LegCo Paper No. CB(1)1885/95-96
(These minutes have been seen by the Administration)
Ref : CB1/PL/ED/1

LegCo Panel on Education

Minutes of Special Meeting
held on Friday, 31 May 1996 t 10:45 a.m.
in Conference Room B of the Legislative Council Building

Members Present :

Member Attending :

Public Officers Attending :

Item I and II
Item I
Item II
Item III

Attendance by Invitation :

Ernst & Young Management Consultants Ltd

Staff in Attendance :

I. Consultancy study on Local Student Finance Scheme

II. Review of the salary scales of the heads of the UGC-funded institutions

III. Any other business

I. Consultancy study on Local Student Finance Scheme

(LegCo Paper Nos. CB(1)1488/95-96, 1501/95-96; Chinese translation of the report summary, position papers prepared by Dr Hon CHEUNG Bing-leung and Hon Henry TANG Ying-yen tabled at the meeting. Hon YUM Sin-lings position paper issued vide LegCo Paper No. CB(1)1552/95-96 after the meeting.)

Mr Matthew CHEUNG began by emphasizing that the Administration kept an open mind on the recommendations of the consultancy study and welcomed public feedback on the matter. He said that this was the first overall review of the Local Student Finance Scheme (LSFS) since it was introduced in 1969.

2. Mr Ivan Kinsella presented the key findings and main recommendations of the consultancy study on the LSFS as follows :

The LSFS was under increasing pressure as a result of rapid growth in the number of tertiary students and the steady rise in tuition fee to achieve the 18% cost recovery target by 1997-98.
The existing assessment formula and vetting procedures were complex and non-transparent. The current Annual Disposable Income (ADI) formula failed to provide an objective measure of need as it might also benefit families with high household income and high expenditure. According to the present trends, by 1997-98, 75% of the students would be classified as needy and be eligible for Government assistance under the LSFS. This figure might rise to over 90% towards the year 2000. It might not be reasonable for such a big proportion of students to be classified as needy.
In order to target grant assistance more tightly at the genuinely needy, the Consultants preferred option was that students who passed the simplified Adjusted Family Income (AFI) test would receive grants covering their living costs, academic expenses and accommodation costs (if qualified under a separate need-based test) in proportion to their household income.
A new non-means tested loan scheme was proposed for all students to cover up to the total tuition fees, academic expenses, living costs and accommodation costs (if qualified) less any grants received. Loans would be repayable over 15 years after graduation. Interest would accrue from the date the loan was drawn down and the rate would be equivalent to that of the Civil Service Housing Loan Scheme (CSHLS) (currently at 5.8% per annum) during the study period and the five-year period immediately after graduation. Thereafter, the prime rate (currently 8.5% per annum) would apply.

3. Mr Alfred WONG also briefed members on proposed improvements to the existing LSFS to be implemented in anticipation that the new scheme might take longer to consider and implement.

4. Some members expressed strong reservation on the findings and recommendations of the consultancy study. They did not consider the new scheme compatible with the existing policy of providing financial assistance to needy students only and queried if it was the Governments intention to reduce its share of costs for tertiary education. Some members urged the Government to continue and improve the existing LSFS and suggested that the new scheme be implemented as an additional option for students. In this connection, some members also called for a review of the 18% cost recovery policy and an evaluation of the cost-effectiveness of UGC-funded institutions.

5. In response, Mr CHEUNG stressed that the Government had no intention to reduce its financial support to tertiary students. As regards the tuition fee policy, Mr CHEUNG re-affirmed the Administrations position to recover 18% of recurrent cost by 1997-98 and to maintain it thereafter. Mr Kinsella added that the new scheme would remain non-cash limited. The amount of grants disbursed would continue to increase under the new scheme. According to the Consultants estimates, the total amount of grants available would be increased by $118 million if the new scheme had been introduced in 1995-96.

6. On the proposed new scheme, some members were strongly opposed to not providing grant assistance for tuition fees. They contended that the increase in the cost recovery rate in recent years had resulted in sharp rise in tuition fees. Dr Hon YEUNG Sum stated that the Democratic Party would strongly protest against the Government if it failed to uphold its promise to provide adequate assistance to students to cope with the increase in tuition fees. Another member said that the new scheme would fail to provide assistance to the majority of students who were from the low income group. He added that it was inappropriate to exclude family expenditure from the assessment formula.

7. In reply, Mr Kinsella gave further explanation as follows:

Option A of the proposed grant scheme was the Consultants preferred option, under which assistance would cover primarily living costs rather than tuition fees. Under Option B, grants would cover primarily tuition fees. The Consultants considered that grants should best be used to provide needy students with sufficient cash to maintain a similar living standard as other students rather than to help them pay tuition fees.
The AFI formula would focus on total family income and contain no expenditure test. It was believed that a family usually had less control over its income than over its expenditure.
An additional element of assistance for the genuinely needy students not covered by the present scheme was an accommodation refund. Up to $15,000 per annum would be provided to each student who qualified on the grounds of long distance from their homes to the institutions concerned and/or unfavourable current housing conditions.

8. Concerning the new loan scheme, some members opined that it would be unreasonable to charge commercial rate on student loans as this would impose a heavy financial burden on students and force poor students to take more part-time jobs during their studies. A member enquired about the financial implications of applying the CSHL rate for the whole borrowing period instead of charging the existing rates of 2.5% for the normal loan and 4% for the extended loan. Another member, however, held a different view that since loans were to be repaid after graduation, students should have the ability to repay when they took up gainful employment. Nevertheless, he considered that there should be flexibility in repayment in the event of low income or unemployment.

9. For the purpose of elucidation, Mr Kinsella made the following points :

Assistance for tuition fees would be catered for by the proposed non-means tested loan scheme. Students would no longer need to take part-time jobs to pay for tuition fees as sufficient access to loans would be available.
The proposed rates of 5.8% and 8.5% were considered very reasonable. They could not be described as commercial rates since no commercial financial institution in Hong Kong offered rates at these levels to students. Although the percentage increase from the current level seemed high, the net increase in dollar terms would be minimal and affordable by graduates. The initial 5.8% rate was the no-loss no-gain rate currently adopted by Government.
The current rate of 2.5% was introduced in 1987 when the inflation rate was 2.5%. The proposed rate of 5.8% was however below current or expected inflation rate of 7% to 8%. The subsequent rate of 8.5% was far lower than the prevailing interest rate of over 20% for most credit card cash advances. Moreover, this rate would only start at the sixth year after graduation by which time the graduates income would have risen with years of working experience.
The 8.5% interest charged on outstanding loans would only serve as a buffer for default in loan repayment.
Flexibility on loan repayment to cater for special circumstances of graduates was part of the Consultants proposals, and the details could be examined further.

10. On the way forward, Mr CHEUNG advised that the Consultants Report was first discussed by the Joint Committee on Student Finance (JCSF) on 27 May 1996. It would consider the report in greater detail with a view to drawing up recommendations to the Administration by mid-August 1996. He stressed that the Administration had not taken a position on the Consultants recommendations and would take into consideration JCSFs recommendations, public feedback and LegCo Members views in developing proposals for improving and/or changing the LSFS. Regarding a members request to extend the consultation period to the end of September 1996 to facilitate tertiary students who were now preparing for their examinations to express their views, Mr CHEUNG agreed to consider the suggestion.

EMB

11. On whether the Panel should invite student representatives of the tertiary institutions to present their views, the Chairman said that this would be decided later in consultation with members.

II. Review of the salary scales of the heads of the UGC-funded institutions

(LegCo Brief ref : EMB CR 21/2041/84; Chinese translation of the brief tabled at the meeting)

12. At the Chairmans invitation, Mr CHEUNG briefed members on the findings and recommendations of the UGC-commissioned consultancy review on the salary scales of the heads of the institutions (HoIs). The Administration had accepted the UGC92's recommendations and the major proposals were as follows :

From a current date subject to the approval of the Finance Committee (FC), salary scales of the heads of Hong Kong Polytechnic University and City University of Hong Kong would be upgraded to Civil Service D8 level while those for the Hong Kong Baptist University and Lingnan College would be upgraded to D7 and D6 levels respectively.
The salary scales of heads of the University of Hong Kong (HKU), the Chinese University of Hong Kong (CUHK) and the Hong Kong University of Science and Technology (HKUST) which were currently set at 98% of the Chief Secretarys salary would be adjusted downward to D8 level. However, the revision should not affect the present incumbents and the designated head of CUHK during their contracts with the institutions.
The Councils of the HKU, CUHK and HKUST might deem it appropriate to offer the present incumbent his salary on a personal basis when entering into a further contract, on the condition that such salary level would be frozen until it was caught up by the D8 salary. The Administration would meet the additional financial requirement if the Councils so recommended.

13. Whilst agreeing that variations in terms of employment should not affect the incumbents, a member queried whether the proposal in paragraph 12(c) was fair and consistent with civil service appointment practices. Other members echoed the concern that the proposed arrangement might set an undesirable precedent on public sector appointment since individual contracts were allowed to deviate from the established salary scale.

14. In response, Mr CHEUNG and Miss Lisa CHAN made the following points :

The concerned recommendation was made in the interest of continuity and with regard to staff management reasons. Indeed, such an exceptional transitional arrangement would not last for long as it was expected that the substantive salary of D8 level would catch up with the present salary of the three HoIs in one or two years time.
The contract for the head of HKUST would be due for renewal in two years time. It was provided in the current contract that it could be extended for a further period of five years. Should the Council of the HKUST recommend to offer the present incumbent the existing salary, the Administration was prepared to accept the additional financial commitment.

15. To follow up on the wider implications of renewing contracts on existing terms, some members queried whether variation in contractual term (i.e. proposed downward salary adjustment of certain HoIs to be equivalent to D8 level) might become a subject of court litigation. In this connection, a member requested the Administration to consider this point and provide information on the manners by which civil service contracts are renewed. The Chairman suggested that the issue should be followed up by the LegCo Panel on Public Service. The Administration was also requested to provide more information on the consultancy review when submitting the proposals to the FC.

EMB

(Post-meeting note: The issue was referred to the Clerk to the LegCo Panel on Public Service on 31 May 1996.)

16. As regards salary scales of academic staff at the professorial level, Miss CHAN advised that they were determined by the respective institutions for the purpose of attracting suitably qualified staff to take up the posts concerned. There were cases where salaries of academic staff at professorial level were higher than those of HoIs. This arrangement was also found in overseas tertiary institutions. Respective institutions were allowed to offer the appropriate salaries to their professorial staff on an individual basis. However, if the level of salary exceeded the prescribed average salary for professorial staff, the institution concerned would have to top up the additional amount.

17. In response to a members concern on the implementation of common terms for local and overseas academic staff in tertiary institutions, Miss CHAN referred members to the Administrations reply to a LegCo question on this subject at the sitting on 24 April 1996.

III. Any other business

Provision of primary graduate teachers

(LegCo Paper No. CB(1)1486/95-96)

18. A member pointed out that the Working Group Report on Provision of Primary Graduate Teachers had failed to address the important issue of insufficient provision of primary graduate teacher posts which had undermined the attractiveness of the teaching career at the primary school level and adversely affected the career advancement of primary graduate teachers. Members urged the Administration to set a definite timetable for achieving the target of filling 35% of primary teacher posts by graduates by the year 2007 in accordance with the recommendation of Education Commission Report No. 5.

19. In response, Mr Joshua LAW advised that although at present, only 10% of the teaching posts in primary schools were at graduate level, it remained the Administrations planning target to upgrade up to 35% of the primary school teacher posts to graduate level by the year 2007. The Administration would continue with its effort to seek necessary resources to achieve the target in a phased programme. The Working Group had examined various alternative-scenarios to accelerate the creation of primary graduate teacher posts to achieve the target and noted that the rate of provision would need to be increased to at least 500 per year from 1997-98 onwards instead of the present annual provision of 300 posts. However, the feasibility of such rate of increase would depend on the availability of additional resources required. Given the constraint in resources and the fact that the scheme had only been implemented since 1994-95, the Working Group considered it useful to conduct a more comprehensive review in 1999-2000 to assess the effectiveness of the scheme and the progress towards the initial planning target.

20. Members urged the Administration to secure the necessary resources for the phased implementation of the scheme. A member also cited as a successful example the provision of graduate secondary school teacher posts where a phased programme was drawn up and the necessary resources allocated for its implementation.

21. Mr LAW noted members concerns and undertook to examine the possibility of seeking the necessary fundings for the phased implementation of the scheme in the coming Resources Allocation Exercise in consultation with the Finance Branch. He stressed that voting of funds for competing bids in the various policy programmes would be determined by their relative priorities.

EMB

22. Members were also concerned about the lack of co-ordination with the course providers of the Bachelor of Education programme which had resulted in an over-supply of primary graduate teachers.

23. In response, Mr LAW said that the Administration had been maintaining close contact with course providers and kept them informed of the rate of provision of primary graduate teacher posts. To attract new teachers to take up posts in primary schools, the Working Group proposed to reserve 20% of new posts created each year for local full-time pre-service Bachelor of Education (Primary) graduates. This would be clearly conveyed to the course providers to facilitate their planning and in-take of students.

24. The meeting ended at 1:05 p.m.

LegCo Secretariat
19 July 1996

Last Updated on 14 Aug, 1998

LegCo Panel on Education

Minutes of Special Meeting held on Friday, 31 May 1996 t 10:45 a.m. in Conference Room B of the Legislative Council Building

I. Consultancy study on Local Student Finance Scheme

II. Review of the salary scales of the heads of the UGC-funded institutions

III. Any other business

Minutes of Special Meeting
held on Friday, 31 May 1996 t 10:45 a.m.
in Conference Room B of the Legislative Council Building