3 The Director of Audit's criticism is based on the undoubted fact (which no one has disputed) that a scheme of assistance based entirely on loans would cost less. His particular criticism relates to P.A.C. Report No. 4 dated December 1981 in regard to which D of A states that "The Committee considered that it was necessary for the Government to go back to square one and recommended that the living expenditure needs of students should be completely reassessed . . .' (Paragraph 107). The Director considers that this reassessment 'did not go back to square one', as it did not consider whether the students' needs could most appropriately be met by grant or by loan, and thus it did not meet the P.A.C.'s recommendation.
4 Attention must be drawn to the actual statement in P.A.C. Report No. 4, which is as follows:-'We consider it necessary to go back to square one and completely reassess the living expenditure needs of the students in the context of present day requirements and we so recommend.' The 'going back to square one' (on which the Director lays emphasis) is clearly seen to mean the reassessment of the living expenditure needs of students, and this was carried out as recommended. The P.A.C. in its Report No. 4 did not refer to a need to examine the type of assistance given, i.e. whether it should be by grant or by loan, and made no such recommendation.
5 As stated above, the Executive Council in 1969 approved a scheme of assistance involving both grants and loans and the scheme came before the Finance Committee of the Legislative Council for review in 1972, 1974 and 1979. After each review, it remained a scheme involving both grants and loans. To argue, as does the Director, that the policy objective of the scheme is not being achieved because it could be done more cheaply by means only of loans, is to confuse policy with simple costs. Most policy objectives could be carried out more cheaply by reducing the benefits conferred (smaller housing units; bigger classes in schools, etc). 'Policy', however, involves more than just the policy objective; it also involves standards. The policy to make the assistance available in the form of grants and loans has been long and clearly established. Since it started in 1969, grants totalling $166 million have been awarded, together with loans totalling $515 million. Over 83,000 grants and 109,000 loans have been awarded. Grants have accounted for less than 25% of the financial assistance given.
6 The remainder of the Director's report seeks to establish that Finance Committee did not realize what it was doing (paragraphs 114 and 117) and attempts to show that, if the scheme were to be replaced by a loans-only scheme, the students would have no difficulty in repaying the loans after graduation (paragraphs 118 and 119). Neither of these assertions is conclusively demonstrated by Director of Audit to be valid.
7 In paragraph 113, the Director gives the reasons why the scheme was administered by a Joint Universities Committee. He then argues (paragraph 114) that when Finance Committee removed the cash limit in 1972, it committed the Government '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'. No basis can be found for this assertion. Government did not seek to exercise detailed control of the scheme, because it had delegated that control to the Joint Universities Committee as described in paragraph 113.
8 The arguments advanced in paragraphs 118 and 119 to show that, had the grants been loans, the students would have had no difficulty in repaying their loans, are based on a comparison of benchmark entry points to the Civil Service for different academic qualifications. D of A's conclusions are that graduates could meet repayments of all their assistance by a monthly repayment of 6%-10% of gross earnings or by up to 58% of the extra earnings of a graduate entrant over a matriculant. There is no reason to challenge this assumption in regard to the comparatively stable employment position and prospects of a person who has obtained employment in the civil service; but it must be obvious. that not all graduates become civil servants and that hardship would result in a number of cases. The Director concludes 'that repayments under an all loan scheme would not cause the majority of students serious problems or undue hardships' but he ignores the serious problems or undue hardship which would fall upon the remainder, in his advocacy of an all-loan scheme. The purpose of the student finance scheme is to remove unreasonable financial hardship, not to defer it; to make it possible for qualified students to take up their chance of tertiary education, not to deprive them of it.
C. DEFECTS IN THE FUNDING ARRANGEMENTS OF THE HONG KONG TRADE DEVELOPMENT
COUNCIL
(Paragraphs 163–182)
The Trade Development Council (TDC) was set up by Ordinance (Chapter 1114) in 1966 to:
(a) promote, assist and develop Hong Kong's overseas trade, with particular reference to exports; and
(b) make such recommendations to the Government as it sees fit in relation to any measures which it considers
would achieve an increase in Hong Kong's trade.
2 Members of the Council comprise chairmen of the five major associations most concerned with overseas trade and business, with a second nominated representative from the three industrial and commercial bodies involved, two Government representatives and a number of other leading citizens appointed by the Governor, including its Chairman. 3 This Council directs the policy and activities of the TDC in accordance with the provisions of Chapter 1114. In particular the annual estimates of the TDC are approved by the Governor in accordance with the provisions of the Ordinance. Hitherto the entire net yield from the ad valorem levy on imports and exports in the preceding financial year are appropriated to the TDC with the approval of the Legislative Council.
4 As income from the import, export and re-export levy grew, the Council was able to accumulate substantial reserves and in recent years has agreed to finance trade-related activities. In view of this development, Government entered into discussion with the Council two years ago with a view to increasing the scope and flexibility for trade-related activities to
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