ENG-1992-03-25

1 HONG KONG LEGISLATIVE COUNCIL -- 25 March 1992 1 HONG KONG LEGISLATIVE COUNCIL -- 25 March 1992 HONG KONG LEGISLATIVE COUNCIL -- 25 March 1992 1 HONG KONG LEGISLATIVE COUNCIL -- 25 March 1992 1

OFFICIAL RECORD OF PROCEEDINGS

Wednesday, 25 March 1992

The Council met at half-past Two o'clock

PRESENT

THE DEPUTY PRESIDENT

THE HONOURABLE JOHN JOSEPH SWAINE, C.B.E., Q.C., J.P.

THE CHIEF SECRETARY

THE HONOURABLE SIR DAVID ROBERT FORD, K.B.E., L.V.O., J.P.

THE FINANCIAL SECRETARY

THE HONOURABLE NATHANIEL WILLIAM HAMISH MACLEOD, C.B.E., J.P.

THE ATTORNEY GENERAL

THE HONOURABLE JEREMY FELL MATHEWS, C.M.G., J.P. THE HONOURABLE ALLEN LEE PENG-FEI, C.B.E., J.P. THE HONOURABLE STEPHEN CHEONG KAM-CHUEN, C.B.E., J.P. THE HONOURABLE MRS SELINA CHOW LIANG SHUK-YEE, O.B.E., J.P. THE HONOURABLE MRS RITA FAN HSU LAI-TAI, O.B.E., J.P. THE HONOURABLE HUI YIN-FAT, O.B.E., J.P.

THE HONOURABLE MARTIN LEE CHU-MING, Q.C., J.P. THE HONOURABLE DAVID LI KWOK-PO, O.B.E., J.P. THE HONOURABLE NGAI SHIU-KIT, O.B.E., J.P. THE HONOURABLE PANG CHUN-HOI, M.B.E.

THE HONOURABLE SZETO WAH

THE HONOURABLE TAM YIU-CHUNG

THE HONOURABLE ANDREW WONG WANG-FAT, O.B.E., J.P. THE HONOURABLE LAU WONG-FAT, O.B.E., J.P.

THE HONOURABLE EDWARD HO SING-TIN, O.B.E., J.P. THE HONOURABLE RONALD JOSEPH ARCULLI, J.P.

THE HONOURABLE MARTIN GILBERT BARROW, O.B.E., J.P. THE HONOURABLE MRS MIRIAM LAU KIN-YEE, J.P. THE HONOURABLE LAU WAH-SUM, O.B.E., J.P.

DR THE HONOURABLE LEONG CHE-HUNG

THE HONOURABLE JAMES DAVID McGREGOR, O.B.E., I.S.O., J.P. THE HONOURABLE MRS ELSIE TU, C.B.E.

THE HONOURABLE PETER WONG HONG-YUEN, J.P.

THE HONOURABLE ALBERT CHAN WAI-YIP

PROF THE HONOURABLE EDWARD CHEN KWAN-YIU

THE HONOURABLE VINCENT CHENG HOI-CHUEN THE HONOURABLE MOSES CHENG MO-CHI

THE HONOURABLE CHEUNG MAN-KWONG

THE HONOURABLE CHIM PUI-CHUNG

REV THE HONOURABLE FUNG CHI-WOOD

THE HONOURABLE TIMOTHY HA WING-HO, M.B.E., J.P. THE HONOURABLE MICHAEL HO MUN-KA

DR THE HONOURABLE HUANG CHEN-YA

THE HONOURABLE SIMON IP SIK-ON, J.P.

DR THE HONOURABLE LAM KUI-CHUN

DR THE HONOURABLE CONRAD LAM KUI-SHING THE HONOURABLE LAU CHIN-SHEK

THE HONOURABLE MISS EMILY LAU WAI-HING THE HONOURABLE LEE WING-TAT

THE HONOURABLE GILBERT LEUNG KAM-HO

THE HONOURABLE ERIC LI KA-CHEUNG, J.P. THE HONOURABLE FRED LI WAH-MING

PROF THE HONOURABLE FELICE LIEH MAK, O.B.E., J.P. THE HONOURALBE MAN SAI-CHEONG

THE HONOURABLE STEVEN POON KWOK-LIM

THE HONOURABLE HENRY TANG YING-YEN, J.P. THE HONOURABLE TIK CHI-YUEN

THE HONOURABLE JAMES TO KUN-SUN

DR THE HONOURABLE SAMUEL WONG PING-WAI, M.B.E., J.P. DR THE HONOURABLE PHILIP WONG YU-HONG

DR THE HONOURABLE YEUNG SUM

THE HONOURABLE HOWARD YOUNG

THE HONOURABLE ZACHARY WONG WAI-YIN

ABSENT

THE HONOURABLE MRS PEGGY LAM, M.B.E., J.P. THE HONOURABLE MARVIN CHEUNG KIN-TUNG, J.P. THE HONOURABLE FREDERICK FUNG KIN-KEE

THE HONOURABLE NG MING-YUM

IN ATTENDANCE

THE CLERK TO THE LEGISLATIVE COUNCIL

MR LAW KAM-SANG

Papers

The following papers were laid on the table pursuant to Standing Order 14(2): Subject

Subsidiary Legislation L.N. No. Subsidiary Legislation L.N. No.

Smoking (Public Health) (Amendment)

Regulation

1992........................................................... 61/92 1992........................................................... 61/92

Revised Edition of the Laws (Correction of

Errors) Order 1992..................................................... 63/92

Labour Tribunal (Suitors' Funds) (Amendment)

Rules

1992.................................................................. 64/92 1992.................................................................. 64/92

Hawker (Regional Council) (Amendment)

Bylaw

1992................................................................. 65/92 1992................................................................. 65/92

Public Health and Municipal Services (Civic

Centres) (Amendment of Thirteenth Schedule) Centres) (Amendment of Thirteenth Schedule)

Order

1992................................................................. 66/92 1992................................................................. 66/92

Solicitors' Practice (Amendment) (No. 2)

Rules

1992.................................................................. 67/92 1992.................................................................. 67/92

Commercial Bathhouses (Urban Council) Commercial Bathhouses (Urban Council)

(Amendment) Bylaw 1992............................................ 68/92

Food Business (Urban Council) (Amendment)

Bylaw

1992................................................................. 69/92 1992................................................................. 69/92

Frozen Confections (Urban Council) (Amendment) Frozen Confections (Urban Council) (Amendment)

Bylaw

1992................................................................. 70/92 1992................................................................. 70/92

Funeral Parlour (Urban Council) (Amendment)

Bylaw

1992................................................................. 71/92 1992................................................................. 71/92 Milk (Urban Council) (Amendment) Bylaw 1992................... Milk (Urban Council) (Amendment) Bylaw 1992................... l) (Amendment) Bylaw 1992................... 72/92

Offensive Trades (Urban Council) (Amendment)

Bylaw

1992................................................................. 73/92 1992................................................................. 73/92

Places of Amusement (Urban Council) (Amendment)

Bylaw

1992................................................................. 74/92 1992................................................................. 74/92

Swimming Pools (Urban Council) (Amendment)

Bylaw

1992................................................................. 75/92 1992................................................................. 75/92

Undertakers of Burials (Urban Council)

(Amendment) Bylaw 1992............................................ (Amendment) Bylaw 1992............................................ 76/92

Dutiable Commodities (Liquor Licences)

(Specification of Fees) (Urban Council Area)

Notice...................................................................... ... 77/92 ... 77/92

Places of Public Entertainment (Licences) Places of Public Entertainment (Licences)

(Specification of Fees) (Urban Council Area)

Notice...................................................................... ... 78/92 ... 78/92

Sessional Papers 1991-92

No. 62 -- No. 62 -- Secretary for Home Affairs Incorporated Secretary for Home Affairs Incorporated

Statement of Accounts for the year ended 31 March 1991 Statement of Accounts for the year ended 31 March 1991

No. 63 -- No. 63 -- Report of the Brewin Trust Fund Committee Report of the Brewin Trust Fund Committee

on the Administration of the Fund for

the year ended 30 June 1991

Written answers to questions

Rates of public housing estates

1. MR JAMES TO asked: W 1. MR JAMES TO asked: W MR JAMES TO asked: Will the Government inform this Council: ill the Government inform this Council:

(a) what criteria have been followed in assessing the rates of public housing (a) what criteria have been followed in assessing the rates of public housing estates;

(b) whether the Housing Authority will commission independent professionals to (b) whether the Housing Authority will commission independent professionals to assess the rateable value of the public housing estates; if not, what the reasons are; and whether consideration will be given to commissioning such assessment;

(c) whether the Housing Authority has received any complaints about exorbitant (c) whether the Housing Authority has received any complaints about exorbitant rates from public housing tenants; and if so, what action the Housing Authority has taken in dealing with such complaints; and, whether it has, for instance, lodged appeals on behalf of the tenants in its capacity as a landlord?

SECRETARY FOR THE TREASURY: Mr Deputy President, in assessing the rates of public housing estates, the Commissioner of Rating and Valuation follows the same principles and criteria as in assessing properties in the private sector. Under the Rating Ordinance, the rateable value of a property is an estimate of its open market rental value. This remains the same regardless of whether the property is actually

owner-occupied, rented at full market rent or at concessionary rent, or subject to statutory control. In arriving at an assessment, the Commissioner takes into account factors which affect the rental value of the property, including its location, facilities, environment and management.

The Housing Department has estate surveyors who appraise the Government's valuation before the rates assessment for public housing estates is finalized. Where necessary, they would seek clarification and supporting evidence from the Rating and Valuation Department, and adjustments in respect of cases that are justified are made as a result of this consultation process. Experience has shown that liaison between the two departments has been effective. The system has worked well and there is, therefore, no need for the Housing Authority to commission an independent surveyor to undertake the appraisal work.

Until recently, neither the Housing Authority nor the Rating and Valuation Until recently, neither the Housing Authority nor the Rating and Valuation Department has received any objections or appeals against rates from public housing tenants. The recent announcement of the rent increase for 69 post-1973 estates has generated some concern over the rates issue. It has therefore been decided that the rates notice and explanatory notes will be displayed within each housing block from March 1992 onwards, so as to give tenants sufficient notice and to enable them to lodge an objection, irrespective of whether it would bring about any direct gain to them in relation to their inclusive rent. If individual public housing tenants feel aggrieved, they may take their objection to the Commissioner of Rating and Valuation in April and May each year. It would not be appropriate for the Housing Authority, in its capacity of a landlord, to lodge an appeal against the Government's final assessment since its views have already been taken into account.

Fringe foreign exchange companies

2. MR JAMES TO asked: Will the Government inform this Counc 2. MR JAMES TO asked: Will the Government inform this Counc MR JAMES TO asked: Will the Government inform this Council:

(a) how many fringe operators of foreign exchange are operating in Hong Kong; (a) how many fringe operators of foreign exchange are operating in Hong Kong; (b) what measures are being employed in monitoring these operators; (b) what measures are being employed in monitoring these operators;

(c) how many complaint cases regarding fringe operators of foreign exchange have (c) how many complaint cases regarding fringe operators of foreign exchange have been received over the past two years;

(d) what major grievances were involved in these complaints lodged by members (d) what major grievances were involved in these complaints lodged by members of the public; and

(e) whether measures will be taken to safeguard the interests of the public; (e) whether measures will be taken to safeguard the interests of the public; if so, what measures will be taken and when they will be implemented?

SECRETARY FOR MONETARY AFFAIRS: Mr Deputy President, the answers in the same order, are as follows:

(a) We have no statistics on the number of fringe foreign exchange companies in (a) We have no statistics on the number of fringe foreign exchange companies in Hong Kong because they are currently not subject to licensing or registration. A very rough guesstimate is of the order of 300 to 400.

(b) The fringe foreign exchange companies presently fall outside existing fields (b) The fringe foreign exchange companies presently fall outside existing fields of supervision and regulation. There are therefore no specific measures to monitor their activities. On receipt of complaints from the public, the police will take appropriate investigation actions.

(c) According to the records of the Commercial Crime Bureau of the police, a t (c) According to the records of the Commercial Crime Bureau of the police, a total of 80 complaints have been received in the past two years against the fringe foreign exchange companies.

(d) The reported grievances cover a wide range of malpractices. These include (d) The reported grievances cover a wide range of malpractices. These include churning, under which a company makes many more transactions than commercial prudence would dictate, in order to boost their profits from commission; in-house trading without carrying out actual foreign exchange transactions; dishonoured cheques;

outright fraud such as fly-by-night companies; collapse of companies due to financial difficulties; inability of clients to contact their account executives; and companies ignoring the clients' buying or selling instructions, thereby preventing the clients from realizing profits or cutting losses, as the case may be.

(e) An inter-departmental working group is working on a legislative framework (e) An inter-departmental working group is working on a legislative framework to regulate this trade through the licensing of such companies, and consideration is being given to the level at which the licensing criteria would be pitched. This approach is, however, expected to require considerable financial resources for the licensing, supervision and enforcement work, which will have to be assessed as usual through the Government's resource allocation system. Separately, the Hong Kong

Futures Exchange is working on an alternative approach which would involve establishing under its auspices a retail currency market aimed at providing a more prudent alternative to investors than the existing fringe market. The Futures Exchange is drawing up the details of its proposal and expects to complete this work within the next few months, when it will consult the Government and the Securities and Futures Commission.

Meanwhile, the Government will continue to issue health warnings from time to time through the media to investors about the risks in investing through fringe foreign exchange operators and advising them at the same time to use authorized institutions under the Banking Ordinance. Members of the public are reminded to exercise utmost care and prudence when entering into any investment arrangement in order to safeguard their own interests.

Rights of female indigenous New Territories villagers

3. MR NG MING-YUM asked: Will the Government inform this Council: 3. MR NG MING-YUM asked: Will the Government inform this Council:

(s) whether the Government has reviewed if the current arrangements for female (s) whether the Government has reviewed if the current arrangements for female indigenous New Territories villagers in matters concerning the right of succession conform with the relevant policies and legislation which deal with such right of the other female residents in Hong Hong;

(b) If they are not, in what ways the female indigenous villagers in the New (b) If they are not, in what ways the female indigenous villagers in the New Territories are different from the other female Hong Kong residents in their entitlements and obligations with regard to the right of succession; and

(c) whether the Government has reviewed if the present arrangements for female (c) whether the Government has reviewed if the present arrangements for female indigenous New Territories villagers in matters pertaining the rights of succession are in conflict with Article 22 of the Hong Kong Bill of Rights Ordinance 1991; if yes, what are the findings; if not, whether Government would initiate such a review

in the near future and release its findings to the public?

SECRETARY FOR HOME AFFAIRS: Mr Deputy President, matters concerning succession are generally governed by the Wills Ordinance (Cap. 30), the Intestates' Estates Ordinance (Cap. 73) and the Deceased's Family Maintenance Ordinance (Cap. 129). These laws apply to all Hong Kong residents irrespective of their gender and social origin. However, in relation to inheritance of land, there are certain customs and traditions observed by the indigenous population in the New Territories which lay down rules for the inheritance of ancestral land along the male line. These rules are given recognition in the New Territories Ordinance (Cap. 97) which provides that succession to ancestral land in the New Territories will generally be in accordance with customary law.

The New Territories Ordinance is currently under review. There are provisions in the Ordinance which enable those holding an interest in land in the New Territories to circumvent the effect of customary law, for example, by seeking an exemption to the land in question from the application of Part II of the Ordinance. Ways and means to improve the Ordinance with a view to making it more relevant to the present-day needs of Hong Kong will be included in this review.

The Administration had indeed studied the implications of the Bill of Rights The Administration had indeed studied the implications of the Bill of Rights Ordinance on such customary law prior to the enactment of the Ordinance. As the Council was informed during the Second Reading of the Bill of Rights Bill 1990 on 25 July 1990, the fact that customary law in the New Territories treats women in a way different to men does not mean that the law is necessarily discriminatory under the Bill of Rights. The United Nations Human Rights Committee have observed that it is not merely differentiation of treatment that constitutes discrimination. If the reasons for the differentiation in treatment are reasonable and objective and the purpose is one which does not contravene the International Covenant on Civil and Political Rights then such treatment will not be discriminatory.

Lower income group

4. DR LAM KUI-CHUN asked: In view of the concern over an increasing Gini Coeffic 4. DR LAM KUI-CHUN asked: In view of the concern over an increasing Gini Coefficient in Hong Kong, will the Administration show to this Council the Lorenz Curve in respect of Hong Kong for 1991-92 and inform this Council:

(a) whe (a) whether the size of the lower income group is increasing; and ther the size of the lower income group is increasing; and

(b) whether the income of this group has been increasing faster or slower than (b) whether the income of this group has been increasing faster or slower than inflation in the last three years?

SECRETARY FOR ECONOMIC SERVICES: Mr Deputy President, the Lorenz Curve based on data obtained from the 1991 Population Census is shown on the attached chart.

There is no generally agreed definition of "lower income group" in Hong Kong. For the purpose of this reply, the "lower income group" refers to the bottom 60% of households in the income distribution.

On this basis, the size of the "lower income group" would increase directly in proportion to the increase in the total number of households in Hong Kong. In line with the increase of 1.5% per year in the total number of households in the last three years, the size of the group also increased at the same rate.

The income of this group has been increasing faster than inflation as measured by the Consumer Price Index (A) in the last three years. Between 1988 and 1991, the median monthly household income of this group increased by 48%, based on data obtained from the General Household Survey, while the Consumer Price Index (A) increased by 35%.

Lorenz Curve 1991

Domestic Households (%)

Source: 1991 Population Census

Hong Kong residents being detained or serving sentences overseas 5. MR LAU CHIN-SHEK asked: Will the Government inform this Council of the follow 5. MR LAU CHIN-SHEK asked: Will the Government inform this Council of the following:

(a) according to Government data, how many Hong Kong residents are at pres (a) according to Government data, how many Hong Kong residents are at pres according to Government data, how many Hong Kong residents are at present being detained by overseas governments or serving sentences outside Hong Kong; and whether Government would consider providing a specific name list of these people and

information about their present situation;

(b) what action the Government has take (b) what action the Government has take what action the Government has taken to facilitate the release of these p n to facilitate the release of these people at an early date; and

(c) whether any government department is specifically responsible for contacting (c) whether any government department is specifically responsible for contacting and assisting families of the detainees?

SECRETARY FOR SECURITY: Mr Deputy President,

(a) As at 18 Mar (a) As at 18 Mar As at 18 March 1992, we are aware of 394 Hong Kong residents being detained ch 1992, we are aware of 394 Hong Kong residents being detained or serving sentences of imprisonment outside Hong Kong. A breakdown according to countries is at Annex.

The Hong Kong Immigration Department has a list of names of these persons but we do not intend to make it public.

(b) The Hong Kong Government has no power to facilitate early release of persons (b) The Hong Kong Government has no power to facilitate early release of persons sentenced to imprisonment overseas. However, in liaison with British Consular posts in the countries concerned, we provide administrative assistance to prisoners in relation to petitions for pardon or early release.

(c) The Hong Kong Immigration Department is informed in each case and, if the (c) The Hong Kong Immigration Department is informed in each case and, if the detainee asks that his next-of-kin be informed, this is done by the Immigration Department. Assistance is also given by the Department to facilitate visits to the detainees by their next-of-kin.

Annex

Hong Kong Residents being detained or

serving sentences overseas

No. of residents No. of residents No. of residents No. of residents

Country being detained Country being detained being detained serving sentences serving sentences serving sentences Total No. otal No.

1. Australia 1. Australia Australia 1 9 10

2. Austria 2. Austria Austria 4 9 13

3. Belgium 3. Belgium Belgium 4 9 13

4. Canada 4. Canada 2 0 2

5. China 5. China 0 34 34

6. Denmark 6. Denmark Denmark 1 0 1

7. France 7. France 8 3 11

8. Germany 8. Germany Germany 2 7 9

9. Greece 9. Greece 2 1 3

10. Indonesia 10. Indonesia Indonesia 0 1 1

11. Italy 11. Italy 0 4 4

12. Japan 12. Japan 10 35 45

13. Korea 13. Korea 6 5 11

14. Malaysia 14. Malaysia Malaysia 0 1 1

15. Mexico 15. Mexico 0 2 2

16. Netherlands 16. Netherlands Netherlands 2 3 5

17. Philippines 17. Philippines Philippines 17 4 21

18. Singapore 18. Singapore Singapore 8 14 22

19. South Africa 19. South Africa South Africa 5 0 5

20. Spain 20. Spain 7 0 7

21. Sweden 21. Sweden 3 1 4

22. Switzerland 22. Switzerland Switzerland 6 3 9

23. Taiwan 23. Taiwan 5 5 10

24. Thailand 24. Thailand Thailand 18 109 127

25. USA 25. USA 7 14 21

26. USSR 26. USSR 0 1 1

27. Vanuatu 27. Vanuatu Vanuatu 0 1 1

28. Vietnam 28. Vietnam Vietnam 0 1 1

Total 118 Total 118 276 394

Employment of disabled persons in the Civil Service

6. MR ERIC LI asked: Will the Government inform this Council whether there are any 6. MR ERIC LI asked: Will the Government inform this Council whether there are any measures to ensure that its present policy on employment of disabled persons in the Civil Service will continue in the new organizations following corporatization, privatization or contracting out; if so, what are the measures?

SECRETARY FOR THE CIVIL SERVICE: Mr Deputy President, the Government's policy on the employment of disabled persons in the Civil Service is to place the disabled in appropriate jobs within the Civil Service wherever possible. As with able-bodied persons, disabled persons applying for appointment in the Civil Service have to comply with any stipulated entry requirements. If they are found suitable for appointment, they should be given an appropriate degree of preference for appointment over other candidates. A disabled person found suitable to carry out the duties of a particular post may be recommended for appointment even though he may not be able, on account of his disability, to perform the duties of every post in the same rank.

As the largest employer of disabled persons in Hong Kong, the Government has t As the largest employer of disabled persons in Hong Kong, the Government has taken and will continue to take the lead in placing disabled persons in appropriate jobs in the Civil Service. Free services are provided by the Selective Placement Division of the Labour Department to disabled persons seeking open employment in both the private sector and in the Civil Service. In 1991, more than 1 000 disabled persons were successfully placed by this Division. As with other private sector employers, organizations taking on responsibility for former government activities are

encouraged to follow the Government's lead in employing disabled persons. Indeed, the Hospital Authority and the Vocational Training Council have adopted a similar policy to that of the Government on the employment of disabled persons.

In the Green Paper on Rehabilitation entitled "Equal Opportunities and Full In the Green Paper on Rehabilitation entitled "Equal Opportunities and Full Participation: A Better Tomorrow for All", it is recommended, inter alia, that options should be explored to facilitate open employment for disabled persons and that organizations in receipt of public funds, public utility companies and big commercial firms should be urged to adopt a more positive policy towards the employment of disabled persons and should take the initiative in making a statement in their annual reports of their employment policy for disabled persons. The public are being consulted on these and other recommendations in the Green Paper.

Award of contract for new airport terminal

7. DR SAMUEL WONG asked: It was reported that the Chek Lap Kok airport terminal d 7. DR SAMUEL WONG asked: It was reported that the Chek Lap Kok airport terminal design had been awarded to the highest bidder on the short-list comprising heavy British interests and that the successful bid was believed to be $70 million higher than the two losing contenders. Will the Administration inform this Council whether it is aware of the rationale as to why the highest bid was chosen and why bids of much heavier local interest, at a lower price, are not selected?

SECRETARY FOR WORKS: Mr Deputy President, in replying to this question, I should take the opportunity to correct a current misunderstanding. Only one of the three finalists was significantly lower in fee; two of the finalists, including the consultant awarded the bid, were extremely close in terms of final fee. The overall method of selection was in fact very similar to that now used by the Government for all engineering and associated consultancies.

Technical merit of the eight proposals received was a predominant factor in determining which consultant was selected. This included such factors as: understanding of objectives, identification of key issues, appreciation of project constraints and requirements, approach to cost effectiveness, technical approach, work programme, quality of management and professionals, cohesion of proposal, and innovation in design. Points were awarded for each factor and totaled to give a technical merit score, on this basis the three finalists were clearly superior to the other proposals received.

Value for money in terms of consultancy fee was dealt with in a manner also consistent with that used for government consultancy awards. The eight fee proposals received were individually evaluated in terms of their make-up and content, to ensure that they covered the consultancy brief. The Provisional Airport Authority (PAA) Board of Directors approved a weighting, to be applied for combining technical merit scores with fee proposals.

The rationale for this weighting, which mirrors the Government's approach, is that an element of fee competition is important, but should not be dominant. The over-riding concern is to select a consultant most able to design a cost effective solution. In the case of the terminal, this had to be the design that best satisfied

all the requirements and future needs of a technically demanding project, whilst at the same time ensuring that the design could be built within budget and on time.

Of the three finalists, based upon technical appraisal including a review by the PAA full Board of Directors, the chosen consultant technically was clearly ahead of the next consultant, whose fee was similar. The remaining finalist, whose fee proposal was the lowest of any received, was third both in terms of technical merit and also when combined with fees.

All bidding consultants were in fact consortia of several firms, and each of the All bidding consultants were in fact consortia of several firms, and each of the eight bidding consortia had involvement of overseas firms because of the need for specialist experience and expertise not available locally. Conversely Hong Kong experience and knowledge were considered important, and were taken account of in assessment submissions. All consortia including the appointed consultant had

involvement of Hong Kong based firms.

Imported workers

8. MR HENRY TANG asked: In relation to the labour importation scheme, will the 8. MR HENRY TANG asked: In relation to the labour importation scheme, will the Government inform this Council whether consideration will be given to allowing wage deductions for the purpose of paying fees charged on an employee by authorities in his country of origin if such deductions have been agreed by the employer and the employee before the latter comes to Hong Kong?

SECRETARY FOR EDUCATION AND MANPOWER: Mr Deputy President, imported workers are entitled to the same protection under Hong Kong law as local workers, including payment of wages in accordance with the amount stipulated in their contracts of employment. Allowable wage deductions are spelt out in the relevant section of the

Employment Ordinance and do not include fees charged on an employee by authorities in his country of origin. There is no plan to increase the ambit of the current provision.

British Nationality Selection Scheme

9. MISS EMILY LAU asked: Will the Government inform this Council of the following 9. MISS EMILY LAU asked: Will the Government inform this Council of the following

regarding the British Nationality Selection Scheme:

(a) the number of applications that have been rejected and the reasons why; (a) the number of applications that have been rejected and the reasons why;

(b) the latest figures s (b) the latest figures s the latest figures showing the breakdown of successful applicants in each howing the breakdown of successful applicants in each category; and

(c) since the category of business administrators and managers was (c) since the category of business administrators and managers was undersubscribed while some of the other categories for professionals were grossly oversubscribed, whether consideration will be given to readjusting the quota for some of the categories to ensure applicants who are qualified will not be rejected because of the lack of places in their categories?

SECRETARY FOR SECURITY: Mr Deputy President, as at 21 March 1992, 3 141 applications under the British Nationality Selection Scheme had been rejected. All were rejected because the applicants did not score sufficient points to bring them within the quota of their selected occupational group.

Also as at 21 March 1992, 12 078 persons had been registered as British citizens Also as at 21 March 1992, 12 078 persons had been registered as British citizens under the scheme. This includes 4 087 principal applicants and their 7 991 dependants. A breakdown of the principal beneficiaries by class and by occupational group is as follows:

No. of principal beneficiaries No. of principal beneficiaries

General occupation class 1 375 General occupation class 1 375

Managers and administrators 50 Managers and administrators 50

Information science professionals 24 Information science professionals 24

News editors and journalists 93 News editors and journalists 93

Medical doctors 331 Medical doctors 331

Physical and life science professionals 25 Physical and life science professionals 25

Nurses and midwives 417 Nurses and midwives 417

Legal professionals Legal professionals 113

Teaching professionals (post-secondary) 138 Teaching professionals (post-secondary) 138

Educational administrators 97 Educational administrators 97

Social work professionals 29 Social work professionals 29

Statistical assistants 34 Statistical assistants 34

Translators/Interpreters 24 Translators/Interpreters 24

Disciplined services class 1 145 Disciplined services class 1 145

Correctional Services Department 205 Correctional Services Department 205

Customs and Excise Department Customs and Excise Department and Excise Department 260

Fire Services Department 537 Fire Services Department 537

Operations Department of the Independent 57 Operations Department of the Independent 57

Commission Against Corruption

Royal Hong Kong Auxiliary Air Force 3 Royal Hong Kong Auxiliary Air Force 3

Garrison 83 Garrison 83

Sensitive service class 1 511 Sensitive service class 1 511

Entrepreneurs class 56 Entrepreneurs class 56

-------

Total 4 087 Total 4 087

====

The quotas for the various classes and occupational groups have been set by the British Nationality (Hong Kong) (Selection Scheme) Order 1990. There is no provision in the Order for the unused quota in one occupational group to be reallocated to another. Any unused places will be carried forward to the second phase of the scheme. We will review the quotas for the various classes and occupational groups before applications are invited for the second phase.

Illegal rooftop structures

10. DR CONRAD LAM asked: Will the Government inform this Council: 10. DR CONRAD LAM asked: Will the Government inform this Council:

(a) of the population size of rooftop squatters and the number of illegal roo (a) of the population size of rooftop squatters and the number of illegal rooftop structures in the territory, and their effect on the local environment;

(b) whether the Governme (b) whether the Governme whether the Government has any specific plan to deal with all these rooftop nt has any specific plan to deal with all these rooftop illegal structures; and

(c) in the case of a clearance exercise, whether the affected rooftop squatters (c) in the case of a clearance exercise, whether the affected rooftop squatters would be resettled and compensated and if not, why not?

SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS: Mr Deputy President, according to the 1991 Population Census, on 15 March 1991 (the Census reference date), 3 086 rooftop structures built with non-permanent material on a permanent building were occupied. There was however no distinction of the legal status of these structures. 9 985 people were enumerated in these structures on the same date.

Illegal rooftop structures are generally used for residential purposes, though in some cases they may be used as drying areas, and for gardens and light industry. Illegal use of rooftop areas for residential purposes increase the population density of the parent buildings beyond what the building services are designed to cope with. It also affects the normal maintenance of the drainage and water proofing of the rooftop areas resulting in environmental nuisance. Illegal structures may also

overload the roof of the parent buildings and lead to structural instability.

There are no immediate plans for large scale clearances of existing illegal rooftop structures because such action would dispossess a substantial number of people. However illegal structures which constitute a danger or pose serious sanitary and environmental nuisance are being and will continue to be removed. In addition, any person found erecting a new illegal rooftop structure will be prosecuted for carrying out building works without the approval and consent of the Building Authority.

Persons who are made homeless as a result of the clearance of illegal rooftop structures are rehoused according to their eligibilities by the Housing Department.

Bank of Credit and Commerce Hong Kong

11. MISS EMILY LAU asked: Will the Government inform this Council of the questions 11. MISS EMILY LAU asked: Will the Government inform this Council of the questions raised by the Attorney General's Chambers on the Commissioner for Administrative Complaints' jurisdiction to investigate the complaints concerning the closure of the Bank of Credit and Commerce Hong Kong and the reasons for raising these questions?

ATTORNEY GENERAL: Mr Deputy President, the Attorney General's Chambers was requested to advise the Secretary for Monetary Affairs on a memorandum dated 4 October 1991 from the Commissioner for Administrative Complaints. As a result two queries were raised with the Commissioner. The first concerned jurisdiction and related to

section 10 of the Commissioner for Administrative Complaints Ordinance and the second concerned section 12(6) of that Ordinance.

On the question of jurisdiction, section 10 of the Ordinance provides that the Commissioner shall not undertake or continue an investigation if the complaint relates to action in respect of which the complainant has a remedy by proceedings in court unless the Commissioner is satisfied that in the particular circumstances it is not reasonable to expect the complainant to resort to that remedy.

The reason why this section was brought to the attention of the Commissioner was because shortly after the complaints were made to the Commissioner, a Bank of Credit and Commerce depositor issued court proceedings against the Commissioner of Banking seeking damages for his loss. In his draft report, the Commissioner for

Administrative Complaints recommended that if the complainant wished to pursue a claim for compensation, he might take the matter to court. On 4 November 1991, the Commissioner wrote stating that he was satisfied that he had jurisdiction to undertake an investigation into the complaint.

The second question related to section 12(6) of the Ordinance which provides that if during the course of an investigation, it appears to the Commissioner that there may be sufficient grounds for him to make any report that may criticize or adversely affect any officer, he shall give the officer an opportunity to be heard. Although the Commissioner had said on 4 October that he had completed his

investigation, he had not at that stage interviewed the Commissioner of Banking or indeed had any direct communication with him. On 31 October 1991 the Crown Solicitor accordingly drew the attention of the Commissioner to the requirement in section 12(6).

Following this letter both the Commissioner of Banking and the Secretary for Monetary Affairs appeared before the Commissioner for Administrative Complaints and had the opportunity of making representations.

Door-to-door mail delivery service

12. MR GILBERT LEUNG asked: Will the Government inform this Council: 12. MR GILBERT LEUNG asked: Will the Government inform this Council:

(a) which areas in the territory are still not provided with door (a) which areas in the territory are still not provided with door-to-door mail delivery service? What plans are in hand to improve the mail deliveries in these areas;

(b) how man (b) how man how many villages were allocated with door numbers under the official house y villages were allocated with door numbers under the official house numbering scheme over the past three years; what arrangement will be made under the scheme in the next three years; and

(c) whether the Administration will review the present standard o (c) whether the Administration will review the present standard o whether the Administration will review the present standard of postal f postal services in the New Territories and consider improvement measures such as increasing the frequency of mail collection from once to twice daily and installing more postboxes in the new towns in the light of the sharp increase of population in the New Territories in recent years?

SECRETARY FOR ECONOMIC SERVICES: Mr Deputy President,

(a) Door-to-door delivery of letter mail is provided throughout the territory, (a) Door-to-door delivery of letter mail is provided throughout the territory, with the exception of unnumbered buildings and remote areas where a postman carrying a mail pouch would have difficulty gaining access. In these cases the Post Office makes arrangements with the residents concerned so that they can receive mail either from nest letter boxes (a group of letter boxes, each serving a household), a communal box or accommodation addresses.

(b) The Commissioner of Rating and Valuation took over responsibility for (b) The Commissioner of Rating and Valuation took over responsibility for

building numbering in the New Territories on 14 December 1990. Since then 479 buildings have been numbered in 78 villages; a large number as a result of requests from individual occupiers or owners.

There are approximately 950 villages in the New Territories for which building numbers are required. Of these about 700 are already numbered and 250 remain unnumbered. A programme is now being devised to review building numbering in all New Territories villages, including those where a numbering scheme has already been established as some updating is required to include new houses. Priority will however be given to those identified as being most in need of numbering due to outstanding requests for direct mail delivery.

(c) The Administration attaches considerable importance to providing postal (c) The Administration attaches considerable importance to providing postal services to the New Territories. At present, mail is collected at least once a day from all postboxes. Our assessment is that this level of service is generally regarded as acceptable by the majority of New Territories residents, but we will continue to monitor the situation closely to ascertain if and when improvements are necessary.

All postboxes are strategically located to serve the maximum number of people. All postboxes are strategically located to serve the maximum number of people. The planning standard applied in built up areas, including those in the New Territories, is that nobody should live further than 0.4 km from the nearest postbox. In rural areas, the standard is 0.8 km. We are satisfied that this provides an adequate level of coverage.

Consultancy works for Airport Core Programme projects

13. MR EDWARD HO asked: Will the Government provide this Council with a list of 13. MR EDWARD HO asked: Will the Government provide this Council with a list of consultancy works for the Airport Core Programme projects for which contracts have been awarded, together with the contract fees and the names and countries of origin of firms forming the selected consortia?

SECRETARY FOR WORKS: Mr Deputy President, attached herewith is a list of consultancies which have been awarded for the Airport Core Programme projects, co-ordinated by myself.

Feasibility Study/ Nationality Feasibility Study/ Nationality

Investigation, Design and Estimated Investigation, Design and Estimated Estimated Main (Origin) of (Origin) of Construction Agreements Fees ($M) Construction Agreements Fees ($M) Fees ($M) Consultant Consultant Consultant Consultant Consultant

Utility and Government Service:

(a) Fill Management Study -- Phase II (a) Fill Management Study -- Phase II Fill Management Study -- Phase II 8 Au Posford Consultants Au Posford Consultants Au Posford Consultants UK Information Management System Limited Information Management System Limited

(b) Fill Management Study -- Phase II (b) Fill Management Study -- Phase II Fill Management Study -- Phase II 3 DEMAS Netherlands Netherlands Dredging Studies related to

marine borrow area

(c) Geological Survey (c) Geological Survey Geological Survey 1 British British British Geological Survey Geological Survey Geological Survey UK (Extension 7: Fill Management Study

-- Phase II Specialist

Geophysical Interpretation)

(d) Fill Management Study -- Phase II (d) Fill Management Study -- Phase II Fill Management Study -- Phase II 22 Binnie Consultants Binnie Consultants Binnie Consultants HK(UK) Investigation and Development of Limited Investigation and Development of Limited

Marine borrow area

Feasibility Study/ Nationality Feasibility Study/ Nationality

(e) Replacement Airport at (e) Replacement Airport at Replacement Airport at 1 British Geological Survey British Geological Survey British Geological Survey UK Chek Lap Kok: Investigation --

Structural geology study for PADS -- Structural geology study for PADS --

a study on the seismotectonics and

crustal structures pertinent to Hong Kong

(f) New Airport and Related (f) New Airport and Related New Airport and Related 90 International Bechtel International Bechtel International Bechtel USA Projects Overall Works Incorporated Projects Overall Works Incorporated

Management -- Phase I

(g) New Airport and Relate (g) New Airport and Relate New Airport and Related 237 International Bechtel International Bechtel International Bechtel USA Projects overall Works Incorporated Projects overall Works Incorporated

Management -- Phase II

(h) Tai Lam Chung/Siu Ho (h) Tai Lam Chung/Siu Ho Tai Lam Chung/Siu Ho 13 Mott MacDonald Mott MacDonald Mott MacDonald HK(UK) Wan land and submarine mains Hong Kong Limited Wan land and submarine mains Hong Kong Limited

(i) Water Supply to North Lantau (i) Water Supply to North Lantau Water Supply to North Lantau 29 PHH/SWK Wate PHH/SWK Wate PHH/SWK Water HK(UK) and raw water transfer to Consultant and raw water transfer to Consultant

Silvermine Bay Treatment Works

(j) Consultancy for Owner (j) Consultancy for Owner Consultancy for Owner 21 Gilman Swire Willis Limited Gilman Swire Willis Limited Controlled Insurance -- Joint Venture of Controlled Insurance -- Joint Venture of

Programme for ACP Gilman Insurance/ Programme for ACP Gilman Insurance/ Gilman Insurance/ HK/

projects Swire/ projects Swire/ HK/

Willis UK Willis UK

(k) Study of Industrial and (k) Study of Industrial and Study of Industrial and 5 Shankland Cox Limited/ Shankland Cox Limited/ Shankland Cox Limited/ HK(UK)/ HK(UK)/ Commercial Enterprises that Arthur D. Little Commercial Enterprises that Arthur D. Little Arthur D. Little HK(USA) HK(USA) need Relocation with the Airport (Asia Pacific) Inc. need Relocation with the Airport (Asia Pacific) Inc.

Tung Chung Development

(a) Consultancy for design (a) Consultancy for design Consultancy for design

and contract stages,

construction support

facilities facilities 75 Mott MacDonald Mott MacDonald Mott MacDonald HK(UK)

Hong Kong Limited

(b) Development Study of (b) Development Study of

North Lantau and Phase I

design

North Lantau Expressway

(a) Detailed design and (a) Detailed design and Detailed design and 131 Mott MacDonald Mott MacDonald Mott MacDonald HK(UK) construction supervision Hong Kong Limited construction supervision Hong Kong Limited of highway, railway and

utility reserve formations

(b) Detailed design and (b) Detailed design and Detailed design and 3 Mott MacDonald Mott MacDonald Mott MacDonald HK(UK) construction supervision of construction supervision of ervision of Hong Kong Limited Hong Kong Limited watermains in utility reserve

Feasibility Study/ Nationality Feasibility Study/ Nationality

Lantau Fixed Crossing Consultancy Agreements

(a) Design and Construction (a) Design and Construction Design and Construction 68 Mott MacDonald Mott MacDonald Mott MacDonald HK(UK) of Lantau Fixed Crossing including Hong Kong Limited of Lantau Fixed Crossing including Hong Kong Limited tender documentation for

Contracts 1 and 2, and BIA

(b) Detailed Structural (b) Detailed Structural Detailed Structural 18 Mott MacDonald Mott MacDonald Mott MacDonald HK(UK) Design of Tsing Ma Bridge and Hong Kong Limited Design of Tsing Ma Bridge and Hong Kong Limited Outline Design of

Kap Shui Mun Bridge

(c) Independent Design Check (c) Independent Design Check Independent Design Check 10 Flint and Neill Partnership Flint and Neill Partnership Flint and Neill Partnership UK of Tsing Ma Bridge

(d) Railway Movement Joint (d) Railway Movement Joint Railway Movement Joint 5 Bridge and Offshore Bridge and Offshore Bridge and Offshore Japan Feasibility Study Engineering Association Feasibility Study Engineering Association

(e) Secondment of (e) Secondment of Secondment of 1 EHC Project EHC Project EHC Project HK

Contracts Specialist Management Company Contracts Specialist Management Company

Limited

(f) Detailed Design, (f) Detailed Design, Detailed Design, 35 Scott Wilson Kirkpatrick Scott Wilson Kirkpatrick Construction and Completion of and Partners/ Construction and Completion of and Partners/ and Partners/ HK(UK)/ HK(UK)/

Route 3 Interchange and Parsons Brinckerhoff Route 3 Interchange and Parsons Brinckerhoff Advance Earthworks at (Asia) Limited/ Advance Earthworks at (Asia) Limited/ (Asia) Limited/ HK(USA)/ HK(USA)/ Northwest Tsing Yi Charles Haswell & Northwest Tsing Yi Charles Haswell &

Partners/ HK(UK)/ Partners/ HK(UK)/

Wilbur Smith Associates HK(USA) Wilbur Smith Associates HK(USA)

(g) Secondment of Systems Engineer (g) Secondment of Systems Engineer Secondment of Systems Engineer 2 HPT System Limited HPT System Limited HPT System Limited HK

(h) EIA (h) EIA 2 Scott Wilson Kirkpatrick Scott Wilson Kirkpatrick

and Partners/ HK(UK)/ and Partners/ HK(UK)/

Parsons Brinckerhoff

(Asia) Limited/ HK(USA)/ (Asia) Limited/ HK(USA)/

Charles Haswell and

Partners/ HK(UK)/ Partners/ HK(UK)/

Wilbur Smith Associates HK(USA) Wilbur Smith Associates HK(USA)

Route 3

(a) Detailed design, (a) Detailed design, Detailed design, 186 Scott Wilson Kirkpatrick Scott Wilson Kirkpatrick construction and completion of construction and completion of and Partners/ and Partners/ and Partners/ HK(UK)/ HK(UK)/ Tsing Yi and Kwai Chung Section of Parsons Brinckerhoff Tsing Yi and Kwai Chung Section of Parsons Brinckerhoff Route 3 alignment CRA1 (Asia) Limited/ Route 3 alignment CRA1 (Asia) Limited/ (Asia) Limited/ HK(USA)/ HK(USA)/ Charles Haswell and

Partners/ HK(UK)/ Partners/ HK(UK)/

Wilbur Smith Associates HK(USA) Wilbur Smith Associates HK(USA)

Feasibility Study/ Natio Feasibility Study/ Nationality

(b) Design Stage 1 (b) Design Stage 1 Design Stage 1 116 Scott Wilson Kirkpatrick Scott Wilson Kirkpatrick

Preliminary design for alignment and Partners/ Preliminary design for alignment and Partners/ and Partners/ HK(UK)/ HK(UK)/

CRA1 and detailed design for Parsons Brinckerhoff CRA1 and detailed design for Parsons Brinckerhoff Kwai Chung advance work (Asia) Limited/ Kwai Chung advance work (Asia) Limited/ (Asia) Limited/ HK(USA)/ HK(USA)/ Charles Haswell and

Partners/ HK(UK)/ Partners/ HK(UK)/

Wilbur Smith Associates HK(USA) Wilbur Smith Associates HK(USA)

West Kowloon Expressway

Investigation, design 108 Investigation, design 108 Freeman Fox Maunsell Freeman Fox Maunsell

and construction - and construction -- Joint Venture of - Joint Venture of

supervision Acer Consultants (Far East) supervision Acer Consultants (Far East)

Limited/ HK(UK)/ Limited/ HK(UK)/

Maunsell Consultants Asia

Limited HK(UK) Limited HK(UK)

West Kowloon Reclamation

(a) Investigation, design, (a) Investigation, design, Investigation, design, 126 Mott MacDonald Mott MacDonald Mott MacDonald HK(UK) construction and supervision of Hon construction and supervision of Hong Kong Limited g Kong Limited reclamation and infrastructure to

provide land for PADS transport

reserves and urban development

(b) West Kowloon (b) West Kowloon West Kowloon 4 Balfours International (Asia) Balfours International (Asia) Balfours International (Asia) HK Reclamation Reprovisioning -- Consulting Engineers Limited Reclamation Reprovisioning -- Consulting Engineers Limited Construction of Cheung Sha Wan Construction of Cheung Sha Wan

Wholesale Market Phase 1

Central and Wan Chai Reclamation

(a) Investigation design and (a) Investigation design and Investigation design and 50 Maunsell Consultants Maunsell Consultants Maunsell Consultants HK(UK) construction supervision of Asia Limited construction supervision of Asia Limited

reclamation with the first phase to

form land for the airport railway form land for the airport railway

(b) Development Specific Investigation (b) Development Specific Investigation Development Specific Investigation 25 Maunsell Consultants Maunsell Consultants Maunsell Consultants HK(UK) Asia Limited

Airport Railway

(a) Airport Railway Feasibility (a) Airport Railway Feasibility Airport Railway Feasibility 20 Freeman Fox Maunsell Freeman Fox Maunsell Study -- Investigation of -- Joint Venture of Study -- Investigation of -- Joint Venture of

alignment, station locations Acer Consultants (Far East) alignment, station locations Acer Consultants (Far East) and operation of airport Limited/ and operation of airport Limited/ Limited/ HK(UK)/ HK(UK)/

railway and traffic forecast Maunsell Consultants railway and traffic forecast Maunsell Consultants Maunsell Consultants HK(UK) Asia Limited

(b) Airport Railway Interface Study (b) Airport Railway Interface Study Airport Railway Interface Study 1 Greiner Incorporated Greiner Incorporated Greiner Incorporated USA

Feasibility Study/ Nationali Feasibility Study/ Nationali Nationality

Investigation, Design and Estimated Investigation, Design and Estimated Estimated Main (Origin) of (Origin) of

Construction Agreements Fees ($M) Construction Agreements Fees ($M) Fees ($M) Consultant Consultant Consultant Consultant Consultant

Western Harbour Crossing

Western Harbour Crossing Western Harbour Crossing 25 Western Harbour Crossing Western Harbour Crossing Feasibility Study -- traffic forecast Consultants -- Joint Feasibility Study -- traffic forecast Consultants -- Joint Consultants -- Joint Venture of Venture of and investigation alignment and layout Acer Consultants (Far East) and investigation alignment and layout Acer Consultants (Far East) of crossing in West Kowloon and Limited/ of crossing in West Kowloon and Limited/ Limited/ HK(UK)/ HK(UK)/

Western District (Plus extension to Maunsell Consultants Western District (Plus extension to Maunsell Consultants include additional Works) Asia Limited/ include additional Works) Asia Limited/ Asia Limited/ HK(UK)/ HK(UK)/

Parsons Brinckerhoff Parsons Brinckerhoff

(Asia) Limited/ HK(USA)/ (Asia) Limited/ HK(USA)/

Pypun-Howard

Humphreys Limited/ HK(UK)/ Humphreys Limited/ HK(UK)/

The MVA Consultancy HK(UK) The MVA Consultancy HK(UK)

Mains water supply to village households

14. MR WONG WAI-YIN asked: Will the Government inform this Council: 14. MR WONG WAI-YIN asked: Will the Government inform this Council:

(a) up to the presen (a) up to the presen up to the present, how many village households in the New Territories have t, how many village households in the New Territories have tap water supply and how many have not;

(b) which villages in the New Territories have been provided with tap water s (b) which villages in the New Territories have been provided with tap water supply systems in the past five years;

(c) which villages by districts in the (c) which villages by districts in the which villages by districts in the New Territories are still not included New Territories are still not included in Government's tap water supply plan, and what the reasons are;

(d) what interim solutions are being formulated by the Administration for (d) what interim solutions are being formulated by the Administration for villages without tap water supply; and how it will ensure that the fresh water presently supplied to the villagers is unpolluted;

(e) whether the Government has any overall improvement plan for those villages (e) whether the Government has any overall improvement plan for those villages in the New Territories West (Tuen Mun and Yuen Long) which are not yet provided with tap water and when the improvement programme is expected to be completed?

SECRETARY FOR WORKS: Mr Deputy President, I will reply to the question in the five parts.

(a) Of the 769 villages in the New Territories (figures compiled in collabora (a) Of the 769 villages in the New Territories (figures compiled in collaboration with City and New Territories Administration), 598 villages have mains water supply systems, and metered supply can be provided upon application.

(b) A total of 102 villages have been provided with mains water supply systems (b) A total of 102 villages have been provided with mains water supply systems in the five-year period from October 1986 to September 1991. The names of these villages are being compiled and will be made available in 10 days' time. (Annex I)

(c) Of the 171 villages without mains water supply system, it is planned that (c) Of the 171 villages without mains water supply system, it is planned that 67 villages will be provided with mains water supply. 35 of these villages will be provided with supply upon completion of the construction works of the water supply schemes under PWP items 146 WF and 156 WF. These are scheduled for completion in two years. The remaining 32 villages are covered under PWP 118 WF.

Of the balance of 104 villages 12 villages are to be cleared in the near f Of the balance of 104 villages 12 villages are to be cleared in the near future. At present, no water supply system will be planned for the remaining 92 villages due

to the very high capita cost. Provision of mains water supply to these villages will nevertheless be kept under constant review.

The names of these villages by districts will be made available in 10 days' time.

(d) For remote villages without mains water supply, the villagers use well or (d) For remote villages without mains water supply, the villagers use well or stream water which is regularly monitored by the Regional Services Department to ensure that the water quality is acceptable.

(e) There are five villages in the New Territories West not yet provided with (e) There are five villages in the New Territories West not yet provided with mains water supply. They are:

Sha Kong Miu (Yuen Long)

Sheung Pak Nai (Yuen Long)

Ha Pak Nai (Yuen Long)

Nim Wan (Tuen Mun) Nim Wan (Tuen Mun)

Tin Fu Chai (Tuen Mun)

Water supply to Sha Kong Miu depends on completion of the water supply system to Tin Shui Wai which is scheduled for 1994. Sheung Pak Nai and Ha Pak Nai have been included in the water supply schemes under PWP Item 119 WF. Nim Wan falls within the proposed NWNT Landfill Site and will therefore not be considered for mains water supply. Tin Fu Chai is one of the remaining 92 villages which have a very high per capita cost and is not scheduled for mains water supply at present.

Second Reading of Bill

APPROPRIATION BILL 1992

Resumption of debate on Second Reading which was moved on 4 March 1992

DEPUTY PRESIDENT: In accordance with Standing Order 54(2) we will now resume the debate on the Appropriation Bill 1992. The motion before the Council is that the

Bill be read the Second time.

Question on Second Reading proposed.

MR ALLEN LEE (in Cantonese): Mr Deputy President, in five years Hong Kong will become a Special Administrative Region of China. I believe that during this transition period the maintenance of social stability, economic prosperity and the general well-being of the community in order to ensure a smooth transfer of sovereignty in 1997 should be a common goal for all those who are concerned with Hong Kong's future to strive after.

Hong Kong's success has been due on the one hand to the perseverance, hard work and agile mind of its people, and on the other hand to the positive policies adopted by the Hong Kong Government which have enabled enterprising people to give their talents full play in their endeavour to create wealth. It is precisely because of this happy combination of policies and people that numerous overseas investors have been attracted to this territory. It is fair competition tempered with the adjusting mechanism of market forces that has brought about a steady rise in the qualify of life for the people of Hong Kong. In Asia, the standard of living in Hong Kong is currently second only to Japan. Our import and export volumes have placed Hong Kong among the world's foremost ten major markets. Such success indeed is no small

achievement given the objective factors of scarcity of natural resources and a large population.

During the transition period, political reform is an inevitable reality. Before During the transition period, political reform is an inevitable reality. Before the policy of Hong Kong people governing Hong Kong is given effect to, the maintenance of a stable and dynamic economic system is an important mission for Members of the Legislative Council to discharge. Such being the major premise, 20 Members of this Council who firmly believe in the spirit of free enterprise and espouse the principle of positive endeavour to create social wealth have formed a Co-operative Resources Centre (CRC). We, members of the CRC, believe that to ensure the continued

development of the economy, the following must be done:

(i) ensuring that Hong Kong becomes a major financial industrial and business (i) ensuring that Hong Kong becomes a major financial industrial and business centre;

(ii) building the infrastructure conducive to Hong Kong's economic (ii) building the infrastructure conducive to Hong Kong's economic

development;

(iii) implem (iii) implementing sound policies on the management of the economy; enting sound policies on the management of the economy; (iv) promoting and maintaining an advantageous investment environment; (iv) promoting and maintaining an advantageous investment environment; (v) endeavouring to promote the international status of Hong Kong. (v) endeavouring to promote the international status of Hong Kong.

We also hold the steadfast belief that concurrent with the development of the We also hold the steadfast belief that concurrent with the development of the economy, the Government and entrepreneurs should care for the well-being of the people. In this regard, we are of the view that the following should be done:

(i) upgrading further the qualify of life of the people; (i) upgrading further the qualify of life of the people;

(ii) uphold (ii) upholding strictly the rule of law and safeguarding the human rights and ing strictly the rule of law and safeguarding the human rights and freedoms of the people;

(iii) maintaining law and order; (iii) maintaining law and order;

(iv) ensuring that there are adequate resources to meet social welfare needs. (iv) ensuring that there are adequate resources to meet social welfare needs.

Members of the CRC believe that the most important factors that go into making Members of the CRC believe that the most important factors that go into making Hong Kong the envy of the world are adequate care taken of Hong Kong people's interests and constant upgrading of their qualify of life. To achieve this objective, Hong Kong people must make a concerted effort to strive for greater economic success. It is only when there is a bigger economic pie that people can have a greater share of economic benefits. The placing of private or sectoral interest above that of others or at others' expense would only result in a free-for-all with its attendant

bickerings and struggles; this would be a futile and non-constructive way of doing things.

In scrutinizing the Budget presented by the Financial Secretary, we, members of the CRC, have invariably taken the above criteria as the starting point. During this two-day debate colleagues from the CRC will present their views and make positive suggestions on the various aspects of the Budget.

There is much about the present Budget that deserves praise. The cautious budgeting strategy adopted by the Financial Secretary is consistent with the spirit

cherished by we Chinese of "saving for a rainy day". As at the end of the current financial year, our reserves have reached $92 billion; the Financial Secretary is forecasting a surplus of $5.1 billion for the next fiscal year. The build-up of a huge reserve is likely to engender misgivings and provoke arguments against it. Some people are worried lest the Government should be making early preparations for massive cost overruns of the new airport project. I hope that the Financial Secretary will give a direct response to this in order to do away with people's worries.

After analyzing the present Budget, we are firmly of the view that middle income families, the so-called "sandwich class", are people within our society most in need of relief. These families are neither eligible for public rental housing nor Home Ownership Scheme housing; their monthly household income ranges from $20,000 to

$30,000. They are not eligible for any sort of direct government help. At a time of high inflation, any increase in clothing, food, housing and transport costs would hit the "sandwich class" the hardest. They are working hard for a living day and night, they have had few channels to express their grievances and they are a silent and forgotten group. They are mostly young couples and professionals who are the mainstay and backbone of our economic system. In view of the fiscal surplus of $14.1 billion, we are of the view that the Financial Secretary need not adopt an overly conservative budgetary strategy. If the "sandwich class" continue to be neglected, their morale will plummet and their sense of belonging to Hong Kong will reduce. The worst to happen would be that these "backbones" of society emigrate; in such event, Hong Kong's future development would suffer an irreversible set-back. I hope the Financial Secretary will give more consideration to this.

Due to various objective factors Hong Kong's economy has, for all these years, been progressing towards a service-oriented economy. The territory has successfully developed into one of the world's largest financial centres. But with the rapid economic development of the Pearl River delta in recent years and the gradual

relocation of local industrial production northward to the Mainland, it has become apparent that we need to actively explore new development strategies in order to cope with the latest development. As a matter of fact, having regard to the long-term development of our economy, the present strategy where overall economic development depends heavily on service industries needs to be reviewed. This is because service industries will certainly bear the brunt and be seriously affected should there be a drastic downturn of the world economy.

As a matter of fact the Administration has, for many years, failed to contribute

to high-tech industrial development, resulting in the lack of a solid foundation for our industry today. The present change has been brought about by China's open policy. The investment in the Mainland by Hong Kong investors has brought great economic advantages to both parties, Hong Kong and the Mainland. Had China not adopted the open policy in 1979, I can say with confidence that Hong Kong's economy would never have performed so well as it has today. Given the available resources, we should make long-term investments and that is why I fully support the massive infrastructural programme. But according to the Financial Secretary's Budget, only $0.2 billion will be set aside as research funds for the development of high-tech industry. This amount,

in our view, falls far short of the actual need and is much less than what the other three Little Dragons have been spending. Having regard to the interest of our long-term economic development, I would suggest that more funds should be allocated for research in the development of high-tech industry in Hong Kong. Only through high-tech development will we be able to compete with other regions and the other Little Dragons of Asia. We may start off a bit late; but provided that the Government is determined to make available sufficient resources to support the necessary research and development, I believe Hong Kong industries will surely be capable of catching up. Only when a good foundation for industrial development has been laid can we be guaranteed the steady growth of our economy in the future. This is the key to the long-term economic development of the territory and hence the further enhancement of the living standard of the people of Hong Kong.

Finally, I hope the Administration and Members of this Council will carefully consider the present Budget. After the Financial Secretary had presented his Budget, many views were expressed by Members. The Financial Secretary also spared no effort in meeting and explaining to us the Administration's stand. Because of the diverse range of views expressed, the press kept up a continual coverage of them as and when they emerged. I have the feeling that since some of my colleagues are opposed to the whole Budget package a political storm seems to be brewing. If the whole Budget is overturned, the operation of the Hong Kong Government will come to a standstill; this will be a serious matter. The Financial Secretary has, however, indicated that some of the suggestions from Members could be accepted subject to certain adjustments to the implementation schedule. I hope the Financial Secretary will reconsider his Budget to facilitate its passage. In his policy address on 9 October the Governor mentioned the important point of co-operative partnership between the Administration and this Council, a point which I said I wholly supported in the policy debate that followed. A co-operative partnership is a bilateral relationship. To run Hong Kong well, the Administration and this Council must reach consensus on major matters.

Here I would call upon Members of this Council to support the expenditure proposals of the Budget on 1 April and the Financial Secretary to consider in full measure the views expressed by Members in order to avoid confrontation between the Administration and Members of this Council. I am of the view that we have a common goal and none would want to see an embarrassing situation emerge. Neither would members of the public want to see it. There is still time for Members of this Council and the

Administration to consider the matter. I hope this incident can be satisfactorily settled.

Mr Deputy President, with these remarks, I support the motion.

MR STEPHEN CHEONG (in Cantonese): Mr Deputy President, the Budget before us has been generally described as "prudent and conservative". The Financial Secretary Mr MacLEOD told us that the economic prospects of Hong Kong is still promising, albeit inflation will remain high. The Hong Kong Government has abundant surpluses and reserves, although instant provision of the fruits of such abundance is not available to the public. Nevertheless, the most important message that the Budget of the Financial Secretary has sent to us is that we must be forward-looking. We should have in mind the possible economic developments ahead, not just for one year, but throughout the second phase of the transitional period and up till 1997. If this can be seen as an indicator, I think it absolutely deserves our support.

Here, I would like to bring our discussion on this "forward-looking" attitude to another level. I believe that the "forward-looking" concept does not confine to paying attention to the economic situation of Hong Kong or the fiscal strategy of the Government, it should also mean taking into account the ways to uphold the elements which sustain the economic developments of Hong Kong. I have for years emphasized that the success of Hong Kong is attributable to our industrious and creative labour force which has served as an impetus to this territory with no natural resources. Although the Financial Secretary, when talking about the fiscal strategy of the

Government, has not explicitly mentioned that the possible effects of the strategy itself on the local labour force should be an essential consideration, I believe that both the Administration and colleagues of this Council are well aware of its significance.

Solving the housing problems of the sandwich class

The suggestion that Hong Kong has a "silent majority" has been known to us for The suggestion that Hong Kong has a "silent majority" has been known to us for

many years. Although this view has been under criticisms, it is indeed true that we have a group of silent people in Hong Kong, that is, the middle class. Today I would like to say a few words for them.

According to the findings of the census conducted last year, the number of households earning $20,000 to $40,000 per month is 216 669. If people in this income band have never owned any property and wish to purchase their own flats, it would simply be impossible for them to do so under the present situation. Even if they have a home purchase plan, say, to buy a $2,000,000 flat, they must be able to pay a down payment equal to at least 30% of the price of the property and the subsequent mortgage payments in the order of $15,000 per month at least, excluding rates payment and so on. Such monthly payments represent 50% or more of the household income, and with the balance of their income to meet all other expenses, they would certainly have to tighten their belts.

Let us look at another example: a man and a woman of the middle class each earning $20,000 per month have come of marriage age and wish to build their own home. Yet they find it difficult to acquire their own accommodation because of their ineligibility for both public housing and the Home Ownership Scheme (HOS). Again, according to the findings of last year's census, there are about 131 027 people making $15,000 to $25,000 per month, and most of them have to pay salaries tax at the standard rate. Given the current market price of properties and the tax burden of these people, it seems very likely that they have to rent their accommodations for a long period of time.

Mr Deputy President, Hong Kong and China have developed much closer economic Mr Deputy President, Hong Kong and China have developed much closer economic relations under the Chinese economic reform and open door policy, as well as because of the rapid economic development of Southeast Asia. As a result, capitals flow into Hong Kong from other parts of the world. This has helped bring about the property boom and also a byproduct of economic prosperity -- the soaring property prices. In terms of home purchasing ability, those of the middle class who cannot afford to buy private properties and yet who are at the same time not eligible for public housing have silently fallen victims to the economic developments of Hong Kong, China and Southeast Asian. If their grievance cannot be relieved, resolved or placated they may become a potential threat to the stability of Hong Kong. If the Government wishes that the public would look ahead optimistically, appropriate measures should be taken to handle this problem.

I suggest that the Government should devise a concessionary housing scheme for the sandwich class through which land can be granted to build accommodations for sale to first-time property purchasers subject to an income ceiling of $40,000 per month. A plausible way is to set prices at a level covering the full costs of site formation, construction and administration but at a discount of the prices of comparable premises in the vicinity. As the scheme may involve a screening process in respect of, say, the applicant's income and whether the applicant is a first-time purchaser, the

administrative costs arising from this should also be included in the prices. Taking the current cost of site formation at $3,330 per sq m and construction cost at $3,764 per sq m under the HOS, and adding a 30% administrative costs and another 30% as contingencies, plus an appropriate discount on basis of prevailing prices of

neighbouring similar sites,I believe that the price level of completed premises under the concessionary scheme would still be more than 30% lower than market price after making an appropriate discount adjustment.

Current statistics on the Private Sector Participation Scheme (PSPS) show that Current statistics on the Private Sector Participation Scheme (PSPS) show that 802 residential units can be built on a hectare of land. On the basis that we have 100 000 households in the middle class, 124 hectares of land will be required to meet their needs. We cannot possibly achieve this level of land allocation with a year or two. It may take five years, or even 10 years. But at least we can let the middle class know that the Government is putting this question into proper perspective. This will be a good beginning. I hope the Government will give careful thought to this and take effective measures as soon as possible to solve the housing problem of the middle class so that home purchase will no longer be beyond their reach.

Tax allowance and tax band

I would also like to talk about tax allowance and tax band. While our economy I would also like to talk about tax allowance and tax band. While our economy is stable and the Government has abundant public funds and a windfall surplus of $13 billion last year, I find it hard to understand why the Financial Secretary cannot pay heed to and accept the wholesome advice of the public by raising the personal allowance to $50,000 and widening the tax band from $20,000 to $30,000 at this very time of persistently high inflation. The proposal will relieve the general public of the pressure under which they can barely make both ends meet. It allows them to enjoy the positive effect of an economic boom and induces them to develop their

potential for the benefit of Hong Kong. If this Council believes that relevant adjustments to be made by the Government are advantageous to the well-being of the people and have no adverse impact on local economy and the Government's financial

situation, then the Government has to make a resolute decision.

The statement made by the Financial Secretary last week, well meant as it may be, gives us an impression of "false promise". People cannot put their mind at rest for the time being. Therefore, even if he is not going to make the relevant adjustments for reasons unknown to us this year, the Financial Secretary should, in his reply to this Council next week, clearly and decisively indicate that he will widen the tax band from $20,000 to $30,000 and raise the personal allowance to $50,000 next year. As to what financial implications this kind of commitment will have on the Government, I do not want to waste your time. But if the Finance Branch wishes to set the accounts straight with us, I do hope we can have the opportunity. According to my preliminary calculations, it will have little effect on the government financial situation this year.

When we talk about taking root in Hong Kong, we mean that Hong Kong people have a sense of belonging to this place and that they can live in peace and work in contentment. If the Government can let our people live in peace by implementing a "HOS for the sandwich class" and let them work in contentment by undertaking to adjust the personal allowance and the tax band, then the public can look forward to the future more optimistically.

Monitoring the funding of the new airport project

Mr Deputy President, the Financial Secretary pointed out in his Budget speech Mr Deputy President, the Financial Secretary pointed out in his Budget speech that the substantial amount of surplus and reserve are required to meet contingencies in the latter half of the transitional period. I believe this has much to do with our new airport project. According to newspaper reports, the estimated construction cost of the new airport railway has increased from $12 billion to $22 billion. May I call upon the Government and the Finance Committee to closely monitor the trend of estimated cost overrun in this huge project. We have to examine in detail each item of funding in relation to the new airport project carefully to see whether it will have any adverse effect on the Government's financial situation. For instance, if the construction cost of the new airport railway far exceeds the estimated figure, we probably will have to make a resolute decision.

Farsighted industrial policy

Lastly, I would like to express my views on industry. In the past few years,

Hong Kong economy has gone through a structural transformation. There has been structural changes from a labour-intensive economy to one that is service-oriented. However, we must bear in mind that our service sector is still led by the export-oriented manufacturing sectors in Hong Kong, Southern China and Southeast Asia. Hence, this is an important area which the Government should definitely not neglect in its overall economic strategy. Also, as far as Hong Kong is concerned, the manufacturing sector provides about 25% of the job opportunities in the local labour market, and having regard to the fact that not all workers are suitable for the service industries, the Government should be farsighted in formulating its industrial policies so as to ensure that the local manufacturing sector can continue to provide at least 15% of the job opportunities and that elements essential to the prosperity and stability of Hong Kong can be preserved. I would like to take the opportunity to welcome the Government's establishment of the Industrial and Technology Development Council, and hope the Council will bear in mind such farsightedness when going about its development in future.

Mr Deputy President, these are my remarks.

MRS SELINA CHOW: Mr Deputy President, of the 10 years or so that I have been a Member of this Council, there is no doubt in my mind that this year's Budget has been the most argued and talked about, well before it is formally debated on in this Council today. Perhaps the fact that it is Mr MacLEOD's maiden Budget has attracted a higher than normal level of interest. Perhaps the new composition of this Council has

stimulated closer scrutiny of the estimates, as well as more ideas of how Hong Kong's money can be better saved and spent. Perhaps also the intense media attention on how the various groupings might react to the different aspects of the Budget, and the dramatic reporting of developments, has catapulted the entire discussion on to a much more visible and audible focus of prominence. Be that as it may, there remain many aspects of this Budget which render itself commendable and worthy of support.

Like many people, I agree with the broad strategy to ensure that public spending is in line with economic growth. I am therefore appreciative of the efforts made to ensure that public spending is cost-efficient and fat-free. In the light of commitments already made in all the major policy areas, as well as our investment in our infrastructure, not the least of which is the new airport, it is only sensible to ascertain that every dollar spent in the public sector represents value for money.

Another basic principle adopted by the Financial Secretary appears also to enjoy wide support. Hong Kong is a cautious community and to provide for a comfortable cushion when we can afford it is considered the right approach. Furthermore, this is a community that does not take well to shocks, as was fully illustrated by the reaction to last year's tobacco tax. So the Financial Secretary's "No New Taxes" approach, together with his deflationary measures, are generally received without too much fuss.

The examination of the estimates in its new format this year has been successful, and there are many in the Administration who deserve acknowledgement and thanks for the conscientious and thorough answers to the voluminous questions raised by Members of this Council. The revised formats of the sittings last week in this very Chamber have no doubt been helpful, not only to Legislative Council Members but also to

interested members of the public and the media. What comes across is a professionally managed Civil Service determined to run along strict lines of efficiency and accountability. It is perhaps worthwhile to ask for an estimate of the resources which have been used to answer all the queries raised by Members. I suspect it is a stiff price that we have paid, and Members should, for the sake of economy, reflect how we ourselves can streamline questions in the future to ensure our quest for accountability is not overzealous and wasteful.

In the Government's rigorous effort to implement its strategy on public spend In the Government's rigorous effort to implement its strategy on public spending, some areas have emerged as ones that may require another look in view of strong feelings expressed. Education is one. So much has been said recently on the cancellation of the repeater allowance in our schools that we are in danger of losing sight of some of the other equally important measures that our school education desperately needs to upgrade its qualities with. Members of the education community, the advisory bodies of the Government, in particular the Education Commission which has spared no effort in coming up with its much deliberated and debated recommendations in its report and members of the OMELCO Education Panel have untiringly impressed on the Administration what is needed urgently. This morning at a meeting of the OMELCO Panel, members were informed of the Administration's latest efforts to respond to calls from the community, both in terms of addressing some of the real concerns by making some changes to the original plan regarding repeater allowance cancellation, as well as facilitating earlier implementation of recommendations in Education Commission Report No. 4. Such responsiveness is laudable, and I hope this signals the recognition of genuine concerns and required adjustments as seen by the community, and points to continued willingness in the

Government to uphold initiatives to enhance the quality of education in our schools.

One of the main difficulties of economizing on public spending is the large proportion of the expenditure that goes into salaries. It follows that the most effective way to save is to cut the size of the establishment. With widening demands which characterize any increasingly affluent society on all fronts, some imaginative ways have to be found to contain our Civil Service and the payroll. Every opportunity should be taken to ensure the quality of service is maintained while the number of permanent staff is kept as low as possible. Whenever dedicated volunteers can be found, they should be recruited to take on tasks which they can assume, and have assumed, well. For instance, the deployment of more auxiliary policemen to take up foot patrol is a cost-effective way to boost the much needed strength of the force, while adding to the reassuring uniform presence that the public sees as a useful deterrent to crime.

On the community building front, with the initiative and organizational assistance from the Government, committed and able volunteers can be identified to lead efforts to take on some of the very labour intensive tasks in the districts. The vote controllers and heads of departments can no doubt be best placed to identify areas where such lay substitutes can be most effective. In any organization of the size of our Civil Service there is bound to be a sparable head count. It just requires very skilful juggling on the part of the management so that the standard and efficiency of frontline services are not in any way jeopardized.

One of the main causes for the public outcry of discontent this year is, in my One of the main causes for the public outcry of discontent this year is, in my view, the size of the surplus. Although speculation had been rife in the business community that the Government was likely to be awash with cash to the tune of $10 billion, everyone was taken by surprise when the final figure of $14.1 billion was announced. Even those who are convinced of a need for a cushion against uncertainty cannot but be sympathetic to advocates for some fine-tuning in spending where the need is proven to be genuine and acute in the light of this huge saving.

In addition, a surplus of another $5.1 billion is budgeted for 1993. At the end of the day, if we are on target, we are looking at an estimated $71.6 billion in the way of reserves at today's prices, which will be well over the $100 billion mark in money terms by 1997. Much as we would like to have a comfortable cushion, is this not too big a cushion to aim at, especially when the Government is only required by the Memorandum of Understanding to ensure a cushion of $25 billion? I hope that the

Financial Secretary is open minded about views that the community might have in this regard.

Yesterday, I was chased by a reporter who asked me whether I support the Budget, and if I do, then how I can reconcile this support with the signature that I decided to put to Mr LAU Chin-shek's and Mr Henry TANG's letter, requesting the Financial Secretary to consider the plight of the sandwich class and the possibility of widening the tax band to help this long forgotten middle class of ours? He also wants to know how I would react to accusations of contra-steering . I would like to make it clear

that I remain as convinced as I was when I signed the letter that there is a problem with the sandwich class, and they, being unorganized and silent, need our attention perhaps even more than those with less earning power and skills. At the same time, I saw the letter as a sincere plea to the Financial Secretary, whose authority and responsibility for the Budget is unquestioned, to take such views, especially when they are strongly held, into account and to do what he regards as necessary. Personally,

I shall continue to put these views forward whenever and wherever I consider helpful, as I have done before in this Council and elsewhere, until enough is done to alleviate the burden of this very important but neglected population.

Broadly speaking then, I am in support of the Budget. Given the many aspirations of our multi-faceted community, there are bound to be ideas which may not have been taken on board when the Budget was first drafted. Any fine-tuning that the Financial Secretary might decide on as a result of careful consideration of views will not only be much appreciated but will go a long way in enhancing the partnership and goodwill between Members of this Council and the Administration.

I support the motion.

MRS RITA FAN: Mr Deputy President, if I am asked to use one word to describe this Budget, I would say it is "prudent". If I am allowed to use two words, then I would say it is "overly prudent". "Prudent" is a welcomed quality in a housekeeper, but if the housekeeper wants everyone to tighten their belts when there is plenty of food in the kitchen for all to see, it should come as no surprise that everyone starts to complain. This is the situation faced by the Financial Secretary with this Budget.

I shall speak on three areas today.

Taxation

Since the first time I participated in the Budget debate in 1984, I have been concerned that the middle income group in our community is often overlooked. I have appealed to successive Financial Secretaries to consider their housing needs, to widen the tax band, to abolish the claw-back provision, and to allow for separate assessment. The last Financial Secretary responded in full to the latter two

requests and in part to the widening of the tax band. For this, I am grateful. However, the middle class is still lagging behind compared to the low income group in terms of the amount of tax they paid and the assistance they get from the Government.

In 1989, I defined the middle class as those earning between $100,000 to $300 In 1989, I defined the middle class as those earning between $100,000 to $300,000 per year. Taking inflation into account, these figures are likely to be around $140,000 to $400,000 now. For 1992-93, the estimated contribution from this middle income group would be in the region of $7 billion, or 34% of the total salaries tax yield. My comments on the middle class in 1984 and 1989, which are in Hansard, still hold true today.

While I do not argue with the principle of "earn more, pay more", I firmly believe While I do not argue with the principle of "earn more, pay more", I firmly believe the middle class deserves much more recognition and consideration from the Government. The Financial Secretary is on the right track when he announces that the housing problems of the "sandwich class" will be examined urgently to see what can be done to help. However, in the shorter term, the widening of the tax band bringing some immediate relief to the middle class must be an option for serious consideration.

We have a growing middle class. The number of taxpayers in this group was 260 000 in 1989. There are about 410 000 in 1992. They are the middle managers in the services sector and the Civil Service, the teachers in schools, the nurses in hospitals, the social workers in youth centres, and the technicians and young technologists in industry. They are the very people who implement the decisions and policies made by leaders in commerce and in the Government. Only with a motivated middle class -- the backbone of our society -- can we hope to maintain Hong Kong's vitality and innovation. It is not in line with this community's overall interest to fail to respond with a sense of urgency to the needs of the middle class.

Education

Expenditure on education has been moving between 16% and 17% of the Budget since

1984-85. The Government has been criticized for spending less than 3% of GDP on education. It has been put to me that the governments of the developed countries, such as Japan, the United States, United Kingdom, and the governments of the other "dragons", for example, South Korea and Singapore, spent 3.8% to 4.8% of their GNP on education in 1987, while we only spent 2.5% of our GDP on education that year. While I would have liked to use this argument to negotiate for more funds in education, I had to say that it only presents part of the picture. The fact is our public

expenditure in 1987 was only 14% of GDP, while the comparable figures for the other countries ranged from 22% to 39%. Since the public expenditure pies in these countries are considerably larger (which is not what we would want to see in Hong Kong), it follows that the percentage which education got vis-a-vis GDP is also higher. But it does not necessarily follow that the share of education in overall public

expenditure is larger. Indeed, education expenditure in Singapore, the United Kingdom, and the United States are only 12% to 13% of their budget, compared to 17.1% in Hong Kong in 1987. Only Japan exceeds Hong Kong by devoting 18.7% of the budget to education.

The actual expenditure on education has increased from about $7 billion in 19 The actual expenditure on education has increased from about $7 billion in 1984-85 to over $19 billion in 1991-92. While this is impressive, it is still insufficient to achieve the twin objectives of expanding tertiary education and improving the quality of education in schools. About one-third of the estimated expenditure for 1992-93 is allocated to tertiary education for funding the expansion. More will have to be committed, if not already committed, to enable tertiary institutions to offer first-year degree places to 18% of the age group in 1994-95. The Secretary for

Education and Manpower revealed at the special Finance Committee meeting last week that apart from the $5.2 billion for University and Polytechnic Grants Committee institutions, another $2 billion is sought for capital works projects in tertiary education. This $7.2 billion represents a 22.8% increase over last year. The

recurrent and capital expenditure sought for schools education is $12.5 billion, representing an increase of slightly over 1%. The Secretary stressed that there is no real reduction in expenditure on schools education. I accept his statement in terms of actual figures, particularly since this 1% increase is measured against the revised estimates of 1991-92 which include salary adjustments in 1991. However, it will take a lot to convince me that the quality of education in schools can be achieved with a shoestring of 1%.

To illustrate my point, let me take the Education Commission Report No. 4 (ECR4) as an example. As the chairman of this Commission, I hope Members can forgive me for hoping to implement its recommendations. Apart from the proposal on mixed-mode

in primary schools, all the other recommendations in ECR4 are now approved policies. ECR4 concentrates on primary and secondary schools education. It aims to improve the quality of education in schools through better designed curriculum, more appropriate assessment methods aimed at enhancing student confidence and motivation towards learning, school-based remedial support for secondary students, whole school approach in guidance for primary students, language improvement measures, programme for the gifted, practical and skill opportunity schools for children of special needs, and so on. These measures are badly needed in the school system, and they received the support of the education community as well as policy makers. None of these measures or their funding are to be found in the present budget estimates.

The Secretary explained last week that funding for the Curriculum Development Institute and development for Target Related Assessment has been set aside under "Additional Commitments" and this amounts to $36 million yet to be submitted to the Finance Committee for approval. Practical schools have been included in the capital works projects. As for the other improvements, they have to be funded from further savings.

Mr Deputy President, such a response is simply not good enough. I have no objection against savings on activities which are no longer necessary. I also favour better deployment of staff and efforts to reduce wastage. But I do not agree that improvement in quality in school education does not warrant additional allocation from the Central Government. The education sector had been vigorous in trimming its fat. Last year, the Education Department identified savings of some $37 million. The Student Travel Scheme saved $166 million by introducing means testing. This year, despite repeated protests from the education community, the repeater allowance was abolished to achieve savings of $51 million in 1992 rising up to $214 million in 1994-95. The savings are handed back to the Central Government to achieve the target set for all departments. How can the Government hope to achieve its stated objective of improving quality of education in schools when insufficient funds are provided on the one hand and savings are forced through on the other, which undermine the morale of the school community? Without corresponding improvement in quality in the school sector, it would be extremely difficult, if not impossible, for the tertiary sector to recruit and educate to the expected standard. It would also mean that Hong Kong cannot get the level of brain power to support our economic growth. Education is investment in the only resource Hong Kong possesses -- our people. Can we really afford to save to such an extent that we risk the loss of the long-term benefit in return for a comfortable cushion in the next few years? This morning, however, the

Secretary for Education and Manpower, when meeting the Education Panel, disclosed that he is now trying his best to obtain resources for the school sector. He has also made modification to the abolishment of the repeater allowance so that it would not affect Form IV students. This is indeed welcome news. However, the Secretary for Education and Manpower cannot do this alone. I therefore have to request and urge the Financial Secretary to lend full support to the reasonable request of the Secretary for Education and Manpower so that the situation can be salvaged before permanent damage is done.

Law and order

The debate on law and order in this Council on 11 March issued a clear message, and that is, no effort and resources should be spared in the fight against crime. This theme was reaffirmed in last week's special Finance Committee meeting by both officials and Members. Our community have had enough of armed robberies, smuggling, car thefts, and triad activities. The police have our full backing to crack down on them. Apart from getting concrete co-operation from China, I believe the force management would also do well to enhance their intelligence system and critically review their deployment of trained police personnel.

I have been told that if more reward is offered for information, better results can be expected in tracking down syndicates and preventing theft, robbery and extortion. However, I am also informed by senior police officers that the present resources for intelligence is quite sufficient. It is not for me to decide which version is more accurate as this depends a lot on one's perspective. However, it can do no harm for the force management to look at the needs of their intelligence system from time to time and take account of the views of their frontline officers.

At a time when recruitment of good calibre young people into the force is not At a time when recruitment of good calibre young people into the force is not easy, it goes without saying that the strength of existing staff must be deployed to the full. Suggestions from Members of this Council and from the public in this area have been numerous and wide ranging. For example, trained police personnel should not be engaged in civilian work, more funds should be allowed for overtime, police should not be asked to perform duties such as removing squatters, which are not

strictly police work, and so on. But apart from force-wide issues, each District Commander can also deploy staff better. The report room has often been a source of complaint by members of the public claiming that police officers are insensitive, unsympathetic and harsh. Like any other professions, some officers are better at

dealing with agitated and frustrated people than others. If more individual care can be exercised in the deployment of officers, Mr Deputy President, it may make a world of difference. In view of the time, Mr Deputy President, I cannot intend to go on. I would simply say I support the Bill.

MR HUI YIN-FAT (in Cantonese): Mr Deputy President, it is a formidable task to formulate a Budget acceptable to all because every sector of the community will try to exert its utmost influence on the Budget. The general impression I have got from this first Budget presented by Mr Hamish MacLEOD is that the Financial Secretary has already tried his best to balance the interests of different parties. In face of harsh criticisms on the Budget, Mr MacLEOD has maintained dialogues with the public and Members of this Council, explained the Budget in detail and promised to make certain improvements in the future. This is a most responsible and commendable attitude rarely seen in other civil servants. However, the Financial Secretary lacks the courage to introduce bolder reforms and this year's Budget has fallen short of the lower income group's expectations that their heavy burden will be relieved. As a result, a budget intended to please all has failed to please anyone. Moreover, Mr MacLEOD does not seem to understand that the political situation and the community's needs and aspirations today are quite different from those of his predecessor's time. The argument that any minor amendment will affect the Budget as a whole is already out of keeping with the times. I think if Mr MacLEOD were in the seat of his predecessor, he would have received much greater support than now.

What strikes me most in this year's Budget is of course the fact that the What strikes me most in this year's Budget is of course the fact that the Financial Secretary still finds it necessary to suppress the actual need for social welfare spending despite the sizable surplus of $14.1 billion this year and the estimated net revenue of $5.1 billion next year. Also, the Budget has not proposed more

concessions in respect of personal allowance and rates to help alleviate the heavy burden on the middle and lower income groups caused by the runaway inflation. I have found this most regrettable.

First, I shall talk about social welfare. As we all know, the growth of social First, I shall talk about social welfare. As we all know, the growth of social welfare expenditure has long been suppressed. Even in times of rapid economic growth, there were no corresponding increases in social welfare spending. Take for example the years 1989 and 1991 when the growth in recurrent public expenditure was the largest over the past few years. Estimated expenditures for these two years increased by 43% and 21.1% respectively over the previous year. However, the increase in social

welfare expenditure for both years was just around 17%. This shows that the social welfare sector has all along been unable to share the fruits of our economic success or the growth in total public expenditure. Contrarily, welfare spending, which has long fallen behind other social services, has always been the first to get the axe in times of economic downturn. It can therefore be said that the Government is "mean" by nature as far as the provision of social welfare to the lower income group is concerned.

As we all know, Hong Kong now ranks among the economically advanced regions in As we all know, Hong Kong now ranks among the economically advanced regions in the world, with the per capita gross domestic product amounting to $125,000. But social welfare in Hong Kong has so far been targeted only at the most disadvantaged and helpless people. Worse still, those who are in need, particularly the old and the disabled, and the severely mentally handicapped, will normally be put on the general waiting list for years before they can receive the necessary assistance. The less fortunate may die before getting what they want. Our investment in social

welfare service every year is less than 1% of our GDP. This shows the Government's indifference towards the plight of its people. We should be ashamed of ourselves because the Government is reluctant to help the people even though we have the capability to do so.

Although the Government has stressed that there will be an 4% increase in real terms in social welfare spending next year, I think this is but a gimmick. According to the draft Estimates, the estimated expenditure for next year will only increase by 2.8% over the revised expenditure for this year, or an 11.3% increase when compared to the original estimate. But this increase is still lower than last year's inflation rate. Another point is that the social welfare budget is shared between the Social Welfare Department (SWD) and the subvented organizations. As the SWD will be

responsible for different social security payments, it normally receives three quarters of the total welfare budget while the remaining quarter is allocated to the subvented organizations. This year, there is a 3.8% increase in the allocation of funds for the SWD, whereas the subvented sector is only given a 0.2% increase. As a matter of fact, the subvented sector will have to cut back drastically on operating costs before they can afford to develop new service areas. Those savings will mainly come from reducing allowances for subvented organizations and the reduction of 3% and 1% respectively in youth services and community development projects. The distribution of resources by the Government is extremely unfair and short-sighted. What is more worrying is that social welfare's share in the budget "pie" is reduced from the previous 6.5% to 6% this year and will be further cut to 5.6% in 1996. This

demonstrates that the Government is deliberately reducing its commitment to social welfare.

Mr Deputy President, I have always stressed that welfare services in Hong Kong have been operating within very limited resources and there is virtually no room for a cut-back. However, the authorities concerned always follow indiscriminately instructions from the Central Government to reduce expenditure and do not attempt to fight for the interests of those who are in abject poverty in our community. What is most regrettable is that with the lapse of just one year after the release of the White Paper on Social Welfare, the Government is already reneging on its words. Plans such as the annual 4.5% increase in welfare expenditure, expansion of the outreach teams, improvement to school social worker: student ratio, provision of more home helpers and centres for the elderly will have little hope of being accomplished this year. The Administration has decided to curtail welfare expenditure for next year in spite of a huge surplus. Although it involves a sum of only $17 million, this will tarnish the Government's image built up throughout the years, erode people's confidence in the Government's determination to honour its commitment, and even damage the partnership between the Government and subvented organizations. The Administration should take the blame for making such an unwise decision which may lead to serious consequences.

I therefore urge the Government to change its mind before it is too late. The Administration should be sympathetic with the hardships of the grassroots. The closer to 1997, the more anxious they will become to see the Government honour its commitment to social services so as to maintain social stability and to encourage investment in the future. In fact, the problem concerning resources for the welfare sector is not hard to solve. I have long been urging the Government to increase the Lottery Fund's share of the Mark Six Lottery proceeds so as to improve the quality of social welfare services. However, the Financial Secretary, apparently unconvinced, has gone ahead to increase betting duty to generate an additional revenue of $390 million after the Jockey Club has agreed to reduce its share of Mark Six tickets to subsidize punters on the administrative costs of betting centres. The selfish motive of the Government is clear as daylight.

Mr Deputy President, there is no doubt that the Government is competing with the public for resources in order to implement the massive infrastructural projects, to honour the Sino-British agreement on the new airport project with regard to the reserves and to prepare for adversities in future. However, with the reserves

forecast to stand at $71.6 billion by 1997, I doubt very much the need to abolish the rates relief scheme and increase the rates by half a percentage point at a time of high inflation. On the other hand, in view of the rising Gini Coefficient which is indicative of the widening gap between the rich and the poor, and given the present surplus, the Financial Secretary should introduce measures to widen the tax band and substantially increase personal allowance for the middle and lower income groups so as to alleviate social intranquility. As a matter of fact, since a 1% rise in profits tax should offset the loss in revenue as a result of the tax concessions, the Financial Secretary should increase profits tax by two percentage points in order that more low-income citizens can benefit from it. As long as the Government can guarantee no further increase in profits tax for the next few years, I believe that the investors can still do business in Hong Kong with ease of mind.

Mr Deputy President, I can appreciate the Financial Secretary's difficulties in formulating an ideal budget in this transition period shrouded with economic uncertainties. Hong Kong will be faced with different sorts of problems in the future. It is imperative that the Government should try to understand the hardships of the common people and take concrete steps to fulfil the various promises it has made on the provision of social services. While it is important to set aside resources for 1997, I think the Hong Kong Government should also grasp every opportunity to re-establish its image of a caring Government. This will boost the confidence and determination of the Hong Kong people to face up to 1997 and give them a better impression of the retreat of the British Government.

Mr Deputy President, in view of the Financial Secretary's undertaking to improve the quality of life of the middle and lower income groups, and the practical difficulties involved in amending the Budget, I hereby support the motion with reluctance.

MR MARTIN LEE (in Cantonese): Mr Deputy President, the United Democrats of Hong Kong (UDHK) find the 1992-93 Budget presented by the Financial Secretary extremely unsatisfactory as it virtually fails to bring relief to the burden on the lower and middle income groups.

Hong Kong's past economic achievements have been accomplished on the basis of a number of factors including, among others, the commitment to low taxation, free market and free trade. In addition, the maintenance of social stability has also

been an important element conducive to our prosperity. We firmly believe that stability and prosperity can be achieved only when it is ensured that opportunity is made available to each sector and every member of the community to share the success of our economic development.

As the Financial Secretary pointed out in his Budget speech, Hong Kong is in the process of transformation and that fact must be taken into account when the Government frames its policies. Hong Kong's economy has indeed been undergoing significant transformation in recent years. And in view of the massive expenditure on the

infrastructure and the challenges Hong Kong is going to face in the latter half of the transition period, this Budget becomes all the more important since this is the first time the Financial Secretary extends the Medium Range Forecast to include 1996-97.

In fact, an abundance of projected effects and related considerations permeates In fact, an abundance of projected effects and related considerations permeates the whole Budget -- that is to say, effects from infrastructure works and the resulting financial constraints on the Government in its current and future financial arrangements, particularly the fiscal reserves of no less than $25 billion set aside for the future Special Administrative Region government as stipulated in the Memorandum of Understanding on the Airport Core Programme. The UDHK appreciate the Financial Secretary's restraints in and worries over the financial arrangements, taking into account the fact that the Government has to ensure stable and adequate revenues to meet the future recurrent and capital expenditure, and to maintain the financial reserves at an adequate level. But we do not concur with nor can we accept the Financial Secretary's financial philosophy of "taking no heed of people's livelihood while investing wealth in the physical infrastructure".

We hold to the position that tax proposals in the Budget, apart from ensuring We hold to the position that tax proposals in the Budget, apart from ensuring that the Government will have stable and adequate sources of revenue, must also be made in the interests of the community as a whole and alleviate the onerous tax burden borne by the sandwich class and the low income group. The UDHK have repeatedly

expressed dissatisfaction with the existing taxation system. I would like to take this opportunity to reiterate that we are not asking for an overhaul of the well-tried-out low taxation policy which has proved to be effective. I have pointed out that this policy has been one of the significant elements conducive to Hong Kong's prosperity. Our view is that the Government, after having done its best to improve Hong Kong's investment environment and safeguard the investor's interests, is also duty bound to look after the needs of the general public who would "unfailingly share

Hong Kong's adversity but not necessarily be able to share Hong Kong's success." Therefore, given the numerous variables and financial constraints in the years to come, it is necessary for us to review the overall taxation structure.

The greatest problem of our taxation system lies in the fact that both its progressive scale of charging and fairness leave much to be desired, thus placing the tax burden unfairly on the sandwich class. But the Financial Secretary has failed to address this problem squarely, as reflected in the tax proposals he made in the 1992-93 Budget. The situation, on the contrary, is getting worse as far as certain areas are concerned. The increase of rates is one of the examples.

Other UDHK members in this Council will elaborate in more detail our dissatisfaction with the Budget. Here I would particularly like to point out that the UDHK are unreservedly supportive of the promotion of Hong Kong's future economic development but we are of the view that this cannot be achieved at the expense of the quality of living of the ordinary people. It is understandable that the Government must be prudent in its financial management since the construction of the new airport would definitely cost colossal sums of money; yet the authorities must at the same time look squarely at the difficulties the lower and middle income groups now have to face and provide sufficient safeguard to them. This explains why the UDHK are so upset to find that the revenue and expenditure arrangements as proposed by the Financial Secretary for the coming financial year have done nothing to ease the sandwich class' tax burden. The UDHK would like to make four requests.

The persistent high inflation in Hong Kong in the past few years has put peop The persistent high inflation in Hong Kong in the past few years has put people's livelihood under heavy pressure and lowered their living standard, with the lower and middle income groups being the prime victims. The Government always claims that it is determined to curb inflation. If so, the Government should, given the huge surpluses, take up the responsibility to extend immediate assistance to the sandwich class by easing their tax burden which has proved to be too heavy for them, instead of feigning sympathy by making empty political promises. The Financial Secretary recently has expressed on a number of occasions his appreciation of the predicament of the sandwich class and hinted that corresponding tax amendment proposals would be made in the next Budget, subject to the financial situation then prevailing. But I cannot see why the Government finds it impossible to take prompt actions, even though the Financial Secretary has accepted that the sandwich class are under enormous

pressure. Does it mean that the Government would resolve to do so only when the fiscal surplus in the next financial year remains in excess of $14 billion?

As elected Members of the Legislative Council with a mandate from the people, we are duty bound to reflect the people's expectations to the Government and demand the Government to take the opinions of the people into full consideration when formulating its policies. There has been a view recently that Legislative Councillors should not reject the Budget as this would be regarded as irresponsible and would damage the Government's prestige. This is really ridiculous. If a government could readily accept good advice and public views, and subsequently take positive response, its image as a caring government would be enhanced, instead of being damaged. Conversely, a government which assumes a couldn't-care-less attitude towards its people's difficulties would lose public support and enjoy no prestige at all. A case in point is the former Financial Secretary's decision last year to take the initiative to propose a reduction in the duty on tobacco when faced with strong opposition. In the current Session, the Council has become more representative as directly elected Members have been introduced. Against this backdrop, it is all the more impossible for us to backtrack because people would be led to think that the colonial government no longer cares about their livelihood.

In a democratic community, in principle only elected members of the legislature with a mandate from the people have the right to decide the financial arrangements on the basis of "what is taken from the people is used in the interests of the people." Take the Members of the House of Lords in Britain as an example. Since they are not elected by the people and have no representativeness, Members of the House of Lords are not given the right to vote on issues concerning financial arrangements. Hong Kong is of course different. However, the Government basically accepts this broad principle. Official Members are therefore excluded from the Financial Committee under the Legislative Council as they have no representativeness. This means that the Government's financial arrangements must, theoretically speaking, have people's blessing.

In fact, unlike its counterparts in western societies, the Hong Kong Government In fact, unlike its counterparts in western societies, the Hong Kong Government is not a ruling party. There are only three Official Members in this Council and the remaining 57 Members are Unofficial Members who must exercise their judgement conscientiously to decide whether to support or reject the proposals in the Budget. Should the Budget fail to provide answer to actual needs, all the Unofficial Members of this Council should have the responsibility to demand the Financial Secretary to make the necessary amendments before endorsing the Budget. In fact, among the 57 Unofficial Members in this Council, 46 have jointly signed a letter requesting the

Financial Secretary to increase the personal allowance and widen the tax band. But unfortunately, the Financial Secretary has categorically rejected the requests.

I really do not understand how the Financial Secretary could still remain adamant that the tax proposals in the Budget are not to be amended notwithstanding the demand made by an absolute majority of the Members. This seems to be an insult to the role played by the Unofficial Members of this Council and reveals that the Government still regards the Legislative Councillors as rubber stamp. The reason given by the Financial Secretary is that the Budget must be accepted or rejected as a package and it is not possible to make any amendments to any parts of the Budget. This argument neither tallies with the reality in Hong Kong nor is acceptable to any democratic society.

In his Budget speech, the Financial Secretary reiterated that the Government "must always be ready to redeploy resources to where they are most needed." The crux of this principle lies in "ready" and "most needed". Given the fact that the Financial Secretary concurs that there is an urgent need to alleviate the tax burden on the sandwich class, why does he refuse to help them on the abstract grounds of "considering the Budget as a whole package"? The Financial Secretary has indicated that, in view of the limited resources, it is impossible to designate any resources as "sacred cows". In Chinese "sacred cows" is translated as " ". The "cow" is missing in the rendition. In fact, the whole project of building the physical infrastructure is more like an elephant than a cow. Innumerable ordinary people are chafing under the monumental yoke of this jumbo elephant. Does the Government know that they can barely breathe?

We cannot unrealistically hope that "tomorrow will be better" and then assume an evasive attitude to put off finding an early solution to our problems. While we have no idea about what the future holds for us, the sandwich class have to put up with the hardship they encounter in their daily life. The Financial Secretary or some Members of this Council, comfortably ensconced in their armchairs, probably do not appreciate their predicament. I would like to stress that the UDHK are not asking the Government to give free lunch to the people when we experience financial

difficulties. We are merely asking the Government to perform its required duties, particularly when our financial situation is sound.

Admittedly, no matter how unpopular it is among the people, the Budget may still be passed without any amendments since the Government could, after all, manage to successfully call on those who have neither firm position nor popular support and

mandate to support the Budget. It is done at the cost of people's livelihood and some Members' indecisiveness and hypocrisy would be exposed to full public view. When the motion on the Budget is put to a vote, people can clearly identify who really represent the views of the people. The devil cannot hide his cloven hoof.

The UDHK members in this Council have originally planned to move four amendments to the Budget which has failed to take care of people's livelihood. However I received a reply at noon from Lord Wilson, in which he categorically made it clear that the UDHK members in this Council will not be allowed to move any amendments to the Budget. No doubt, under the existing executive-led political structure, the Governor is empowered to make the aforesaid decision. But we must express our deep regret at the Governor's move.

People in Hong Kong know that in passing the Budget last year, the Government allowed Members of the Legislative Council to move amendments and hold a debate. Though the Government indicated afterwards that this was allowed on the basis of erroneous legal advice, why is the Government so narrow-minded this year that it refuses Members to move the proposed amendments, despite the fact that directly

elected Members are newly added to the Council who can fully represent the views of the people? This is a retrograde step in comparison with the way this matter was handled last year. The Governor's decision blatantly shows that he does not respect the directly elected Members and the views of the public they represent.

Mr Deputy President, the UDHK hope that the Financial Secretary would change his mind after taking into account the views expressed both inside and outside this Council, and take the initiative to amend those items in the Budget which run counter to the views of the people. After all, this is the present Financial Secretary's maiden Budget and the first one debated and put to the vote following the introduction of a directly elected element to this Council. I still cherish the hope that the relationship between this Council and the Financial Secretary could have a good beginning and look forward to building up a truly good partnership on the basis of mutual respect and close co-operation.

MR DAVID LI: Mr Deputy President, past Budgets seldom deigned to look beyond the operational needs of the Government. At first glance, the document before us today seems to break this mould.

But the changes are more cosmetic than fundamental; and the motivation based more But the changes are more cosmetic than fundamental; and the motivation based more on political necessity than on the true recognition of the needs and wants of the people and businesses of Hong Kong.

Contradictions abound -- contradictions which can only weaken the Administration's credibility: A pledge to promote the territory's economic success, against a proposal to increase corporate profits tax; pledges to fight inflation and to rein in government spending, against proposals which would see a significant rise in government rates and a continued acceleration in public expenditure growth above and beyond the expected economic growth.

The picture is further confused by the forecasts for the government reserves, which are at once encouraging in their sheer magnitude and frightening in the implication that the Administration needs so much more.

In reviewing the proposals which comprise the Financial Secretary's maiden Budget, my constituents have primarily responded with questions rather than criticisms. Compliments have been few and far between.

Key among my constituents' concerns is the proposed one-percentage-point hike Key among my constituents' concerns is the proposed one-percentage-point hike in corporate profits tax. If approved, this move is unlikely to win the Financial Secretary many friends in the business community. Worse, it may well send the wrong message to current and prospective investors at a time when corporate tax rates are generally falling throughout the Asia-Pacific Region.

In the wake of an estimated $14.1 billion cash surplus in the current fiscal year, which will see reserves top an estimated $91.8 billion at the end of this month, it is difficult to ascertain exactly why Hong Kong needs a further $5.2 billion cash surplus in the coming year. Granted, the new tax rate -- if maintained -- will

continue to generate additional revenues in future years. But are these revenues truly needed?

While pronouncing the $91.8 billion cushion as "reasonable" in the light of proposed 1992-93 expenditure, the Financial Secretary refrained from commenting whether the forecast level of reserves for the next six fiscal years will remain "adequate". In particular, questions remain as to whether the Financial Secretary is comfortable with the $71.6 billion in reserves forecast for 31 March 1997.

If this amount is not "adequate", what figure would be more to the Financial Secretary's liking? Upon what calculations or formulas would this figure be based? Might such a figure be used to justify additional tax increases in coming years?

My constituents -- in fact, all taxpayers -- would like answers to these questions. We need to know when, if ever, the pressure to raise additional revenues -- to increase tax rates or create new duties -- will ease. To be sure, there have been some positive signals from the Administration -- for example, the decision to shelve the ill

considered wholesale sales tax and the reduction in the stamp duty.

But Hong Kong's taxpayers have also seen the Administration move the "goal posts" for expenditure and revenue year after year, and have loyally complied with the resulting tax increases. Yet, there must come a time when even "good sports" stop and question why the rules of the game keep changing.

With the Memorandum of Understanding on the Airport Core Programme, it was widely assumed that fiscal reserves of $25 billion as at 1 July 1997 would be adequate to put the future Hong Kong Special Administration Region on a firm financial footing.

Upon analysing the figures attached to the Financial Secretary's Budget speech, it appears that even with the new tax cuts but without the tax increases, the territory would have had little trouble in meeting the $25 billion target. And this would not count the realization of capital gains on past investments such as the Kowloon-Canton Railway Corporation through privatization.

In proposing both the new tax rises and the limited increase in personal allo In proposing both the new tax rises and the limited increase in personal allowance, the Administration has apparently slapped Hong Kong taxpayers with a new $71.6 billion target. But where has this figure come from? How can it be reconciled with the $25 billion figure? What accounts for the $46.6 billion difference?

Hong Kong will not, and cannot, ignore these questions. In the absence of clear, detailed answers from the Administration, the people will draw their own conclusions. Already, rumours have spread about how the $71.6 billion figure must reflect the "true", much higher cost of the new airport, or how it must reflect the

Administration's great concern about the unfunded liabilities of civil service pensions.

These suppositions may not be accurate. But they need not be accurate to darken These suppositions may not be accurate. But they need not be accurate to darken

peoples' perceptions of Hong Kong's future. Left uncorrected, such rumours can do far more damage than the truth -- no matter how disturbing or painful that truth may be.

When someone fails to answer fair and honest questions, a bond of trust is br When someone fails to answer fair and honest questions, a bond of trust is broken. This is why government transparency is so important. And in Hong Kong's new political climate, this is where the Administration keeps falling short.

In the interests of continuity, the Financial Secretary may perhaps be excused for adhering closely to the practices of his predecessor -- in both form and focus.

The Government's loose accounting methods remain. The draft Estimates still "squirrel away" multi-billion-dollar expenditure cushions, labelled "Additional Commitments" under the Miscellaneous Services Head. Likewise, fiscal strategy is still limited to fulfilling the "housekeeping" needs of the Government.

But the Financial Secretary cannot be excused from answering obvious and important questions about his Budget. He cannot hide behind the argument that his Budget is an "all or nothing" proposition -- no discussion, no changes, no compromise.

This is not a healthy stance for the Financial Secretary to adopt. It is not borne out by recent experience and runs counter to both the purpose and spirit of this debate.

The Financial Secretary needs to justify the increase in profits tax. He needs to respond constructively to charges that he has done nothing for the "sandwich class".

Hong Kong's future economic success will not be determined by the size of its Hong Kong's future economic success will not be determined by the size of its reserves. It will be determined by our competitiveness and by our ability to ensure that all sectors of the community participate in the territory's prosperity.

If the Financial Secretary truly has no room within which to manoeuvre, then he If the Financial Secretary truly has no room within which to manoeuvre, then he must state his case much more clearly to this Council.

With these remarks, Mr Deputy President, I reserve my vote on the Budget, pending the response of the Financial Secretary to the questions I have raised today.

MR NGAI SHUI-KIT (in Cantonese): Mr Deputy President, this Budget before us is the first one presented by the Government after the signing of the Sino-British Memorandum of Understanding on the new airport. It would serve as a blueprint for the framing of our public finance policy during the run-up to 1997 and have a direct bearing on the transfer of sovereignty in 1997 as well as the future Special Administrative Region (SAR) government's financial situation and management after 1997. As far as this Council is concerned, this is the first Budget put forward for our consideration after the introduction of direct election to this Council. It is expected that the debate on the Budget would be conducted in a more politically charged atmosphere. The present Financial Secretary would also be subject to greater political pressure than any of his predecessors. I hope that in the remaining years before 1997, the public finance policy will be formulated in a way to achieve the objectives of

maintaining a steady and healthy financial situation that we have enjoyed for years and ensuring the corporate profits tax to stay at a level as low as our investors would find it comfortable. On the other hand, in determining the salaries tax level, the Government must see to it that it is within the affordability of the "sandwich class" who will be the economic backbone of the future SAR. Failing this, our

stability will be at stake well before the establishment of the SAR, since the sandwich class would become restive under the enormous pressure brought about by the heavy financial burden of the physical infrastructure projects. This kind of undercurrent would bode no good for Hong Kong.

To begin with, I would like to point out that deficit budgeting was first brought in by the former Financial Secretary in 1990. Tax measures introduced then were inevitably coloured by this frame of mind. Contrary to what he forecast, however, a surplus was recorded at the end of the financial year. The present Financial

Secretary follows his predecessor's step and forecasts a deficit in 1993-94. I do not want to see this kind of forecasts turning into a common practice employed by the Government in its budget preparation with an aim to justify tax increases by making use of the argument of saving against a rainy day as an excuse. I think it is incumbent on the Financial Secretary to make the Medium Range Forecast more accurate so that it could serve as a reliable economic indicator. Judging from the Consolidated Cash Flow under the Medium Range Forecast over the past few years, one would get the

impression that figures relating to the "effect of budget revenue measures", "cash surplus" and "reserve balance" of any particular year in question are nothing but the substantially adjusted figures of the preceding year. This practice would undermine significantly the effectiveness of these figures used as a tool for forecasting and wreak havoc on the investment planning of the industrial or commercial

concerns.

Mr Deputy President, it is commendable for the Financial Secretary to extend the Mr Deputy President, it is commendable for the Financial Secretary to extend the Medium Range Forecast to 1997 and I would like to suggest that a further step should be taken to include years beyond 1997 in his future forecasts. It is admittedly the SAR Government's responsibility to prepare the budgets after 1997 when the Hong Kong Government's administration comes to an end in 1997. Nevertheless I think the Hong Kong Government should do the forecast because financial management plays a vital role in our transition arrangements and the post-1997 forecasts would also have a bearing on the manner Hong Kong is to be run before 1997. In addition, may I suggest that the Financial Secretary should draw up a few sets of different forecasts in the Medium Range Forecast for reference purpose, indicating how our public finance would be affected by different possible economic growth rates.

Mr Deputy President, as one of the representatives from the business and industrial sector, I am disappointed to note that corporate profits tax would go up by 1%. However, in consideration of the benefits the infrastructure projects would bring to our economic growth and to show our social responsibility, we reluctantly endorse the increase despite the knowledge that this undesirable situation has arisen

from the necessity to raise massive funds over the next few years to meet the Government's target of completing the projects before 1997. However, I must make it crystal clear that this increase should never be regarded as an acceptance of more profits tax increases in the future, particularly at a time when different political forces would try to amass political assets for the 1995 direct elections by lobbying for an increase of corporate profits tax and a reduction of income tax. The Government must steadfastly reject these irresponsible requests and spare no effort in removing any factors or elements of uncertainty which would discourage investment and hamper our economic growth in the run-up to 1997.

On the other hand, we need more than a bright investment outlook. The success On the other hand, we need more than a bright investment outlook. The success story of Hong Kong owes very much to its human resources. In moving the second reading of the Appropriation Bill 1992, the Financial Secretary at the start of his speech, stressed that his prime duty was to do all he could to ensure that our record of success during the past 40 years continued into the future. We must not lose sight of the fact that our energetic, resilient, well-trained and above all enterprising people have been the driving force behind our success over the past 40 years. Quite a number of them have now emerged as leading industrialists or businessmen in our community. Following their footsteps are some hardworking people of the younger generation. Out

of the prevalent sentiment in the final years of the transition period, this group of people have been described as "yuppies" by the media. As a matter of fact, all they possess are hard earned. However, once successfully breaking ranks with the working class at the lowest stratum in their pursuit of higher social status, they can no longer enjoy the free social services provided by the Government. While some public housing tenants, who may have been enjoying low rent benefit for one to two decades, can still grumble at rent increases and threaten to stop paying rent, these "sandwich class" people are not eligible for the Home Ownership Scheme because their family incomes are in excess of $18,000 and thus have to turn to the high-priced private housing. But our Government has turned a blind eye to this extremely unfair situation for years.

I am an employer. Among my staff there are manual workers, managers and professionals. Therefore, I accept that low-income people should be provided with necessary welfare services and need not pay income tax at all. On the other hand, I think the hardworking "sandwich class" deserve a better deal, bearing in mind that they would form the economic backbone for the future SAR.

Mr Deputy President, before and after the Budget was announced, pressure groups have only been focusing their lobbying efforts on a raise of personal allowance. But it is the widening of the tax band and the lowering of marginal tax which deserve our immediate attention. An upward revision of personal allowance would do as much good to low-income people as a cut of taxi flagfall fare to short-trip passengers. Likewise, widening of the tax band and a reduction of marginal tax would have the same welcome effects on the sandwich class like a lowering of per metre fare jump on long-trip passengers.

Last year, the Government widened the tax band to $20,000 and streamlined the Last year, the Government widened the tax band to $20,000 and streamlined the marginal tax as well. But the amount a taxpayer with taxable income of $80,000 or above had to pay is exactly the same as he had done in the year before. In other words, the tax reform introduced last year has brought no relief to them. I think the Financial Secretary should take prompt action and rectify the situation in this financial year.

According to official statistics, the population of taxpayers has grown from 560 500 in 1986-87 to 1.45 million in 1992-93, or an increase of 258%, since the standard rate has been progressively lowered to the current level at 15% from 1986-87. During the same period, the number of taxpayers who are required to pay

at standard rate has shot up from 26 500 to 130 000, representing a jump of 490%. Meanwhile, the tax they paid has risen to $12.5 billion from $2.22 billion or a staggering rise of 560%. In 1986-87, a taxpayer was required to pay according to the standard rate when his annual income reached an amount equivalent to 293% of the per capita GDP then prevailing. However, in 1992-93, he has to do so when his annual income comes to 167% of the per capita GDP. This demonstrates clearly the catch-all nature of this tax net.

These figures lay bare the fact that the standard tax net is widened at a rate These figures lay bare the fact that the standard tax net is widened at a rate faster than the tax net in general. What is more, a drop in standard tax rate can only benefit the highly-paid salary earners instead of those less highly-paid ones who are unfairly drawn into the standard tax net, which results in the bulk of tax being paid by a small group of people, and thus increasing their tax burden.

I now urge the Financial Secretary to modify his financial philosophy and accord top priority to the well-being of the "sandwich class". He should also carefully define the "sandwich class" on the basis of their incomes so that standard rate could be duly adjusted to shift the heavier tax burden on to the real high-income group.

Meanwhile, to serve the purpose of our tax reform, a "sandwich class standard rate" should be introduced, with its ceiling fixed at 15% to ensure that the tax they pay would not be more than 15% of their income even if the standard rate is raised.

Mr Deputy President, as a conscientious critic, apart from voicing my views on Mr Deputy President, as a conscientious critic, apart from voicing my views on tax relief, I would also like to put forward some proposals on the revenue side. I am of the view that we should impose profits tax on property speculators according to the relevant provisions under the Inland Revenue Ordinance. This will not only boost our coffers, but also curb the speculation activities by jacking up their costs.

I must stress that I am not calling for the introduction of a capital gains tax as proposed by some people. To the contrary, I am against such a tax. What I am saying is that every effort should be made to safeguard the interests of the commercial and industrial sector. One way of doing so is the exemption of tax on proceeds arising from capital asset. However proceeds from the sale of current asset should be subject to profits tax.

According to the "six badges of trade" put forth by the United Kingdom Royal Commission on the Taxation of Profits and Income, most of the property deals fall into the category of "trading" and are more to do with transactions of current asset than capital asset. The six badges of trade can be summarized as follows:

(1) the nature of the asset on sale; (1) the nature of the asset on sale;

(2) the span of time the asset stays in the hands of the owner. Details can be (2) the span of time the asset stays in the hands of the owner. Details can be found in six sections of the Inland Revenue Ordinance.

As the bell has sounded, I am not gong to elaborate on that.

My point is that we should levy profits tax under section 14 of the Inland Revenue Ordinance and that is to say, proceeds from capital asset should be exempted.

To wind up, Mr Deputy President, at this politically sensitive moment I must add a few words before the Budget is put to a vote. Unless a voting down of this Budget can force the Financial Secretary to step down and bring in a new Financial Secretary to resubmit a new Budget, I think it would be pointless to say no to this Budget. To vote down this Budget would only tie the hands of the Government and cripple Hong Kong. Bearing in mind that under this executive-led system, the Governor, as the President of the Legislative Council, is empowered to dissolve this Council, we must realize that the Legislative Council is not as powerful as some colleagues would imagine.

Mr Deputy President, in view of the need to maintain the Government's prestige and authority in administration and the Budget being acceptable as a whole, I support the motion.

MR LAU CHIN-SHEK (in Cantonese):

Wishes of the general public

Mr Deputy President, after a year of historically high inflation in 1991, I believe many workers who suffered from negative growth in real wages last year are, with a heavy heart, looking forward to a Budget from the Financial Secretary which will give them a respite, so that the standard of their living will stop falling further. Unfortunately, things have gone contrary to our wishes. Mr MacLEOD's Budget has brought the public indignation and disappointment.

The Financial Secretary believes that the tax proposals in his Budget will not affect the Consumer Price Index. But given the variety of public services and the imminent increases in fees and charges, the level of inflation will certainly be pushed higher and the people will have a more difficult life. At the same time, the rate of increase in personal allowance indeed fails to catch up with the aggregate inflation over the past few years and last year's negative growth in real wages. In fact, it is found that more and more people from the lower income group will be included in the tax net.

I, therefore, am of view that the Financial Secretary should, in the Budget, take I, therefore, am of view that the Financial Secretary should, in the Budget, take care of the interests of the lower and middle income groups, make commitments to improve their living and not shirk the responsibility of beating inflation and reducing the pressure of living on these groups.

Mr Deputy President, I do not intend to repeat specifically my views on the v Mr Deputy President, I do not intend to repeat specifically my views on the various items of expenditure and revenue of the new Budget. Today, I will, from the macro point of view, focus on examining the philosophy of policy-making and financial management that the Government has been employing over the years. I will then look at the impact that the Budget will have on the general public. Lastly, I will comment on Members' striving to amend the Budget.

Philosophy of policy-making and financial management

Most western countries agree that the function of taxation and expenditure and revenue policies is to "redistribute social wealth and resources" so as to narrow the gap between the rich and the poor and reduce the extent of class confrontation. This will therefore enable our society to play fairer and develop more steadily. However, the Government has been avoiding this social responsibility and ignoring the trend of polarization of wealth between the rich and the poor. The ex-Financial Secretary, Sir Philip HADDEN-CAVE had clearly stated that the objective of a financial system was to appropriately distribute social resources for public spending but not to achieve social justice or to control the rate of economic growth and the pattern of the economy. Sir Philip's philosophy of financial management has been faithfully followed by his successors. Obviously, it is the government's policy that to boost economic growth will be accorded top priority after the objective of narrowing the gap between the rich and the poor has been met. The policy of public finance is based on three main principles, namely, a balanced or surplus Budget , the accumulation

of reserves and the avoidance of debts. When moving the Second Reading of the Appropriation Bill, the Financial Secretary stated clearly that he was determined to fulfil the following three objectives of financial management: (1) to ensure that public spending remains in line with economic growth; (2) to raise sufficient revenue to cover government spending commitments, and to ensure that at least half the costs of the capital expenditure is financed by recurrent revenue; and (3) to maintain reserves at the level the Financial Secretary judges adequate both to meet known commitments and to provide a cushion effect against future uncertainties.

Mr Deputy President, obviously, the three objectives spelt out by the Financial Secretary are based on the concepts of a balanced Budget , the avoidance of debts and the accumulation of sufficient reserves. The so-called known commitments are mainly to boost economic growth. From the viewpoint of financial management, the Financial Secretary will have no problem in managing the Airport Core Programme which has just gone underway. But do not forget that the Government is not a private company.

How could budgeting be simply regarded as financial management? Economic and social policies

Recently, the new Financial Secretary has mentioned the theory of "positive non-intervention" which he himself does not support. This makes people wonder whether the Government will change its established philosophy in making its policies. But I believe neither "intervention" nor "non-intervention" has been the basic principle of the Government. Instead, to boost economic development is its prime concern. It can be seen that the Government will intervene when it thinks necessary. The importation of foreign labour in recent years is an obvious example of intervening the labour market. Suppression of growth in wages which has been advocated by the Government in the past two years is no doubt another example of serious intervention. Being members of the general public, we will not care whether the Government should intervene or not, what we are concerned about are the advantages and disadvantages that will be brought to the lower income group.

Most unfortunately the development in recent years clearly indicates that this approach of administration where economic policies are given the foremost consideration has placed the lower and middle income groups in a very disadvantageous position. I do not wish to repeat here my views on subjects like the importation of labour but instead would dwell on the interaction or interrelationship between economic policies and social policies and the widening gap between the rich and the

poor.

This approach of putting economic policies before social policies underscores to a great extent the inequitable distribution of public resources. In formulating the Budget, the Government has failed to commit itself to laying down social policies according to social needs. In fact very often the Government is prepared to renege on the commitments it has made to the funding of some of the social policies in an attempt to maintain an usually low rate of taxation, to allow for growth in expenditure for the economically essential projects, such as the infrastructural projects, and sometimes even simply to maintain a balanced budget.

As a matter of fact instances of the Government eating its own words are numerous. In 1972 Lord MacLEHOSE announced the 10-year Housing Development Programme which, for various economic reasons, ended up with nothing definite in the end. I do not know how Lord MacLEHOSE would feel were he to visit Hong Kong now. In October 1990 our Governor Lord WILSON promised in his policy address that most of the urban squatter areas would be cleared in around five years' time. But according to the reply the Director of Housing recently gave to the Finance Committee members, there will still be over 100 000 squatter households in the territory by 1995. As to spending on education, the repeated demonstrations staged recently by the education sector have revealed the root of the problem; but to our surprise the Government has time and again delayed the implementation of the approved recommendations contained in the Education Commission Report No. 4. With regard to health, many of the

recommendations in the Report of the Working Party on Primary Health Care have also suffered delay in implementation. With regard to labour, years ago the Government promised to provide retraining to help workers change jobs; but now funds for the implementation of this programme are to come from a deduction from the wages of

imported workers. All these point to the fact that commitment to social policies has never been given the highest priority by the Government in distributing public resources.

The Hong Kong Government and some members of the industrial and commercial sectors repeatedly assert the belief that any move towards economic growth is in itself neutral and will certainly be in the interest of the community, whereas social policies which emphasize social values will only be for the benefit of a minority group -- what we call the free lunch concept. Social policies therefore are merely economic policies for the poor, or to be more specific, the burden of the public. Under this premise our social policies are not only fragmented but also "cost-led"

instead of "demand-led". As a result the lower income group, already a disadvantaged group under the existing pattern of economy, will be forever condemned to hell.

Under the present policy, spending on social policies has to face yet another cut as provision will have to be made for the financing of the mammoth infrastructural projects and the accumulation of huge reserves. Given this perverse, across the-board cut on spending for every government department, the Financial Secretary projected in his Medium Range Forecast that growth in expenditure for social services, such as health, welfare, education and housing, would in the next few years be lower than that of the last few years. May I sound a warning here: If the Government continues with this strategy of public income distribution which is unfair to the lower income group, social crisis will intensify and in the end no one will benefit from it.

Widening gap between the rich and the poor

Perhaps the Government considers that continued economic growth will certainly do good to the community as a whole. So it is on this assumption that the Financial Secretary in moving the Second Reading of this year's Appropriation Bill said, "Economic success must be a Financial Secretary's first priority. Our past success has meant that the standard of living for the whole community has been transformed." But has the Financial Secretary ever faced up to the fact that uneven distribution of social wealth is getting more and more serious and that the problem of poverty has transformed from "absolute poverty" to "relative poverty"?

Statistics from the Census and Statistics Department show that real growth in wages for managerial level of all trades has risen by 64% from 1983 to 1991 whereas the corresponding rise for general workers from 1982 to 1991 is only 14%. In recent years the linked exchange rate and high rate of inflation have resulted in a negative growth in deposit rate; obviously the lower and middle income groups will be left to bear the brunt of high inflation. However a handful of high income earners have been able to reap a profit as a result of soaring flat price and bullish stock market, further underscoring the widening gap between the rich and the poor. Last year the territory's Gini coefficient reached the level of 0.48; the economic miracle as told by the Government crumbles on its own.

Today, with a reserve of almost $100 billion, the Government still refuses to make greater commitment to improve the living standard of the lower income group and

gives no regard to the ever widening gap between the rich and the poor. Is such a policy worthy of public support?

Changes in the legislature

Mr Deputy President, it is precisely because we want to change this Government's public finance philosophy which has been so uncaring to the poor that Mr Henry TANG and I launched a signature campaign soon after the release of the Budget in a bid to urge the Financial Secretary to amend the Budget for the interest of the lower and middle income groups. Over three quarters of our colleagues signed the letter urging the Government to raise the tax allowance and widen the tax band. This shows that the Legislative Council can no longer neglect the views of the public. In the face of this change in the new legislature I believe a serious response from the Government is warranted. What I mean by a serious response is that it should not be only a response to Members of this Council but, more importantly, a response to the public. It is precisely because of this that I fail to understand why amending the Budget to follow the will of the public should be regarded as a blow to the

Government's authority. Could it be true that our Government wants to follow the example of some tyrannical and despotic governments which will never admit to errors?

In any case, given the trend of democratic development, the Government simply In any case, given the trend of democratic development, the Government simply cannot act blindly and alienate itself from the reality. I dare say that even if the Government and the Financial Secretary succeed in turning down this request by most Members of this Council this year or even the next, they will certainly fail to do so by 1994 and 1995. I therefore earnestly hope that the Government can as soon as possible review comprehensively its philosophy in administration and public finance to keep in line with the public wish. Only in so doing will the Government be a real authority with the support of the public.

Mr Deputy President, I understand that when I stress again and again the need for social wealth to be fairly distributed I will inevitably be labelled as an advocate of communism. But we must not forget that for capitalist economies to have this development today their governments have been giving due regard to the implementation and improvement of social policies. These policies or measures to safeguard the interest of the lower and middle income groups are in fact inseparable from the

development of these economies.

Mr Deputy President, with these remarks, I vow that I will continue to do my best

to strive for amendments to this year's Budget.

MR PANG CHUN-HOI (in Cantonese): Mr Deputy President, the Budget the Financial Secretary presented this year is moderate and conservative in comparison to last year's Budget. Basically it gives the impression of robbing the rich without giving the money to the poor. The new airport has given the people of Hong Kong a dream of the rose garden; but it is also because of the airport project that the lower and middle income groups are made to suffer a lower quality of living. Benefits are yet to come but the public have already had to bear the burden. While we all know that every means has been explored by the Financial Secretary to maintain a substantial surplus, there should have been other ways to generate new sources of income and the best way of going about it is a complete overhaul of our taxation system. A Budget as unimpressive as this one gives full expression to conservatism and inertia which is understandably the mentality of a sunset government. But from the standpoint of the people of Hong Kong, that is a mentality that would hardly go down well with the people.

What makes this year's Budget most unacceptable is, firstly, the Financial Secretary's failure to take into consideration the rate of inflation over the years so as to give personal allowance a reasonable upward adjustment and, secondly, the proposed increase in rates.

In the past few years the rate of increase in personal allowance was small, well below that of inflation. This year, despite the 12% increase the Financial Secretary has given to the allowance, the adjusted level is still too low to reconcile with the cost of living index. Our Federation of Hong Kong and Kowloon Labour Unions therefore would like the tax allowance to be raised to a realistic level of $62,000. The successive growth of the economy in Hong Kong these years has not only failed to bring advantages to the public, especially the lower income group, but these people have also been drawn into the new tax net cast by the Financial Secretary. Whatever small rise in tax allowance will only be eroded by inflation. According to a

newspaper survey 80% of the respondents were not satisfied with this slight increase in tax allowance. A compassionate and responsive way of government should, I believe, still be the good tradition of governance observed by the United Kingdom Government. The fact that this question of personal allowance has drawn such wide criticism should serve as a sort of lesson to the Financial Secretary, namely, that the public would like him to be ready to accept good advice and not to go against the popular will.

Rates is another much criticized area. As a matter of fact rates can be said to be some form of poll tax in Hong Kong. I observed to the Financial Secretary some time ago that every one living under a roof had to pay rates, including the low income tenants of the public housing estates and the "caged apartment" lodgers. After the Government's revaluation exercise in 1990 the rateable value for residential flats has on the average increased by 65% whereas for non-residential flats the increase is more than two-fold, resulting in an overall average increase of more than 85%.

A rates hike would imply an even share of burden regardless of rich or poor. This goes against the principle of equitable taxation, that is, "Earn more, pay more." Moreover it is a known fact that any increase in rates will push up consumer price as the increase will invariably be passed on to the consumers by the owners or

operators as a rise in cost. In the end not only will inflation remain a hopelessly unresolved problem but the rise in rates will, like fuel added to fire, push the rate of inflation further up.

I anticipate that rates will remain an important source of government revenue, perhaps with a yearly percentage rise in rate. When the Financial Secretary met me on 10 March he frankly admitted that rates, like sales tax, was a reliable source of revenue. The increase in rates and the removal of the 25% cap as a relief measure have triggered off a public outcry which I wonder if the Financial Secretary can still turn a deaf ear to. The Government should exclude rates as a major source of revenue in the future and the 25% cap be retained as a relief measure.

If I may put it this way, the personal allowance and the rates hike have put to If I may put it this way, the personal allowance and the rates hike have put to the test the Financial Secretary's responsiveness to public opinion. There is an old Chinese saying: "Prosperity to those who follow the popular will; downfall to those who do otherwise." Although this may not be applicable to the present

political system of Hong Kong, given that democracy is now a worldwide trend, I believe this saying should be rather close to truth.

At first I agreed to the principle held by the Financial Secretary that amendments should not be made to part of the Budget for fear that any such precedent might reduce the Budget process to a bargaining exercise. But wrong is wrong when measured against truth. Knowing it to be wrong but yet choosing to wait until next year to put the wrong right is unjustifiable. A while ago a Member said something to this effect: "We will have other problems to face tomorrow, inflation for one; so a positive way

to get things done should be to start right now."

Going through the whole Budget I would say that the entire development of Hong Going through the whole Budget I would say that the entire development of Hong Kong hinges very much on the new airport. To make provision for the project the Financial Secretary has to work hard to ensure that substantial surplus be maintained each year. It is anticipated that the people of Hong Kong will be in for greater belt-tightening in the next few years with the lower and middle income groups having to pay a very heavy price. If the new airport fails to bring about the projected growth in the economy of Hong Kong it will become one of the greatest ironies given that the public will have to continue sacrificing their quality of living for the project. The new airport should be an asset to a higher quality of living; but now it may turn out to be a liability.

With the construction of the new airport, the lower and middle income groups we With the construction of the new airport, the lower and middle income groups we belong to have already had the feeling that the Government has deviated from the financial guideline of maintaining a balanced Budget where spending will be tailored to income. In order to amass great surpluses the Financial Secretary no longer takes it upon himself the responsibility of narrowing the gap between the rich and the poor and effecting a more equitable distribution of income to palliate tension or

incompatibilities within the community. Such inaction, as a matter of fact, runs counter to the expectations economists and financiers have of the Government's public finance policy.

In his speech moving the Second Reading of the Appropriation Bill the Financial Secretary said that the present resources, particularly land and labour, had been under great strain because of increase in economic activities. Normally importation of labour will not be resorted to unless no other option is available to the Government.

If the importation is taken to be a long-term measure and the various loopholes associated with it remain unplugged, the damage this measure may have on the community will be disastrous. In order to relieve the pressure of inflation the Government should, by way of greater emphasis on retraining and hence switching of jobs by the local workforce, raise the level of productivity of the community. This, I should say, is the unshirkable responsibility of the Government.

Mr Deputy President, I understand that the subject we discuss today is the Financial Secretary's Budget. But financial strategies will invariably affect the Financial Secretary's way of management; so I would like to take this opportunity to remind the Financial Secretary that unless he raises the personal allowance and

freezes the rates I cannot accept the present Budget which does not accord with the will of the public.

Mr Deputy President, with these remarks, I shall reserve my decision as to which way to cast my vote.

MR SZETO WAH (in Cantonese): Mr Deputy President, in his 1991 Policy Address, Lord WILSON stated that "to pass legislation and obtain financial provision for its programmes, the Administration will have to win the support of a majority of Members in this Council. This means building up a co-operation partnership with the Council."

In the debate on the Motion of Thanks that followed, I pointed out that there were two entirely different ways to win the support of a majority of Members in this Council and the establishment of a co-operative partnership with the Council, namely

(1) making use of the undemocratic system of this Council where only a limited (1) making use of the undemocratic system of this Council where only a limited number of seats are provided for directly elected Members who represent the view of the majority, all means may be tried to form "fire fighting teams", "flood control teams", "rescue teams", "poaching teams", openly or covertly, to secure support from the majority of the Council and turn a deaf ear to public opinion; or

(2) recognizing the unreasonable fact that the Administration is not a governing (2) recognizing the unreasonable fact that the Administration is not a governing party returned by election, due respect may be paid to public opinion reflected by the elected Members (especially the directly elected Members) and policies may be formulated on the basis of the opinion instead of canvassing results.

Now, let us see which way the Administration took to deal with the present Bu Now, let us see which way the Administration took to deal with the present Budget.

The Financial Secretary had not in any way sought the views of the Members of this Council and those of the public throughout the whole process of framing the Budget before its release. This simply indicates that he has divorced himself from the public views.

No sooner had the Budget been announced than 46 Members of this Council jointly signed a letter requesting an increase of personal allowance and a widening of the tax band. The 46 Members from different political groups, in fact, represent an absolute majority of this Council and what they expressed were nothing but the views

of the people in the street. Subsequently, Members of different political groups as well as independent Members put forward their common requests, inter alia, for raising personal allowance and widening the tax band, dropping the proposal of raising rates and making more allocations for basic social services.

The Financial Secretary's response was that the Budget should be treated as a The Financial Secretary's response was that the Budget should be treated as a package and no amendment could be made. He turned down all the requests and merely made a promise that he would do something in the next Budget but threatened that he would renege on the promise should the Council vote down this year's Budget. He not only denied our requests but also posed a threat to us.

Is there anything in the world that cannot be amended as it must be handled as a whole? Even in the case of an entity such as the human body, it is surgically possible to remove one's caecum. One's whole arm can be amputated when one's finger is bitten by a venomous snake. The advanced medical science nowadays allows

transplant of organs and even blood in the human body can be totally replaced through transfusion. Why is this Budget so sacred that not a bit of it can be changed? Did the former Financial Secretary, Sir Piers JACOBS not change his mind and revise his proposal for tobacco duty last year? Mr MacLEOD's argument is contradictory to Sir Piers' move.

Does Mr MacLEOD's intransigence fall in line with the idea of partnership with Does Mr MacLEOD's intransigence fall in line with the idea of partnership with the Members of this Council which Lord WILSON attached so much importance to and strived to establish?

Some Members, though highly critical of the Budget, were of the view that the Budget should not be voted down. To indicate so early their decision not to vote down the Budget is tantamount to an unconditional surrender, simply helping to relieve the Administration of the pressure to make amendments. The criticism they voiced has amounted to nothing. This kind of criticism is actually more like a blessing than an attack.

Views have been expressed that a rejection of the Budget would paralyse the Government and bring about a political backlash. Is it true that the Government must have its own way as the acceptance of public opinion on its part would hamper its administration? If so, why should the Government bother to present the Budget to this Council for its comments and endorsement? Does it mean that the Government could defend itself against any criticism and attack by merely using "possible paralysis"

and "political backlash" as an excuse. In fact, it is the functions and powers of this Council to endorse allocation of funds, to serve as a watchdog and to echo the people's sentiments that are in jeopardy. This kind of political stability, free of any political backlashes can only be achieved through rubberstamping decisions. As a matter of fact, the provisional allocation this Council passed on 8 March ensured that the Government could still have access to $39 billion and introduce a new Budget even if the present Appropriation Bill in rejected. Therefore, the so-called

"paralysis" and "political backlash" are no more than remarks meant to scare. Please stop using these shocking remarks. The Government's operation is not going to stall, nor will there be any political backlash.

Some people opined that a rejection of the Budget will damage the Government's prestige in its administration. As a Cantonese saying goes, "One may bring dishonour on oneself but respect has to be earned"; true prestige is to be gained not to be claimed. It is praiseworthy for one to correct one's mistake. To achieve genuine and higher prestige, it is essential for the Government to be receptive to good advice and the views of the public. To be bull-headed or self-willed could only earn

worthless and empty prestige.

Some people warned that a rejection of the Budget would undermine our executive-led system. Where could we find the words "executive-led" in the provisions of Hong Kong's constitutional law? Please think twice before quoting and expounding this term. We must work according to the law. This Council may exercise any powers bestowed on it under the law, such as to examine and pass the Budget. It is totally unacceptable to erode the powers of this Council in this respect by putting forth "executive-led" as an excuse.

It is also alleged that among those critical of the Budget, some of them are trying to reap political gains. This statement is no different in nature to remarks such as "to politicize issues" or "with an aim to court votes" which could be heard from time to time in this chamber. Dr SUN Yat-sen said that politics is the management of public affairs. The job of this Council is precisely the management of public affairs. Why cannot it be politicized? Could it be said that we are here to play children's game? In participating in election, one naturally has to echo the voters' views and get involved in canvassing for votes. There is nothing wrong with

vote-courting. What is wrong and illegal is to buy votes. Are not Mr George BUSH of the United States and Mr John MAJOR of Britain trying all they can to court votes? Is there anyone sneering at their efforts? Why do people not sneer at them?

Political capital is the asset one could draw on when participating in public affairs, providing public service and gaining voters' support by reflecting their views. As elected Members, why should we not do so? Only those who are about to retire from the political arena and public service after having already reaped enough profit would scorn the gaining of political capital.

I have voted against the Budget thrice in the past, which I think may be a record in this Council. For the first time, I did so to press for the introduction of separate taxation for husband and wife. For the second time, I voted against the Budget in order to fight for the improvement of the service conditions of the kindergarten teachers. Again, I opposed the Budget the third time to show my objection to the Administration for its development of tertiary education at the expense of the quality of basic education.

In the past week, the Honourable Fred LI and I have held three consultation meetings on the Budget with the residents of our constiuency. Towards the end of the meetings, we asked the participants: Should we vote for or against the motion if the Financial Secretary rode roughshod over the views of the public and refused to introduce amendments to the Budget? More than 90% of the participants attended the meetings raised their hands, urging us to vote against it.

Mr Deputy President, I have to act according to the wish of my constituents. My colleagues of the United Democrats of Hong Kong in this Council will elaborate our views on the Budget and they have my full support. With these remarks, I await the Financial Secretary's response to be given next week.

MR TAM YIU-CHUNG (in Cantonese): Mr Deputy President, today we are here to debate the first Budget of the new Financial Secretary. Before the release of this "maiden Budget", there were numerous reports in the press speculating on the contents of the Budget. Some people thought that those were the Government's balloons to test public opinion. Many organizations have also voiced their aspirations with regard to the Budget. Yet, after the formal announcement of the Budget by the Financial Secretary on 4 March, there were strong oppositions from the public at large and most

organizations which had voiced their aspirations were disappointed. Why has this Budget given rise to such wide-spread discontent and what lessons could be drawn by the Government? These are the main topics for my speech today.

As Hong Kong has stepped into the second year of the nineties, the Government As Hong Kong has stepped into the second year of the nineties, the Government can no longer, as in the past, manipulate behind closed doors and justify itself that everything is fine. The Government must understand that in the past few years, the political, economic and social situations of Hong Kong have undergone many changes. If the Government turns a blind eye to these factors in its policy and administration, strong responses from the community will easily be evoked. The Government will be embarrassed, the conflicts and misunderstandings between the Government and the

public will be deepened as well. I thus hope that the Government would understand the present situation of Hong Kong.

Firstly, let us look at the economy and people's livelihood. Hong Kong is now undergoing an economic transformation stage. As more and more manufacturers have moved their production line to China, employment with the local manufacturing industries are on the decline. Many manufacturing workers have experienced a negative growth in their income and a decline in their living standard. On the other hand, some investors have reaped huge profits during this economic transformation period. Some of them have invested their gains in speculative activities in the financial and property markets, leading to an overheated local economy and a widened gap between the rich and the poor. As the inflation rate of Hong Kong has remained high over the past few years at a double-digit figure, the lower and middle classes have to bear greater burden and they have been nursing great grievances. If the Government fails to implement a fiscal policy that can take care of their interests and abate their discontent, the consequences will surely be grave.

With the opening and democratization of our political system, the public have higher political awareness. They demand greater accountability from the Government and attach greater importance to individual rights. Various political bodies and pressure groups are more justified to strive, both within and outside the

establishment, for the interests of the sectors they represent. Hong Kong is becoming more and more politicalized. Therefore, the Government must be more open in the process of policy making. It must listen to the views of different sectors and take heed of the responses of the public. Otherwise, comments on the Budget would become a political event and the Government would then come under criticisms and attacks from various political forces.

In fact, in the next few years, the Government will have to consider the overall changes in Hong Kong in formulating its fiscal strategy. If the Government wants its future Budgets to gain extensive support and to be endorsed smoothly, it must

take note of the following:

First of all, the Government must not engage too much in window dressing and First of all, the Government must not engage too much in window dressing and evade the problems. In particular, it must not play with figures to hide the true facts. For example, the Financial Secretary claimed in his Budget that Hong Kong has a Gross Domestic Product per head of US$16,000, which is well ahead of a number of developed economies. However, the living standard of an area cannot be assessed solely on the average GDP value. Factors such as the distribution of wealth and the gap between the rich and the poor have to be taken into consideration as well. Let us take the Gini Coefficient as an index. Many advanced countries have a Gini Coefficient that ranges from 0.35 to 0.38. Yet, in Hong Kong, the figure of last year was 0.48. I hope that the Government would not hide the facts that the disparity between the poor and the rich in Hong Kong is getting wider apart and that efforts will be made to narrow such a gap. The Financial Secretary also said that the costs of the Airport Core Programme would only take up 25% of the Government's capital expenditure.

However, other than the Airport Core Programme, the infrastructural development scheme also includes other construction and reclamation works. Hence, to say that the Airport Core Programme would only take up 25% of the capital expenditure can hardly reflect the true picture with regard to the financial implication of the infrastructural development scheme. All in all, I hope that the Government will no longer play with the figures. This will give the public an impression that the Government is not sincere and is not willing to face the reality squarely. This will undermine the public's confidence in the Government and strike a blow to Government's credibility.

Thus, the Government must build up a fair and credible image with regard to its fiscal management. It must not let the public think that it is sided with some consortia at the expense of the interests of the lower and middle classes. In fact, the Government has all along given the public an impression that it makes effort to safeguard the interests of the industrial and commercial sectors and neglects the welfare of the middle and the lower classes. Let us take the profits tax as an example. The Financial Secretary proposed to raise the tax by merely 1%. This slight increase can hardly enhance, to a reasonable extent, the pay back of the industrial and commercial sectors to the community. In my opinion, even if the Government further increases the profits tax by one percentage point to 18.5% as in the mid-80s, our investment environment would not be affected.

On the other hand, the Financial Secretary proposed to increase the personal

allowance from $41,000 to $46,000 only. Hence a person with an average monthly income of merely $3,800 will be caught by the tax net. Surely, more and more low income people will have to pay tax and have to bear greater burden. Furthermore, as the Financial Secretary is unwilling to widen the tax band to increase its progressivity, more and more middle income people will have to shoulder heavy taxation burden. These measures are unfair to the middle and lower classes and will not help to narrow the gap between the rich and the poor.

Another proposal by the Financial Secretary that is controversial concerns the general rates, which will be increased by half a percentage point. Although the surplus of last year amounted to $14.1 billion, $12.8 million more than estimated, the Government still raises the general rates. This is most puzzling. Let us not forget that the rateable value of all properties in Hong Kong was reassessed in early 1991, leading to an 85% increase in rateable value. The Government was thus forced to introduce a rates relief scheme. The fact that the scheme will not be extended this year and that the general rates will be raised will definitely bring about a substantial increase in rates. I wrote to the Financial Secretary in February asking him not to increase rates which would add to the burden of the public. Yet the

Government now proposes a hefty increase in rates despite huge profits. Apart from feeling disappointed, I cannot help wondering if the Government is hoarding wealth to pay for the infrastructrual development projects.

In recent years, the Government has been increasing taxes and trimming expenditure for implementing the infrastructure projects. This gives people an impression that "infrastructure projects override everything". The Government really should not cut those public expenditures that affect the welfare of the public to pay for these projects. For example, although there will be a $7 billion increase this year in expenditure on social welfare, the actual increase will only be a mere 2.8% after the inflation factor is taken into account.

Mr Deputy President, as a whole, the Financial Secretary has adopted a kind of "housekeeping" attitude in formulating this Budget. He has not given adequate thoughts to the drastic political, economic and social changes of Hong Kong. This Budget can neither alleviate the social conflicts arisen during the economic transformation period, nor can it take care of the immediate concerns of the middle and lower classes. The Financial Secretary has not paid adequate attention to the piled-up grievances of the public and the increasing politicized situation of Hong Kong. His "maiden Budget" has thus come under unprecedented criticisms and

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