6.55 Paragraphs 138-140. Slow progress and delays in taking action on formulating a detailed policy on the subventing of insurance premiums and in devising a system by which the various risks can be covered at minimum cost. Commenting on paragraphs 138-140 of the Director of Audit's report, the Deputy Financial Secretary said that progress had been slow but the subject was a difficult one. The Finance Branch of the Government Secretariat had been examining the existing arrangements for subventing insurance premiums in the subvented sector, in which the main elements were medical, education and social welfare subventions. Types of insurance were employees' compensation, fire insurance and public liability. The exercise had highlighted a number of policy and practical difficulties which still had to be resolved. Legal and administrative problems to be sorted out included the question of providing an indemnity to the organizations if the Government should take over risks such as public liability. The Deputy Financial Secretary said that a paper on this subject had been prepared which would be submitted to the next meeting of the Standing Committee on the Administration of Subventions in order to obtain the views of the three Controlling Officers who were mainly concerned.
6.56 The Committee asked if a consolidated policy which would economize on insurance premiums had been considered. The Deputy Financial Secretary replied that he had sought advice on this but there were questions to be answered such as who would be the insurer? Could the Government take out the policy on behalf of all the organizations? What if an organization said it would prefer to negotiate its own policy? There would be difficulties in identifying and excluding from future subventions the amount now paid by the Government in respect of insurance which in the case of schools was included in general expenses. Even if it proved possible for Government to take out a policy on behalf of the organizations, there would be a need to go to tender or to seek quotations from a number of insurance companies. Such a course could be construed as intervention in the management of the subvented bodies.
6.57 On being asked the total amount of insurance premiums paid by the Government by way of subvention the Deputy Financial Secretary estimated that in 1984-85, the figure for medical organizations was $2.3 million and for education $3.3 million. He estimated that claims of about $300,000 had been made against the insurance companies in 1984-85.
6.58 Conclusions and Recommendations. Whilst the Committee note that some progress has been made in the last year they are concerned that the Deputy Financial Secretary has not fulfilled the commitment he made to the Committee in November 1984 to reconvene the Standing Committee on the Administration of Subventions and to put a proposition to it within six months. However, the Committee note that it is the intention to reconvene the Standing Committee in January 1986. The Committee wish to be informed of the outcome of the meeting and the progress in implementing the Standing Committee's subsequent recommendations.
6.59 The Committee remain concerned that the Government is reimbursing in full the cost of the insurance premiums paid by the subvented organizations.
6.60 The Committee cannot understand the difficulties, as outlined by the Deputy Financial Secretary, attached to taking out a consolidated insurance policy in respect of employees' compensation and fire risks.
6.61 The Committee are of the opinion that the cost of a consolidated policy taken out by the Government must be less than the total cost of the policies taken out by the individual organizations and, in respect of fire insurance, that there is the further alternative of the Government carrying the risk itself.
6.62 The Committee attach importance to the implementation at an early date of new arrangements provided these are found to be more cost-effective than the present arrangements. In this context, the Committee accept that in some areas such as public liability insurance there may be no easy alternatives to the present arrangements, but there are other areas such as insurance for employees' compensation and fire risks where a consolidated insurance scheme could be implemented with resultant savings in public funds.
6.63 Paragraph 149. Raising productivity and restraining growth in departmental establishments. In response to the Committee's invitation to comment on the results of the establishment reviews carried out so far by the Finance Branch of the Government Secretariat, the Deputy Financial Secretary stated that a total of 23 establishment reviews covering 20 departments had been completed. However he did not have details of the results of the reviews readily available because the deletion of posts, where applicable, had been dealt with by departmental establishment committees under delegated authority and not by the Establishment Sub-Committee of the Finance Committee. In response to the Committee's enquiry whether any difficulties had been encountered in obtaining Controlling Officers' agreement to recommendations made, the Deputy Financial Secretary stated that it was not an easy matter to obtain the agreement of the Controlling Officers to a reduction in posts and there was always room for disagreement and for compromise.
6.64 The Deputy Financial Secretary informed the Committee that the Finance Branch had also been conducting value for money studies for the last three years. He considered this was a more effective approach than conducting establishment reviews. Establishment reviews dealt only with the question of the right complement of staff to do the job, whereas value for money studies examined the policy behind staffing. Moreover they addressed wider issues including whether the job was necessary, whether it could be done in some other way, for example by using more capital equipment, thus increasing productivity, and whether the correct levels of staff were employed. He had therefore informed the Establishment Sub-Committee of the Finance Committee that Finance Branch proposed to carry out an enhanced programme of value for money studies in lieu of establishment reviews. The Deputy Financial Secretary said that value for money studies were an on-going process and that the whole of the Government, being such a large institution, could not be studied at the same time. Therefore the Finance Branch had to concentrate their resources on those areas considered to be the most productive.
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