LegCo Panel on Public Service
Meeting on 25 November 1996
Government Expenditure on Personal Emoluments
and Personnel Related Expenses

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At the last Panel’s meeting held on 7 October 1996, Members questioned the reasons for the increase in government expenditure on personal emoluments and personnel related expenses 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. We undertook to provide an answer in writing.

2. Before we go into the detail of calculation, Members may wish to note the following points :

1. Civil service’s strength quoted at the meeting was 190,446 for 1991-92 and 179,972 for 1995-96. A comparison between the civil service’s strength at 1.4.95 (179,972) with the related expenditure in the 1996-97 estimates would be distorted since new posts have been/will be created in 1995-96 and 1996-97. A more valid comparison is to take the civil service’s strength as at 31.3.92 and 31.3.96 for comparison with actual expenditures in 1991-92 and 1995-96 respectively;
2. A major component of "Personnel Related Expenses"(PRE) is Pensions payments which have no correlation with the number of staff presently within the Civil Service;
3. The personal emoluments (PE) figures quoted for 1991/92 contained 8 months expenditure in respect of staff in government hospitals for the period 1 April 1991 to 30 November 1991, prior to the formation of the Hospital Authority thus making straight comparisons difficult;
4. Expenditure on "Personal Emoluments" relates only to staff employed in government departments funded through the general revenue account. It does not cover the salaries and allowances for civil servants in bodies such as the Housing Authority, the Hospital Authority, the two municipal councils, the government trading funds and like bodies as there is both a debit and credit entry. In comparing personal emoluments with the numbers of staff, we should thus exclude staff on the establishments of these bodies in order to have like for like comparisons. On the other hand, the "Personnel Related Expenses" of civil servants in these bodies are charged centrally to the relevant votes (and the on- costs credited to the General Revenue). Thus the total number of civil servants, irrespective of where they work, should be compared for personnel related expenses comparisons.

3. Taking account of the above technicalities, the comparisons are as follows :

Strength

*Other bodies include USD, RSD, Hospital Authority, Housing Authority,

VTC and bodies employing seconded staff from the civil service.

For the purpose of comparison of PE and PRE expenditure betwwen the years 1991-92 and 1995-96, the net reduction in civil service strength was only 3,010 (1.6%) and 979 (0.7%) respectively.

Actual Expenditure

# 1995-96 actual expenditure instead of 1996-97 estimate is used

for comparison

Comparison of PE Expenditure

4. Based on the above figures, PE expenditure per employee has increased by 52.7% over the four years from 1991-92 to 1995-96. Over the same period, four annual pay awards have been paid out (i.e. those from April 1992 to April 1995 inclusive) which accounted for a 48.2% increase. The balance of approximately 1.1% per annum can largely be attributed to the effect of incremental creep among eligible officers.

Comparison of PRE Expenditure

5. In comparing the PRE, the expenditure per employee has increased over the four years by only 21.7%. The reasons for this will be many and varied but primarily due to the fact that -

1. Not all allowances have been automatically increased for inflation each year (i.e. the Home Finance Scheme up to 1994); and
2. The take up rates for the various schemes have changed markedly.

6. For the purpose of illustration, Members may wish to know that the amount of expenditure in 1991-92 on Home Purchase Allowance, Home Financing Scheme and Accommodation Allowance was $2,033m while the corresponding expenditure in 1995-96 was $2,506m, representing an increase of 23.3%. The number of current recipients has also risen from 16,422 to 19,299 during the same period. It is worth noting however that, following the introduction of the Home Financing Scheme (HFS) in 1990, the number of officers living in Non-departmental Quarters (NDQ) and those receiving Private Tenancy Allowance (PTA) has fallen from 3,678 in 1991-92 to 2,502 in 1995-96. As the Home Financing Allowance is payable for only 10 years, there will be considerable long term savings in Government expenditure as a result of this change (estimated to be $15,400m at 1994 prices over a period of 20 years).

7. For the Overseas Education Allowance (OEA), the expenditure has increased from $205m in 1991-92 to $295m in 1995-96. However, Members will recall that with effect from August 1996, new recruits ceased to be eligible for the OEA; expenditure on OEA will fall over time.

Civil Service Branch
November 1996

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