TNAG-1415-FCO40-1896-Public-finance-in-Hong-Kong-1985 — Page 180

167.

The linking of the amount of subvention to the yield from the ad valorem charge has also enabled the Trade Development Council to tailor its annual expenditure budget to the expected higher income instead of its actual expenditure requirements. For example, in its five-year forecast made in July 1984, the Trade Development Council originally estimated its expenditure for 1985-86 to be $174 million. However, in November 1984 in its formal estimates submission the figure was revised to $213 million (including estimated expenditure of $5 million on the Exhibition Centre which was an additional commitment) to coincide roughly with the estimated yield from the ad valorem charge.

168.

In order to contain the large annual increases in the Trade Development Council's expenditure and the building up of excessive reserves, the Government recently put a number of proposals to the Council for its consideration with a view to reducing the level of the annual subvention to the Council. No formal agreement has yet been reached with the Council but for as long as the subvention is linked to the yield from the ad valorem charge the subvention, and the expenditure budget, will still be based on expected income rather than an assessment of actual expenditure requirements based on need.

169.

An expenditure budget which is not based on an assessment of actual expenditure requirements based on need does not provide the incentive to economize, and in my report for the year ended 31 March 1979, I pointed out that certain expenditure of the Council had not always been subject to the degree of control which was desirable in a body receiving finance from public funds. In particular I mentioned that the Council had been paying much higher salaries to its staff than those payable to the equivalent grades in the civil service, that there was a need to devise a better system to ensure that only the official expenses of delegates on overseas missions were charged to the funds of the Council, and that there was an apparent overexuberance in the fitting out and furnishing of the Council's offices and residential accommodation provided for a senior staff member. I have recently conducted a further study of selected areas of the Council's expenditure and my findings are set out below.

Since 1978, the Council has budgetted its expenditure in accordance with the Council's guideline that 50% of the subvention should be spent on staff, not less than 30% on promotional activities, and about 20% on office expenditure.

170.

Page 180Page 181