TNAG-2633-FCO40-3824-Future-of-Hong-Kong-nationality-British-Nationality-(Hong-K-1992 — Page 115

VERMENT MOUSE MUMO KUMU.

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CONFIDENTIAL

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10.

There is a suggestion that for the purpose of the second phase of the Scheme, the existing earnings scale should be adjusted by inflation rates over the past 3 years. This would have the merit of minimising and simplifying the necessary amendments that would have to be made to the existing Order. It is not supported however as the existing earnings scale has not been able to differentiate people earning less than $200,000 on average per year, who form the majority (59%) of applicants in the first phase. The income brackets have not either been set at intervals which would sufficiently differentiate people in different income groups,

groups, resulting in clusters of applicants within certain income ranges further up the income scale.

11.

Nevertheless, the need to differentiate people earning less than $200,000 may have diminished when inflation rates in the past 3 years are taken into consideration. The cumulative inflation rate for this period is 35%. Therefore, leaving the bottom end of the existing earnings scale intact will in effect limit the people scoring the minimum number of points per year's relevant experience to those earning less than $150,000 in 1988 dollar terms, which seems to be appropriate. Further differentiation among those earning less would not be meaningful and is not recommended.

12.

It is recommended that the income ranges should be more evenly spaced in order to further differentiate people in the middle income band. On the scale of points for individual income brackets, it is considered that under the existing points scale which gives 10 points to each year of relevant service of an applicant earning annually an average of over $2 million, only very few people would have scored the maximum number of experience points. This may have nullified the effect of experience as experience points scored would not have been in proportion to those scored for age or qualifications. For instance, a manager with 15 years' relevant experience in OGI earning an average of $300,000 in 1988 would have scored only 75 points for experience but up to 200 points for age if he was in the prime age band. To maintain the

CONFIDENTIAL