For discussion
FCR(97-98)25
on 23 July 1997


ITEM FOR FINANCE COMMITTEE

HEAD 40 - EDUCATION DEPARTMENT

Subhead 305 Code of Aid for secondary schools
Subhead 350 Refund of rents and rates to kindergartens, private schools and study rooms

HEAD 177 - SUBVENTIONS : NON-DEPARTMENTAL PUBLIC BODIES

Subhead 514 Hospital Authority

HEAD 190 - UNIVERSITY GRANTS COMMITTEE

Subhead 496 Refund of rates - UGC-funded institutions

Members are invited to approve -

  1. expansion of the ambits of Head 40 Education Department Subhead 350 Refund of rents and rates to kindergartens, private schools and study rooms and Head 190 University Grants Committee (UGC) Subhead 496 Refund of rates - UGC-funded institutions to cover refund of Government rents to organisations under these Subheads; and

  2. supplementary provision as follows to meet an increase in expenditure in 1997-98 for refund of Government rents to the subvented organisations concerned -

    1. $22,614,000 under Head 40 Education Department Subhead 305 Code of Aid for secondary schools;

    2. $10,100,000 under Head 40 Subhead 350 Refund of rents and rates to kindergartens, private schools and study rooms;

    3. $10,050,000 under Head 177 Subventions : Non-departmental Public Bodies Subhead 514 Hospital Authority; and

    4. $38,000,000 under Head 190 University Grants Committee Subhead 496 Refund of rates - UGC-funded institutions.


PROBLEM

The existing ambits of Head 40 Subhead 350 and Head 190 Subhead 496 do not provide for the refund of Government rents to eligible kindergartens, private schools and UGC-funded institutions. The approved provision under Head 40 Subheads 305 and 350, Head 177 Subhead 514 and Head 190 Subhead 496 are inadequate to meet the requirements in 1997-98.

PROPOSAL

2.We propose to expand the ambits of Head 40 Subhead 350 and Head 190 Subhead 496 to cover the refund of Government rents to private non-profit-making kindergartens and schools and UGC-funded institutions, and to approve supplementary provision of $22,614,000, $10,100,000, $10,050,000 and $38,000,000 under Head 40 Subheads 305 and 350, Head 177 Subhead 514 and Head 190 Subhead 496 respectively to meet the additional requirement in 1997-98.

JUSTIFICATION

3.The Government Rent (Assessment and Collection) Ordinance came into operation on 30 May 1997. The main purpose of the Ordinance is to implement the provisions in Annex III to the Sino-British Joint Declaration (JD) and Article 121 of the Basic Law, which stipulate the charging of an annual rent at a rate of 3% of the rateable value of the property for the extension of leases not containing a right of renewal that expired before 30 June 1997 and for the granting of new leases on or after 27 May 1985 and until 30 June 1997.

4.At present, private non-profit-making kindergartens and schools and subvented organisations such as those in the welfare, education and health sectors receive refund of rates. In line with existing subvention policy, we consider that we should also extend the refund arrangement to cover Government rents.

5.The existing ambits of Head 40 Subhead 350 and Head 190 Subhead 496 do not provide for the refund of Government rents to the organisations concerned. The proposed refund of Government rents to these organisations will require expansion of the ambits. At the same time, the approved provision for the affected organisations are inadequate and require supplementary provision in 1997-98.

FINANCIAL IMPLICATIONS

6.We estimate that the refund of Government rents to relevant organisations will require supplementary provision of $109,001,000. A breakdown of the requirement by Head/Subhead is at the Enclosure. Supplementary provision for Head 40 Subheads 305 and 350, Head 177 Subhead 514 and Head 190 Subhead 496, each of which exceeds $10 million, will require Members' approval. We will deal with supplementary provision not exceeding $10 million under delegated authority in the usual manner. If Members approve the proposal, we shall offset the supplementary provision of $109,001,000 by deleting an equivalent amount under Head 106 Miscellaneous Services Subhead 251 Additional commitments.

BACKGROUND INFORMATION

7.Annex III to the JD provides that all leases of land not containing a right of renewal that expired before 30 June 1997 might be extended up to 30 June 2047 without payment of an additional premium. Instead, an annual rent shall be charged from the date of extension equivalent to 3% of the rateable value of the property of the lease at that date, adjusted in step with any changes in the rateable value thereafter. Moreover, from the entry into force of the JD on 27 May 1985 until 30 June 1997, new leases of land might be granted for terms expiring not later than 30 June 2047. Such leases shall be granted at a premium and nominal rental until 30 June 1997, after which date they shall not require payment of an additional premium but an annual rent equivalent to 3% of the rateable value of the property at that date, adjusted in step with changes in the rateable value thereafter, shall be charged.

8.The leases affected include -

  1. leases in the New Territories (including New Kowloon) which would have expired on 27 June 1997 had they not been extended until 30 June 2047 under the New Territories Leases (Extension) Ordinance;

  2. leases in the urban area which have been extended since the entry into force of the JD; and

  3. leases granted since the entry into force of the JD on 27 May 1985.

Finance Bureau
July 1997



Enclosure to FCR(97-98)25

Payment of Government Rent in 1997-98

HeadSubheadSupplementary
provision
required in
1997-98
$'000
37Department of Health511-Subvented institutions120
40Education Department300-Code of Aid for primary schools5,239
305-Code of Aid for secondary schools 22,614
320-Code of Aid for special schools977
330-Assistance to private secondary schools and bought places3,076
340-English Schools Foundation junior schools398
345-English Schools Foundation secondary schools662
350-Refund of rents, Government rents and rates to kindergartens, private schools and study rooms10,100
63Home Affairs Department470-Subventions to New Territories organisations26
170Social Welfare Department410-Rehabilitation services (grants)2,588
411-Social welfare services (grants)6,662
176Subventions : Miscellaneous521-Skills centres483
503-Subventions to voluntary agency camps530
177Subventions : Non-departmental public bodies520-Vocational Training Council6,316
441-Hong Kong Productivity Council1,160
514-Hospital Authority10,050
190University Grants Committee496-Refund of rates and Government rents - UGC-funded institutions38,000
Total109,001




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