TNAG-1362-FCO40-1808-Hong-Kong-Hansard-reports-and-minutes-of-the-meetings-of-the-1985 — Page 178

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as a form of standardised cost arrangement.

However, I think

that Dr. Ip was probably envisaging something more like the

standard cost system which is being introduced for social

welfare services. Under this system each agency receives a

fixed amount of subvention that is sufficient to provide the

service to approved standards. The agency must work within

this sum,

as any deficit at the end of a financial year

would not be made up. On the other hand, any surpluses accumulated

may be held by the agency in a special reserve account which

may be used for other activities that are approved by the

Social Welfare Department.

22.

The standard cost system has been introduced for

a total of eight social welfare services, but some difficulties

have been encountered. The main problem is that staff costs

can vary quite widely between different agencies which are

providing the same service, because of the differing

seniority of the staff, which affects their position on the

incremental salary scales. When standard cost was introduced

it was decided to base the staff element of the grants on the

mid-points of salary scales, but this has resulted in over-

large subventions being paid to a number of agencies. This is

clearly undesirable, since large surpluses are being accumulated

in agencies' reserves which could be put to better use in

developing other badly-needed services. We are trying to find

a way of overcoming this problem, but I fear that it may have

to be at the expense of the flexibility which Dr. Ip rightly

values.

/There..