Extract from Hausan 19/3/36
HONGKONG GOVERNMENT SERVICE (LEVY ON SALARIES) ORDINANCE, 1936.
THE ATTORNEY GENERAL moved the first reading of a Bill intituled "An Ordinance to make provision for a levy on the salaries He said: of public officers in the Hong Kong Government Service."
The necessity for the introduction of a measure of this nature and the general principles governing it are set out in the Memorandum of Objects and Reasons, but in a Bill of this importance it is only right that I should supplement that Memorandum with an explanation
in greater detail.
Clause 2 provides for a double levy on all sterling salaries which exceed £240 per annum. That figure has been selected because it is regarded as the bare level of subsistence in the case of sterling paid officers. Officers below the £240 level are, in the Police Department lance-sergeants whose salary rises from £190 to £240, in the Prisons Department certain junior warders where the salary rises from £190 to £330, and in the Medical Department certain junior nursing sisters where the salary rises from £220 to £295.
The first part of the double levy on sterling salaries is, a graduated percentage cut of 2 per cent. on the first £240, 5 per cent. on the next £360, 7% per cent. on the next £400, 10 per cent. on the next £400 and 121⁄2 per cent. on the remainder of the salary.
The second part of the double levy is provided for in clause 2 (4) and involves the payment of the salaries, after deduction of the percentage levy and Widows' and Orphans' Pension Contribution (if any), at the arbitrary rate of one shilling and sixpence to the dollar,
for the first quarter of this year, and for subsequent quarters at such rates as this Council may direct by resolution. On this point I may say that the Government intend to introduce, with the approval of the Secretary of State, a resolution for a lower exchange rate, that of one shilling and five pence farthing, for the second quarter, with further reductions of rate for the last two quarters.
The double cut for the first quarter will amount on the higher salaries of £1,400 and over to a levy of 20 per cent. and over.
These proposals sound very drastic, but they are designed to do justice between sterling paid salaries and dollar paid salaries in view of the fact that when a sharp fall in exchange occurs the cost of living does not rise pari passu. There is a lag which has for the purpose in hand been taken at a year, partly because that is the period under review and partly because there are grounds for viewing the financial situation after 1936 with less anxiety as by that time our most expensive commitments for Public Works Extraordinary will be completed or nearing completion.
Clause 3 of the Bill provides for a levy on dollar salaries exceeding $240 per annum at the rate for the first half year of 4 per cent. on the first $1,000, 8 per cent. on the next $1,500, 12 per cent. on the next $2,500, and 15 per cent. on the remainder. For the rest of the year these rates will be reduced to 3 per cent., 6 per cent., 10 per cent., and 12 per cent. respectively.
Here again the figure $240 has been selected as representing the bare level of subsistence. It will exclude messengers and coolies and others not receiving more than $20 per mensem.
It must be remembered that on the revision of salaries in 1930 resulting from the Report of the Salaries Commission the basic dollar salaries were increased twenty per cent. whereas the basic sterling salaries received an increase of only 15 per cent., the contemplated High Cost of Living Allowance never having been in fact paid. This fact has to be considered in contrasting the differences in the incidence of the levy in the cases of the dollar paid and sterling paid salaries,
The only other clause of the Bill which calls for special comment is clause 6 which allows the Legislative Council by resolution to exempt either wholly or partially from the operation of clauses 2 and 3 any officer or any class or description of officer. It is intended by the Government to introduce under this clause a resolution exempting from levy the salaries paid to those (other than officers seconded from the general establishment) employed on the construction of the Jubilee Reservoir and Shing Mun Dam.
I now turn to the financial aspect of the proposals.
The deficit on the estimates for 1936 at one shilling and eight- pence amount to $2,926,303. To this has to be added the sum of
$3,000,000 for our sterling commitments if the dollar is reckoned The at one shilling and threepence making $5,926,303 in all. conventional dollar taxes on liquor, tobacco and light dues are estimated (less Military Contribution) to produce $936,000 and the taking in the surplus on the Trade Loan (less military contribution) a further $400,000. Deducting these receipts the deficit is reduced to $4,590,303. The dollar and sterling salary cuts are estimated to reduce the total salary bill by $1,143,475 leaving a deficit on the year's working of $3,446,828. Certain reductions in Public Works expenditure have been effected, which, however, are largely set off by the extra cost (owing to the low dollar) of the new Queen Mary Hospital; but it is anticipated that $164,600 will be saved. Deducting this sum the net deficit is therefore $3,282,228 for the year.
It is obvious that such a position calls for sacrifice on the part of Government officers and the only question the Government had to consider was the amount of that sacrifice.
THE COLONIAL SECRETARY seconded, and the Bill was read a first time.
Objects and Reasons.
The "Objects and Reasons" for the Bill were stated as follows:- 1. In order to assist in decreasing the anticipated budget deficit for the year 1936 after the fall in the exchange value of the local dollar it has been considered necessary to impose a temporary levy on Government salaries by way of reduction of expenditure.
2. In accordance with the views expressed in the Secretary of State's Circular despatch of the 16th July, 1932, dealing with such levies in the Colonies generally, the reductions are clearly designated as temporary and accordingly take the form of a levy on salaries imposed by statute renewable from year to year, the value of emoluments for pension purposes is not affected, and the principle of a fairly graduated scale of reduction is adopted in preference to an arrangement providing for all-over cuts of so much per cent. on salaries up to a certain limit, and of a higher percentage on salaries above that limit.
3. Clause 6 gives the legislature power to grant exemptions by resolution.
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