FCR(98-99)75

For discussion
on 5 February 1999

HEAD 46 - GENERAL EXPENSES OF THE CIVIL SERVICE
Subhead 038 Private tenancy allowance

Members are invited to approve supplementary provision of $17 million under Subhead 038 Private tenancy allowance.

PROBLEM

The approved provision under this subhead is not sufficient to meet increased expenditure in 1998-99.

PROPOSAL

2. The Director of Accounting Services (DAS) requests supplementary provision of $17 million under Subhead 038 Private tenancy allowance.

JUSTIFICATION

3. On the basis of actual expenditure for the nine months from April to December 1998, DAS estimates that expenditure for payments of Private Tenancy Allowance (PTA) to eligible staff in 1998-99 will exceed the approved provision by about $17 million, calculated as follows -

4. The supplementary provision required is mainly due to -

1. a higher than estimated number of PTA recipients during 1998-99 which accounts for $2 million of the supplementary provision sought. In compiling the 1998-99 Estimates, we estimated an average of 648 PTA recipients throughout the year. On the basis of the actual position in the first nine months of the year, we now estimate an average of 657 PTA recipients for the fiscal year; and

2. a higher than estimated payment per PTA recipient which accounts for about $15 million of the supplementary provision sought. In preparing the estimated requirement for 1998-99, DAS assumed $24,400 as the average payment for each existing recipient, based on the actual expenditure and number of recipients at that time. The actual average payment for each recipient turns out to be $26,000 calculated on the basis of the actual expenditure and number of recipients over the past nine months. This is partly attributed to the increase of 14.4% to 16.6% in PTA rates from 1 April 1998 in accordance with the established mechanism (see paragraph 7 below).

FINANCIAL IMPLICATIONS

5. If Members approve the proposal, we will offset the supplementary provision required by deleting an equivalent amount from Subhead 013 Personal allowances under the same Head of Expenditure. The reduced requirement under Subhead 013 arises mainly because the number of officers drawing overseas education allowance is smaller than originally estimated.

BACKGROUND INFORMATION

6. PTA is for local officers who are on Master Pay Scale (MPS) point 34 or above (or equivalent) and overseas officers irrespective of pay point, appointed before 1 October 1990. It provides a monthly allowance for renting accommodation during an officer's employment with the Government. Officers receiving PTA and who are on or above MPS point 34 (or equivalent) may opt to join the Home Financing Scheme (HFS) by forfeiting their entitlement to PTA before their option deadline. They will have a reduced entitlement period under the HFS if they opt to join the scheme after their deadline. Local officers appointed on or after 1 October 1990 are eligible for HFS as a condition of service but are not eligible for PTA.

7. The rates of PTA are adjusted on 1 April each year on the basis of the changes in the rental indices in the third and fourth quarters as compared to those in the previous year compiled by the Rating and Valuation Department. To illustrate, for the 1 April 1998 revisions, the basis for adjustments was the rental indices in the third and fourth quarters of 1997 as compared to those in the third and fourth quarters of 1996. The revised rates will be applicable to officers who first start to draw PTA and to those existing PTA recipients whose tenancies commence after the adjustment. But those recipients whose tenancies commence before the adjustment will continue to claim PTA at the "old" rates for their tenancies (except where the revised rates are higher, those who have been topping up the cost of renting themselves may claim the increased rates). Those who change tenancies before expiry of their current lease will normally be allowed to do so on the condition that, for the remaining period of the lease, the PTA payable in respect of the new tenancy shall not exceed that payable in respect of the old tenancy. That is to say, after the original expiry date of the old tenancy, the officers will only be eligible for the rates of allowance then prevailing.

8. PTA rates were adjusted downward in 1966, 1984 and 1996 in line with the decrease in the rental indices. Finance Committee approved in 1991 vide FCR(90-91)181 to delegate to the Secretary for the Treasury the authority to revise the rates of PTA in accordance with the rental movements in certain geographical areas where the majority of PTA claimants live. In view of the recent fall in the rental market, we anticipate that the rates of PTA will be correspondingly reduced in April 1999.

9. In line with normal practice, we do not make any provision for inflation adjustment for PTA under the relevant subhead in the original Estimates but would deal with any additional requirement that may be required during the financial year through supplementary provision.

Civil Service Bureau
January 1999