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HONGKONG LEGISLATIVE COUNCIL
With regard to the question of the transfer of the Fund the Committee desire to point out that the Government has, under Section 13 of Ordinance No. 30 of 1890 and Section 5 of Ordinance No. 3 of 1900, guaranteed that all contributions shall during the continuance of the Fund bear interest at the rate of 6 per cent. per annum.
Under
present circumstances the Government employs the Fund for pur- poses of General Expenditure paying per cent. compound interest for the use if the monepy.
The Committee under- stands that it is now proposed that the Government should continue to use the money but should cease to pay interest upon it.
CA
The
the Fand are in no way injured. Government binds itself to pay pensions according to Pension Tables mentioned in the Ordinance, and the rates contained in those Tables are based on the assumption that compound interest at 6 per cent. is, and, will continue in effect to be, paid by the Government. The only advantage which Government obtains is that it is relieved from the necessity (inherent in the old system of these Funds) of con- tributing 6 per cent, compound interest on surpluses, should such exist, which had the effect of continuously increasing the surpluses and of throwing on the Govern- ment a larger burden than was reasonable or necessary. On the other hand if there were at any time a deficit, the funds The Government is apparently of the system would tend to increase that deficit, opinion that the annual expenditure in since the Government contribution would respect of pensions and cost of managge- then he calculated on a balance smaller ment will ultimately equal if not exeged than that needed to meet the future the sum of the hunual contributions liabilities of the fund, and the Govern- together with interest on the capital calment contribution would therefore be less culated at 6 per cent. The Civil Service on the other hand anticipate that the capital of the Fund will increase largely as to make it possible at some future date to revise and to increase the rates of pension; and they are prepared to undertake for themselves the risk that the Government now proposes to under- take, namely that the expenditure may eventually exceed the income,
SO
· With regard to the second of the Com- mittee's findings it is urged by a majority of the contributors that each officer is in natural justice entitled to the eventual return with interest of that portion of his salary which he has been conspelled to surrender. They suggest in place of the existing scheme a scheme of compulsory Individual insurance based upon the pre- sent 4 per cent. reduction of salary with the stipulation that the policies shall be held by the Government or by a Board of Directors and that an officer shall have no power to alienate his policey from his wife or children or to discontinue his pay. ments thereon."
The Government accepted the recoin- mendation that the fund should hot be trans- ferred, and Ordinance 17 of 1906. was passeri, whereunder the Ceylon Tables and certain minor benefits were introduced, while the fund remained in the hands of the contribu- tors. This Ordinance was sent home, and it
was disallowed. The Secretary of State, towards the close of his dispatch, says:
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I will now proceed to explain the reasons for the abolition of the Fund. By this course the interests of members of
than the amount required to maintain an equilibrium between the assets and liabili ties.
Thus the normal condition of the fund must be one of more or less unstable equilibrium, and this unsatisfactory con- dition would be intensified through the small
size of the Hongkong Fund. Besides those indicated above, the policy recommended has other advantages. The necessity for periodic costly and trouble- some valuations is avoided. Moreover the experience of other colonies has shown that where distinct funds with separate accounts exist it is difficult to satisfy the members who when the assets of the Fund have reached a considerable figure are apt to think that the pensions can be
considerably increased or the contribu- tions reduced.
I have felt it necessary to advise His Majesty to exercise his powers of dis allowance in respect of Ordinance No. 17 of 1906 and it is disallowed accordingly."
The matter was referred again to the Committee and they reported in June, 1907, as follows:
"That a large majority of members is strongly opposed to the Fund being taken over by the Goverment.”
"As regards the contention that the Government made in effect a large contrila tion to the Fund by agreeing to pay interest at the high rate of 6 per cent on the monies belonging to the Fund deposited with it" we would point out that the rate of interest changed in loans against first class security
HONGKONG LEGISLATIVE COUNCIL
by the Hongkong and Shanghai Banking Corporation since 1891 has been:
From
1.1.91-31.8.91 1.9.91-30.9.92
To the Public To the Govt.
7% per an. 5% per an. 6..
1.10.92-30.9.95
7
*1
1.10,95 date
6,
and on current account:
From
1.10.91-date 2% per an."
>
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14
And it is within our knowledge that for some years past and for periods varying in length the Government's account with the Bank has been overdrawn as a result of currency transactions.”
"It is also evident from the figures that the monies belonging to the Fund have possessed a marketable value during the whole period equal to and during part of the period exceeding the Government's contribu- tion.
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"Further, we have made enquiries and are informed on good anthority that the Fund could be lent out on mortgage at the present time at as much as 8% -9% and that this form of investment would offer the very best security to the Contributors. "
We would suggest therefore as a means of of relieving itself the burden of paying 6% on surpluses that the Government might itself invest or appoint trustees to invest the monies belonging to the Fund in approved local securities."
The matter was referred again to the Secre- tary of State, and the reply was: "I may say at once that I am not prepared to con- sider the substitution of an insurance
scheme for the Fund." and, again, I have therefore come to the conclusion that the original proposal that the Government should take over the Fund and guarantee pensions on the Ceylon pension tables in return for the four per cent. contributions must be adopted, and I have to request that you will take steps at an early date to introduce and pass the necessary Ordinance.” That was done, and Ordinance 15 of 1908 was duly passed. The Fund was taken over on the 1st of January, 1909, interest at six per cent. being credited up to that date. Hon, members have asked for the figures. I have worked them out roughly. taking the receipts the four per cent. contributions and deducting the pay ments,
expenses, pensions, etc. The capital sun would now be $1,117.335. The interest on that would be $07,000. In the figures before you to day the
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126
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estimated receipts are $53,000. That gives an income of $120,000. The expen- diture before you to day is estimated at $27.000. Although the Secretary of State has pointed out the undesirability of these valuations, I have no doubt he would be willing to consider the valua- tion of the Fund on the present basis. No doubt the Fund has been peculiarly fortunate in having no heavy pension calls upon it. One other matter I may mention. It is in connection with the Controlled Shipping Accounts. The money serves the purpose of an insurance fund against war risks. The whole money is kept available and apart.
H.E. THE OFFICER ADMINISTERING THE GOVERNMENT-- Before proceeding to deal with matters raised by hon. members which have not so far been dealt with I should like to state that the debate this afternoon has traversed more points and has been in every way more satisfactory than any 1 have listened to since I have been in the Colony on the second reading of the Supply Bill. It shows that hon. members are taking a very great interest, which the Government hopes hon. mem- bers will always take, in the affairs of the Colony.
I was particularly struck by the suggestion of the hon. member on my right, who spoke first, that the sug gested expenditure on public works should submitted to consideration by the Public
the Works Committee before Estimates are framed. The Government will always be prepared to receive sug- gestions as to the expenditure of public money, but it must be remembered that under the Royal instructions every ordinauer, vote, resolution or question.
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object or effect of which may be to dispose of or charge any part of the revenge arising within the Colony shall
proposed by the Governor unless the proposal of the same by some other men- ber shall have been expressly allowed or directed by him." I come from the Straits Settlements, where the Estimates are considered by such a Committee as the hon. member proposes. The Com- mitter in Singapore consists of the Colonial Secretary and Treasurer with alf the unofficial members. The Com- mittee in Penang consists of the Resident Councillor and the unofficial members of Penang. They go systematically through th Estimat s item by item, possibly sitting three days a week, and the
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