6.65 The Deputy Financial Secretary revealed that the results obtained from the value for money studies so far undertaken were very satisfactory. They had been instrumental in reducing the total establishment by 2,500 posts and had been very helpful in reinforcing the Government's objective of a zero growth policy. He informed the Committee that over the last three years, savings of some $430 million had been achieved. Agreement had been reached with major departments such as the Medical and Health Department and the Electrical and Mechanical Services Department to set up steering groups, which included representatives of the Finance Branch, to look into areas where it might be possible to get improved value for money. The Deputy Financial Secretary confirmed that the savings were not achieved at the expense of efficiency. The objective was to make the Government machinery increasingly efficient. He informed the Committee that in future, reports on the value for money studies completed would be submitted to the Establishment Sub-Committee of the Finance Committee.
6.66 Conclusions and Recommendations. The Committee are pleased to note the substantial achievements resulting from the present programme of value for money studies and give their full support for the enhanced programme which they believe will be an effective tool in raising productivity and restraining growth in departmental establishments.
6.67 The Committee wish to be informed of the progress of the enhanced programme of value for money studies and of any difficulties that may arise in the implementation of agreed recommendations.
TRADE AND INDUSTRY BRANCH
6.68 Paragraphs 163-182. The funding arrangements of the Hong Kong Trade Development Council. The Secretary for Trade and Industry and the Executive Director of the Trade Development Council attended before the Committee. The Chairman asked the Secretary for Trade and Industry and the Executive Director of Trade Development Council whether they had anything to add to the Government Paper tabled in the Legislative Council on 20 November 1985 in answer to certain policy matters which had been commented on in the Director of Audit's report. (A copy of the Government Paper is at Appendix B to this report). The Executive Director said that the funding formula recommended in 1965 by the Working Committee on Export Promotion Organization was to enable the Council to make businesslike decisions with the flexibility to respond to situations and opportunities without having to go through Government bureaucracy. In his view, the formula had worked well, so much so that it was now being studied by other governments. The Executive Director said that the Director of Audit's report had given the impression that the Council was squandering money as fast as it was received. This was not the case. As at 31 March 1985 the Council had a surplus reserve of $82 million and had increasingly been financing other trade-related activities such as lobbying in Washington D.C. and the Shippers' Council. These activities had been gaining in importance. Two years ago the Council had entered into discussion with the Government with a view to increasing the scope of trade-related activities financed out of the re-export portion of the ad valorem charge. Agreement had recently been reached on a new funding arrangement which would come into effect on 1 April 1986. Both the Government and the Council were satisfied that under the new arrangement there would be sufficient resources to finance the Council's mandatory duties and at the same time provide flexibility to finance trade-related activities. The Executive Director said that he was guided by a Council of very responsible members who were the chairmen and representatives of various trade and business associations. He was also guided by a whole system of advisory committees. Every year, the budget was approved first by the Council, then forwarded to the Government Secretariat for examination before submission to the Governor for final approval. The Council's accounts were audited every year by commercial auditors.
6.69 The Committee asked whether the revised funding arrangements were consistent with sound principles of financial management. The Secretary for Trade and Industry explained that the revised arrangements were a pragmatic solution based on the principle that the ad valorem charge was credited to general revenue and that the new arrangements would have regard to the public expenditure policy of the Government. The revised funding arrangements should provide adequate funding for the Trade Development Council's activities and in his view the arrangements were consistent with the principles of financial management set out in paragraph 181 of the Director of Audit's report. Under the new arrangements the Trade Development Council would be given an appropriation equivalent to the yield from the ad valorem charge on domestic exports and imports and the Government would determine, after consultation with the Council, a list of trade-related activities to be financed out of the ad valorem charge on re-exports. If the Council had insufficient funds from the appropriation to carry out its activities, the Government would support a request from the Council for a supplementary appropriation of funds from the re-export portion of the ad valorem charge. The available projections suggested that it was unlikely that the import and export ad valorem charge alone would be adequate to cover the Trade Development Council's activities in the next three years.
6.70 The Committee asked about the Secretary for Trade and Industry's role in the annual examination of the Trade Development Council's estimates and the criteria used. The Secretary said that in order to enable the Council to make businesslike decisions it was not the intention to overburden the Council with the controls imposed upon a Government department. The procedures for the annual submission of estimates, accounts and report of activities were clearly laid down in Part VI of the Hong Kong Trade Development Council Ordinance (Chapter 1114). He therefore confined himself to the examination of the annual estimates of the Council and in so doing he had to satisfy himself that the trade promotional programme was balanced and was in harmony with the Government's external commercial relations policy. He also examined the estimates of expenditure to see that they were consistent with public expenditure policy and that, where possible, economies had been made. Finally, he satisfied himself that the Council had adequate resources to enable it to carry out its responsibilities.
6.71 The Committee asked why a review of the Trade Development Council's staff salaries and benefits and detailed annual checks on the level of salaries paid in relation to those paid by the Government had not been carried out as
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