1 HONG KONG LEGISLATIVE COUNCIL -- 29 May 1991 HONG KONG LEGISLATIVE COUNCIL -- 29 May 1991 1 1 HONG KONG LEGISLATIVE COUNCIL -- 29 May 1991 HONG KONG LEGISLATIVE COUNCIL -- 29 May 1991 1
OFFICIAL REPORT OF PROCEEDINGS
Wednesday, 29 May 1991
The Council met at half-past Two o'clock
PRESENT
HIS EXCELLENCY THE GOVERNOR (PRESIDENT)
SIR DAVID CLIVE WILSON, G.C.M.G.
THE CHIEF SECRETARY
THE HONOURABLE SIR DAVID ROBERT FORD, K.B.E., L.V.O., J.P.
THE FINANCIAL SECRETARY
THE HONOURABLE SIR PIERS JACOBS, K.B.E., J.P.
THE ATTORNEY GENERAL
THE HONOURABLE JEREMY FELL MATHEWS, C.M.G., J.P. THE HONOURABLE ALLEN LEE PENG-FEI, C.B.E., J.P. THE HONOURABLE STEPHEN CHEONG KAM-CHUEN, C.B.E., J.P.
THE HONOURABLE CHEUNG YAN-LUNG, C.B.E., J.P.
THE HONOURABLE MARIA TAM WAI-CHU, C.B.E., J.P. DR THE HONOURABLE HENRIETTA IP MAN-HING, O.B.E., J.P. THE HONOURABLE CHAN YING-LUN, O.B.E., J.P.
THE HONOURABLE MRS RITA FAN HSU LAI-TAI, O.B.E., J.P. THE HONOURABLE PETER POON WING-CHEUNG, O.B.E., J.P. THE HONOURABLE CHENG HON-KWAN, O.B.E., J.P.
THE HONOURABLE CHUNG PUI-LAM, O.B.E., J.P.
THE HONOURABLE HO SAI-CHU, O.B.E., J.P.
THE HONOURABLE HUI YIN-FAT, O.B.E., J.P.
THE HONOURABLE MARTIN LEE CHU-MING, Q.C., J.P.
THE HONOURABLE DAVID LI KWOK-PO, O.B.E., J.P. THE HONOURABLE NGAI SHIU-KIT, O.B.E., J.P.
THE HONOURABLE PANG CHUN-HOI, M.B.E.
THE HONOURABLE POON CHI-FAI, J.P.
PROF. THE HONOURABLE POON CHUNG-KWONG, J.P.
THE HONOURABLE SZETO WAH
THE HONOURABLE TAI CHIN-WAH, J.P.
THE HONOURABLE MRS ROSANNA TAM WONG YICK-MING, O.B.E., J.P.
THE HONOURABLE TAM YIU-CHUNG
THE HONOURABLE ANDREW WONG WANG-FAT, O.B.E., J.P. THE HONOURABLE LAU WONG-FAT, O.B.E., J.P.
THE HONOURABLE GRAHAM BARNES, C.B.E., J.P.
SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS
THE HONOURABLE MICHAEL LEUNG MAN-KIN, J.P.
SECRETARY FOR TRANSPORT
THE HONOURABLE EDWARD HO SING-TIN, J.P.
THE HONOURABLE RONALD JOSEPH ARCULLI, J.P.
THE HONOURABLE MARTIN GILBERT BARROW, O.B.E. THE HONOURABLE MICHAEL CHENG TAK-KIN, J.P.
THE HONOURABLE DAVID CHEUNG CHI-KONG, J.P.
THE HONOURABLE RONALD CHOW MEI-TAK
THE HONOURABLE MRS NELLIE FONG WONG KUT-MAN, J.P. THE HONOURABLE MRS PEGGY LAM, M.B.E., J.P.
THE HONOURABLE DANIEL LAM WAI-KEUNG, J.P.
THE HONOURABLE MRS MIRIAM LAU KIN-YEE
THE HONOURABLE LAU WAH-SUM, O.B.E., J.P.
DR THE HONOURABLE LEONG CHE-HUNG
THE HONOURABLE LEUNG WAI-TUNG, J.P.
THE HONOURABLE JAMES DAVID McGREGOR, O.B.E., I.S.O., J.P.
THE HONOURABLE KINGSLEY SIT HO-YIN
THE HONOURABLE MRS SO CHAU YIM-PING, J.P.
THE HONOURABLE JAMES TIEN PEI-CHUN, J.P.
THE HONOURABLE MRS ELSIE TU, C.B.E.
THE HONOURABLE PETER WONG HONG-YUEN, J.P.
THE HONOURABLE MRS ANSON CHAN, J.P.
SECRETARY FOR ECONOMIC SERVICES
THE HONOURABLE PETER TSAO KWANG-YUNG, C.B.E., C.P.M., J.P. SECRETARY FOR HOME AFFAIRS
THE HONOURABLE MRS ELIZABETH WONG CHIEN CHI-LIEN, I.S.O., J.P. SECRETARY FOR HEALTH AND WELFARE
THE HONOURABLE ALISTAIR PETER ASPREY, O.B.E., A.E., J.P. SECRETARY FOR SECURITY
THE HONOURABLE CHRISTINE CHOW KWAN-TAI, J.P.
SECRETARY FOR EDUCATION AND MANPOWER
ABSENT
THE HONOURABLE MRS SELINA CHOW LIANG SHUK-YEE, O.B.E., J.P. DR THE HONOURABLE DANIEL TSE, C.B.E., J.P.
THE HONOURABLE PAUL CHENG MING-FUN
IN ATTENDANCE
THE CLERK TO THE LEGISLATIVE COUNCIL
MR LAW KAM-SANG
Papers
The following papers were laid on the table pursuant to Standing Order 14(2): Subject
Subsidiary Legislation L.N. No.
Hotel and Guesthouse Accommodation
(Appeal Board) Regulations 1991.............................. 203/91
Hotel and Guesthouse Accommodation (Fees) Regulations
1991..................................................... 204/91 Registration of Persons (Application for New Identity Cards) (No. 8) Order 1991........................... 206/91
Museums (Urban Council) Bylaws 1991..................... 207/91
Tax Reserve Certificates (Rate of Interest)
(No. 2) Notice 1991................................................. 208/91
Oral answers to questions
Prostitution by underaged girls
1. MRS TAM asked: With reference to the recent crackdown on a prostitution syndicate in which some underaged girls were reportedly involved, will Government inform this Council:
(a) of the extent of the female underaged prostitution problem in Hong Kong; and
(b) whether there is any indication that the involvement of underaged girls in prostitution is increasing and if so, what measures will be taken to tackle this problem?
SECRETARY FOR SECURITY: Sir, we do not have available statistics or other information which indicate the full extent of the problem. Based on the number of cases which come to the notice of the government departments concerned, the involvement of girls under 16 years of age in prostitution has not been increasing in recent years.
First, the number of girls under the age of 16 reported missing who are subsequently found by the police in employment in vice establishments are:
1988 1989 1990 1991 to date
62 27 24 5
Secondly, the number of girls under the age of 18 in respect of whom applications are made to the juvenile court for care and protection orders are:
1988 1989 1990 1991 to date
479 427 288 81
Many, though by no means all, of these applications are made in respect of girls found in employment in vice establishments.
Thirdly, the number of girls under the age of 18 engaged in prostitution who have come to the notice of the Family Welfare Services Branch of the Social Welfare Department has remained constant at approximately 200 in the past three years.
As regards the measures which are being taken to tackle the problem, these
include:
(a) Where young girls are found in employment in vice establishments, and recommended by social workers as in need of care and protection, an application for a care and protection order will be made to the juvenile court. The court may place a juvenile under the supervision of a Social Welfare Officer for a period not exceeding three years. Besides supervision, the Social Welfare Officer will counsel the girl and her parents, assist with schooling and employment, and if necessary arrange for residential care.
(b) Similar assistance may be given to girls who come to the notice of the Family Welfare Services Branch of the Social Welfare Department.
(c) Police school liaison officers regularly visit school and give talks to students which inter alia cover the dangers of involvement with triad members, and of enticement or coercion into prostitution.
(d) School social workers and other non-governmental social work organizations also provide guidance and assistance to young girls who have been involved in prostitution and to their families.
MRS TAM: Sir, can the Secretary for Security inform this Council how the police can ensure that the Family Welfare Services Branch of the Social Welfare Department has enough information about the underaged girls engaging in prostitution? Can automatic referral be made so that these girls can have the necessary help and assistance?
SECRETARY FOR SECURITY: Sir, I think that the figures I have quoted include all those cases which have come to the attention of the Social Welfare Department or have been referred to the Social Welfare Department.
Unleaded petrol
2. MR MARTIN LEE asked: In relation to the introduction of unleaded petrol, will Government inform this Council:
(a) given the fact that only 50% to 60% of consumers are using unleaded petrol -- rather than the 90% originally estimated by the Government -- whether it will lower the duty rates on both types of petrol so as to ensure that the price differential policy for leaded and unleaded petrol remains revenue neutral; and
(b) whether it will take the responsibility to collect and make public data on the level of airborne benzene resulting from the use of unleaded petrol and whether it will take steps to control the level of benzene, a known human carcinogen, contained in unleaded petrol?
SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS: Sir, the differential duty rates of $3.72/litre for unleaded petrol and $4.17/litre for leaded petrol came into effect on 1 April this year as a revenue-neutral measure to encourage the use of unleaded petrol. In setting these rates, it was assumed that 90% of petrol consumed in the current financial year would be unleaded. If it turns out that fewer drivers convert to unleaded, there will be some additional revenue, but the amount should not be substantial.
The two rates came into effect just two months ago. Some of us, including myself, hoped for an even quicker change over, but, with over 50% of consumers apparently having already changed to unleaded, we still seem to be doing pretty well, certainly much better than any other developed country which has embarked on a similar exercise. But before we become too jubilant or despondent as the case may be, we should allow ourselves a few more months to see how the consumption settles down. Should it be seen that it has stabilized at a ratio which is worse than the present ratio or seems unlikely to improve further, we will certainly have to look at the whole matter again including the differential duty rates.
Sir, the answer to the second part of the question is a definite "yes". The Environmental Protection Department (EPD) has been carrying out what are known as "monthly benzene in ambient air measurements" as part of their air pollution monitoring programme. The measured levels average around 10 microgrammes per cubic metre, and is not a cause for concern. This is, for example, only about one-tenth of the New York State Ambient Air Standard.
Both unleaded petrol and leaded petrol contain benzene. The oil companies have
agreed to maintain benzene levels in unleaded petrol at the same level as that which leaded petrol contained before the introduction of unleaded petrol -- which ranged from 1% to 3%. The relevant British Standard limit is 5%.
The oil companies will supply the EPD regularly with data on their shipments including the content of benzene in unleaded petrol. The EPD will also carry out spot checks on benzene levels as part of their unleaded petrol enforcement programme.
MR MARTIN LEE: Sir, bearing in mind the recent television programme suggesting that the change to unleaded petrol may have disadvantages and that the advantages are not so great, will Government continue to use its public relations limb to urge our citizens to switch over to unleaded petrol?
SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS: Certainly, Sir. I think that perhaps more public relations is and will continue to be necessary throughout the year. It must be understood that the introduction of unleaded petrol is the first step of a systematic programme for dealing with pollution from petrol-driven vehicles on the road; and that, without it, it will be impossible to move on to the next stage, which is higher design standards for emissions from motor vehicles, in particular the
incorporation of catalytic converters in motor vehicles. I think that this is probably less well understood than it needs to be and the Government will make efforts to improve the situation.
MR PETER WONG: Sir, in view of the fact that Hong Kong drivers are no slouches in deciding what a good thing is financially, has the Government carried out any surveys to find out why Hong Kong drivers are willing to pay more for leaded petrol?
SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS: No, Sir, nothing on a systematic basis yet. We will consider such surveys if necessary and in the circumstances I described earlier.
MR MARTIN LEE: Sir, having regard to Government's own figures showing that if only 50% of the petrol users use unleaded petrol, the additional income to the Government
for the year is likely to be $77 million, does the Government consider this sum to be substantial or not ?
SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS: Sir, we are still hopeful of a higher rate of conversion during the next few months and it was on this basis that I suggested that the additional revenue windfall would not be too substantial.
PROF. POON: Sir, it is mentioned in the third paragraph of the main answer that the level of benzene is around 10 microgrammes per cubic metre. Will the Secretary inform this Council what the total concentration of benzene and benzene derivatives is?
SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS: Sir, I am not adequately briefed to answer that question but I will certainly arrange for a written answer to be sent to Prof. POON. (Annex I)
MR MARTIN LEE: Sir, does the Government have any intention to set the maximum level of benzene at whatever percentage in the foreseeable future?
SECRETARY FOR PLANNING, ENVIRONMENT AND LANDS: Sir, we have no plans for early legislation to this effect. We are at present in the exercise -- bearing in mind that it is a very dynamic one -- of proposing to continue with the arrangements we have with the petroleum supply companies.
Emergency care on ambulances
3. DR IP asked: Since ambulancemen are not trained to give intravenous fluid replacement, will the Government inform this Council how irreversible cardiovascular shock and death can be prevented in cases of traumatic internal bleeding which cannot be stopped with external pressure?
SECRETARY FOR SECURITY: Sir, ambulancemen are at present not trained to give
intravenous fluid replacement. In all cases of suspected internal bleeding, the ambulance will deliver the patient to the Accident and Emergency Department of the nearest hospital as quickly as possible. Ambulancemen are able to give treatment, such as maintaining a free airway, application of oxygen and resuscitation, and
cardio-pulmonary resuscitation, if required whilst on the way to hospital. If necessary, the ambulance crew will alert the hospital in advance of arrival so that the hospital can make the necessary arrangements to be ready to treat the patient immediately upon arrival.
An advisory group has been appointed to examine the desirability and feasibility of extending the range of paramedic training given to ambulancemen. Following its recommendations, the use of defibrillators on ambulances was introduced on a pilot basis in January this year. The advisory group has just submitted its
recommendations on the need for other paramedical services on ambulances, including intravenous injection, intubation and the administration of drugs, and these are now being considered by the Administration.
DR IP: Sir, since the advisory group mentioned earlier has already recommended the need for intravenous injection by ambulancemen, when can we expect the Administration to make a decision on this matter?
SECRETARY FOR SECURITY: Sir, the recommendation of the advisory group is that ambulancemen should be trained in intravenous injection. It is, first of all, necessary to introduce training for the ambulancemen. This will cover training in taking blood pressure, training in theories and techniques, and also practical training in cannulation in hospitals. After that, further training in intravenous injection will be necessary. We are now considering this recommendation and clearly we have to consider also the detailed training arrangements and the resource implications. But I hope this will be done very shortly.
DR LEONG: Sir, would the Secretary agree that emergency care must begin at the site of injury and not delayed until the patient reaches the Accident and Emergency department? And if so, what measures will be taken to improve on-the-spot emergency care before the recommendations of the so-called advisory group can be implemented?
SECRETARY FOR SECURITY: Sir, ambulancemen are of course trained in the much basic first aid training and, as I have said, we have appointed an advisory group specifically to advise on extending the range of training. We have recently received its recommendations on the extension of training to cover intravenous injection and intubation and I hope that we can take these forward as soon as possible.
MR TAM (in Cantonese): Sir, can the Government inform this Council of the experiences of other countries in extending the range of paramedic services on ambulances?
SECRETARY FOR SECURITY: Sir, that is a very wide question. All I would say is that the advisory group, in considering the whole question of what additional paramedic training might be given to ambulancemen, has looked closely at the practice in other countries and has learnt from the experiences of other countries.
MR CHEUNG YAN-LUNG (in Cantonese): Sir, how many patients died as a result of bleeding on their way to hospital this year? Can the Secretary inform this Council whether there are better ways to prevent this?
SECRETARY FOR SECURITY: Sir, no, I regret that figures on deaths are not available. But what I would say is that following a recent survey it has been found that only one in some 700 patients carried in ambulances was suffering from traumatic internal bleeding.
MR PETER WONG: Sir, in cases where additional expenditure on equipment such as defibrillators can result in lives saved, can the Administration inform this Council how it goes about deciding whether to make this additional expenditure?
SECRETARY FOR SECURITY: Sir, again, that is really a very wide question. Clearly when we received the recommendation on introducing defibrillation equipment and training for ambulancemen, we considered both the capital costs and the training requirements and measured those against the benefits, and we came to the conclusion that defibrillation should be introduced.
MR TAM (in Cantonese): Sir, can the Government inform this Council of the effectiveness of using defibrillators on ambulances after its introduction in January this year?
SECRETARY FOR SECURITY: Sir, we have decided to review the use of defibrillators based on experience gained over the first six months after its introduction. We have not yet conducted that review and I think it would be premature at this stage to try to speculate what the effect will be.
DR IP: Sir, with our traffic jams, sometimes it may take half an hour before a patient arrives in hospital. How long does it take for an adult with a severed large artery to bleed to death?
SECRETARY FOR SECURITY: Sir, I regret that I am not able to answer that question.
DR IP: Sir, would it not be important that the answer to that question be known so that Government can assess whether or not ambulancemen should be trained in intravenous injection?
SECRETARY FOR SECURITY: Sir, I can certainly seek a medical opinion and give a written answer (Annex II). But I do not feel confident to give an answer now. Perhaps what I could say, though in answer to the second part of the question, is that the average time for an ambulance to arrive at the scene of an accident is 10 minutes and thereafter to examine the patient and deliver the patient to hospital normally takes a further 15 minutes.
Written answer to question
Vietnamese boat people
4. MR POON CHI-FAI asked: As at 7 May, a total of 4 319 Vietnamese boat people (VBP) have arrived in Hong Kong this year, representing a 250% increase when compared with the total number of arrivals during the same period last year, or over 600% increase when compared with the number of boat people who returned to Vietnam this year under the voluntary repatriation scheme. It has been pointed out by the Administration that 95% of those fleeing Vietnam are heading for Hong Kong. Will Government inform this Council:
(a) whether there are any measures to deter the continued influx of VBP; whether action will be taken to refuse their entry; and when will the implementation of the mandatory repatriation scheme be resumed?
(b) why Hong Kong, being a victim to the VBP problem and heavily saddled with the expense incurred, has not been given the legitimate right to implement mandatory repatriation on the VBP who have entered the territory illegally; and why Chinese illegal immigrants who have also come to seek a better living, like their counterparts from Vietnam, have been given differential treatment?
SECRETARY FOR SECURITY: We believe that the Comprehensive Plan of Action (CPA) remains the right approach to solve the problem of Vietnamese migrants. It is the failure to implement the CPA in full which has so far prevented a resolution of the problem. We are continuing our efforts to obtain agreement on arrangements for the repatriation of all those screened out as non-refugees. This, we believe, will be the most
effective measure to discourage the influx of migrants seeking resettlement. In the meantime, we are co-operating with the UNHCR and the Vietnamese authorities on their publicity in Vietnam which seeks to discourage people from leaving Vietnam clandestinely.
While we are seeking to achieve the full implementation of the CPA, we intend to abide by our obligation under the CPA to give temporary asylum to asylum seekers from Vietnam. At present there are no plans to change this policy.
We intend to resume repatriation of those screened out as non-refugees as soon as we can reach agreement with Vietnam to take back its citizens in accordance with the provisions of the CPA and normal international practice. We are able to return Chinese illegal immigrants because China accepts them back. This is true also for other countries in the region, which accept back their nationals under normal
international arrangements. It is regrettably not yet the case with Vietnamese illegal immigrants.
First Reading of Bills
LAW AMENDMENT AND REFORM (CONSOLIDATION) (AMENDMENT) BILL 1991 ROAD TRAFFIC (AMENDMENT) (NO. 2) BILL 1991
FIXED PENALTY (TRAFFIC CONTRAVENTIONS) (AMENDMENT) BILL 1991
ROAD TUNNELS (GOVERNMENT) (AMENDMENT) BILL 1991
SUPPLEMENTARY MEDICAL PROFESSIONS (AMENDMENT) BILL 1991
Second Reading of Bills
LAW AMENDMENT AND REFORM (CONSOLIDATION) (AMENDMENT) BILL 1991
THE FINANCIAL SECRETARY moved the Second Reading of: "A Bill to amend the Law Amendment and Reform (Consolidation) Ordinance".
He said: Sir, I move that the Law Amendment and Reform (Consolidation) (Amendment) Bill 1991 be read the Second time. This Bill seeks to put beyond doubt the validity of a common practice by banks and other lending institutions to secure loans and credit facilities by taking charges over cash deposits held with them by borrowers or third parties.
In a case concerning Charge Card Services Ltd in the United Kingdom in 1986, the Court held that, whereas a person might take a valid security over a debt due by another, he could not take such a security over a debt due from himself. A bank deposit is a debt due by a bank. The decision suggests that a bank might take a valid security over a deposit held by a third party, say another bank or a subsidiary deposit taking company, but it could not take a mortgage or charge over a deposit pledged by the borrower or a third party with itself.
The Charge Card decision has generated considerable controversy and confusion within the legal and financial communities both in England and Hong Kong. Due to the uncertainty, some local lending institutions have established inconvenient, circuitous and costly arrangements to secure their loans. This is not only detrimental to the institutions and their customers, but also places Hong Kong lending institutions at a considerable disadvantage in relation to those in jurisdictions where there is no doubt as to the validity of security deposits.
This state of uncertainty is highly unsatisfactory. Both the legal and banking communities have been consulted, and they are in support of addressing this problem with a legislative amendment.
Sir, I move that the debate on this motion be now adjourned.
Question on the adjournment proposed, put and agreed to.
ROAD TRAFFIC (AMENDMENT) (NO. 2) BILL 1991
THE SECRETARY FOR TRANSPORT moved the Second Reading of: "A Bill to amend the Road Traffic Ordinance".
He said: Sir, I move that the Road Traffic (Amendment) (No. 2) Bill 1991 be read the Second time.
This Bill has two main objectives. First, it allows for the introduction of more modern equipment for collecting parking fees. Second, it empowers the Commissioner for Transport to determine the fees for using parking spaces within a maximum ceiling set by the Governor in Council.
Some 14 000 on-street parking meters are now in use. These are coin-operated and suffer limitations from user's and management point of view. For example, payment is restricted to coins and coin collection is labour intensive. The amendments now proposed will enable the introduction of electronic parking meters and automatic parking ticket vending machines. Both will accept stored value cards and, in the case of parking ticket vending machines, other modes of payment in addition to coins, thus providing greater convenience to motorists. Upon enactment of the legislation, a series of trials will be conducted to determine the equipment best suited to our needs.
The opportunity is taken to regularize the existing procedure for determining parking charges. Currently, the Commissioner for Transport regulates the use of parking spaces at particular locations through the installation of a mix of meters with varying fee levels and parking durations, as specified in the Second Schedule to the Road Traffic (Parking) Regulations. The Bill provides legal backing for these arrangements, and gives the Commissioner flexibility in setting parking fees so long as these are within the maximum limit prescribed by the Governor in Council.
Sir, I move that the debate on this motion be adjourned.
Question on the adjournment proposed, put and agreed to.
FIXED PENALTY (TRAFFIC CONTRAVENTIONS) (AMENDMENT) BILL 1991
THE SECRETARY FOR TRANSPORT moved the Second Reading of: "A Bill to amend the Fixed Penalty (Traffic Contraventions) Ordinance".
He said: Sir, I move that the Fixed Penalty (Traffic Contraventions) (Amendment) Bill 1991 be read the Second time.
This Bill amends the Fixed Penalty (Traffic Contraventions) Ordinance to make failure to pay for the use of a parking space an offence, when new electronic parking meters or parking ticket vending machines are provided. Anyone who commits the offence will be subject to a fixed penalty of $200.
Sir, I move that the debate on this motion be now adjourned.
Question on the adjournment proposed, put and agreed to.
ROAD TUNNELS (GOVERNMENT) (AMENDMENT) BILL 1991
THE SECRETARY FOR TRANSPORT moved the Second Reading of: "A Bill to amend the Road Tunnels (Government) Ordinance".
He said: Sir, I move that the Road Tunnels (Government) (Amendment) Bill 1991 be read
the Second time. This Bill seeks to provide for the private management of government tunnels.
At present, Government owns and operates four toll tunnels and one non-toll tunnel. Under the Road Tunnels (Government) Ordinance, the Commissioner for Transport is the sole authority for managing these tunnels, including the control and regulation of vehicular and pedestrian traffic and, where appropriate, the collection of tolls. The Director of Electrical and Mechanical Services is responsible for maintaining the tunnels' electrical and mechanical equipment. During 1989-90, some 470 staff and recurrent provision of about $100 million were dedicated to these activities.
To achieve better value for money and to provide greater flexibility in meeting changing needs, the Governor in Council gave policy approval in September 1990 to privatize the operation and maintenance of government tunnels under management contracts. As a first step, the management of the Aberdeen Tunnel will be contracted out very soon. Depending on the success of this initiative, we will conduct a review early next year to see how best the management of the other tunnels could be contracted out.
The amendments in this Bill allow for the appointment of private operators to manage government tunnels and provide them with necessary powers. These include the powers to seize and remove any vehicles which cause obstruction. To safeguard public interest, the Commissioner for Transport will be able to give general directions to the operator concerning the performance of functions and the exercise of powers
conferred on the operator by the Ordinance. Government will also retain control over the level of tolls.
Sir, I move that the debate on this motion be now adjourned.
Question on the adjournment proposed, put and agreed to.
SUPPLEMENTARY MEDICAL PROFESSIONS (AMENDMENT) BILL 1991
THE SECRETARY FOR HEALTH AND WELFARE moved the Second Reading of: "A Bill to amend the Supplementary Medical Professions Ordinance".
She said: Sir, I move that the Supplementary Medical Professions (Amendment) Bill
1991 be read a Second time.
Following the enactment of the Occupational Therapists (Registration and Disciplinary Procedure) Regulations 1990 and the Medical Laboratory Technologists (Registration and Disciplinary Procedure) Regulations 1990, registration of members of the two professions commenced on 1 October 1990.
Under section 16(1) of the principal Ordinance, a person registered shall not practise a profession in Hong Kong unless he holds a practising certificate which is then in force.
In accordance with section 16(3) of the Ordinance, a person who applies for a practising certificate, will be issued with one valid until the end of the year. Section 16(4), however, states that where a practising certificate is issued pursuant to an application made during the course of a year in respect of the following year, the certificate shall be in force for a period of 12 months commencing on 1 July in the following year. Thus, there could be periods within the year not covered by valid practising certificates, thereby creating an anomalous situation.
The Bill seeks to amend section 16 of the Ordinance to remove this anomaly in the validity periods of practising certificates by providing for all practising certificates to end on the same date, that is 30 June.
Sir, I move that the debate on the Second Reading of the Bill be now adjourned. Question on the adjournment proposed, put and agreed to.
LOANS (AMENDMENT) BILL 1991
Resumption of debate on Second Reading which was moved on 15 May 1991 Question on the Second Reading of the Bill proposed, put and agreed to. Bill read the Second time.
Bill committed to a Committee of the whole Council pursuant to Standing Order 43(1).
INLAND REVENUE (AMENDMENT) (NO. 4) BILL 1991
Resumption of debate on Second Reading which was moved on 15 May 1991 Question on the Second Reading of the Bill proposed, put and agreed to. Bill read the Second time.
Bill committed to a Committee of the whole Council pursuant to Standing Order 43(1).
STAMP DUTY (AMENDMENT) (NO. 2) BILL 1991
Resumption of debate on Second Reading which was moved on 15 May 1991 Question on the Second Reading of the Bill proposed, put and agreed to. Bill read the Second time.
Bill committed to a Committee of the whole Council pursuant to Standing Order 43(1). ADMINISTRATION OF JUSTICE (FELONIES AND MISDEMEANOURS) BILL 1991 Resumption of debate on Second Reading which was moved on 15 May 1991 Question on the Second Reading of the Bill proposed, put and agreed to. Bill read the Second time.
Bill committed to a Committee of the whole Council pursuant to Standing Order 43(1).
HONG KONG WAR MEMORIAL PENSIONS BILL 1991
Resumption of debate on Second Reading which was moved on 15 May 1991 Question on Second Reading proposed.
MR McGREGOR: Sir, I have never understood why the former Secretary for Social Services, Mr Eric HO, a colleague of mine during my government days and a friend for many years, should ever have taken a position against giving ex-prisoners of war full pension rights. He is recorded as having said that the prisoners in Japanese hands were "a privileged minority." It was an astounding thing for someone like Mr Eric HO to say, a man born in Hong Kong who had himself experienced the terrible privations and fear of life under the Japanese conquerors from 1941 to 1945. I know him to be a kind and caring person whose contribution to Hong Kong has been extensive and sincere. I asked him at one stage why he had made the comment. He told me that he had meant to indicate that many of those outside the camps were even worse off than those inside. It was an off-the-cuff remark which must have haunted him through the years. It would not have represented his true feeling of compassion for the ex-prisoners of war.
When I came to this Council I was determined to do all I could to ensure that the ex-prisoners of war and the war widows would be given the right of a government pension after so many years of denial. I took positive action, as others had done. Taking legal advice from Mr Geoffrey GRIMMETT, whose help I acknowledge today, I prepared the way to submit a Private Member's Bill to establish pensions for these unfortunate people. I found Mrs Elizabeth WONG not only willing to listen but to listen with an open mind. She took the right decision and she has said publicly that she is proud of it. I also have a sense of pride and a feeling of righteousness at having had a part to play. As one who also saw action against the Japanese in World War II, and who witnessed at the end of it the dreadful results on prisoners of
incarceration, ill treatment and torture, I am very happy today to see the passage of the Bill.
I am also happy to have heard from Mr Eric HO, soon to retire from public service, that the Bill may have inadvertently missed some old soldiers who deserve to be included. Those are volunteers who were captured during the battle for Hong Kong in December 1941 but who escaped from Japanese custody before 30 December of that year and some of whom continued to fight against the Japanese from bases in China. The British Army Aid Group assisted in some of these escapes and made use of the services of some of the escapees.
Mr Eric HO has raised the point which should be examined so that we can be sure that we have taken care of all those military personnel who suffered through services to Hong Kong in those dark and terrible days. I would not wish to hold up this Bill. I will therefore ask the Council at the next In-House meeting to set up a small ad hoc group to consider Mr HO's proposal. If this is supported, I would be prepared
to move a Private Member's Bill to seek an amendment to this legislation in due course. The possible beneficiaries have waited long enough.
Sir, I wish to take this opportunity of expressing the hope that the Hong Kong War Memorial Association and its brave warriors will recognize that we all say things that we regret for the rest of our lives. Mr Eric HO's compassion and concern for those who faced the ordeal in 1941, including his love for a brother who was killed at that time, should surely now allow the ex-prisoners of war to forgive his remark and join hands in friendship and honour.
Thank you, Sir, I support the Bill.
SECRETARY FOR HEALTH AND WELFARE: Sir, I am indeed grateful to my honourable friend, Mr McGREGOR, for his comments and his support for the Bill. I have noted his concern on the point made by my predecessor, Mr Eric HO, but I can assure him that I am well aware of this question and the matter has already been examined in depth.
Lest it be forgotten, the purpose of the Hong Kong War Memorial Pensions Bill 1991 is to convert discretionary grants to pensions payable to those already eligible under the Hong Kong War Memorial Fund Ordinance, which is to be repealed and replaced, and the Far Eastern Relief Fund which is to be wound up. New applicants will have to apply and fulfil the criteria under the new law before becoming eligible.
Sir, it has now been fifty years since the defence and fall of Hong Kong during the Second World War. Still, many people have strong feelings about the war. Given the controversy over the question of pensions for ex-prisoners of war in the past, there are bound to be, even now, divergent views on this issue. However, I think it to be wrong to hold up passage of this Bill and I am glad Mr McGREGOR did not suggest it. I fear if we were to wander outside the ambit of this Bill, we would be in the woods of ambiguity once more.
Sir, we must do what we believe to be right. Often the wish to do the perfect thing is an excuse for not doing anything at all. Let us not have excuses! Too long have we waited. Let us get on with it.
Sir, I beg to move.
Question on the Second Reading of the Bill put and agreed to. Bill read the Second time.
Bill committed to a Committee of the whole Council pursuant to Standing Order 43(1).
IMMIGRATION (AMENDMENT) BILL 1991
Resumption of debate on Second Reading which was moved on 24 April 1991 Question on Second Reading proposed.
MRS FAN: Sir, I rise to support the passage of the Immigration (Amendment) Bill 1991 subject to the amendments to be moved by the Secretary for Security at the Committee stage.
The ad hoc group set up to scrutinize this Bill met with the Vietnamese Asylum Seekers Sub-Committee of the Hong Kong Bar Association to hear their representation, and also received a joint submission from the Hong Kong Catholic Youth Council and two other bodies, as well as another submission from a member of the public. The points they raised were discussed at length with the Administration, which responded in writing as well as verbally. The ad hoc group is mindful that the proposals in the Bill have significant effects on the Vietnamese boat people (VBP) under the
custody and care of the Hong Kong Government. However, we are also aware that the Hong Kong Government is obliged to abide by international and domestic laws; it also has the responsibility to protect the well-being of the more vulnerable population in the detention centres, and it also has to operate within the constraints placed on Hong Kong by circumstances beyond its control. The ad hoc group balanced these different and sometimes conflicting considerations carefully, and the majority of Members decided to support the proposed Bill except clause 4.
With your indulgence, Sir, I shall briefly summarize the major points considered by the group.
Power of detention (new section 13D(l))
The Bill seeks to provide the Administration with the power to detain VBP arriving
in Hong Kong, whether or not they have requested permission to remain in Hong Kong. The group is concerned that the Administration must not be seen to be withholding from the VBP their choice to continue with their journeys and thereby bringing additional burden on Hong Kong. The Administration has explained that when Vietnamese boats come into the immediate port area of Hong Kong seeking asylum or assistance, the Administration is bound by both local legislation and international maritime law to ensure that the ship is safe to set sail and carry passengers. The relevant local legislation is found in the Shipping and Port Control Ordinance and the Merchant Shipping (Safety) Ordinance. The relevant international law is the International Convention for the Safety of Life at Sea 1974. The Administration assured the group that they do not interfere with Vietnamese boats in transit through outer Hong Kong waters. After reviewing the relevant laws, the group is satisfied that the Administration needs this power to prevent VBP who after landing try to evade the detention policy by requesting to go elsewhere although they do not have the means to do so nor is there any country willing to accept them. However, to avoid misunderstanding by members of the public the group feels that the Administration should use every possible opportunity to explain this to the community.
Reasonableness of length of detention (new section 13D(1A))
The Administration has explained to the group that the intention of this provision is to invite the court to take into consideration the practical constraints under which the policy operates, that is, to have regard to all the circumstances affecting each person's detention, including, but not limited to, the number of persons being detained pending screening and the manpower and resources allocated for the work. One member of our group does not agree that 18 months' detention can be considered reasonable under any circumstances. However the majority of members of the group support this provision because under the present circumstances there is no viable or practical alternative to detention for VBP awaiting screening or who have been screened out, if they choose not to volunteer to go back to Vietnam.
Curtailment of judicial review -- clause 4
The Administration has emphasized to us that the amendment to section 13F(8) is purely to clarify the existing provision, that is, the merit of all decisions of the Refugee Status Review Board including those leading up to the final determination of the status of the Vietnamese should not be subject to review or appeals in any court. This is the spirit of the law, but the Administration feels that the present
format lacks clarity. Members, however, think that while the new provision cannot resist applications for judicial review, it may cause unnecessary misunderstanding that the Administration is attempting to interfere with the judiciary's supervisory jurisdiction over the executive. We therefore request it and the Administration graciously agrees with our view and I understand that the Secretary for Security will move an amendment to withdraw this clause.
Power to transfer between detention centres (new section 13D(5) to (8))
Members accepted that this power of transfer is necessary to ensure order and good management in the VBP centres. The power has been made retrospective as every one of the 50 000 VBP currently detained in Hong Kong has been transferred at least once. Timing for lodging appeal against transfer will be made clearer by the
amendments to be moved later. Members are also content that the appeal should be to the head of the relevant disciplinary service which manages the centre from which the transfer originates.
Sir, the group has also considered a number of other points which were answered by the Administration, but I shall not raise them here. Suffice to say, the majority of the ad hoc group, supported by the Legislative In-House meeting, believe that this Bill is necessary under current situation. However, dare I add, I think many of us will be much happier if, instead of passing this amendment Bill, we are asked to repeal Part IIIA of the Immigration Ordinance, that is, the part on Vietnamese refugees because that will signify the resolution and end of the VBP problem -- a day that we shall all look forward to.
Sir, I support the motion.
MR MARTIN LEE: Sir, I am troubled by the new subsections 13D(5), (6) and (7) because it seems to me that it is a form of disguised punishment imposed on individuals for an indefinite period of time and these individuals would be segregated from their families. I am also concerned about the time limit for appeal which is only 48 hours from the time of transfer. When one reads that in the light of the abolition of the right of petition to the Governor under the existing section 53(8), I think the Bar has got a point in saying that this appears to be a very harsh provision in the law. So I shall abstain from voting.
SECRETARY FOR SECURITY: Sir, I am grateful to Mrs FAN and the ad hoc group for their careful consideration of this Bill, and their constructive comments and suggestions.
I would like first to confirm that the inclusion of the phrase "whether or not he has requested permission to remain in Hong Kong" in section 13D(1) of the Ordinance in no way implies that the Government intends to compel any Vietnamese asylum seeker who has the means to leave and wishes to do so to remain in Hong Kong. The present practice is, on arrival at Hong Kong's sea boundary, the occupants of any vessel carrying undocumented residents of Vietnam will be given the option either to travel on at once or to enter Hong Kong and face detention pending a decision whether or not to permit them to remain. This policy is not affected by the Bill and the purpose of the new section 13D(1) is simply to make clear that an asylum seeker who has entered Hong Kong on this basis or who arrives in Hong Kong without the means to go on and in the absence of any other country willing to admit him cannot later seek to challenge the legality of his detention.
Sir, Mrs FAN has raised a number of other points and I shall be moving three amendments to the Bill at the Committee stage which I would like to explain briefly.
Firstly, the proposed section 13D(8), which is added by clause 2(4) of the Bill provides that past transfers of detainees from one place to another were properly authorized. I shall be moving an amendment at the Committee stage to change the date referred to in that section from 23 May 1990 to 31 May 1991. This change will ensure that the provision applies to all transfers before the date on which, with this
Council's agreement and your assent, Sir, the amendment Bill will pass into law.
Secondly, clause 3 proposes the introduction of a right of appeal against transfer in the interests of order or good management. It contains in the proposed section 13DA(2) the procedures which will apply to such an appeal. The intention is that an appeal must be made by a detainee within 48 hours of his arrival at the detention centre to which he is transferred. To make this quite clear, I shall move at the Committee stage an amendment to this section.
Thirdly, clause 4 of the Bill proposes a change to section 13F(8), regarding decisions of the Refugee Status Review Board and seeks to extend the protection of such decisions from judicial review. On reconsideration, I agree that this is unnecessary, and I shall move at the Committee stage an amendment to delete clause
4.
Sir, I move that the Immigration (Amendment) Bill now be read a Second time. Question on the Second Reading of the Bill put and agreed to. Bill read the Second time.
Bill committed to a Committee of the whole Council pursuant to Standing Order 43(1).
EDUCATION (AMENDMENT) BILL 1991
Resumption of debate on Second Reading which was moved on 15 May 1991 Question on the Second Reading of the Bill proposed, put and agreed to. Bill read the Second time.
Bill committed to a Committee of the whole Council pursuant to Standing Order 43(1).
EMPLOYEES COMPENSATION ASSISTANCE BILL 1991
Resumption of debate on Second Reading which was moved on 8 May 1991 Question on Second Reading proposed.
MR TAM (in Cantonese): Sir, it is beyond doubt that employees will welcome the enactment of the Employees Compensation Assistance Bill 1991 by Government because it strengthens the protection to injured employees. Yet, there are shortcomings in the legislation.
According to this legislation, the areas of coverage include medical expenses for injured employees, two-thirds of the earnings during the period of injury or sickness and compensation made according to assessment of casualty. This certainly protects injured employees from failure to obtain compensation because of
irresponsibility on the part of employers. But since compensation to employees by
the Employees Compensation Assistance Fund is not made in the form of advance payment, injured employees have to experience a long period of proceedings before they can apply for assistance fund. During this interim period, employees may find it difficult to maintain their daily necessities or even be unable to afford medical expenses as a result of employers' failure to pay for medical expenses and two-thirds of employees' earnings during the period of injury or sickness.
Sir, those employees who have been injured or contracted occupational diseases are already unfortunate. It is absolutely unfair to them if they have to busy with or worry about their medical expenses and livelihood. In view of these, I hope that Government can give the Employees Compensation Assistance Fund the power of granting advance payment, particularly in respect of advance payment for medical expenses and two-thirds of the earnings during the period of injury or sickness, in order to meet the urgent needs of injured employees. In addition, the Honourable PANG Chun-hoi has reminded me to press for the preparation of a more detailed information leaflet for distribution by the Labour Department before the relevant legislation is put into effect.
Sir, with these remarks, I support the motion.
SECRETARY FOR EDUCATION AND MANPOWER: Sir, I am grateful to Mr TAM Yiu-chung for supporting the Bill and would like to respond to the comments he has made.
Mr TAM has suggested that the Employees Compensation Assistance Fund should provide immediate relief to employees by paying out the compensation in the first instance. As I said in this Council when introducing the Bill, employers are required under the Employees' Compensation Ordinance to provide a comprehensive range of employment-related compensation to workers. In order to ensure that employers are able to do so, the Ordinance required employers to take out insurance to cover their liabilities. The Ordinance also specifies the time limit within which compensation must be paid. For example, medical expenses must be paid within 21 days. Failure to pay is an offence under the law. In the vast majority of cases, compensation payments are promptly made.
For those who fail to receive compensation after exhausting all existing legal remedies, we now have as a safety net the Employees Compensation Assistance Scheme. This, however, does not alter the fact that the primary responsibility to pay
compensation rests with the employer and action should be targetted at the employer not the Fund for payment in the first instance.
Question on the Second Reading of the Bill put and agreed to. Bill read the Second time.
Bill committed to a Committee of the whole Council pursuant to Standing Order 43(1).
PENSIONS (SPECIAL PROVISIONS) (VOCATIONAL TRAINING COUNCIL) BILL 1991 Resumption of debate on Second Reading which was moved on 15 May 1991 Question on the Second Reading of the Bill proposed, put and agreed to. Bill read the Second time.
Bill committed to a Committee of the whole Council pursuant to Standing Order 43(1).
Committee stage of Bills
Council went into Committee.
LOANS (AMENDMENT) BILL 1991
Clauses 1 to 4 were agreed to.
INLAND REVENUE (AMENDMENT) (NO. 4) BILL 1991
Clauses 1 and 2 were agreed to.
STAMP DUTY (AMENDMENT) (NO. 2) BILL 1991
Clauses 1 and 2 were agreed to.
ADMINISTRATION OF JUSTICE (FELONIES AND MISDEMEANOURS) BILL 1991 Clauses 1 to 4 were agreed to.
Schedules 1 to 4
ATTORNEY GENERAL: Sir, I move that schedules 1 to 4 of the Bill be amended as set out under my name in the paper circulated to Members.
Except for those amendments to which I will make particular reference, the proposed amendments are necessary in order to ensure that the provisions of section 89 of the Interpretation and General Clauses Ordinance, which concern the mode of trial of particular classes of offence, will still apply once the distinction between felonies and misdemeanours is removed.
In schedule 1, the proposed amending items (a)(i) and (ii) simply clarify the existing section 89(1)(b) and (2)(b) of the Interpretation and General Clauses Ordinance. Item (e) is consequential upon the amendment to section 86 of the Trade Marks Ordinance enacted on 22 May. Item (i) deals with a reference to "felony" which was omitted when the Bill was prepared.
The proposed amendment to schedule 3 is a drafting change only. Sir, I beg to move.
Proposed amendments
Schedule 1
That schedule 1 be amended --
(a) In item 1 --
(i) by adding after paragraph (b) --
"(ba) In section 89(1)(b), repeal "appear;" and substitute "or "on indictment" appear; or".";
(ii) by adding after paragraph (d) --
"(da) In section 89(2)(b), add "or "on indictment"" after ""upon indictment"".";
(iii) by deleting paragraph (f) and substituting --
"(f) In section 90(1) --
(i) repeal "a misdemeanor" and substitute "an indictable
offence"; and
(ii) repeal "of $50,000".".
(b) In item 2 --
(i) in paragraphs (a) and (b), by adding "indictable" before "offence" wherever it appears";
(ii) in paragraph (d)(ii), by adding "triable summarily" after "misdemeanor" and by adding "triable either summarily or upon indictment" after "offence".
(c) In items 3, 5, 6, 16, and 18, by adding "triable upon indictment" after "offence". (d) In item 4, by adding "indictable" before "offence".
(e) By deleting item 7.
(f) In item 10, by adding "triable summarily" after "misdemeanor" and by adding "triable either summarily or upon indictment" after "offence".
(g) In item 12, by adding "on conviction on indictment" after "punishable".
(h) In item 14(e), by deleting the passage after "repeal" and substituting ""in every other case of a misdemeanor committed for trial before the court".".
(i) By adding after item 15 --
"15A. Firearms and In item 3 of the
Ammunition Schedule, in the
Ordinance passage opposite the
(Cap. 238) section number 36,
repeal "felony" and
substitute "an arrestable
offence".".
Schedule 2
That schedule 2 be amended --
(a) In the item relating to sections 10 to 17 etc., by adding "triable upon indictment" after "offence".
(b) By deleting the item relating to sections 19, 23 and etc., and substituting --
"Sections 19, 23, Repeal "a misdemeanor"
25, 26, 31(1), and substitute "an
35, 39, 47, 50 offence triable upon
and 54 indictment".".
(c) By adding after the item relating to section 24 --
"Section 27(1) Repeal "a misdemeanor"
and substitute "an offence".
Section 32(3), Repeal "a misdemeanor
33, 34, 40, 44(1) triable summarily" and
and (2) and 51 substitute "an offence
triable either summarily
or upon indictment".".
(d) In the item relating to section 36, paragraph (b), by adding "triable summarily" after "misdemeanor" and by adding "triable either summarily or upon indictment" after "offence".
(e) In the item relating to section 56, by adding "indictable" before "offence". (f) In the item relating to section 58, paragraph (a), by deleting "indictable". Schedule 3
That schedule 3 be amended, in the item relating to section 21, by deleting "triable". Schedule 4
That schedule 1 be amended, in item 4, by adding "triable upon indictment" after "offence".
Question on the amendments proposed, put and agreed to.
Question on schedules 1 to 4, as amended, proposed, put and agreed to.
HONG KONG WAR MEMORIAL PENSIONS BILL 1991
Clauses 1, 2, 4 to 6, 8 to 12, 14, 16 to 23 were agreed to.
Clauses 3, 7, 13, 15 and 24
SECRETARY FOR HEALTH AND WELFARE: Sir, I move that the clauses specified be amended as set out in the paper circulated to Members.
The purpose of the proposed amendment to clause 7(2)(d) is to include a member of any service specified in the schedule who sustained an injury during such service during the period from 7 December 1941 to 25 December 1941. This is to achieve consistency with the criteria of eligibility for grants under the existing Hong Kong War Memorial Fund.
It has been pointed out to us that the Bowen Road Hospital was also used as a prisoner of war camp before 30 December 1941 and that members of the scheduled services detained there should be included. Hence the proposed amendment to clause 7(2)(d)(ii).
The proposed amendments to the other clauses seek to clarify certain drafting points and to correct a typing error.
Sir, I beg to move.
Proposed amendments
Clause 3(4)
That clause 3(4) be amended, in paragraph (c), by deleting " " where it firstly occurs and substituting " ".
Clause 7(2)
That clause 7(2) be amended --
In paragraph (d) --
(a) by adding "sustained an injury during such service or" before "was captured"; and
(b) in sub-paragraph (ii), by adding "Bowen Road Hospital," after "Street,".
Clause 13(7)
That clause 13(7) be amended, in paragraph (b), by deleting "legally" wherever it occurs and substituting "lawfully".
Clause 15
That clause 15 be amended --
(a) By deleting sub-clause (1) and substituting --
"(1) Before or after the determination of an appeal, the Appeal Board may refer any question of law arising for determination by the Court of Appeal by way of case stated."; and
(b) in sub-clause (2), by adding " " after " " and "" respectivel Clause 24
That clause 24 be amended by deleting "paid under section 5 of" and substituting "and additional benefits paid under".
Question on the amendments proposed, put and agreed to.
Question on Clauses 3, 7, 13, 15 and 24, as amended, proposed, put and agreed to. Schedule was agreed to.
IMMIGRATION (AMENDMENT) BILL 1991
Clauses 1, 5 and 6 were agreed to.
Clauses 2 to 4
SECRETARY FOR SECURITY: Sir, I move that clauses 2 to 4 be amended as set out in the paper circulated to Members.
Proposed amendments
Clause 2(4)
That clause 2(4) be amended, in the proposed section 13D(8), by deleting "25 May 1990" and substituting "31 May 1991".
Clause 3
That clause 3 be amended, in the proposed section 13DA(2), by deleting "from the" and substituting "to that".
Clause 4
That clause 4 be amended by deleting clause 4.
Question on the amendments proposed, put and agreed to.
Question on clauses 2 to 4, as amended, proposed, put and agreed to.
EDUCATION (AMENDMENT) BILL 1991
Clauses 1 and 2 were agreed to.
EMPLOYEES COMPENSATION ASSISTANCE BILL 1991
Clauses 1 to 22, 24 to 27 were agreed to.
Clauses 23
SECRETARY FOR EDUCATION AND MANPOWER: Sir, I move that Clause 23 be amended as set out in the paper circulated to Members.
As it stands, clause 23 restricts the costs payable to an applicant by the Fund Board to costs incurred in making the application. It has been pointed out that this will not enable the Fund Board to pay costs incurred by an applicant in obtaining the court judgement which is a necessary pre-requisite for an application under clause 16.
The amendments ensure that an applicant will be protected in respect of costs incurred by him in bringing the court proceedings which established his entitlement to compensation or damages. The amendments also make it clear that any subsequent legal costs incurred in recovering the compensation or damages will be covered.
Such protection will be limited to costs due under an order of the court as taxed on a party and party scale. The protection is dependent on there being a concurrent claim against the Fund for compensation or damages. No claim can be made against the Fund for such costs in their own right.
Sir, I beg to move.
Proposed amendment
Clause 23
That clause 23 be amended --
(a) In subsection (1) -
(i) by adding "of compensation or damages" after "amounts";
(ii) by deleting the passage after "Fund" where it last occurs and substituting -
"--
(a) the costs incurred by the applicant in making the application; and
(b) an amount equal to any costs payable to the applicant pursuant to an order of a court for costs against the employer or the employer's insurer in proceedings claiming the compensation or damages.".
(b) In subsection (2), by deleting "subsection (1)" and substituting "subsection (1)(a)".
(c) In subsection (3) -
(i) by deleting "An applicant under section 16" and substituting "The applicant"; (ii) by adding "pursuant to subsection (1)(a)" after "proposes to pay";
(iii) by deleting "of the applicant's bill of costs by the District Court" and substituting "by the District Court of the applicant's bill of costs in respect of his application under section 16".
(d) In subsection (4), by adding "for the purposes of subsection (1)(a)" after "liable".
(e) By adding after subsection (4) -
"(4A) The amount payable by the Board pursuant to subsection (1)(b) in respect of costs ordered by a court shall be only such amount as has been allowed, or would in the opinion of the Board be allowed, on taxation of those costs on a party and party basis.
(4B) Section 37 applies in respect of a payment made from the Fund pursuant to subjection (1)(b) as if such payment were payment of an amount of compensation or damages.".
(f) In subsection (9), by deleting "Costs" and substituting "Amounts". Question on the amendment proposed, put and agreed to.
Question on clause 23, as amended, proposed, put and agreed to. Schedules 1 to 3 were agreed to.
PENSIONS (SPECIAL PROVISIONS) (VOCATIONAL TRAINING COUNCIL) BILL 1991 Clauses 1 to 5 were agreed to.
Council then resumed.
Third Reading of Bills
THE ATTORNEY GENERAL reported that the
LOANS (AMENDMENT) BILL 1991
INLAND REVENUE (AMENDMENT) (NO. 4) BILL 1991
STAMP DUTY (AMENDMENT) (NO. 2) BILL 1991
EDUCATION (AMENDMENT) BILL 1991 and the
PENSIONS (SPECIAL PROVISIONS) (VOCATIONAL TRAINING COUNCIL) BILL 1991 has passed through Committee without amendment and the
ADMINISTRATION OF JUSTICE (FELONIES AND MISDEMEANOURS) BILL 1991 HONG KONG WAR MEMORIAL PENSIONS BILL 1991
IMMIGRATION (AMENDMENT) BILL 1991 and the
EMPLOYEES COMPENSATION ASSISTANCE BILL 1991
has passed through Committee with amendments. He moved the Third Reading of the Bills.
Question on the Third Reading of the Bills proposed, put and agreed to. Bills read the Third time and passed.
Member's motion
INFLATION
MR LAU WAH-SUM moved the following motion:
"In view of the persistently high rate of inflation and in particular its rising trend in the past few months, and the growing impact of the problem on our economic development and social stability, this Council urges the Government to take immediate steps, as a matter of great urgency, to reduce the current rate of inflation."
MR LAU WAH-SUM (in Cantonese): Sir, I move a motion debate on the question of inflation. The motion is: "In view of the persistently high rate of inflation and in particular its rising trend in the past few months, and the growing impact of the problem on our economic development and social stability, this Council urges the Government to take, as a matter of great urgency, immediate steps to reduce the current rate of inflation."
Since the mid 1980s, Hong Kong's economy has soared, and the quality of life of people of all strata has improved greatly. The heat in the consumer market has also "risen step by step". However, with the slowing down of the world economy, the growth rate of our Gross Domestic Product (GDP) also fell for three consecutive years.
Regrettably, public expenditure still went up rapidly, far above the growth rate of the economy, and added to this is the shortage of labour, which leads to enormous increase in production cost, resulting in a situation of stagflation.
At the same time, there is the worry over imported inflation. Since the Hong Kong dollar is pegged to the US dollar, commodity prices in Hong Kong rise by leaps and bounds with the weakening of the US dollar during the past years. These factors together bring about today's situation in which the rate of inflation has reached double digits.
Inflation has been rising persistently for the past three years. In particular the Consumer Price Index A for April released by the Government only last week has reached 13.9%, which is a significant surge compared with the 12.9% for March. The rate of inflation has notched such an alarming growth in no more than one month that it is worrying, and the situation does not permit us to sit back and idly look on.
Some people may perhaps think that Hong Kong has made the best of its free and open economy without interfering with prices, because inflation would automatically adjust itself in a free market economy system, but is the actual situation as simple as that? We must realize that although Hong Kong has a free and open economic system, it does not mean every trade can compete with absolute freedom. For instance, the various public utilities, suppliers of fuels and so on do not have to reduce their prices to attract business. Even if they go on raising their prices tremendously every year, thus stimulating inflation, the consumers have no choice but to accept them.
However, the automatic adjustment of a market economy system takes a long time to take effect. I am not resorting to sensationalism when I say if we do not take immediate steps to slow down inflation, the rate of inflation will climb up incessantly until production cost rises to a dangerous level, so that trade will recede, unemployment will mount and consumer demands will fall. Even if inflation adjusts itself automatically by that time, we shall have paid a heavy price.
In fact high inflation rate is extremely unfavourable to social development. To
the ordinary people, in particular those in the lower income bracket, the impact is greatest. The lean wages they earn are only just enough to make ends meet, and yet a large chunk of their income is being eroded by inflation. This is a real hardship to suffer. Their hopes of saving money and improving the quality of their life are becoming dimmer every day. It is only natural that their dissatisfaction is growing as time passes, which is tantamount to planting a time bomb that will rock social stability. I do not believe that people with lower income in general would like to wait until they lose their jobs to see a fall in inflation.
We must not forget also that Hong Kong is in a period of stagflation. According to forecasts of economists, it is very likely that the world economy would recover early next year. Therefore, we must lower production cost within a short time to strengthen our competitive edge to meet the arrival of recovery. May I ask when we shall have time to await the automatic adjustment of inflation in the economic system?
Sir, the rate of increase in public expenditure during the past few years has by far outstripped the growth of GDP. To balance the budget, the Government could only resort to raising fees and taxes heavily. What is more serious is that as the Government wished to maintain the proportion between direct and indirect taxes, the Financial Secretary tremendously increased indirect taxes and at the same time
reduced direct taxes during the past several years in succession. How is it possible then to prevent the acceleration of inflation?
Personally I am convinced that to strike at inflation, there must be the tripartite efforts by the Government, the industrial and commercial sector, and the labour sector to consult each other and act in co-ordination. As a responsible government and the largest employer in Hong Kong, the Government should lead the way by first containing the growth of public expenditure.
As is well known, the emoluments of civil servants take up a large share in Government's recurrent expenditure. If expenditure is to be reduced, then apart from freezing the growth of manpower and raising the productivity of the Civil Service, the growth of the pay package of civil servants must also be controlled.
As a matter of fact, in the past two or three years, the waves of civil servants of various grades demanding pay increases kept rising and falling, resulting in a range of about 20% on average in the pay increase of the Civil Service. This figure includes salary adjustment, grade adjustment, improvement of fringe benefits, and
so on. To lower the temperature of inflation, the fastest immediate measure is to freeze the emoluments of civil servants for one year. We all know that the range of growth of civil servants' pay is determined with reference to the growth trend of pay in the private sector. However, the hefty increases in civil servants' pay in the past two or three years have far outstripped the private sector, and the latter, in order to keep up its competitiveness in the labour market, has to follow the
Government, thus starting a vicious circle. I, therefore, believe that if only the Government will take the lead, a starting point will be found in our endeavour to slow down inflation.
Of course, we understand that freezing civil service pay will affect the morale of civil servants, but the Government must in no way be impeded by this. Since the rate of inflation is 7.5% in the Financial Secretary's medium range forecast, the range of pay increase of the Civil Service this year should be lower than 7.5% in principle. With reference to the situation in 1983, I would propose that the range of pay increase this year be 5%. In the same period, other semi-government
organizations, such as tertiary education institutions, subsidized and aided organizations and all allowances and fringe benefits related to government emolument, such as Councillors' allowances should also follow this range in order to show parity overall.
In order to show Government's determination and sincerity, and to take into consideration the burden of people with lower income, I propose that the fees and charges payable to government and semi-government organizations be frozen for one year at the same time. Recently, the Financial Secretary announced to reduce the tax increase on tobacco in order to lower inflation, and I think this is not the most appropriate measure. The best method is to further relax the percentage of rates. I wish to reiterate my proposal made two weeks ago that the authorities should extend rates reliefs implemented this year by another year, that is, the maximum amount of rates paid by rate-payers for the whole of 1992-93 should not be more than one quarter over that in 1990-91, so as to benefit the whole population. As more than half of Hong Kong's population live in public housing estates under the Housing Authority, and since rents of public housing include the rates, the recent large adjustments in rates therefore are not reflected in the rate of inflation of 13.9% announced by the Government last week. When the new rents are determined, this will certainly exert an extra pressure on inflation.
Only if the Government implements a series of measures, can it win the co-
operation of the industrial and commercial sector and the labour sector to control the growth of wages. Only when the growth of wages is under control, will it be possible to suppress the growth of charges of public utilities at a level lower than inflation. I, therefore, consider that we cannot engage in empty talk to control the increase of charges by public utilities without regard to the growth of wages.
Sir, labour shortage has been seen in many trades over the past few years. Fortunately, the labour force available in the Pearl River Delta has helped Hong Kong to a great extent to relieve the strong demand for unskilled labour. In the management level, although we face the problem of outflow through emigration, their vacancies are largely filled by overseas employees. Otherwise the local labour market would have been subjected to even greater pressure, and the range of growth of wages would not have been limited to those in the past few years.
The reasons for labour shortage, if we are to trace them to the roots, are no more than the following:
(1) The economic system of Hong Kong has been gradually changing over the past few years, so that demand for labour in different trades has gone through a radical change. For instance, the rise of the service sector has made it particularly in need of manpower, but it is to be regretted that re-training schemes cannot be
effectively implemented to meet such changes.
(2) The increase in educational opportunities for young people has deferred their entry into society, which, although desirable, unfortunately creates a vacuum in the supply of labour.
(3) The persistent fall in the birth rate and the gradual increase of emigration have also contributed to the shortage of labour.
I, therefore, propose that the Government conduct a study in depth to see which trades are most hard pressed by the shortage of hands. Then, on the basis of the outcome of this study, measures to strengthen a systematic re-training scheme of manpower, to adopt a policy of an orderly opening of the labour market, and to import labour on a selective basis will be implemented.
For instance, many building sites are running the risk of contravening the law, but still employ large numbers of "black market" labour from the Mainland. This is
sufficient to prove that Hong Kong's construction industry is suffering a genuine shortage of hands. Consequently, the authorities should relax the import of labour in the construction sector, and conduct recruitment in Shenzhen through service organizations.
Some people are worried that the import of labour would exert pressure on social services. However, as long as this measure helps the economic growth of Hong Kong and can slow down inflation, we can require employers who import labour to pay for part of the expenditure in social services.
In general, the ultimate goal of importing labour selectively is not to reduce wages of local labour, but only with the hope to ensure that Hong Kong will not see a worsening of inflation because of a shortage of labour which pushes up wages tremendously.
Sir, as Hong Kong lacks natural resources, it must rely on imports; so it is very difficult to avoid imported inflation. Since the pegging of the HK dollar to the US dollar in 1983, although the exchange rate of HK dollar has been stabilized, yet the fluctuation of commodity prices has been dictated by the US dollar. In theory, prices of imported commodities in Hong Kong should rise and fall with the US dollar, but is it really so? Honourable Members can easily observe, with but cursory
attention to the consumer market, that when the US dollar was weak in the past few years, prices rose closely in step. However, when the US dollar rose again after the Middle East war, prices did not fall correspondingly. This is enough to prove that when the US dollar is strong, we do not reap the benefit, but once it weakens, all Hong Kong people have to suffer greater pressure of inflation.
The pegging of the HK dollar to the US dollar has been in place for a few years already, from which we have obtained the advantage of a stable HK dollar. Now that we are faced with the problem of imported inflation, it is time for us to review the situation. I feel that to peg the HK dollar to the currencies of our major trading partners would be better than pegging it to the US dollar because this measure can neutralize the impact on Hong Kong due to the fluctuation of one single currency, and it may also adjust part of the imported inflation. I, therefore, propose again that the Government set up an ad hoc committee to study whether it would be better to peg the HK dollar to a basket of currencies.
Under the system of pegging to only one currency, it is difficult for us to tighten
the money supply in the market through financial measures. Since the Government has decided to issue bonds of two to three years' maturity to finance infrastructural construction, I propose here that the Government raise the volume of bond issues, and extend the maturity period of the bonds, so as to raise as much funds as possible in the Hong Kong market, and to reduce the inflationary effect on infrastructural programmes. This measure would be more effective than to tighten the money supply in the market by raising interest rates.
Sir, during the heady days when Hong Kong's economy was booming, the people of Hong Kong were used to large pay increases and unrestrained consumer spending. Once austerity has to be exercised, they find it undeniably hard to adapt themselves. I believe that we all remember that during 1982-83, Hong Kong went through a period of gloom. At that time, the Government adjusted the civil service pay increase to as low as 5%, which was lower than the inflation prevailing then. However, in less than a year, the economic development of Hong Kong was back on track, and thereafter maintained a long period of high economic growth. From this we can see that if we can make sacrifices for a short time, bright sunny days will return after the storm.
On the other hand, high inflation rate will aggravate the investment environment. It will hit the overall economic development of Hong Kong, push up production cost and weaken the competitive edge of Hong Kong products in international markets. In tourism, high inflation rate will maintain prices at a high level which will further damage the reputation of Hong Kong as a "shoppers' paradise" and keep tourists away.
No one can escape from the evil effects of high inflation. If people can be patient and go through one year's hard time, better days are just round the corner. In fact, although the world economy has been dull, economists forecast that the upturn of the economy will start again in 1992. If we are prepared to make sacrifices now, we shall be able to lower production cost in time, reduce the erosion of inflation, and strengthen the competitive edge of Hong Kong products in international markets, so that Hong Kong's economy will develop towards the ascending track beginning next year. If this economic uptrend can persist, the high economic growth will certainly see Hong Kong safely through the psychological gate of 1997. The large-scale
infrastructural programmes introduced by the Hong Kong Government have the objectives of stimulating confidence and dispel the worries over the 1997 issue. The economic performance of Hong Kong can actually decide the success or failure of these programmes. High inflation rate is bound to raise their cost enormously, and if it is not contained, I am afraid that the cost will be so high as to be beyond the ability
of the Hong Kong Government to support. If the economy flourishes and inflation is under control, these will greatly reduce the pressure on the increase of cost in the infrastructural construction programmes. The vitality and momentum of the community will drive away the shadow of 1997 and most people who cannot leave Hong Kong will benefit.
Finally, I wish to urge the Government once again to take the lead and to fight inflation in co-operation with the industrial and commercial sector, the labour sector and all the people. We must not disregard the overall development of society because of temporary personal gains, thus causing irremediable losses to Hong Kong in the future.
Sir, with these remarks, I beg to move.
HIS EXCELLENCY THE PRESIDENT: I have received notice from Mr Martin LEE to move an amendment to the motion. His amendment has been printed on the Order Paper and circulated to Members. I will call upon him to move the amendment when it comes to this turn to speak.
Question on the motion proposed.
HIS EXCELLENCY THE PRESIDENT: There are a considerable number of Members, I know, who wish to speak on this motion. We also have an amendment. Could I appeal to Members not to let inflationary tendencies get at the length of their speeches? (Laughter)
MR CHEUNG YAN-LUNG (in Cantonese): Sir, with the latest inflation rate running at almost 14%, the debate moved by the Honourable LAU Wah-sum this afternoon is most timely.
Effects of inflation
Inflation erodes the purchasing power of everyone in the community. Persistent price increases deter investment, undermine business confidence and affect public livelihood. As the inflation rate has reached a record level in recent months, it
is crucial that some immediate measures must be taken to cope with the problem. However, in doing so, we should avoid intervening unnecessarily with the operation of market forces; we should remove bottlenecks and barriers which hamper economic growth and cut down domestic consumption without suffocating the concept of free enterprise which has served Hong Kong so well over the past.
Property market
Sir, I must declare interest at this point as I am the director of several real estate companies. Firstly, I propose that serious consideration be given to levying a new tax on property transactions. Household expenses account for a major share of family income: it is not uncommon for an average family to set aside 50% of its disposable income for mortgage payments and other related charges. Property prices thus play an important part in influencing the trend of inflation.
I am glad to see that the Administration has recently reminded the banking sector to exercise prudence in processing property mortgages, and has raised the interest rates by 1% to cool down speculation in the property market. However, I believe more stringent measures should now be taken to tackle the problem. The Administration should impose, as a long-term measure, a capital gain tax on property which changes hand within a very short period of, say, 15 days, after purchase.
Control of public expenditure
Secondly, I would like to urge the Administration to conduct a critical review of the overall structure and efficiency of government and quasi-government bodies.
An increasing number of government services are being hived off to achieve greater management flexibility, better cost-effectiveness and more swift response to demand. The associate costs of these hiving-off exercises, however, are beginning to give rise to concerns about a potential hefty increase in fees and charges. It is also of utmost importance that the Administration should ensure that the public bodies being hived off will not be endowed with monopolistic privileges.
On the part of the Civil Service, although the Administration has pledged to control growth and achieve higher productivity, I would suggest that a zero-based review be conducted on the establishment as well as the role of all government departments with a view to identifying certain "core policy areas" which should be
accorded with priority in resource allocation. Furthermore, I look forward to a greater emphasis on cost savings by controlling officers in presenting their estimates of expenditure to the Finance Committee.
The Labour market
Thirdly, there have been heated debates on whether the rising trend of inflation is caused by the chronic shortage of labour in Hong Kong. Whilst I cannot discount this as a contributing factor, some labour sectors are already suffering from an increasing rate of underemployment or unemployment as we enter a transition period from manufacturing industries to hi-tech and service industries. While importation of foreign labour can help to alleviate the immediate difficulties, the
Administration should take immediate steps, either by way of providing vocational training or technological assistance, to prepare our labour force for future industrial developments.
Public utilities
Fourthly, the Administration should be more cautious in scrutinizing fee revisions by public utility companies and in reviewing its own fees and charges. As most of the utility companies are making healthy profits and the Government is expecting a budget surplus, it is not unreasonable for them to exercise more restraints in revising the fees and charges to reduce the burden on the general public.
Control of credit
Finally, I would like to see a tighter control on consumer credit facilities. The proliferation of credit cards with generous limits induces a high propensity to spend. The Administration should consider devising arrangements with credit card companies whereby excessive expansion of credit facilities can be restrained at least temporarily when inflation is severe.
Conclusion
Finally, Sir, inflation is becoming a major threat to our continued economic prosperity that calls for urgent and decisive actions. Although our options are somewhat limited, I believe we can overcome the problem by the co-ordinated efforts of various sectors in the economy. The Administration, on its part, should take a
leading role in this process.
With these remarks, Sir, I support the Honourable LAU Wah-sum's motion.
MISS TAM (in Cantonese): Sir, I support the announcement made yesterday by the Government regarding the adjustment of civil service pay. This year's civil service pay rise will be at 10.43%, which is lower than last year's pay trend in the private sector (that is 13.5%). Both yesterday and today, there were voices of dissatisfaction from civil servants' unions. Such a response is understandable.
It is, in fact, impossible to decide in today's debate whether civil service pay should always follow the pay trend in the private sector. As for the 10.43%, it represents the index in the cost of living arrived at after a meticulous process of analysis to ensure civil service pay is in line with the cost of living. There are also annual increments for a number of middle ranking civil servants. As such, the rise is not simply 10.43%. I want to state clearly in limited time that the fact this year's civil service pay rise does not correspond with the pay trend in the private sector is not directed against civil servants, asking them to shoulder the social responsibility of combating inflation. The idea is that both the Government and the private sector have to unite in the battle against our Number One public enemy.
Two weeks ago, the Government made the precedent of reducing the tobacco tax increase by 100%. It is an obvious effort to clamp down on inflation. I believe the Financial Secretary will do more towards this end today. If the civil service pay and the private sector pay continue chasing each other, government expenditure will continue to worsen from the current share of 63% of the recurrent expenditure; as to the private sector, costs will be higher and Hong Kong will lose some of her competitiveness in the provision of services and production of industrial products. Therefore, setting civil service pay rise this year at 10.43% is one of the important decisions to declare a full battle on inflation. I support this decision and hope the solutions suggested in today's debate will win the support from all sectors.
The Honourable LAU Wah-sum has made quite a comprehensive analysis of inflation and, in his motion, he hopes the Government will take immediate action. Now I wish to make two proposals which are not for immediate purposes as price rises were already introduced by the franchised bus companies and the Kowloon-Canton Railway Corporation (KCRC) in the last two months. Nevertheless, in view of their serious effects on
Consumer Price Index (A), I think I still have to raise them. To curb inflation is not a matter for today or the current month; in short, it is not something to be accomplished overnight.
Food, clothing, housing and transportation are the four basic necessities of life. The daily use of public buses by the people of Hong Kong is estimated to stand at over four million men-times and as such, it is an unavoidable "consumer" item. The two main factors leading to the sharp increase in bus company costs are staff pay rise and increased fuel cost. In the past two years, the pay rises for transport workers were 16% and 13% respectively. As for the fuel cost, the rise was evident following a tax increase of 30% last year and the Gulf war this year. The average family income for the income families of the Consumer Price Index (A) last year rose by 14.6%, whereas the rise in transport fees rose by 13.4%. Indeed, it is an issue that must be faced squarely.
Let me once again point out the need for franchised bus companies to improve their management, operation standards and utilization of resources. The profit control scheme is not a shield to guarantee profit. Residents have come to realize that to reach the level of profits permitted under the control scheme applicable to franchised bus companies, the rise in prices will be at a higher rate than inflation. I must state here that we should not change lightly the profit arrangements for well-run companies which accede to the opinions of the Transport Department and their commuters.
However, for companies that are poorly run and are unwilling to make improvement, or those that fail even to reflect in their accounts fares paid by their commuters, they should not be allowed to abuse the franchises or the profit control scheme. I think each and every application for price increases submitted by a franchised bus company should be carefully reviewed, and not each application can be granted with a so-called guaranteed profit.
Another important means of transport is by rail. I do not propose to discuss here the peak hour surcharge applied by Mass Transit Railway Corporation (MTRC) because it has promised to prove with figures that the additional income is used to cover the lower fare charged in non-peak hours.
The KCRC provides heavy and light rail services. In its annual report published last week, the KCRC reports a KCR passenger volume of 179 million men-times and an average daily light rail passenger volume of 235 000 men-times in 1990; representing an increase of 13% over 1989. The Corporation's profit after tax was $624 million.
Inflation as released in May this year was 13.9% whereas the percentage of fare increase applied for in April was 14.1%. The Government asked the KCRC to reconsider its rate of fare increase, but the results were not too satisfactory.
I do not support the issuance of an administrative directive or order by the Government or the Financial Secretary to a statutory private corporation as to how it should manage its financial affairs, but I want to raise a relatively basic issue. At present, the internal arrangements of the KCRC are that the profit generated from the heavy rail cannot be utilized to off-set the deficit in the light rail. We all know that light rail services will be extended to Tin Shui Wai. The plan that
residential flats or housing estates are built in areas along the way or in Tin Shui Wai itself will take years to mature. Does this mean that the deficit suffered in the light rail section can only be borne by light rail passengers and hence continual fare rises in the light rail section? Why is it that since the two services belong to the same corporation, income from the heavy rail cannot be used to facilitate development of the light rail? In all franchised bus companies and ferry companies, there is a machinery for income derived from different routes to be pulled together to cover expenses. Of course, having authorized the KCRC to manage itself, the
Government should not interfere with its operation lightly. However, to face squarely the issue of inflation, we need the co-operation from all those who are concerned. I hope mass transit organizations protected by the profit control scheme or endowed with exclusive operation can respond to this debate the next time when they apply for fare increases by cutting the rates of increase and improving the cost effectiveness of their operations.
Sir, taxis may not be a major means of transport, but in view of the recent drop in fuel prices, spokesmen for taxi drivers have suggested reviewing the decision to scrap the fuel surcharge made yesterday by the Executive Council. The same has been reported by the press. Local fuel suppliers should respond to the drop in prices after the Gulf war and make appropriate downward adjustments. Such a move will have direct influence on the overall bid to curb inflation. I hope fuel companies will heed good advice, review oil prices and reduce them.
Sir, with these remarks, I support Mr LAU's motion.
MR CHAN (in Cantonese): Sir, I shall speak on the issue of inflation in today's debate just as I did last week. Speculation in pre-completed flats has shot up property
prices and hit hardest the "sandwiched class" buying flats for their own occupation. The spiraling inflation rate hit hardest the general working public, and even more so retired persons with fixed income and old people living on public assistance.
I suggested banning the sale of pre-completed flats last week as a means to keep flat prices steady in the belief that the move would cool inflation. Today I shall propose other ways to curb inflation.
The Hong Kong Democratic Foundation (HKDF) is of the view that the Government should take the lead and adopt decisive measures to combat inflation. However, there are two things we believe the Government must not do. The first one is to bring in large amount of imported labour and the second one is to change the pegged link between the US dollar and the Hong Kong dollar.
Some people may say that inflation is the result of labour shortage and hence higher wage levels. I think an influx of labour from abroad is not the best way to solve the problem and curb inflation. Because of our high wages, many factory operators have transferred their production processes to mainland China and Southeast Asia. Whilst we have not yet solved the employment problem of local labour, importing more will hit where it hurts. First and foremost is therefore to increase the productivity of Hong Kong people and encourage employers to step up in-service training programmes for their staff. On the part of the Government, efforts should be directed towards improving education and technical standards.
I believe my honourable colleagues will today propose a change in the currency link between the Hong Kong and the US dollars because it has disarmed us of our "weapon" to use interest rate to clamp down on inflation. As regards whether the currency link should be dropped, the HKDF has discussed it in detail. We find that the unstable US dollar in recent years has dragged down the Hong Kong dollar but the link has boosted our confidence in the Hong Kong dollar too. This is very important for Hong Kong in the context of the transitional period. Therefore, it is our opinion that for lack of a better alternative, the link between Hong Kong dollar and US dollar should remain as it is.
Nevertheless, I suggest the Government combat our spiraling inflation rate and protect the well-being of the public by taking the following measures:
First, the Government should have a sensible tax policy. Increases in indirect
taxes have reached a limit. In view of the need to curb inflation, the Government has reduced the increase on tobacco tax by 50%. There is no case whatsoever to increase other indirect taxes on the pretext of losses in tax revenue. No matter whether the Government feels the existing proportion between direct and indirect taxes is appropriate, I must emphasize that it is not the right time to introduce any change to it for the time being. Let me take this opportunity to urge the Financial Secretary designate to abandon all thoughts of introducing the sales tax! If not, high inflation will climb from one peak to another and the heavy blow to the lower classes will become more severe.
Second, government expenditure is immense. If expenditure can be controlled stringently, inflation will be contained. The Government should spend within the limits of its income and there should not be a budget deficit. But how can the Government control expenditure and at the same time improve services? I believe in the circumstances of no additional manpower for the Government, a survey of the workload of each unit in all government departments should be conducted. For an establishment as large as our Civil Service, there must be some uneven distribution of workload. Additional manpower needed for the improvement of services can, therefore, be drawn from units with smaller workload. In this way, workload distribution will be more even and the quality of services will be improved. I call this killing two birds with one stone.
Third, the Government should adopt the cost accounting method to ensure value for money in respect of its expenditure. An independent committee should be set up in the meantime to study the desirability of assigning certain services to private companies on a contract basis.
Besides, this Council is concerned about the issue of overspending on public work projects. In the current spate of inflation, the Government must protect taxpayers, not contractors of public work projects. There is therefore a need to change the current method of contracting out by, for example, introducing fixed price contracts. The idea is at most to share the burden of inflation, not to compensate for the
difference in costs solely on the part of Government.
Fourth, this concerns the fees charged for public services. The profit control scheme now in force does not encourage public utilities companies to improve efficiency and cut cost. Instead, it makes the inflationary situation become even worse. I think a better system is to link fare increases to the rate of inflation.
Under the existing profit control scheme, the permitted return rate is calculated after deduction of expenses. A better system of control is to encourage these companies to get higher profits through better efficiency, not to protect their gains by way of the profit control scheme. Also, all fare increases for public services should be co-ordinated and considered comprehensively by the Government. The companies should not be allowed to act on their own policies and compete with each other.
There may well be a lot of causes leading to inflation and the Government alone may not be able to solve the problem. However, it is still possible for the Government to take important steps in this direction. As I have said just now, it is possible to devise a reasonable tax policy with particular emphasis on avoiding further
increases in indirect taxes and controlling expenditure. This will set a good example for the private sector to follow and will avoid pushing up inflation rate still further.
Once again, I call on public transport companies to reduce their fares by 50% for elderly people aged 65 or over. I can say it is the best way to help elderly people combat inflation. I fully support the proposal made by my honourable colleague, Mr LAU Wah-sum, to fix the rate of rates increase for the coming year at this year's level.
Sir, I support the motion.
MRS FAN: Sir, Hong Kong is besieged by inflation. It has been coming at us for some time. The Consumer Price Indices (CPI) for the last two years have been persistently high. The signs are clear. But we, should I say the Financial Secretary and those who advise him as well as all of us, have failed to take heed of these warnings. So today, this monster "Inflation" is able to cast its dark shadow over every household and business in town, thanks to our complacency. We can hardly afford to be
complacent any more. Perhaps some will argue that they have never been complacent, they have given this issue a lot of hard thinking. The reason why they have not taken any apparent initiative is because they are prudent. To these prudent people, my answer is -- "Do not procrastinate any more; inflation is not about to leave us without some strong prodding."
It has been suggested that inflation is wage-led; so importation of labour will curb inflation. It has also been reasoned that this year's civil service pay
adjustment should be kept lower than the inflation rate to control public expenditure. Others however argued the inflation is caused by the increase in housing expenditure, transport costs, and so on which have resulted from government policies and decisions, directly or indirectly. These assertions are all valid in their own ways. But none tells the full story. The fact is that all these factors and many others are all interrelated. One thing is clear -- nobody wants to lose out; so every group is trying to push the burden of responsibility on some other groups, so that they may suffer less than the others.
Demands for higher wages are usually justified on the ground of maintaining the real value of the wages. But the increases asked for are often more than what is required to maintain that purchasing power. The employers pay and then get it back from their consumers. Again the pricing of goods and services often allow for a wider profit margin than merely recovering costs. As a result, we all pay more for our daily needs. Our pay packages diminish more quickly than expected. We then demand for another increase in wages to catch up with inflation, but not fully realizing that in our own small ways we are all helping to fuel it.
The Government also contributes towards inflation by upholding the principles of recovery of costs and maintaining the real value of the revenue. When applied, this means increases in government fees and charges on an annual basis, and yearly upward revision of a number of indirect taxes. Inflation or no inflation, the belief is that it is far less painful to have small increases over a number of years than to have a sizable increase every few years. The effect this line of action has on inflation has been discounted by some government officials as insignificant. But unfortunately, it is not. It may be insignificant in increasing the CPI, but to the community it sends a very clear message that Government is seen to be leading
inflation.
Inflation also gets some help from the financial institutions in the generous manner that mortgages, loans, and instalment plans are offered to property buyers. The latter only have to pay 10% down payment. Speculators' ability to push up the property price is much enhanced, and end-users have to pay more, causing the housing element in the CPI to rise considerably.
Sir, if we are serious about fighting inflation, the Government, the private sector, and the labour unions have to combine forces. The labour unions should consider lowering their salary demands and here I would like to appeal to a civil
service union to accept the 10.43% that is being on offer. This, in my view, is a fair offer and I hope that they will not only consider their own needs but also the well-being of the whole community. The private sector should consider lesser increases on prices for goods and services with financial institutions taking a more conservative approach in lending. In the private sector, I would especially like to appeal to the retailers and the public utility and the transport companies. We have seen and experienced a lot of incidents of price increases purely because they put a bit of profit in addition to the rise in inflation. The Government should take the lead and convince the others of its determination to tackle inflation. Merely telling the private sector to control wages, or the public transport companies to control fare increases, is simply not enough. Action, not words, is required. I am sure the Financial Secretary later on will tell us how to set an example to the private sector. Apart from what has already done on the civil service pay adjustment, I think the Government should also freeze the various fees and charges for a 12- month period. Only a government, which is prepared to take cuts in expenditure and in revenue, can convince the community of its determination and thereby inspire confidence and support from the private sector and the labour unions. Only when the Government freezes charges, such as water charges, can it convincingly resist requests for fare increases by public transport companies. Only when the Government stops revising its fees such as, car parking fees, postage rates and so on for a year, can it start to hope that other independent public bodies, such as the Housing Authority, the municipal councils may also temporarily suspend their annual revision of fees. In so doing, the Government will sacrifice a certain amount of revenue, but in return, the cost of living to the public at large will increase at a slower rate. The purchasing power of the pay package will last longer. A lower increase in salary becomes more tolerable. The wage spiral slows down. The heat of inflation gradually dissipates.
Sir, if we are to stand a chance of breaking the vicious circle of inflation, the Government must take the lead and be seen to take this lead. The private sector looks to the Government, the labour unions look to the Government. Everyone is worried that their group will be made to suffer more than the others. In fact, we all stand to suffer a bit, but it is much more acceptable for everyone to take a little less, than to submit ourselves meekly to the spiral of inflation. We have to be prepared to sacrifice some of our pay rises, some of our projected profits, before we can enjoy the fruits of a reasonable cost of living. If we allow inflation to prevail, Hong Kong will soon be unattractive to visitors and businessmen and we certainly have a call from a visiting community yesterday about the reducing
attractiveness of Hong Kong as a business place. We cannot allow our competitive edge to be blunted because that would mean our ability to generate wealth will depart from us.
Sir, in supporting Mr LAU's motion, may I appeal to everyone in Hong Kong to put aside our differences on this occasion and join forces to fight inflation, with Government clearly in the lead.
MR CHENG HON-KWAN: Sir, both inside this Chamber and outside it, there is general agreement on how serious the problem of inflation has become for all of us. You yourself, Sir, in opening the Council Session back in October, cautioned against complacency on this issue. The Financial Secretary has expressed concern publicly on several occasions, notably in his Budget speech.
Like some other Members, I made clear in this year's Budget debate, as I did also last year, how worried I was by the spiral of rising prices, costs and wages. And recently there have been strong warnings from authoritative voices in the financial sector -- like, for instance, the Chairman and the Chief Economist of a leading bank.
The picture is indeed sombre, with stark figures to illustrate it. Let me cite just two figures: 5.5 and 13.9. The inflation rate as reflected by Consumer Price Index (A) rose from a low of 5.5% in 1987 to a high of 13.9% in April this year.
Yet though there is a consensus on the seriousness of the problem, there have been varying views about its causes -- and about the right remedies. However, expert opinion is divided.
One specialist, for example, will single out the link between the Hong Kong dollar and the US dollar as a chief contributory factor. Another will lay the blame on the growth, over the last four years, of the relative size of the government sector, if measured in terms of the total public expenditure as percentage of GDP.
Equally divergent have been the comments on the recent increases in indirect taxation. The impact, in the assessment of the Hongkong and Shanghai Bank, is likely to be "directly inflationary". The Financial Secretary, as I understand him, maintains the opposite.
These differences incline me towards caution. They also reinforce my conviction
that the problem is a complex one for which there is -- as you, Sir, put it in October -- "no easy cure". Drastic remedies may seem highly attractive, momentarily. But if one thinks them through, they pose threats of side-effects as damaging as the disorder itself.
Yet inaction would be inexcusable. We cannot sit back and hope for a self correcting process. Such a process sometimes occurs when inflation hits the cost of exports and sets the alarm bells ringing. But because so much of our manufacturing is now done in China, where labour is much cheaper, those alarm bells have not yet sounded. Eventually, of course, they will ring out. In the long run, high inflation is bound to damage our competitiveness.
Despite varying analyses, our present problem can be traced with some certainty to the rapid growth of our service industries in the second half of the 1980s. This led to intense competition for labour in a tight market. The industries competed among themselves; Government was also a competitor. The market is still tight, the
competition remains keen.
Against this background, what can Government -- and what can the private sector -- do to combat inflation? As regards Government, I welcome the fact that this year's Budget, for all the controversy about indirect taxes, is likely to prove more counter-inflationary, overall, than its predecessor. But I would urge that over the next few months special attention should be focussed on the following areas:
(1) The labour shortage
There seems to be a need for greater selectivity, as well as flexibility, in authorizing the importation of labour, so as to cater for the sectors most in need, the service industries. No less important, we should step up our efforts to train young people for work in these fields, and to retrain older people -- such as those previously employed in manufacture.
(2) The size of the public service
While welcoming the limits that have been set, I hope that ways can be devised of applying them even more stringently with a view to achieving greater value for money.
(3) Public transport
From now on, I would suggest, Government should set its face against approving any fare increases that are not below the current rate of inflation.
(4) The prime lending rate
Government should exercise its influence, and use the devices available to it, to have interest rates rise rather than fall as necessary. On that account, I welcome the measure taken by the banks last week.
(5) Fiscal measures
Doubts about an undue reliance on indirect taxes have not been allayed, and we must expect public discussion of this issue to continue. I would counsel the incoming Financial Secretary to keep an open mind on the question until he has carefully weighed the arguments for and against.
(6) Property speculation
This regrettable aspect of the inflationary scene should, I believe, be kept under the closest possible scrutiny. I would even suggest that if the situation becomes conspicuously worse, a short-term gains tax on real estate transactions could be considered.
And I turn, though much more briefly, to the private sector. It seems clear that any constraints introduced by this Administration can only have a full beneficial effect if complemented by a widespread public acceptance of the need for restraint over remuneration and prices. Something like a campaign of public education may be called for; and much will doubtless depend on how we, who preach restraint, ourselves practise it as individuals.
Sir, you have frequently pointed out how crucial the element of confidence is to the future of Hong Kong. Inflation is a great destroyer of confidence, inflicting psychological as well as economic damage. The best way of subduing this enemy, it seems to me, is through a war of attrition, conducted on several fronts. It may not be a short or easy war. But it can -- and must -- be won.
Sir, I support Mr LAU's motion.
MR CHUNG (in Cantonese): Sir, recently the rate of inflation has climbed up to 13.9% and there is a general price increases throughout the market. It appears that soaring prices and inflation have led to the formation of a vicious circle. This is most alarming. Now our prosperous economy and stable society are subject to a severe test.
If the inflation rate rises further, it will definitely increase the costs of investment in commerce, industry and the infrastructural projects. Furthermore, it will also weaken the purchasing power of the general public, thus reducing their interest of consumption. Our market activities will then be slowed down. Our
economic development will become stagnant or it may give rise to recession, thus bringing adverse effects to the employment and general revenues of the territory.
As a matter of urgency under the present situation, the Administration should take appropriate measures to curb inflation and alleviate its negative effects on our economy and the livelihood of the public.
The fundamental reason for spiralling inflation is that the finance and service industries have been gaining prominence over the manufacturing industries in our economic framework. We need to import large quantity of economic resources and consumer goods. As import exceeds export, it is quite natural that imported inflation has become a major factor contributing to our inflation problem.
Theoretically speaking, increasing the interest rates or tightening the credit services are just stopgap measures to deal with the symptoms of inflation. However, if our interest rates continue to rise, it will not only suppress investment and reduce economic vitality, it will no longer be keeping in line with the linked exchange rate system -- since the interest rates of the United States are on the decline while our interest rates are on the opposite trend.
We should not expect that any revenue proposal will strengthen the fiscal ability of the Administration to tackle the inflation problem. On the contrary, we anticipate that any drastic revenue measures and significant increase in rates will lead to price rises and our revenue will be eroded by inflation.
Cutting down government spending and public expenditure will only lead to a reduction of corresponding services and it will not lower the actual demand of these
services. Hence such measures cannot help solve the problem of inflation at source.
In order to alleviate inflation, suppression of wages might have a certain effect but this is not a solution to the problem because inflation in Hong Kong is propelled by the price increases and the rate of inflation has been used by both the Civil Service and the private sector as an indicator of their pay adjustment.
I believe the Administration can maintain the stability of the Hong Kong dollar without attempting to change the linked exchange rate. Before we come to realize the trend of co-operation among members of the unified system in Europe and the positive and negative effects of this system, we should not consider the suitability of adopting a comprehensive exchange rate policy, that is, linking the Hong Kong dollars to a basket of currencies, replacing the existing system whereby the Hong Kong dollars are pegged to the greenbacks.
The major function of the linked exchange rate system is that it provides a reliable political assurance to the Hong Kong currency during the transitional period. The event of September 1985 has proved that the prevention of "political inflation" is more important than the combat against "economic inflation". In weighing and judging the benefits and disbenefits of the linked exchange rate system between the local currency and the greenback, it is considered worthwhile to adopt this system even at the price of imported inflation at times.
Sir, as a sum-up to the reasons mentioned above, I would like to put forward the following eight points related to the problem of inflation:
Firstly, in the short run, I think apart from curbing the artificial price spiral, there is little room for Hong Kong to adopt compulsory measures to reduce inflation. Of course, there are a few interim measures which are flexible strategies that can be considered for implementation. For instance, on the premise that the overall planning remains unaffected, we can stop injecting money into the Capital Works
Reserve Fund so that we can make use of part of the budgetted capital spending as the resource to tackle inflation and make necessary transfers of funds according to their needs and urgency.
Secondly, amendments have to be made to some revenue proposals or plans for fee increases. If it is necessary, government bonds should be issued to finance the provision for spending.
Thirdly, some people have suggested that the government bureaucratic structure should be streamlined. As a matter of fact, the staff establishment of some government departments are now being restructured. The number of staff should be increased or decreased according to the actual needs. At the present stage, as a measure to relieve inflation, we can follow the principle of value for money adopted by the Audit Department and see whether we can make some savings from the emoluments of the Civil Service without lowering the standard of the services provided.
Fourthly, the problem of inflation should be tackled at source. In the course of enhancing productivity and promoting economic development, we have to seek positive measures to combat inflation. Therefore we need to have target-oriented assistance from the Government, including assistance provided to the commercial and industrial sectors with a view to enhancing their productivity and expanding their export markets.
Fifthly, all available resources should be used to improve the relationship and the communication channel between production and consumption of the local market to a reasonable extent. There should be a better balance between supply and demand. I am sure that this is the best method to attain the counter-inflation objective. The importation of labour on restricted conditions is just one concrete example.
Sixthly, Hong Kong does not only require balanced progress in productivity but also favourable conditions for promoting long-term investment and technical reforms in the manufacturing sector. Other feasible measures should also be adopted to attract private capital and commercial financing to the public investment projects. In this respect, the Administration can co-operate with the banking sector so that trust banks can issue investment bonds or set up development funds for both local or international markets on behalf of the organizations they served. On the whole, so long as the private resources can join the market through various channels, and as far as the inflation problem is concerned, the question whether changes should be made to the capital work programme is of no great significance.
Seventhly, all along the Administration has persisted in the implementation of the laissez-faire policy and the principle of non-intervention. However, if we found it necessary to seriously tackle all profiteering activities such as price manipulation or unreasonable increases in fees, and to plug all the legal loopholes in order to protect consumers' interest, then all these measures can help to eliminate
the artificial causes of inflation.
Eighthly, the most simple and effective way to deal with inflation is to work diligently and be thrifty. Do not make wastage but saving. The Government has always emphasized the importance of tapping new resources and trimming down expenditure. In fact, everyone should do the same.
Sir, Hong Kong would have access to unlimited economic resources provided there are equitable protection under the law as well as a stable political environment. The existing inflation problem will no longer trouble us if we can attract private investment, maximize our production potential and strike a balance between the supply and demand in the market. I would like to point out a fact which worth mentioning. There has been a substantive growth in our bank deposits even though the inflation rate is higher than the interest rates. This is a strong evidence on the faith of the stability of the Hong Kong dollars as well as our counter-inflation measures.
Sir, with these remarks, I support the motion.
MR HO SAI-CHU (in Cantonese): Sir, according to the Census and Statistics Department, the rate of increase in the Consumer Price Index (A) have rocketed to 13.9% in April compared with the same period last year, reaching a record high level for the past decade. This situation has caused great public concern.
A slight increase in inflation rate is a normal phenomenon when the economy is buoyant and the general public has more money to spend. Our economy has thrived over the past years, leading to a rapid growth in Gross Domestic Product. Although the inflation rate of last year and the year before last rose by about 10%, the public still enjoyed a higher standard of living. Great inflationary pressures have not been felt. However, with the slowing down of our economic growth over the past two years and the GDP growth rate of a mere 2.5%, the rise in the inflation rate to the present high level has caused fears among the public. Cries for counter inflation measures by the Government have become louder and louder.
As Hong Kong lacks natural resources, the economic conditions of this international financial and trading centre are susceptible to external factors. Since early this year, apart from water and food which can be obtained at a relative stable price from China, we have to pay more for other imports, such as clothing,
footwear, food, domestic appliances as well as raw materials and semi-manufactures for industrial usages. Higher prices of imports and a series of revenue raising measures, announced by the Government in March, have fueled inflation.
As inflation directly affects people's livelihood, the Government should take measures to hold it down. The recent 1% rise in interest rate will temporarily dampen inflationary pressure. However, under the present arrangement of pegging the HK dollar with the US dollar, the interest rate cannot be raised by a big margin so as to avoid serious deviation from the pegged rate. There are thus suggestions to peg the HK dollar with a basket of currency. I do not support this proposal. It is true that this proposal allows greater flexibility in fixing the interest rate of the HK dollars, by which the Government can control inflation by adjusting the interest rate. Yet, the present linked exchange rate system has, over the past years, provided us with a high degree of monetary stability. The pegged rate was adhered to even in times when the US dollar was weak. Now that the US dollar has picked up, any changes are undesirable. As Hong Kong moves into the latter part of the transition period, it is of utmost importance to maintain social and economic stability. Any changes in the linked exchange rate system may shake our society and economy. Should
unforeseeable circumstances arise, the consequences may be disastrous. Apart from pushing up the interest rate, the Government can also contain public expenditures to curb inflation. The Government should freeze all increases in revenue or charges during the year to avoid further price rises.
Apart from these measures, I think it is more important to demand for the concerted efforts of the general public to combat inflation. Inflation cannot be successfully stemmed by the sole effort of the Government. Although I do not advocate austerity, we can make some concessions in regard to our interests. At present, a kind of
inflationary expectation seems prevailing throughout the territory. In order to avoid being in a disadvantageous position, businessmen raise the prices of their commodities and employees demand for higher salary increases. Inflation is thus viciously pushed up. The economy is adversely affected and most of us have to bear the consequences.
I thus urge people of all trades to actively suppress the price increase trend. As a large proportion of public expenditure is spent on the pay award to civil servants, they should lower their demand for pay rise at a rate lower than the inflation figures. Employees of the private sector should also follow suit. In sectors where there is a shortage of labour, a suitable number of overseas workers should be imported to ease the pressure of wage increases. All public utilities companies should improve
their management and lower their cost of operation. To attain profits by raising fares are unacceptable. If we pool our efforts to combat inflation, I believe that the inflation rate can be lowered to a single digit next year.
Sir, with these remarks, I support the motion.
MR HUI (in Cantonese): Sir, according to statistics recently released by the Census and Statistics Department, the Consumer Price Indices (A) and (B) for April on the 1984-85 basis rose by 13.9% and 13% respectively over the same period last year, the second highest record in Hong Kong since 1981. Without any doubt, inflation has become our economy's common enemy. More worrying still is the serious threat of inflation on the quality of life of our middle and lower classes. In fact, many wage earners have noticed that the quality of their life has not improved along with the growth of the economy in recent years, but has dropped instead. This is particularly so in two of the four basic necessities of life, namely, housing and transport. These people have to pay much more to maintain their basic needs in these two areas.
The reasons for our spiraling inflation rate are plenty and complicated. They include the currency link system with the US dollar, which results in imported inflation; overexpansion of the public sector and overheated internal consumption. The Government taking the lead to increase taxes and prices has sparked off price spirals. I cannot agree with the view of the industrial and commercial sector as well as of the Government that inflation is due to rise in wages and hence increased production costs. It is only a view which takes a piecemeal for the whole picture and is most unfair to the low income groups, especially semi-skilled and unskilled workers. They are not only unable to catch up with the inflationary rate with the wage increase, but are also bound to face the blow of insufficient working hours, changing to another trade or unemployment.
As such, I believe there is no single way to curb inflation. The Government must consider the issue from all angles and devise a set of comprehensive counter measures, and yet the interests of certain groups of the community must not be sacrificed. Under these circumstances, there is in fact a lot the Government can do. The
Government with its short-sighted views on people's livelihood cannot ward off the blame for causing higher and higher inflation rates year after year. In times when inflation is pulling the general public into deep water, the indifferent attitude adopted by the Government and the indication that nothing much can be done make me
feel both disappointed and discontented.
According to the 1984-85 basis, weights in housing and transport expenses are 15.31% and 6.79% respectively in the Consumer Price Index (A) and 20.16% and 6.83% respectively in the Consumer Price Index (B). I shall take Consumer Price Index (A) as an example. Although housing and transport do not make up the largest share of expenses for the low income families, their rates of increase in April were 14.3% and 16.3% respectively over the same period last year, higher than the average rates of increase. From this, we can see that the low income families have been forced to cut expenses on other items, such as food and clothing in favour of the necessary expenses on housing and transport. One can rightly describe this as "frugal living".
All in all, I think the Government needs to shoulder full responsibility for the additional housing expenses borne by the lower income class. The Census and Statistics Department explains that a 2.3% rise in CPI(A) in respect of housing for April over that for March is attributed to the rent increases of a number of private housing flats and public housing units run by the Housing Authority and the Housing Society. The increase does not reflect fully the effects of large increases in rates as from April. When the owners of medium- and small-sized flats transfer the increase in rates onto tenants, the pressure of the rise in housing expenses will increase.
It is all the more worrying to learn that the Government is planning to relax and eventually remove rent control in the future and let rental adjust itself by supply and demand. Apparently, this is a full adoption of the principle of a free economic market. However, we all know the Government has always safeguarded its income from the sale of land and the benefits of property developers through the policy of limited supply of land. When at all was there a case of balanced supply and demand or supply outgrowing demand? Furthermore, there are far too many human interferences in the property market where real prices can hardly be decided by supply and demand. Besides,
the rents and prices of private housing flats is an important comparative factor for the Housing Authority to fix rents for public housing estates, selling prices of Home Ownership Scheme flats and selling prices of public housing units. As such, removal of rent control will inevitably increase the housing expenses of the lower income class and will further stimulate inflation.
Housing is a basic necessity for every family. No matter how high the prices, residents with some means will always try to meet this necessary expense. As a responsible government, the Government of Hong Kong should not put an extra burden
onto the low income families for the mere sake of increasing its revenue. I think the only way to cut down on the pressure of inflation on housing expenses is to reduce the rate of rates of public housing estates, or to allow the Housing Authority to put off the inclusion of the rates increase into its future rental adjustments until our economy recovers. In the long run, the solution is to increase the supply of public housing units so that these units will have a checking effect on the price of private flats.
On the transport scene, the rise in the index for April was the largest of all. To my mind, the chief culprit is none other than the Government. In the past, the Government took the lead to increase vehicle licence fees and fuel tax. The operating costs of public transport vehicles as a result rose and it became an excuse for future fare increases. On the other hand, the Government tried fervently to protect the permitted profit of mass transit vehicles so that when such organizations reported a profit level below the permitted one, their applications for fare increases were easily approved. The rates of increases were sometimes even higher than the
inflation rate. The KCRC and the MTRC are good examples. Although they are financially independent non-government-run establishments, the Government may still influence their policies through the appointment of representatives to sit on their boards of directors. It is a pity that the Government did not seek to exercise this power properly.
Public transport vehicles have formed a part of the daily life of the general public. We need them to go to work and to school and they have an irreplaceable part in the building of social and human relations. Unfortunately, with the Government causing the above-described vicious cycle single-handedly, people simply have no chance to regain their breaths. To suppress the rise in the index of transport
expenses, I think the Government should give consideration to the effect of a price rise to inflation when considering adjustments of charges and taxes that may cause a rise in operating costs. For the long term, the Government must review the profit control scheme now applied to franchised companies with particular emphasis on
permitted profits. The next thing to do is to appoint more councillors with electoral background to the policy-making level of franchised transport companies so as to strengthen monitoring by the public.
As for the clothing and food items, their rises in the Consumer Price Indices are not as high as for housing and transport. Nevertheless, we cannot deny that the traditional virtue of frugality of the Chinese people is fast vanishing in our
economically prospering society in pursuit of vanity. Many people are not only over-nourished, but also ostentatious to an alarming degree of extravagance. Some tighten their other living expenses in order to pursue a trendy style of attire. In the end, an expensive piece of attire is worn once or twice in the year and then left untouched.
What I have just said is neither meant to interfere with the mode of consumption and the concept of value of the people of Hong Kong nor is it meant to indicate that they have to tighten their belts from now on. It is just that I believe the first and foremost step for them to take in the battle against inflation is to follow the most primitive way -- live a simple life and cut expenses on commodities of relatively low real value or at least avoid going in for extravagance. I think for the Government to promote simple living, there is environmental protection significance and at the same time, this is also a discharge of its social responsibility to change our habits. I hope the authorities concerned will consider this point.
In short, since inflation has become our common enemy, we need the participation of our entire community although the Government is still the one to take the lead. Even if the Government has sufficient reasons and figures to support the suppression of wage rises as the way to combat inflation with the least side-effects, I still think the pay rises for upper-, middle- and lower-ranking civil servants should be handled differently. I mean the pay rise for the lower-ranking ones can be as much as the inflation rate, but for the middle- and upper-ranking ones, the rise should be 1% to 2% and 3% to 4% respectively below the inflation rate. Sir, although we are aware that the Executive Council has proposed a flat rise of 10.43% for all civil servants, in fact the low income officers will be the ones affected most. For an officer with a monthly income of, say, $50,000, he will have $5,000 more to spend, but for an officer with a monthly income of, say, $5,000, he will have only $500 more. I believe the latter officer has to tighten his belt a great deal in order to survive. I, therefore, urge the Government to give special attention and care for people with low income. Finally, I believe the only way to show sincerity and determination on the part of the Government is to take positive but not flowery actions. In this way, private organizations can be convinced to take corresponding measures.
Sir, with these remarks, I support the motion.
MR MARTIN LEE moved the following amendment to the motion:
That Mr LAU's motion be amended by deleting all the words following the word "stability," and substituting for the words deleted the following:
"this Council calls upon the Government to show leadership and to formulate immediately a comprehensive, active policy programme to counter inflation, which would include the following:
(a) implementing a vigorous science and technology policy that will stimulate investment and increase productivity;
(b) controlling increases in public transportation fares and public utility fees;
(c) reducing regressive indirect taxes; and
(d) controlling excessive speculation in housing prices;
and, further, urges all sectors of the community to come together with a unity of purpose to combat the rising inflationary spiral."
MR MARTIN LEE: Sir, I move that my honourable colleague, Mr LAU Wah-sum's motion be amended as set out on all the papers circulated to the Honourable Members, and though my speeches are normally long, Sir, I shall make sure that this one will not fall victim to the old persuasive inflation which surrounds us; and in that context, Sir, may I inform the Honourable Members that recently, as a result of my following a certain diet, I have been able to tighten my belt by four inches.
Sir, the purpose of my amendments to the motion is to set down on record that this Council backs strong action to counter inflation and is willing to take concrete steps to accomplish this aim. We must do more than just provide our own individual suggestions as to what the Government should do under the umbrella of a motion that leaves initiatives with the Government; rather, we need to detail our proposals in the motion itself and then pass it, thereby making clear the stance of the Council as a whole. Otherwise, we will fail in our duty to provide leadership to our
community.
It is in this spirit of providing leadership on the complicated but important
issue of how to combat inflation that the United Democrats of Hong Kong have come up with the series of proposals included in my amendment. We pose this policy programme as an alternative to the limited measures of the Government, which seem to consist almost entirely of measures that will fall hardest on middle and working class families. I hope this Council will support my amendments and thereby send a strong signal to the Government that a comprehensive policy programme is urgently needed and that the current piecemeal approach of the Government is inadequate. For, it is only when the community sees the Government taking leadership and implementing a comprehensive programme that the critical element of confidence in the economy will be restored.
The United Democrats of Hong Kong believe that the Government must act immediately to counter inflation. Long-term inflation at the level that we have been experiencing will seriously erode our ability to compete in the international economy and will cripple our economic growth. High levels of inflation, moreover, erode the incentive to save and invest, and thereby discourage the critical investment needed to improve our productivity.
Inflation, however, is more than just a threat to our long-term economic growth. The very high levels we are experiencing pose an immediate and severe burden on the least priviliged members of our community -- the old, the labourers, and those on social assistance. The old see their savings rapidly vanishing as inflation strips the value of the money they have put away in the bank for their retirement. Working class families find it harder and harder to make ends meet with each rise in the price of basic necessities such as food and transportation. And, those on social
assistance find their very existence threatened as price rises far outstrip their meagre public benefits.
What then is the Government to do? Clearly, what is needed is an active long-term programme to counter inflation. The centre of this programme must be a sustained effort to improve our productivity, for that is the only way to ensure that our economy will experience real growth and that our workers will experience an improvement in their standard of living.
In order to increase productivity, I urge the Government to adopt a more active science and technology policy through which the Government will promote increased research and development (R&D). This increased R&D is especially necessary in high-technology fields. The economy of the territory has long progressed from
labour-intensive manufacturing to services and high-skilled, technologically advanced production. If we are to succeed in the present decade, we must successfully complete this transformation by remaining at the forefront of high-technology industries and developing the skills of our workforce.
Thus, I call upon the Government to work in partnership with industry to identify areas where intensive research and development can give Hong Kong a technological edge over its competitors. Industry should be given tax advantages to participate in research efforts, and incentives such as increased depreciation allowances should be explored in order to encourage industries to use more automation and advanced equipment. Likewise, the Government must make sure that the new University of
Science and Technology is fully funded and enabled to carry out advanced research. And, the Government must devote more effort to provide training for workers so that they can develop the skills necessary to make full use of technologically advanced equipment. Such training is particularly necessary to help industrial workers find new jobs in the expanding service industries.
On a more immediate level, the Government should send a strong signal to the public that it is willing and ready to attack inflation by controlling fare increases in public transportation and fee increases in public utilities. Recently, the Government approved a 20% fare increase for CMB, 15% for KMB, and 14% for light rail, increases that were significantly in excess of inflation. Such an ill-advised approval contributes directly to short-term inflation, and it sends a very poor signal to the community that the Government is not serious in forcing public franchises to tighten their belts. After having seen the success of the bus companies, taxi owners have followed suit in seeking fare rises that are far in excess of inflation. Their requests should be firmly rejected by the Government. Likewise, I call upon the Government to make a public statement of intention that they will not approve in the immediate future any fare increases for public transportation or fee increases for public utilities.
Another important step the Government ought to take is to reduce the proportion of indirect taxes. The Government erred badly in this year's Budget in deciding to place so much emphasis on regressive indirect taxes while leaving untouched the corporate profits tax. Not only did such a decision have an inflationary effect by raising prices immediately, but it also caused a widespread feeling of unfairness among working class people in Hong Kong. The inequity of the Budget has caused them to feel that the Government is not concerned with the impact of inflation among
lower-income families. Hence, I call upon the Government to reconsider this misguided emphasis on regressive indirect taxes in next year's Budget, and instead, to rely more on progressive taxes. Such a statement of intention from the incoming Financial Secretary would be very welcome indeed.
The fourth area where immediate government action is necessary is in controlling excessive speculation in housing prices. We discussed this issue in depth in last week's debate, and I will not take Members' time to reiterate that discussion; yet, I remind the Government of the urgency of this matter and call for urgent action.
The four steps I have outlined above will not in themselves fully solve the problem of inflation, but they are important steps. Clearly, Government on its own cannot defeat inflation. Rather, such an effort will require commitment from every sector of the community with a strong unity of purpose. The Government must take the lead, and the business community must be willing to co-operate with the Government and make sacrifices as well.
To this end, I am distressed by the lack of leadership that the Government and certain sectors of the business community have exhibited up until now. Their approach seems to be to shift the burden of inflation to the working people of Hong Kong. For example, the business community calls for increased importation of labour, yet I have seen little willingness on the part of business leaders to reduce the salary increases of their own employers or refrain from passing on costs to consumers.
I take the example of property development. Despite the spiralling costs of new flats, the property development industry has shown little willingness to exercise leadership and bring these prices under control. Nor have the banks exhibited necessary restraint in reducing the excessive lending that is helping to spur speculation in housing. The Consumer Council has proposed a balloting system in an attempt to prevent violence in queues for flats and cool the overheated selling process. Yet, the response of the industry has been to reject the suggestions of the Consumer Council, while still insisting to adhere to the present practice of queuing in an overcharged atmosphere which leads to the creation of a false market which, in turn, leads to higher prices, higher rental and high rates, and thus adds to inflation even further. Such an attitude is highly unconstructive, and I urge the industry to exhibit more concern towards consumers and the community as a whole.
Furthermore, I am firmly opposed to increasing the importation of labour. Such
an act will serve almost certainly to lower wages for workers at the bottom end of the wage scale, yet the Government has offered little proof of the need for increasing imported labour. The Government has always stated that its policy is to import labour only if local labour is not available. Currently, unemployment is rising and
increasing numbers of workers are suffering from underemployment in industries such as textiles. At such a time, I feel that importing more labour will only make things more difficult for our own workers and exacerbate the feelings of inequity they bear towards current government economic policy.
A second area where the Government must show leadership is in the area of civil service pay. Such leadership is plainly lacking in the pay increase package announced yesterday. Senior levels of the Civil Service -- including those in this Chamber today -- ought to be taking the lead by accepting a pay rise that is lower than the one offered to those at the bottom of the wage scale. Dare I suggest a percentage rise for our honourable friends in this Chamber of 9.8 which is a single digit and yet is a lucky figure in Cantonese which bodes well for Hong Kong. Such a step is the more imperative in light of the fact that the pay trend survey indicates that lower-level civil servants deserve a pay increase higher than that of their more senior counterparts. Yet, this is not to be the case. Lower-level civil servants, who are the ones hardest hit by inflation, ought to receive a pay rise that will allow them to keep pace with the increased cost of living.
In sum, we need to come together as a community if we are to harness the inflationary spiral. We must not think negatively or try to shift the burden of inflation on to one particular group or class of people. Rather, we must look at the long-term importance of this issue and realize that if we all make our own demands to the detriment of the public good, we will act only to push inflation ever upwards. We must all be willing to make certain sacrifices in order to work for the long term prosperity of Hong Kong, for if we work together now, we will all benefit in the long run.
And, most important, we must have the confidence that we as a community have the strength and the ability to tame the inflationary tiger. We know that if we pull together, and if the leaders in our community help set the direction, we will be able to do it. For, perhaps more than anything else, it is this sense of confidence -- this ability to think and act positively -- that will beat inflation.
Sir, I beg to move.
Question on Mr Martin LEE's amendment proposed.
5.14 pm
HIS EXCELLENCY THE PRESIDENT: Once again, as I have done in the last few weeks, I should like to remind Members of the rules, which probably Members are now familiar with. Those who have spoken already may speak again on the amendment but they should confine their remarks to the amendment. Those who have not spoken may speak on the amendment but it will be taken that they are speaking both on the original motion and the amendment, which means that they do not have an opportunity to speak again once the amendment has been disposed of. Perhaps Members who wish to speak would give their names to the Clerk, while the rest of us, whether or not they have reduced their waistline, (laughter) have a short break for tea.
5.51 pm
HIS EXCELLENCY THE PRESIDENT: Council now resumes.
MR LI: Sir, suddenly, the major question mark hanging over Hong Kong is not 1997. It is economic survival in 1992 and 1993.
Hong Kong's real GDP growth rate in 1986 was 11.9% and rising. Its inflation rate was bottoming at 2.8%. Last year, growth rate slumped to 2.4%. Last month, inflation hit 13.9%.
Five years ago, Hong Kong was a vigorous, dynamic, highly competitive economy. Today, we face stagflation -- slow growth and high inflation.
From the beginning, the Government has monitored inflation's march. When the inflation rate rose to 5.5% in 1987, the Government considered this as "fairly moderate by historical standards." The next year, when inflation averaged 7.5%, it decided: "For Hong Kong, this is high."
When inflation hit 10.1% in 1989, the Government heeded its critics, warning that inflation was "a matter of concern". This March, the Government upgraded the alarm to "a matter of great concern."
Sir, inflation can be cyclical. It can be structural. It can also be -- as in Hong Kong's case -- a combination of the two. This last is often extremely vicious and especially difficult to correct. It is definitely something you do not want to face when preparing to launch a major public works programme.
The Government has preferred to treat Hong Kong's inflation as cyclical -- as something that would go away of its own accord. And each year, when the promised light at the end of the tunnel has grown no brighter -- when inflation has not abated -- the Government has found a new "bogeyman" to blame for its failed forecast.
Never, of course, has the Government thought to blame itself. Yet, it has played a significant role in fuelling the wage-price spiral -- through higher indirect taxation, unchecked real increases in Government expenditure, and the steady growth in civil service employment and remuneration.
Since 1986, the Government's share of GDP has jumped by more than two percentage points. This may seem like a small number. But it represents some HK$12 billion, at current prices. In addition, despite the tight labour market, the number of persons on the Government's payroll has climbed by 12 000.
In other words, the Government itself has been part of the problem.
The Government's expenditure-driven approach to budgeting largely insulates it from inflation. Government departments deal in numbers which allow neither for inflation nor for increases in personal emoluments. As a result, with inflation racing into double-digits, departmental expenditure estimates become virtually meaningless not long after the ink is dry.
Not that this matters to the Government. It has funds squirrelled away. And if need be, it can always raise taxes to support its spending habits and to maintain its purchasing power.
While the Government may be financially insulated from inflation, it cannot escape its responsibility for inflation. Consuming nearly a fifth of the territory's GDP, it cannot pretend that it is a small, anonymous, powerless cog in the Hong Kong economic machine.
As the territory's largest and most important economic entity, the Government exerts far greater influence in the local market than any other institution. Indeed, the larger it grows, the more its every move sends shock waves through the economy.
Recognizing this, one of the Government's main objectives -- for the better part of the past five years -- has been to justify its inaction with a repertoire of stock excuses. These include the overworked "Positive Non-interventionism" litmus test, the "Beware of Hong Kong Dollar Speculation" horror story and the "Limited Economic Leverage of the Government" myth.
The Government claims that its hands are tied. But the truth is that the chains are of the Government's own making. The policy tools needed to fight inflation are at the Government's disposal. The Government is simply unwilling to use them because that would compel it to re-examine its entire approach to monetary and fiscal policy.
Take monetary policy. The Government's credo, "In The Link We Trust", puts currency stability -- or the illusion of currency stability -- above all else. Yet, the only true strength the Hong Kong dollar can ever have arises from the vitality of the Hong Kong economy.
The Government has sacrificed monetary autonomy -- and therefore the ability to use interest rates fully to combat inflation -- for an arbitrary, inflexible link to an often unstable currency. This can only put the Hong Kong economy at risk.
As for fiscal policy, the Government stubbornly claims that the small size of the public sector and the openness of the economy "limit the leverage it can exert through changing tax rates or the level of expenditure."
But this argument will not work any more. The tobacco tax fiasco revealed just how "limited" the Government's economic leverage really is. How can the Government claim to be powerless in the fight against inflation if it can cut the rate by more than half a percentage point simply by halving the increase in one levy?
As long as the Government practices "business as usual" inflation will not be defeated. Yet, if high inflation is allowed to persist, it will continue to erode personal and corporate purchasing power and savings. It will widen social cleavages. It will breed discontent. It will destroy the territory's competitiveness.
Members of my constituency have warned that Hong Kong's high inflation rate is not only deterring new investment, but is also accelerating the shift of existing operations out of the territory.
No government, democratic or otherwise, can function effectively in a high inflation environment. The longer the Government hesitates, the more difficult and more painful it will be to remedy the situation. Not only that, the longer it takes Government to act, the greater the damage that will be done to the Government's credibility.
The Government must provide the leadership Hong Kong needs. It must convert its "great concern" into action. This will not be easy. There are no "quick fixes". Controls on prices, wages or rents would be disastrous. Any move which -- in effect -- unnaturally deflated property prices would be equally devastating -- not only slashing the personal assets of hundreds of thousands of people, but also severely testing our financial system.
What courses of action does this leave the Government? Is there a solution? Half-way measures will not work. Spurred on, no doubt, by the thought of this debate, the Government has finally come forward with some unco-ordinated proposal for combatting inflation. While it is encouraging the Government has at last been prodded into action, what is required is not piecemeal approach. Remember that Hong Kong's problem is not just high inflation. It is high inflation and slow growth.
What the Hong Kong economy needs is a coherent, comprehensive and continuing monetary and fiscal policy aimed at curbing inflation and promoting economic growth.
That policy should:
-- Rein in government capital and recurrent expenditure through fixed-cost or/and "zero-based" budgeting;
-- Roll back the recent growth in the cost and size of the Civil Service;
-- Increase productivity within the Government through computerization and streamlined procedures;
-- Boost private sector productivity by providing tax incentives for companies
to invest in labour-saving techniques and equipment;
-- Develop Hong Kong human resources by placing a higher priority on vocational and professional training, as well as worker retraining;
-- Explore prudent alternatives to the present arbitrary linked rate, which would provide greater monetary policy autonomy;
-- Privatize government operations, as appropriate; and
-- Liberalize the importation of labour on a closely-monitored, non-competitive basis.
Sir, time is important. What is at stake here is not simply the Government's credibility in the economic sphere, but its ability to govern Hong Kong effectively.
What is at risk is not one or two years of poor economic performance. What is at risk is Hong Kong's economic future.
With these remarks, Sir, I support the original motion.
6.00 pm
HIS EXCELLENCY THE PRESIDENT: It is now six o'clock and under Standing Order 8(2) the Council should adjourn.
CHIEF SECRETARY: Sir, with your consent, I move that Standing Order 8(2) should be suspended so as to allow the Council's business this afternoon to be concluded.
Question proposed, put and agreed to.
MR TIEN: Sir, I would like firstly to thank you and other more senior Members for allowing me to speak first. Sir, inflation is like sin -- we may not know what it is, but we all know that it is wrong.
We all know that an uncontrolled inflation is a serious worry for all of us. The Consumer Price Index (A) in April was 1% above that of March. The current figure of 13.9% is the highest point in 10 years.
Having said that however, I believe it possible to point to some aspects of inflation which concern Hong Kong. Like most other countries, there are two aspects: firstly, internal, and secondly, external. To take external first, as we have no natural resources, we depend upon imported raw material and many daily necessities of life. In consequence, as the US dollar was weak the last few years, so our import prices have soared. That resulted in high imported inflation.
Most countries use high interest rate to curb inflation. In general, bank interest rate is about 4% to 5% higher than the rate of inflation.
In Hong Kong's context with a current inflation rate of 14%, logically, our interest rate should be of the order of 18% to 19%. However, such an idea is unimaginable.
Let us remember that our projected growth rate is only 2.5% -- an historically low figure. The end result of a 19% interest rate must surely be negative growth, for Hong Kong a depressing prospect.
Secondly, a 19% interest rate would mean about a 10% difference between US and Hong Kong dollar interest rates. This situation seems to me to be quite untenable.
The alternative is to either de-link or link to a basket of currencies but I can also see powerful reasons against both such moves.
Linking to a basket arrangement would not solve Hong Kong's inflation problem simply because our inflation was still substantially exceeding the average inflation in the countries whose currencies were included in the basket.
On de-linking, totally external political forces beyond our control, such as the June 4 incident in 1989, indicated that the link is essential in maintaining both economic and political stability. The link avoided a possible run on the Hong Kong dollar at that time.
Given that we have this US dollar link, our hands are somewhat tied on this complex and difficult issue. There is no obvious and easy way to cure such imported inflation.
Sir, on the subject of internally created inflation, it was the Financial Secretary himself who helped me confirm certain long-term views which I have on the subject.
In his speech delivered at the Legislative Council sitting held on March 6, 1991, the Financial Secretary said and I quote: "Excessive pay increases carry with them an inflationary penalty. This applies to both the public and private sectors." I am sure that the Financial Secretary here has put his finger on the central issue, namely, where we have full employment, (or a mere 2% unemployment), there is an obvious tendency for scarce labour to price itself as high as possible. In other words, labour will use its monopoly power to escalate wages beyond sense, reason and
endurance of the wealth-creating capacity of our economy.
In his subsequent speech of April 17, the Financial Secretary pointed out that, "in the calendar year 1990, wages for manufacturing workers went up by an average of about 12%. Inflation (then) ran at 9.8%."
This is an impossible combination. Both in theory and in practice, it is a recipe for disaster. We now have an inflation rate of just under 14%; does that mean wages have to be increased by 16%? The vicious upward spiral can be further pushed upwards by reports in the press of a further 14% salary increase demanded by public sector employees.
Last year, civil servants received a 15% increase, with an inflation rate of 9.8%. If they were to receive a 14% increase as suggested, this would have cost the rest of the community an extra $5.6 billion. Government has just announced yesterday that the public service increase will be 10.43% equal to the Consumer Price Index (A) increase of the past 12 months. This 10.43% increase will maintain civil servants' real wage and spending power at last year's level. I fully support the proposed 10.43% increase.
I urge public sector employees to accept this reasonable offer, to set aside their own interest and to take a lead in our fight against inflation. I further urge the business and industrial community to follow suit to support Government's initiative by also increasing wages for their employees at the Consumer Price Index (A) level and no more.
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