PLC Paper No. LS 43

Paper for the House Committee Meeting of the
Provisional Legislative Council
on 7 November 1997

Legal Service Division Report on Resolution under section 12 of the Trading Funds Ordinance
(Cap. 430)

The Secretary for the Treasury has given notice to move a motion to close the Sewage Services Trading Fund ( " the Fund " ) on 31 March 1998 at the meeting of the Council on 19 November 1997.

2.The Fund was established by a resolution of the Legislative Council passed under the Trading Funds Ordinance (Cap. 430) in March 1994. It is responsible to finance the construction of a High Priority Programme for the collection, treatment and disposal of sewage around the harbour. As from April 1995, it is also responsible for operating a sewage charging scheme. For a trading fund, it is required to meet all its expenses out of revenue.

3.Under the Sewage Services Ordinance (Cap. 463), the Chief Executive in Council may make regulations prescribing the rate to be used for sewage charges and any increase is subject to disallowance by the legislature. Since the Administration was unsuccessful in securing the previous LegCo's agreement to increase sewage charges in line with inflation, and in view of the rapid growth in operating expenditure as new facilities are brought on stream, the Fund is forecast to incur large operating deficits in the coming years. The Administration is of the view that the only way to make up the deficits is to close the Fund and re-establish sewage services on a vote-funded basis.

4.By virtue of section 12 of the Trading Funds Ordinance, the Legislative Council may, on the recommendation of the Financial Secretary, resolve to close a trading fund. The Financial Secretary shall set out the arrangements for the closure of the trading fund in the proposed resolution. The definition of Financial Secretary for this purpose under the Interpretation and General Clauses Ordinance (Cap.1) includes the Secretary for the Treasury.

5.The Secretary for the Treasury now proposes to close the Fund at the end of the day on 31 March 1998. On the closure of the Fund, all money whether from operating revenue or from cash assets shall be part of the Capital Investment Fund. All liabilities shall be assumed by the Government and all other assets shall be transferred back to and form part of the property of the Government. Thereafter, funding of recurrent expenditure on sewage services would be provided for in the General Revenue Account Estimates.

6.The Panel on Environmental Affairs was briefed on this proposed resolution during the 19 September 1997 meeting (See Ref. WB(CR) 10/84 (97) issued by the Works Bureau). According to paragraph 26 of the minutes of that meeting, Members present at that meeting generally supported closure of the Fund.

7.The proposed Resolution is in order from the legal point of view.

Prepared by

Ho Ying-chu, Anita
Assistant Legal Adviser
Provisional Legislative Council Secretariat
3 November 1997