservations about the role of the Hospital Authority (HA) in raising funds for the Samaritan Fund and the current policy on fees and charges for certain special medical treatment and accessories.

27. In response, the Deputy Director (Operations) of Hospital Authority (DD/HA) clarified that HA had taken over from the former Hospital Services Department the management of the Samaritan Fund, including the liaison work with existing donors to the Fund. The role of HA in this respect would be mainly to liaise with the Charitable Funds. There was no intention to put HA under the pressure to solicit donations to meet in full the general operating or recurrent costs of hospitals.

28. Regarding non-standard charges in the former subvented hospitals, the Principal Assistant Secretary for Health and Welfare advised that the Government was now working to bring these into line with charges in former Government hospitals. Regarding some special medical items, such as expensive drugs, implants, prostheses, consumables and equipment for home use, which were not covered by the $60 daily maintenance charge, patients could seek assistance from the Samaritan Fund for the purchase of these items. As part of its overall health care reforms, the Government was taking steps to rationalise the list of such privately purchased items and to improve transparency about charges and procedures for financial assistance. DD/HA added that HA would also take the initiative to evaluate the cost-effectiveness of new inventions in medical science and technology with a view to seeking the necessary resources from Government to meet the need.

29. Members were concerned that the revised criteria for assistance under the Fund appeared to have become more stringent. In response, DD/HA clarified that there were in fact no established criteria in the past. HA therefore had to assess an applicant’s eligibility on the basis of how the purchase of the medical item would burden the household taking into consideration the household income. Under the revised criteria, an income level higher than that used under the CSSA scheme would be adopted. In addition, the applicant’s household savings should not exceed three times of the cost of the privately purchased medical item. Members considered that while the savings criterion would be reasonable for expensive items, it might be too stringent for the purchase of items of lower cost. DD/HA noted Members’ concern and added that HA would review the revised criteria to ensure that they were not stricter than the previous practice, and that the needy would not be debarred from assistance under the revised policy.

30. The Committee approved the item.

Item No. 6 - FCR(95-96)79

HEAD 30 - CORRECTIONAL SERVICES DEPARTMENT
Subhead 603 Plant, vehicles and equipment

31. A Member commented that the existing recurrent cost of $3.1 million which represented almost 40% of the system cost was too high. In response, the Assistant Commissioner of Correctional Services advised that with the replacement of the system, the annual maintenance costs would be reduced to $1.86 million. He agreed to provide Members with the annual repairs and maintenance costs in the past few years. He also confirmed that there would not be any Electrical and Mechanical Services Department charges as the system was outside the inter-departmental charging arrangements (Operating Services Account).

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32. The Committee approved the item.

Item No. 7 - FCR(95-96)80

CAPITAL WORKS RESERVE FUND
HEAD 708 - CAPITAL SUBVENTIONS AND MAJOR SYSTEMS AND EQUIPMENT
Transport Department
New Subhead “Modernisation of Kowloon Bay Vehicle Examination Centre”

33. The Assistant Commissioner for Transport advised Members that, in addition to the proposed modernisation of facilities aiming at increasing the annual inspection capacity by 25%, there were also longer term plans to cope with the increased demands for vehicle inspection beyond 1999. Upon the contracting out of trailer inspection in 1997, an existing trailer inspection lane could be released for use by other vehicles. In addition, after the relocation of the Tokwawan Centre to the Kai Tak Airport site, a new centre with enhanced capacity would be established. As regards Members’ question on the impact on charges arising from the project, the Administration would provide information in writing.

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34. The Committee approved the proposal.

35. The Committee was adjourned at 5:00 p.m.

Legislative Council Secretariat
15 December 1995

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