LegCo Panel on Public Service

I. Confirmation of Minutes of Previous Meeting

(LegCo Paper No. CB(2) 481/96-97)

The minutes of the meeting held on 28 October 1996 were confirmed.

II. Date of Next Meeting and Items for Discussion

2. The next meeting would be held on Wednesday, 18 December 1996 at 8:30 am to discuss the following items:

1. Regulations on the appointment, removal and discipline of civil servants after 1997
2. Implications of the recent Court of Appeal judgment on the localization of the civil service
3. Secondment of civil servants to public-funded organizations
4. Double housing benefits in the civil service
5. Transition of the civil service

3. Members also agreed to discuss the issue of continual employment of short-term or temporary staff in the civil service at the meeting to be held in January 1997.

Clerk

III. Expenditure on Civil Service Pay and Benefits

(LegCo Paper No. CB(2) 478/96-97(01))

4. At the invitation of the Chairman, the Principal Assistant Secretary (Civil Service) (PAS(CS)) briefed members on the paper which set out the reasons for the increase in government expenditure on personal emoluments (PE) and personal related expenses (PRE) during the past few years against a reduction in the number of civil servants. Members’ attention was drawn to the following points before going into the detailed elaboration:

1. Mr Ronald ARCULLI had quoted at the meeting on 7 October 1996 figures in respect of the relevant expenditures in 1991-92 against the related figures in the 1996-97 estimates. Since the actual civil service strength and expenditures in 1996-97 had yet to be known, the Administration felt that a more valid comparison was to take the strength as at 31 March 1992 and 31 March 1996 for comparison with the actual expenditures in 1991-92 and 1995-96 respectively.
2. The PRE figures included pension payments which had no correlation with the number of staff at those points in time but which had to be recognized in providing the figures.
3. The PE figures for 1991-92 included expenditure in respect of staff in government hospitals for the period from 1 April 1991 to 31 November 1991 prior to the setting up of the Hospital Authority, thus complicating a straight comparison of the figures for 1991-92 and 1995-96 respectively.
4. PE expenditure was related only to staff in government departments funded through the general revenue account but did not cover the salaries and allowances of civil servants on transfer/secondments to public-funded bodies such as the Housing Authority, Hospital Authority, the Hong Kong Monetary Authority, the two municipal councils and the various trading funds etc because of the different accounting arrangements for these bodies. The staff on the establishments of these bodies were therefore excluded in comparing PE expenditures and the numbers of staff. On the other hand, since the PRE expenditures of these bodies were charged centrally to the relevant votes, the total number of civil servants, irrespective of where these civil servants worked, was included in PRE comparisons.

5. PAS(CS) said that, with the above factors taken into consideration, the reduction in the total strength and the strength excluding other public-funded bodies between the years 1991-92 and 1995-96 was 3 010 (1.6%) and 979 (0.7%) respectively. In terms of actual PE expenditure , there was a 37.8% increase, i.e., from $25.2 billion in 1991-92 to $34.8 billion in 1995-96. Having discounted the number of staff on transfer/secondment to other bodies, the increase was 51.6%, from $22.6 billion in 1991-92 to $34.3 billion in 1995-96. As for PE per employee, there was an increase of 52.7% over the period from 1991-92 to 1995-96, which largely reflected the annual pay awards paid out in the four-year period. The balance of just over 1% per annum was attributable to the incremental creep among eligible officers.

6. PRE expenditure excluding pension, on the other hand, had risen from $3.1 billion in 1991-92 to $3.8 billion in 1995-96, indicating a 19.7% increase. PRE per employee had increased over the period by only 21.7% primarily due to the fact that there had been no upward adjustments for inflation each year for some of the more substantial elements of PRE, for example the Home Financing Allowance (HFA), and the take up rates for these various schemes had changed over the period.

7. PAS(CS) pointed out that there were hidden in these expenditure figures savings arising from the reduction in the number of officers living in Non-departmental Quarters (NDQ) or in receipt of Private Tenancy Allowance, following the introduction of the Home Finance Scheme (HFS) in 1990. As the HFA was payable for only ten years, there would be considerable savings estimated to amount to $15.4 billion over a period of 20 years at 1994 prices. In addition, the effect of the recent cessation of payment of Overseas Education Allowance for new recruits remained to be seen over time. PAS(CS) said that PRE was by no means a static situation. It would change as there were changes in policy and civil service entitlements.

8. Mr Anthony CHEUNG Bing-leung enquired of the degree of control of the Civil Service Branch over the creation of civil service posts in those public bodies as mentioned in paragraph 3(d) above, in particular the creation of non-directorate posts which did not require the approval of the Establishment Subcommittee of the Legislative Council. PAS(CS) clarified that all these bodies had maintained a Departmental Establishment Committee and staff creations were subject to the same arrangements as applied to government departments.

9. Mr CHEUNG Man-kwong enquired if there were any concrete plans to dispose of vacant quarters as more and more eligible officers were buying their own homes through the Home Purchase Scheme and Home Financing Scheme. PAS(CS) replied that some 800 odd NDQ units had been disposed since the Home Financing Scheme was introduced. A total of five quarter sites had also been sold. In addition, the Administration had recently instituted a leasing-out programme resulting in the leasing of over 95 vacant units to the private sector on a two-year lease term. This was an interim measure to make the best use of the units, pending their final disposal. The Administration would continue to sell-off sites and units which were no longer needed for accommodation purpose, and to move officers from units which the Administration wished to dispose of to units which it intended to retain. The Administration had not acquired, either through building or renting, additional NDQs for quite a considerable period of time. As regards departmental quarters, however, sometimes the need to re-develop old blocks might require reprovisioning these quarters into newer properties which matched the desirable standard.

10. Members urged for a constant watch on the vacancy situation of civil servants quarters to avoid resources wastage. PAS(CS) responded by saying that, as Secretary for the Civil Service indicated in the context of the recent Public Accounts Committee meeting, the demand for quarters was being closely monitored. There had been monthly, quarterly and bi-annual returns submitted to the Government Property Agency (GPA) in respect of each department that had a departmental quarter requirement. The demand was monitored collectively by the individual departments, the GPA and the policy branches to ensure that decisions taken under the existing policy would match effectively with the absolute needs, and that there would be minimal, if any, vacancies at any one point in time.

11. In reply to a member’s enquiry on the pension component of PRE, PAS(CS) said that there were a number of complications when pension payments came into the picture, such as the terms introduced in the New Pension Scheme whereby the commuted value of the pension was increased from 25% to 50 %. Others included the number of people coming up for pensionable age, the number of pensioners alive at any point in time, how long they would live after retirement etc. As these were largely varying or unknown factors which had no correlation with the number of staff presently with the civil service, it was better to exclude pension from PRE in order to make a valid comparison in the present context.

12. The Chairman remarked that the information provided by the Administration in the paper still failed to explain the increase in PE and PRE expenditures from $25.3 billion and $6.6 billion in 1991-92 to an estimated $36 billion and $13.1 billion respectively in 1996-97, against a reduction of about 10 000 in the number of civil servants during the same period. Deputy Secretary (Civil Service)1 (DS(CS)1) said that as the queries were originally raised by Mr Ronald ARCULLI at the meeting on 7 October 1996, it would be helpful to clarify with Mr ARCULLI as to the source of the figures he quoted so that the Administration could examine further into the background and revert to the Panel in writing. On the advice of the Chairman, the Secretariat would approach Mr ARCULLI for the relevant information.

(Post-meeting note: The Clerk has written to Mr ARCULLI on 27 November 1996 for the information).

13. Mr Anthony CHEUNG Bing-leung stated that while financial estimates usually covered the period up to the end of a financial year, establishment figures referred to the position as at the beginning of the year. In order to avoid confusion, he suggested that in preparing future draft estimates, the Administration should also provide a projected end-of-year establishment figure to facilitate comparison.

IV Transition of the Civil Service

14. Mr CHEUNG Man-kwong said that there had been reports that a special Chief Executive (Designate) Office (CE Office) would be set up to provide assistance to the Chief Executive (CE) designate. He enquired if any preparation by the Administration was in place in respect of the form of assistance it would render, the status of the CE Office, the number and ranking of civil servants who would be transferred to the Office, the scope of their duties and the financial arrangements to cater for the expenses incurred in the operation of the Office etc. He admonished that any eventual decisions taken had to be absolutely lawful and reasonable and, if necessary, subject to the scrutiny of the Legislative Council. In reply, DS (CS)1 said that the Administration would co-operate positively with the CE designate when the latter was elected, and provide assistance which would include office accommodation as well as manpower and secretarial support. There were as yet no fixed arrangements, pending discussion with the CE designate. DS(CS)1 assured that resources to be deployed would depend on the actual operational needs of the Office. Any finalized arrangements would not depart from the established rules and they would not operate in such a way as to jeopardize the effective functioning of the existing government.

15. Mr Anthony CHEUNG Bing-leung enquired whether the government would pay for the salary of the civil servants on deployment to the CE Office, or charge for the necessary expenses, as in the case of civil servants on secondment to subvented bodies. DS(CS)1 replied that the former scenario referred to an "on loan" situation while the latter were "secondments". The on loan arrangement was one of the options available to the Administration but it had yet to be decided in consultation with the CE designate. Officers on loan and on secondment would still retain their status as civil servants. Mr CHEUNG Man-kwong opined that as there appeared to be no separate votes in the Administration to give effect to expenditures incurred for the CE Office, the operation of which would likely to exceed six months, the provision of resources from the General Revenue for the purpose would need the endorsement of the Legislative Council.

16. In response to a member’s question, DS(CS)1 said that civil servants providing assistance to the CE designate would be accountable to the latter on day-to-day operational matters. But as they were civil servants, they would be ultimately responsible to the respective Heads of Grade.

17. Mr CHEUNG Man-kwong was concerned about the possibility of civil servants being caught in a difficult position of having to serve two masters. In other words, while these offices would remain as civil servants of the existing government on the one hand, they might be forced to identify themselves with the views of the CE designate of the future Special Administration Region (SAR) Government on the other. Mr CHEUNG pointed out that the social and political inclinations of the CE candidates were different from that of the present government, as evidenced by the fact that a lot of issues set out in their election platforms were not in keeping with the existing policies. He urged that, in order to maintain the political neutrality of the seconded civil servants and to uphold their public credibility, the Administration should promulgate in clear terms their scope of work and the role they would play in the CE Office. In particular, the Administration should make it clear that these officers should not be required to defend or explain policy issues on behalf of the CE designate. DS (CS)1 responded that civil servants who would be working with the CE designate would not see it as something divisive. They would work positively and constructively with the CE designate while maintaining their politically neutral stand and taking fully the interest of the public in mind.

18. The Chairman asserted that the role of the CE designate being to prepare for the formation of the future SAR Government after the change of sovereignty, there would be areas in which the future government would not want to go by the current policies. He also called on the Administration to sort out as soon as possible the duties and functions of those offices who would be working in the CE Office, and report any new developments at the next Panel meeting.

Admin

19. In reply to a member’s question, DS(CS)1 advised that the Civil Service Branch was responsible for the operational deployment of staff and therefore would be involved in deciding on the numbers and rankings of officers who would be posted to the CE Office.

V. Other Business

20. DS(CS)1 briefed members on the Court of Appeal (the Court) ruling delivered on 22 November 1996 on the appeal lodged by the Association of Expatriate Civil Servants against a previous High Court judgment on the government’s localization policy:

1. Of the 13 appeal issues, seven aspects of the government’s policy decisions were ruled to be unlawful. These included the "demotion" of overseas agreement officers and the restrictions on promotion of certain overseas officers on agreements; the requirement on officers under the transfer schemes to use up all their accrued leave upon the expiry of their contracts; the ceiling for the promotion of overseas officers to the ranks of Administration Officers Staff Grade A and B1; and the Chinese language proficiency requirement on overseas officers under the opening up scheme or on "transferees".
2. Four other aspects of the localization policy were upheld, namely,
   1. the meaning of permanent resident under the transfer schemes;
   2. deduction of length of transferees’ agreements by previous extension;
   3. the opening up arrangement; and
   4. the succession post scheme of the Legal Department.
3. Two other aspects were ruled not susceptible to judicial review. They included the interpretation of the meaning of a ‘local’ in the Common Terms proposals and the recommendation of a compulsory Chinese language ability being a requirement for future appointments.
4. The two cross-appeal items lodged by the government in respect of the policy which prohibited officers switching from overseas to local terms from being employed on permanent and pensionable terms were dismissed.

21. DS(CS)1 advised that the Court ruling had its impact felt most significantly in two areas which demanded urgent considerations by the Administration. These were issues relating to the demotion of overseas agreement officers, the bar on transfer of agreement officers to permanent and pensionable terms and the Chinese language requirments. The rest were issues of a technical nature.

22. Mr CHEUNG Man-kwong asserted that the Court ruling which over-turned the government’s Chinese language policy in respect of overseas officers would threaten the implementation of Article 9 of the Basic Law whose purpose was to nurture a bi-lingual civil service. He expressed that it would be wrong for the Administration, in presenting the case in Court, to presume a proficient standard of English in overseas officers and highlight only on the Chinese language aspect. Without mentioning the equal importance of both languages, it would lead the Court into believing that the government was imposing a discriminatory language requirement upon overseas officers.

23. DS(CS)1 said that the bi-lingual requirement was already in force as far as new appointments were concerned. The present problem faced by the Administration was how to apply the same to existing overseas agreement officers. Despite the effort by the Administration to defend its policy as best as it could, the Court had ruled that the wording of the written requirement set out by Civil Service Branch that "transferees" should fulfil a prescribed standard of Chinese was unlawful, and that any required standard would need to be determined on the basis of the unique requirement of the job concerned. In what way the Administration was to act in compliance with the Court ruling and at the same time achieve the intended policy purpose had to be further examined.

24. The Chairman advised that the subject matter of the implications of the Court judgment on localization policy would be discussed in more detail at the next meeting.

VI. Close of Meeting

25. The meeting ended at 12:15pm

LegCo Secretariat
11 December 1996