121. A recent study has indicated that mainly as a result of the requirement for more supporting documentary evidence introduced with effect from 1982-83, there has been a reduction in the number of application ntaining inaccurate and mis-stated information. However the level of overpayments still remains high. Over the two academic years 1982-83 and 1983-84, the amount of grants and loans overpaid was estimated to total $6 million and $12 million respectively, representing 13% and 9% of total grants and loans awarded in these two years. The Secretary, University and Polytechnic Grants Committee has informed me that the processing of applications has evolved over the years into a highly complex and time-consuming affair, which probably has reached the limits permitted by the time and resources available. With the continual increase in the number of applications any further improvements to the thoroughness and subtleness of checking will sooner or later cause the entire structure to fall apart, when the demands on staff and space outgrow the manageable or, at least, cost-effective level. Nevertheless, the Secretary envisages further improvements could be made as a result of various revisions to the vetting procedures which he is currently examining, but additional staff resources would be required to carry out the necessary checking work. A change over to an all loan scheme would, in my view, have the desirable effect of reducing the incentive to submit inaccurate information and the financial consequences arising from overpayments, since all overpayments could eventually be recovered. The procedures for administering such a scheme would also be simpler.
122. I have also suggested to the Secretary, University and Polytechnic Grants Committee that in view of the high cost of interest that the Government has forgone in the past by making the loans under the scheme interest-free, the cost of which I have estimated to be in excess of $100 million, he should also consider imposing a concessionary rate of interest on outstanding loans, partly to defray the cost of running the scheme and partly to ensure that students apply only for what they genuinely need.
123. I understand that the Secretary, University and Polytechnic Grants Committee is currently reviewing the matter in conjunction with the Secretary for Education and Manpower.
124. Head 22 - Agriculture and Fisheries Department. Subhead 603. Plant, vehicles and equipment. (250), 40 light motor cycles. The Livestock Husbandry Section of the Agriculture and Fisheries Department provides an artificial insemination service to improve the quality of the local pig herds and for this purpose eleven motor cycles were allotted to the section. A recent audit examination of their log books revealed that the majority of these motor cycles had not been fully utilized, the average rate of usage being only ten days per month. In response to my observation, the Director of Agriculture and Fisheries informed me that the low utilization rate was a result of two vacancies (the post holders of which are required to ride motor cycles in performing their duties) and a decrease in demand for the artificial insemination service. The Director also informed me that following a subsequent review of departmental needs, 17 motor cycles, including six from the Livestock Husbandry Section, were found to be surplus to requirements and that he was making arrangements to return the serviceable ones to the Government Land Transport Agency for deployment elsewhere within the Government. The Director further informed me that procurement orders for 17 replacement motor cycles in 1984-85 had been cancelled, resulting in a saving of $136,000.
125. Head 28 - Civil Aviation Department. Subhead 111. Hire of services and professional fees. Air passenger departure tax. The Air Passenger Departure Tax Ordinance passed in June 1983 required aircraft operators to collect a tax from passengers departing from Hong Kong and to pay the tax collected to the Director of Accounting Services within thirty days after the date of issue of a notice of demand by the Director of Civil Aviation. The Ordinance also provided that the Financial Secretary may authorize the payment to an operator of a fee for collection of the tax. It was recognized by the Government that the aircraft operators would benefit from the interest accrued on the tax collected during the period that the Ordinance permitted them to retain it and it was intended to take this benefit into account in fixing the actual fee to be paid. It was also felt desirable to aim for the administratively simple formula of a uniform payment per passenger based upon estimated costs less interest benefits. In May 1983, the Executive Council was informed that the tentative estimate for the annual fee payable would be about $2 million. The actual fee paid in 1984-85 was $5.3 million which may be reduced by about $500,000 after certain interest recoveries have been agreed with the aircraft operators. Early in 1985, I carried out a review of the efficiency of the air passenger departure tax collection system and concluded that the system was cumbersome, complex and expensive, a situation brought about by a failure to follow previous intentions.
126. The first variation to the original intentions was the decision of the Director of Civil Aviation to inform the aircraft operators in March 1983 that they would be paid a fee to cover the estimated full cost of collecting the tax, apparently overlooking the previous intention that the fee would be based on estimated cost less the interest benefit from the tax collected. Having committed himself to paying a fee based on the full cost of collecting the tax, the Director of Civil Aviation informed the operators three months later, in June 1983, that the interest on the tax collected would have to be taken into account after all, which in effect meant that it would have to be refunded to the Government even though the Ordinance permitted the operators to retain it. This complicated the tax collection arrangements because it became necessary to assess the interest earned on the tax by each operator. Not surprisingly, some operators did not fully co-operate with this arrangement and it became difficult for the Director of Civil Aviation to collect the interest that he claimed, particularly as the Government had no legal authority to do so, in contrast to the legal authority it possessed to fix the level of the fee. During the next two years the Director negotiated with the aircraft operators to find a solution to the problem and in May 1985 it was agreed between the parties that the operators would forgo their right to retain the tax money for the period permitted by the Ordinance and deposit the daily tax collections in a Government
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