reasonable to relate grants to expenditure on fees, books, stationery and equipment, and interest-free loans to living and other personal expenses.
112. Because the reason put forth for not selecting the most economical option was the serious problems it would cause the students, especially for a young woman envisaging marriage, I conducted an examination into the relevant records to see what serious problems were identified. I had expected that such a conclusion would have been the result of a thorough study or survey into the students' repayment problems, and that the findings would have been properly evaluated and documented. However, after a scrutiny of the relevant files I was unable to trace any such study. As far as I could ascertain, the assumption that serious problems could be caused was derived from certain arguments expressed in the United Kingdom around that time in opposition to a proposal to replace the United Kingdom's grant scheme by a loan scheme. The arguments centred on the United Kingdom students' lack of ability to repay that a graduate on leaving university would generally earn no more than the average semi-skilled worker, and that a large number of women graduates would leave employment after having a family, thus bringing a negative dowry to their husbands. Without apparently conducting any detailed research, these arguments were accepted by the Administration as being valid in Hong Kong, and were reflected in its proposal to the Executive Council, despite the somewhat different circumstances of the two places - university graduates in Hong Kong would perhaps be more fortunate in their job prospects, and the availability of domestic help would probably allow more women graduates to remain in employment after having a family. The lack of detailed research could possibly be attributed to the haste with which the scheme had to be introduced in time for its commencement in the academic year 1969–70.
113. Because of criticisms in the past over the administration of the system of scholarships and bursaries by a Government department and that the composition of the student body was therefore to some extent influenced by an authority outside the Universities themselves, the Administration proposed that the detailed operations of the scheme should be administered by a Joint Universities Committee composed of university officials and students, with assistance from the Secretariat of the University Grants Committee. Government would exercise financial control over the scheme by means of a cash limit which would be calculated according to a formula based on maximum assistance to an arbitrary 25% of the student population. Accordingly, cash limits were set for the first five academic years 1969–70 to 1973–74, and the Joint Universities Committee was allowed to make awards within the funds available on whatever criteria it chose to establish.
114. The cash limit, as a means of control, was however rather short-lived. After the scheme had been put into operation, the existence of this limit apparently prevented all students judged eligible to receive assistance in accordance with the criteria laid down by the Joint Universities Committee from getting sufficient assistance to cover all their academic and living expenses. Whilst this was envisaged in the 1969 Executive Council Memorandum, it was regarded as a breach of the objective of the scheme that no student should be unable to accept a place for lack of means. Therefore a request was made by the Joint Universities Committee, and supported by the Secretary, University Grants Committee, for an increase in funding. The Finance Committee of the Legislative Council was asked in September 1972 to revise the method of financing so that the requirement for funds would be assessed annually based on the students' needs in the previous year. This request was approved and the cash limit was thus effectively lifted. As a result the Government was committed to meeting the full cost of a scheme over which it did not exercise detailed control, a situation which does not appear to have been fully realized at the time.
115. Two other events occurred in the 1970's which made the scheme even more expensive. In both cases when seeking the necessary financial approval for a change in the funding arrangements there was a failure to review the validity of the underlying assumption regarding the students' ability to repay loans and to ensure that the objective of the scheme was being achieved in the most economical manner.
116. The first event happened in 1974 and the other in 1979. Before 1974, in determining a student's need for assistance, his disposable income would first be assessed and then be used to offset a predetermined level of tuition fees and other academic expenses. Any deficit would be covered by the award of a grant with a loan being given to cover living expenses, also up to a predetermined level. If there was a surplus, no grant would be awarded and the surplus would be used to meet living expenses, any shortfall being met by a loan. In other words, the disposable income was used first to offset the grant element of the scheme and thus economize on the use of public funds. With general prosperity in the early seventies, and a rise in family incomes which was not matched by an equivalent rise in the cost of tuition fees and other academic expenses, assistance by way of grant to the students became smaller relative to their loans producing economies in the overall financing of the scheme. The Joint Universities Committee however, perhaps being more concerned to preserve the benefits to the students rather than the overall cost of the scheme, requested an increase in the amount of grants and a reduction in the loan element. This was supported by the Secretary, University Grants Committee and a proposal was made to the Finance Committee of the Legislative Council that disposable income be split on a 70:30 ratio between academic and living expenses. This would mean that, although the total assistance to each student would remain the same, the grant element would be increased. The Finance Committee paper of July 1974 seeking approval for the change admitted that justification for the proposal was tenuous. Nevertheless, two points were put forth to support the proposal: first, assisted students came from very poor families, with income below $900 per month for a two-child family; second, some graduates had great difficulties in repaying their loans. I have found that both points were not based on valid or up-to-date information. The figure of $900 was apparently a miscalculation as based on the results of the 1973-74 allocation exercise, the cut-off point for a two-child family was more than $1,300 per month. With regard to the second point, the alleged repayment difficulties were apparently not substantiated by any
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