LC Paper No. CB(2)2651/98-99
(These minutes have been
seen by the Administration)

Ref : CB2/BC/23/98

Members Present :

Hon Andrew WONG Wang-fat, JP (Chairman)
Hon HO Sai-chu, JP
Hon Cyd HO Sau-lan
Hon LEE Wing-tat
Hon Fred LI Wah-ming
Hon Ronald ARCULLI, JP
Hon James TO Kun-sun
Hon Ambrose CHEUNG Wing-sum, JP
Hon CHAN Wing-chan
Hon CHAN Kam-lam
Hon Jasper TSANG Yok-sing, JP
Hon Howard YOUNG, JP
Hon YEUNG Yiu-chung
Dr Hon TANG Siu-tong, JP

Members Absent :

Hon Kenneth TING Woo-shou, JP
Hon CHOY So-yuk
Hon FUNG Chi-kin

Public Officers Attending :

Mrs Maureen CHAN

Deputy Secretary for Constitutional Affairs

Mr Peter CHEUNG

Deputy Secretary for Home Affairs

Mr John LEUNG

Principal Assistant Secretary for Constitutional Affairs

Miss Amy TSE

Principal Assistant Secretary for the Treasury (Revenue)

Mrs Lesley WONG

Principal Assistant Secretary for the Treasury

(Management Accounting)

Miss Doris NG

Assistant Director of Urban Services (Finance)

Mr Johnny WOO

Assistant Director of Urban Services (Leisure Management)

Mr Tony MA

Assistant Director of Regional Services (Culture & Entertainment)

Mr K T LAI

Assistant Director of Regional Services

(Environmental Health Policy)

Mr Paul CHEUNG

Senior Staff Officer of Urban Services (Leisure Policy)

Mrs N DISSANAYAKE

Senior Assistant Law Draftsman

Miss Selina LAU

Government Counsel

Clerk in Attendance :

Mrs Constance LI

Chief Assistant Secretary (2) 2

Staff in Attendance :

Mr LEE Yu-sung

Senior Assistant Legal Adviser

Miss Connie FUNG

Assistant Legal Adviser 3

Miss Flora TAI

Senior Assistant Secretary (2) 2

I. Meeting with the Administration
Discussion of fee-setting policy
[LC Paper No. CB(2)2085/98-99]

At the invitation of the Chairman, Deputy Secretary for Constitutional Affairs (DS for CA) briefed members on the paper on the existing mechanisms for setting and revising fees and charges of the two Provisional Municipal Councils (PMCs), and the provisions on fees and charges in the Bill. She said that there was a great variety of fees and charges collected by the PMCs based on different charging policies as detailed in the paper. The Administration proposed that these fee levels should remain unchanged, until the Administration had completed the review to align all fee levels in two years following re-organization.

Pricing strategies and subsidy levels

2. Mr LI Wah-ming asked the Administration to provide more information on the charging policies of the two PMCs described in paragraph 4 of the paper. He said that to facilitate discussion by the Bills Committee, the Administration should provide a list on the existing fees and charges of the PMCs, categorized by their subsidy levels (including those on full cost-recovery), together with the rationale on the subsidy levels or charging principles.

3. DS for CA responded that there were over 800 types of fees of this category, and that the Administration would need time to gather the information. She stressed that the Administration had proposed to retain the existing fees and charges of the PMCs during the initial period of re-organization. Mr LEE Wing-tat remarked that the information would help the Bills Committee to understand the existing fee-setting mechanism in PMCs. Mr Ambrose CHEUNG also suggested to categorize these services into "facilities" and "activities" to facilitate discussion. DS for CA undertook to provide the information.

Admin

(Post-meeting note : The Administration has provided the information under Paper No. CB(2)2204/98-99(01).)

Future fee setting mechanism for leisure and cultural services

4. Referring to paragraph 7 of the paper, Mr LI Wah-ming said that he could not accept the Administration's proposal that the fees and charges for leisure and cultural services should be determined by the future Director of Leisure and Cultural Services subject only to the approval of the Financial Secretary. He stressed that these fees and charges must be monitored and approved by the Legislative Council (LegCo) by way of negative vetting. Mr Ambrose CHEUNG shared the views of Mr LI, pointing out that a mechanism must be put in place to monitor the exercise of powers by government officials, as the right of the general public to participate in leisure and cultural activities was at stake.

5. In response, Deputy Secretary for Home Affairs (DS for HA) informed members that a Task Force had been set up in the Home Affairs Bureau to put in place a new structure on culture, the arts, recreation and sports services and to set up the new Department of Leisure and Cultural Services for operation after 31 December 1999, if the Bill was enacted. The Administration hoped to introduce, as part of the restructuring exercise, a more flexible mechanism for setting of fees and charges, so that staff could react promptly to changes in demand. Flexible and differential fees and charges would induce a better spread of demand, enhance participation of activities and increase the utilization of facilities. The overall aim was to get more value and to provide a better service. Nonetheless, the Administration had guaranteed that -

1. the existing level of provision of culture, the arts, recreation and sports services would remain unchanged during the first year after the abolition of PMCs;
   
   
2. the well-established policies for setting fees and charges, which were based on full cost recovery or partial subsidy depending on the nature of the services, would continue; and
   
   
3. broad policy guidelines and price range for various types of fees and charges would be issued after the review.

DS for HA assured members that the policy objective of providing demand-oriented and affordable leisure and cultural services cost-effectively instead of recovery of operating costs would be the primary consideration in determining the fees and charges for leisure and cultural services.

6. Mr Ambrose CHEUNG referred to the Administration's Response to the Consultancy Report on Culture, the Arts, Recreation and Sports Services, in which the Administration had indicated acceptance in principle of the Consultant's recommendation to review the subsidy level of all public entertainment programmes. This being the intention, he queried why the Administration still claimed that the well-established policies for setting fees and charges would continue. In this connection, Mr CHEUNG considered that the Administration should explain the basis on which the Consultant formed his recommendation and why the Administration accepted the recommendation. Referring to the fact that fees and charges of leisure and cultural services had all along been subject to monitoring and approval by PMCs, Mr Ambrose CHEUNG said that he failed to see why these fees should not be approved by LegCo after the abolition of PMCs. He also queried why the Culture and Heritage Commission had no role to play in the future fee setting/revision mechanism.

7. DS for CA responded that fees and charges for licensing and regulatory schemes would be prescribed by regulation and subject to LegCo scrutiny. As for the fees and charges for leisure and cultural services, the Administration had undertaken in the paper that general pricing principles and subsidy levels would be discussed in the relevant LegCo Panel. DS for HA added that the Culture and Heritage Commission was not expected to advise the Government on determination of fees and charges for leisure and cultural services. He pointed out that, if the policy was to encourage utilization of the leisure and cultural services, price levels for the same type of these services might vary with regard to the market situation and other factors. He stressed that the fee-setting mechanism must be flexible especially if more private sector initiatives were to be introduced, such as contracting out of the management of venues. As these fees would require frequent adjustments to suit market situation, it would not be practicable to introduce a rigid mechanism for review of these fees and charges once or twice a year. Mr CHEUNG maintained the view that the Administration should consult the Culture and Heritage Commission on the general pricing principles and subsidy levels. He reminded the Administration that the Provisional Urban Council (PUC) continued to monitor the price levels of the Hong Kong Stadium even after contracting out the Stadium management to a commercial company.

8. DS for HA stressed that the Administration did not object to LegCo monitoring, but it would be arguable whether LegCo should determine all the fees and charges. Mr Howard YOUNG also expressed reservation about LegCo determining all fees and charges for leisure and cultural services, considering that PMCs might be able to do so only because they had executive powers.

9. Mr LEE Wing-tat expressed concern that the Financial Secretary would have the inclination to recover the full costs of leisure and cultural services if given the power to determine these fees and charges. He warned the Administration that if the "full cost recovery" principle was to be applied to leisure and cultural services, it would go against the Chief Executive's pledge to promote culture and heritage in his 1998 Policy Address. In response, Principal Assistant Secretary for the Treasury (Management Accounting) (PAS(Tsy)(MA)) explained the Administration's current policies for setting fees and charges. She said that for services where there were compelling social grounds for Government to subsidize, such as in education or health, the "full cost recovery" principles would not apply.

10. Mr LEE Wing-tat referred to the fact that most fees and charges were at present subject to LegCo approval by way of negative vetting whereas the rest was determined by respective government officials on an exceptional basis under delegated authority. He inquired whether the proposal to empower the Director of Leisure and Culture to determine all fees and charges for cultural and leisure services implied a departure of the present policy. PAS(Tsy)(MA) advised that nearly all fees and charges of Government services were subject to the approval of LegCo by way of negative vetting. However, there were also arrangements for some department heads to determine certain fees and charges. For example, Director of Social Welfare could prescribe the fee for issue of certificate to child-minder, and Director of Immigration was empowered to determine the fee for delivery of the Hong Kong Special Administrative Region passport to a place outside Hong Kong for collection upon the applicant's request. Mr LEE opined that the Administration's proposal of Financial Secretary delegating the power to the Director of Leisure and Cultural Services to determine fees and charges meant a fundamental change to the existing mechanism. In this connection, the Chairman explained that the Administration's proposal was based on operational considerations, having regard to the fact that there were over 800 types of fees and charges for recreation and sport services, and that about 8 000-9 000 programmes or activities were organised each year. He advised that the crux of the problem was to decide which types of fees and charges could be determined by the Financial Secretary instead of LegCo.

11. Mr LEE Wing-tat and Mr LI Wah-ming were of the view that LegCo should play a steering role in the future fee setting/revision mechanism of cultural and leisure services, and LegCo should be given the authority to determine the subsidy levels for the various fees. The mechanism could still enable LegCo to delegate its authority to the future Director of Leisure and Cultural Services to set the fees and charges in accordance with the subsidy levels approved by LegCo. Mr LEE said that he was more concerned about the fee level for some "basic" services, such as admission charges for public swimming pools. The Chairman advised that the suggestion would mean establishing a mechanism with legal backing so that LegCo could examine and approve the fee level or subsidy level by way of subsidiary legislation. It would also be necessary to specify in the legislation the proposed delegation by LegCo to the Financial Secretary or the Director of Leisure and Cultural Services. DS for CA said that the suggestion would require further examination by the Administration, and she undertook to provide a written response. In this connection, Mr Howard YOUNG said he would reserve his position on the suggestion of LegCo approving the subsidy levels, as there would be difficulties in classifying these services by their subsidy levels. (Post-meeting note : The Administration has provided a response vide Paper No. CB(2)2204/98-99(01).)

Admin

12. In response to Mr LEE Wing-tat, PAS(Tsy)(MA) assured members that the Administration had no intention to change the current pricing principles adopted by the PMCs through the reorganization exercise. Mr LEE said that if that was the Administration's intention, the Secretary for Constitutional Affairs should give such an undertaking in his speech to resume Second Reading debate of the Bill.	Admin

Alignment exercise of fees and charges

13. Members noted that the Administration proposed to preserve the current fees and charges relating to various licences and permits and the use of facilities and services of the PMCs, and that a review would be conducted to align these fee levels within two years following re-organization. Mr CHAN Wing-chan queried why the Administration needed two years to complete the review. DS for CA explained that the review might not need two years to complete, and the Administration would rationalize those fees as soon as the relevant reconciliation exercise was completed. Mr Ronald ARCULLI suggested that in view of the deflation in recent years, the Administration should adopt the lower fees and charges if there were differences in the fee level of the two PMCs.

14. Mr LEE Wing-tat remarked that the relatively high level of fees and charges for licensing and regulatory schemes was caused by the cumbersome licensing procedures which led to high administrative costs. He opined that the future fees and charges should be determined on the basis of the new structure, after the streamlining of the licensing and regulatory schemes. In this connection, he enquired about the progress of the study commissioned by the Business and Services Promotion Unit (BSPU) of the Financial Secretary's Office. DS for CA informed members that BSPU had commissioned a consultancy study, with the support of the PUC, to identify means to further streamline the restaurant licensing process. The study would be completed by the end of June 1999. The Chairman advised that the Administration should provide the consultancy findings to the relevant LegCo Panel for further discussion.

Admin

Responding to Mr CHAN Wing-chan, DS for HA said that Financial Secretary could delegate his authority to the Director of Leisure and Cultural Services for setting fees and charges of leisure and cultural services. The Administration would need to devise a policy for determining the fee levels and the price ranges which could be approved by the Director, subject to a monitoring mechanism. He stressed that a flexible mechanism would be necessary if schemes for contracting out were to be implemented. In view of the enormous diversity of price levels for leisure and cultural services and the large volume of fees for such services, it would not be feasible for a council to examine and approve changes to the price levels for a whole range of services.

15. Referring to members' concern that the Administration might increase the fees and charges for leisure and cultural services after the review, DS for HA said that fees and charges for these services would be determined on account of policy objectives and based on a "market-oriented" approach, and that operating costs would not be the only consideration. Various factors such as the location of venues, popularity of programmes, changing market situations and users' affordability would be taken into account when setting the fees. DS for HA stressed that members should not assume that the review would necessarily lead to an upward adjustment of the fees, given the policy objective of Home Affairs Bureau to promote leisure and cultural activities and the various productivity enhancement measures. In essence, cost recovery, although a relevant consideration, would not be the overriding determinant of fees and charges.

16. In response to Mr LI Wah-ming's concern about the transparency of the alignment exercise, DS for CA assured members that the Government would consult parties concerned, and that the proposed fee levels would be discussed in the relevant LegCo Panel. She added that LegCo might consider establishing a corresponding Panel to discuss and monitor policy matters related to the provision of municipal services under the new structure.

17. Dr TANG Siu-tong informed members that the Provisional Regional Council (PRC) operated many recreation and leisure venues at district level. He asked whether District Councils (DCs) would have a role in determining the fees and charges for the use of these venues. Mr LEE Wing-tat added that PRC had always given heed to the views of its District Committees in decision-making. DS for HA responded that it was Government's declared policy to enhance the role of DCs, but there was no intention at present for DCs to determine fees and charges. A working group chaired by the Director of Home Affairs was now looking at ways to enhance the role of DCs, including its monitoring role over the provision of district services. He pointed out that the number of members in each DC had been increased in anticipation of the new responsibilities, and that the Administration would seek to provide more resources, i.e. allowances for DC members, to facilitate their work.

18. The Chairman and Dr TANG Siu-tong pointed out that the enhanced role of DCs was not reflected in the relevant legislation. In this connection, Mr LEE Wing-tat asked whether the Administration would seek to enhance the role of DCs by administrative arrangements. DS for CA replied that the Administration would seek the views of the respective DC on the provision of community facilities in the district, and that the Administration would need to explain to the public if it went against the views of the DC.

The Administration's response to questions raised at the meeting on 13 May 1999
[Paper No. CB(2)2088/98-99(01)]

19. Members noted that under section 142 of the Public Health and Municipal Services Ordinance (Cap. 132) authorized a public officer or public body may delegate powers and functions, other than a power to make regulations. Mr LEE Wing-tat then asked and DS for CA confirmed that the Bill had not proposed delegation of statutory powers to new categories of public officers after the transfer of authority. In this regard, SALA advised that section 142 of Cap. 132 empowered any public officer or public body to delegate powers and functions conferred upon him or it by the Ordinance, and such public officer or public body had the discretion to decide the circumstances under which he should delegate. Mr LEE said he was concerned about the legislative and administrative arrangements required for the delegation of authority to non-directorate officers after the transfer. SALA pointed out that if the former authority (which was defined in the Bill) had delegated any of its statutory powers which was to be transferred to the new authority, such delegation would be saved by virtue of clause 8(2)(e) of the Bill as if it was a delegation made by the new authority. To address members' concern, the Chairman asked the Administration to provide further information elaborating the arrangements for delegation of statutory powers upon the transfer of authority when the Ordinance came into operation. (Post-meeting note : The Administration has provided the information vide Paper No. CB(2)2204/98-99(01).)

Admin

II. Any other business

20. Mr Ronald ARCULLI requested the Administration to provide information on the total savings to be achieved by the re-organization of municipal services upon passage of the Bill. DS for CA responded that the Bill sought to provide a statutory basis for the transfer of functions of the two PMCs after their abolition. After the passage of the Bill, the Administration would need to forward its proposal for setting up the Environment and Food Bureau and the Department of Leisure and Cultural Services, together with the proposed budget and relevant financial information, to the Finance Committee of LegCo for approval. Some members were of the view that the information was necessary for members to consider whether to support the Bill. The Chairman advised that the Bills Committee would discuss the issue at a later stage in order to allow time for the Administration to compile the information. (Post-meeting note : The Administration has provided a response vide Paper No. CB(2)2204/98-99(01).)

Admin

21. Members noted that Mr Ambrose CHEUNG had suggested a list of "medium-range" policy issues relating to the Bill for future discussion. The list was tabled at the meeting (and subsequently issued to members vide LC Paper No. CB(2)2124/98-99). Some members also suggested inclusion of other topics, such as the role of DCs, the future arrangement for the Music Office, and the proposed contracting out and privatization of municipal services and the staffing arrangements. The Chairman suggested and members agreed that some of these policy issues would be discussed, where appropriate, when examining relevant clauses of the Bill.

III. Date of next meeting

22. Members noted that the next meeting would be held on Friday, 4 June 1999 at 8:30 am.

23. The meeting ended at 4:35 pm.


Legislative Council Secretariat
21 July 1999