FCR(1999-2000)32

For discussion
on 2 July 1999

ITEM FOR FINANCE COMMITTEE


HEAD 112 - LEGISLATIVE COUNCIL COMMISSION
Subhead 366 Remuneration and reimbursements for Members of the Legislative Council
Subhead 872 Setting up and winding up expenses for Members of the Legislative Council

    Members are invited to approve modifications to the remuneration and reimbursement package for Members of the Legislative Council with immediate effect as recommended by the Independent Commission on Remuneration for Members of the Executive Council and the Legislature of the Hong Kong Special Administrative Region.

PROBLEM

We need to give Members of the Legislative Council (LegCo) greater flexibility in the use of their operating expenses reimbursements and more support to help them in discharging their functions.

PROPOSAL

2. We propose, with immediate effect -

  1. to merge the reimbursement for "office and staff expenses" ($88,600 per month) with that for "district office expenses" ($14,760 per month), making available a total amount of $103,360 per month to each LegCo Member as "accountable expenses reimbursement for office operation", subject to adjustment in October each year in accordance with the movement of the Consumer Price Index (C);

  2. to merge the reimbursement for expenses on setting up the central office ($50,000) with that for district office(s) ($100,000), making a total of $150,000 available to each LegCo Member for setting up offices for each LegCo term (up to 50% of this amount would be available to re-elected Members who have claimed the setting up expenses in the previous term for the purposes of renovation, removal, expansion and/or setting up of additional office(s));

  3. to remove the 50% ceiling on the non-accountable portion of the allowance for "entertainment and travelling expenses";

  4. to allow Members to deploy up to 50% of the allowance for "entertainment and travelling expenses" for meeting staff expenses on an accountable basis;

  5. to make available an "information technology and communication equipment expenses reimbursement" of up to $100,000 to each LegCo Member per LegCo term. This expenses reimbursement is to be drawn only after the reimbursement for setting up expenses at (b) above has been fully utilised. Members who draw on this expenses reimbursement within the first Special Administrative Region (SAR) LegCo term and who are re-elected to the second SAR LegCo will not be entitled to a fresh provision in the second LegCo term. They will only be eligible to draw on the unexpended portion under their entitlement during the first LegCo term. All Members will be eligible to the full entitlement in the third term and thereafter; and

  6. to make available the current remuneration and reimbursement package for LegCo Members, as revised to incorporate changes at (a) to (e) above, to Members of the second SAR LegCo.

JUSTIFICATION

3. In response to LegCo Members' request, the Independent Commission on Remuneration for Members of Executive Council and the Legislature of the Hong Kong Special Administrative Region (the Independent Commission) has reviewed Members' level of operating expenses reimbursements and recommended modifications to Members' renumeration and reimbursement package. We accept the Independent Commission's recommendations to provide greater flexibility in the use of the operating expenses reimbursements and to create a new expenses reimbursement to help Members improve communication with the public through wider use of information technology.

4. The Independent Commission appreciates Members' wish to have more resources to improve office operation but considers that, under the present economic environment, it would not be appropriate to increase the operating expenses reimbursements for Members. Instead, Members should be provided with further flexibility in the use of the reimbursement for staff and office expenses. Since both the reimbursement for "district office expenses" and that for the "office and staff expenses" are provided to support Members in running their offices, the Independent Commission recommends merging the two, which should be consistent with the purpose of the funding. The two existing expenses reimbursements are adjusted annually in October each year by the Secretary for the Treasury under delegated authority in accordance with the movement of the Hang Seng Consumer Price Index, which will be replaced by the Consumer Price Index (C). We propose that the "accountable expenses reimbursement for office operation" should be subject to annual revisions on the same basis.

5. The current arrangement of two separate and distinct reimbursements for expenses on setting up Members' central office (in accommodation provided by Government) and district office(s) is over restrictive. This makes it impossible for Members to use the spare resources in one to make up for any shortfall in the other. The Independent Commission recommends that the two expenses reimbursements should be merged to allow Members greater flexibility in using the funds to meet their individual requirements in the setting up of offices.

6. The Independent Commission recommends that the 50% ceiling for the non-accountable portion (i.e. not supported by receipts) of the allowance for "entertainment and travelling expenses" should be removed to streamline administrative arrangements and save costs. The Independent Commission considers retaining a separate allowance for "entertainment and travelling expenses" to be necessary, since Members will inevitably incur some entertainment and travelling expenses.

7. Nevertheless, in view of some Members' wish to expend more on staffing, the Independent Commission has no objection to providing further flexibility to Members whereby up to 50% of the allowance for "entertainment and travelling expenses" may be used to meet staff expenses. The use of the "entertainment and travelling expenses" allowance for employing staff will have to be on an accountable basis as the Government has to pick up the cost of severance payments to these staff upon the winding up of offices by Members.

8. The Independent Commission appreciates Members' wish to operate more district offices to better serve the public, but observes that there is a practical limit to the time that Members can spend in each district office given the heavy commitment of LegCo Members in general. The Independent Commission is therefore of the view that Members should be encouraged to maintain contact with the public through other means such as by fax or electronic mail in addition to the usual face to face meetings with the public at their district offices. The Independent Commission therefore recommends that a reimbursement of "information technology and communication equipment expenses" be provided to encourage Members to purchase/upgrade information technology and communication equipment during their term of office. We propose that this new expenses reimbursement should be made available to current Members with immediate effect. However, since the first SAR LegCo term is for a period of only two years and there is now less than a year to go, Members re-elected to the second LegCo will only be eligible to draw on the unexpended portion under their entitlement during the first LegCo.

9. It would be appropriate to apply the modified package to the second SAR LegCo which will commence in about a year's time. Announcing the details of the remuneration and reimbursement package for the second LegCo term early will enable potential candidates to be aware of the amount of resources available to them should they be elected to the second LegCo.

FINANCIAL IMPLICATIONS

10. Merging the reimbursement for "district office expenses" and that for the "office and staff expenses" into an "accountable expenses reimbursement for office operation", and making available up to 50% of the allowance for "entertainment and travelling expenses" for hiring staff would entail financial implications for the Government when Members' offices are wound up. This is because retiring Members are provided with reimbursements for "winding up expenses", and that portion of the "winding up expenses" reimbursement for making statutory severance payments to Members' staff is not subject to a financial limit as long as the staff are employed with operating expenses provided by the Government. The more staff engaged by Members using the increased flexibilities provided will give rise to a greater requirement for severance payments. The actual financial implications will depend on the actual liabilities of Members arising from severance pay to their staff. We estimate that the maximum financial implications for the current LegCo term would be about $800,000 (assuming all Members use the full amount of the "accountable expenses reimbursement for office operation" and 50% of the allowance for "entertainment and travelling expenses" for hiring staff). For a four-year term, the corresponding maximum financial implications are about $3.5 million.

11. Merging the two setting up expenses reimbursements for the central office and the district office(s), and removing the 50% ceiling for the non- accountable portion of the allowance for "entertainment and travelling expenses" will not carry any additional financial commitment.

12. Provision of a new reimbursement for "information technology and communication equipment expenses" will incur non-recurrent expenditure of up to $6 million for a LegCo term, on the assumption that all Members would claim up to the maximum of their entitlement. We will approve the commitment and supplementary provision required in 1999-2000 under delegated authority.

BACKGROUND INFORMATION

13. On 14 July 1995, Finance Committee considered FCR(95-96)44 and approved a revised remuneration package for LegCo Members. On 12 April 1996 and 10 January 1997, Finance Committee considered FCR(96-97)4 andFCR(96-97)89 and approved modifications to the package for LegCo Members. Details of the current remuneration and reimbursement package for LegCo Members are at Enclosure 1.

14. At its meeting on 10 July 1998, the LegCo House Committee decided to form a Subcommittee on Review of Operating Expenses for Members of the Legislative Council to review the operating expenses for LegCo Members. The Subcommittee met with the Administration in September 1998, and April and June 1999 to discuss the level of operating expenses for LegCo Members. Views and suggestions made by the LegCo Subcommittee were relayed to and considered by the Independent Commission before the modifications to the remuneration and reimbursement package as currently proposed were drawn up. The proposed modifications were presented to and accepted by the LegCo Subcommittee at its meeting on 17 June 1999. The modified package, incorporating the changes, is detailed at Enclosure 2.


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Administration Wing
Offices of the Chief Secretary for Administration and the Financial Secretary
June 1999


Enclosure 1 to FCR(1999-2000)32


Current Remuneration and Reimbursement Package
for Legislative Council (LegCo) Members

  1. Monthly remuneration of $63,870(Note).

  2. Monthly operating expenses reimbursement and allowance comprising -

    1. an accountable expenses reimbursement for office rental, rates, management charges and utilities expenses of up to $14,760 (i.e. as reimbursement for "district office expenses");

    2. an accountable expenses reimbursement for office and staff expenses of up to $88,600; and

    3. an allowance for "entertainment and travelling expenses" of up to $14,760 (50% of which is non-accountable).

  3. A setting up expenses reimbursement of up to $100,000 for Members to set up district office(s) (up to 50% of the expenses reimbursement for re-elected Members who have claimed the reimbursement in the previous LegCo term for the purposes of renovation, removal, expansion and/or setting up of additional office(s)).

  4. A setting up expenses reimbursement of up to $50,000 for Members to take up their allocated central offices (up to 50% of the expenses reimbursement for re-elected Members who have claimed the reimbursement in the previous LegCo term for the purposes of renovation, removal, expansion and/or setting up of additional office(s)).

  5. Winding up expenses reimbursement comprising two parts -

    1. a fixed amount equivalent to the total monthly operating expenses reimbursement covering "office and staff expenses" and "district office expenses", i.e. a total of $103,360, of which $10,000 may be claimed against certified claims of expenses incurred, to enable Members to cover expenses incurred when they cease to be Members of the legislature, either because they decide not to stand for re-election or for reasons beyond their control such as death, serious injury, defeat in an election or the dissolution of the legislature; and

    2. a separate amount with no pre-set ceiling, payable on the basis of the actual severance payment that needs to be paid to staff employed using the operating expenses reimbursement and in accordance with the provisions of the Employment Ordinance. LegCo Members are eligible to compensate their staff who have worked for them for less than two years on a pro-rata basis at the rate of two-thirds of the employees' last month's salary for each year of service if Members have to cease office for reasons over which they have no control.

  6. The LegCo President is entitled to a monthly remuneration of $127,730, an annual entertainment expenses reimbursement of up to $177,200 and the operating expenses reimbursements as other LegCo Members receive. The President's Deputy, i.e. Chairman of the House Committee, is entitled to a monthly remuneration of $95,810 and the operating expenses reimbursements as other LegCo Members receive.

The amounts under item (a), (b), (e)(i) above, the monthly remuneration and the annual entertainment expenses reimbursement of the LegCo President, and the monthly remuneration of the President's Deputy are annually adjusted in October in accordance with the movement of the Hang Seng Consumer Price Index (to be replaced by Consumer Price Index (C)). The current levels of monthly renumeration and the operating expenses reimbursements have been applicable since October 1998.



(Note) LegCo Members who also sit on the Executive Council will receive two-thirds of the salary components of the LegCo remuneration package. For Members who also serve on the Provisional Municipal Councils and/or the Provisional District Boards, they receive the LegCo remuneration package in full (including the expenses reimbursements) with two-thirds of the honorarium for the other tiers of representative government.



Enclosure 2 to FCR(1999-2000)32


Proposed Modified Remuneration and Reimbursement Package
for Legislative Council (LegCo) Members

  1. Monthly remuneration of $63,870(Note).

  2. Monthly operating expenses reimbursement and allowance comprising -

    1. an "accountable expenses reimbursement for office operation" of up to $103,360; and

    2. a non-accountable allowance for "entertainment and travelling expenses" of up to $14,760. Up to 50% of this allowance can be used by Members to meet staff expenses on an accountable basis, with the Government bearing the financial responsibility of the associated severance payments in future.

  3. Other reimbursable operating expenses comprising -

    1. a setting up expenses reimbursement of up to $150,000 for each LegCo Member per LegCo term to set up their offices (up to 50% of the expenses reimbursement for re-elected Members who have claimed the expenses reimbursement in the previous LegCo term for the purposes of renovation, removal, expansion and/or setting up of additional office(s)); and

    2. an "information technology and communication equipment expenses reimbursement" of up to $100,000 for each LegCo Member per LegCo term. This expenses reimbursement is to be drawn after the reimbursement for setting up expenses has been fully utilised. Members who draw on this expenses reimbursement within the first Special Administrative Region (SAR) LegCo term and who are re-elected in the second LegCo term will not be entitled to a fresh provision in the second LegCo term. They will only be eligible to draw on the unexpended portion under their entitlement during the first SAR LegCo term. All Members will be eligible to the full entitlement in the third term and thereafter.

  4. Winding up expenses reimbursement comprising two parts -

    1. a fixed amount equivalent to the "accountable expenses reimbursement for office operation" i.e. $103,360, payable on a reimbursement basis, of which $10,000 may be claimed against certified claims of expenses incurred, to enable Members to cover expenses incurred when they cease to be Members of the legislature, either because they decide not to stand for re-election or for reasons beyond their control such as death, serious injury, defeat in an election or the dissolution of the legislature; and

    2. a separate amount with no pre-set ceiling, payable on the basis of the actual severance payment that needs to be paid to staff employed using the "accountable expenses reimbursement for office operation"and up to 50% of the allowance for "entertainment and travelling expenses", and in accordance with the provisions of the Employment Ordinance. LegCo Members are eligible to compensate their staff who have worked for them for less than two years on a pro-rata basis at the rate of two-thirds of the employees' last month's salary for each year of service if Members have to cease office for reasons over which they have no control.

  5. The LegCo President is entitled to a monthly remuneration of $127,730, an annual entertainment expenses reimbursement of up to $177,200 and the operating expenses reimbursements as other LegCo Members receive. The President's Deputy, i.e. Chairman of the House Committee, is entitled to a monthly remuneration of $95,810 and the operating expenses reimbursements as other LegCo Members receive.

The amounts under item (a), (b), (d)(i) above, the monthly remuneration and the annual entertainment expenses reimbursement of the LegCo President, and the monthly remuneration of the President's Deputy are annually adjusted in October in accordance with the movement of the Hang Seng Consumer Price Index (to be replaced by Consumer Price Index (C)).



(Note) LegCo Members who also sit on the Executive Council will receive two-thirds of the salary components of the LegCo remuneration package. For Members who also serve on the Provisional Municipal Councils and/or the Provisional District Boards, they receive the LegCo remuneration package in full (including the expenses reimbursements) with two-thirds of the honorarium for the other tiers of representative government.