Information Paper

Review of the Kindergarten Subsidy Scheme


The Kindergarten Subsidy Scheme (KSS or the Scheme) was introduced in 1995. The Education Department (ED) has recently completed a review of the Scheme. This paper outlines the findings of the review and the preliminary proposals.


2.The aim of KSS is to improve the quality of kindergarten education through the provision of a direct subsidy to kindergartens (KGs). The Scheme enables KGs to meet the proportion of qualified teachers required by the Government without having to increase their fees substantially. KGs joining the KSS must meet the requirement on percentage of trained teachers and pay teachers according to the recommended salary scale. KGs charging school fees not exceeding the cut-off point set by the Government are eligible to join the Scheme.

3.When the KSS was introduced in 1995, the rate of subsidy was calculated on the basis of enrolment, adjusted annually according to the Consumer Price Index (A). There were 415 non-profit-making KGs that year but only 236 joined the KSS. In early 1996, Government conducted the first KSS review, which included an opinion survey among all KGs. The general feedback was that both the eligibility cut-off point and subsidy rate should be raised. Details of the review were reported to the then Legislative Council Panel on Education on 3 May 1996.

4.In the light of the first review, improvement measures were introduced from the 1996-97 school year. They include raising the eligibility cut-off point from 1.2 to 1.5 times of the weighted average school fee of non-profit-making KGs in the previous school year; and adjusting the annual rate of subsidy according to the increase in Consumer Price Index (A) plus 5% increment to take account of teachers' salary rise. Despite such improvements, there is no significant increase in the number of KGs joining KSS. The main features of the existing KSS and conditions of subsidy are at Annex.

5.To enhance the attractiveness of the Scheme and to encourage KGs to employ more Qualified Kindergarten Teachers (QKTs) to meet the Chief Executive's policy commitment to increase the proportion of qualified KG teachers , Government has earmarked an additional $35 M from the 1998-99 school year (the total annual provision will be $120 M).

The Review

6.To take stock of how the Scheme has been operating in the past two years with a view to improving the attractiveness of the Scheme and making optimal use of the additional resources, ED has set up a working group (WG) a few months ago to further review the KSS. Views were sought from KG operators, the Kindergarten Education Consultative Committee, Board of Education Sub-committee on Pre-primary Education and the general public. Amongst the views collected by the WG, the majority favoured changing the present mode of subsidy basing on the size of enrolment to one directly linked to teachers' salaries. Some also suggested that Government should increase resources to encourage KGs to employ more QKTs.

7.In reviewing the operation of KSS, the WG found that the Scheme has achieved certain success in improving the quality of KG education. For example, in the 1995-96 school year, the wastage rate of teachers in KGs which have joined KSS was 10%, whilst that in other KGs was 16%; and in the 1996-97 school year; the average annual salary for teachers in KSS KGs was 12% higher than teachers working in other KGs. Furthermore, KSS has achieved the aim of minimising the impact of fee increases on parents resulting from the new regulatory requirements.

Preliminary proposals

8.After careful consideration of the views from concerned parties, the WG considered that there were two possible options:

  1. To continue the existing mode of subsidy, i.e. that the calculation of subsidy should still be based on enrolment. The rate of subsidy (which is $880 per pupil per annum) will be adjusted annually by the increase in Consumer Price Index (A) plus a factor of 5% to take account of teachers' annual salary increment;

  2. To change the mode of subsidy and subsidise a certain percentage of teachers' salaries. The initial thinking is to implement the revised scheme in two stages starting from the 1998-99 school year. In the first two years, the salaries of QKTs , Qualified Assistant Kindergarten Teachers (QAKTs) and principals holding the Certificate in Kindergarten Education qualification will be subsidised. Starting the third year, subsidy will only be given to QKTs and principals holding the Certificate in Kindergarten Education qualification.

The proposal to include subsidy for QAKTs in the first two years is because many KGs are still employing such teachers. With this transitional arrangement, KGs will be given more time to recruit qualified teachers. It is anticipated that with the gradual increase in the supply of QKTs, KGs joining KSS will be able to employ more qualified teachers.

9.The WG considered that irrespective of the option to be adopted by Government, the existing basis of calculation for the eligibility cut-off point should be maintained at 1.5 times of the weighted average school fees of the previous school year for non-profit-making KGs. If the second option were to be adopted, the WG considered it necessary to set an upper limit to the manning scale to ensure the proper use of public funds. For example, the ceiling could be two teachers per class. The preliminary inclination of the WG is to support the second option as it addresses more directly the concerns expressed by the KG sector. It could also encourage KGs to increase the employment of qualified teachers. Irrespective of the option to be adopted in the final analysis, the total financial outlay should not exceed the total allocation of $120 million.

Advice Sought

10.Members are invited to comment on the initial proposals set out in paragraphs 8 and 9 above. We will finalise our proposal after considering the views from Panel members, concerned parties and organisations. The final proposal will be further examined within the Administration before we seek funding approval from the Finance Committee of the Provisional Legislative Council.

Education Department
January 1998


Main features of the existing Kindergarten Subsidy Scheme and Conditions of Subsidy

Main Features

  1. Kindergartens (KGs) charging schools fees not higher than $13,200 per pupil per annum (pppa) in the 1996-97 school year are eligible to apply for Government subsidy under the KSS. The eligibility cut-off point is equivalent to 1.5 times of the weighted average school fee of non-profit-making KGs in the 1996-97 school year.

  2. In the 1997-98 school year, the rate of subsidy is $880 pppa. It is adjusted annually by the increase in Consumer Price Index (A) plus 5% annual increment on teacher salary. Smaller KGs with 80 or fewer pupils are given a subsidy equivalent to that of a KG with 80 pupils.

  3. KGs approved to join the KSS will have their operating costs adjusted by the amount of subsidy before the final fee level is determined.

  4. Within the 3-year transitional period (1995-96 to 1997-98 school years), profit-making KGs are allowed to join KSS if they have undertaken to convert to non-profit-making status. After the 1997-98 school year, only non-profit-making KGs will be eligible to apply for KSS.

Conditions of Subsidy

  1. KGs joining KSS are required to fulfil the following conditions:

    1. to employ at lease 40% Qualified Kindergarten Teachers; and

    2. to pay teachers according to Government's recommended salary.