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current financial year and for the foreseeable future, is that the Urban Council's revenue has not kept pace with inflation. For example, the Urban Council's main source of revenue is from rates. Rateable values were last revised in 1977/78 (when they were increased on average by 80%), and it was possible at that time to reduce the Council's share of the rate from 6% to 4%; the 4% rate figure has remained in force ever since. Rate income has increased from $346 million in 1977/78 to an estimated $420 million in the current year, and $436 million in 1981/82. This represents an increase of only $90 million or 26% during the 5-year period 1977/78 to 1981/82. This rate of increase is considerably less than the increase in costs arising from inflation over the same period.

The other revenue sources of the Urban Council, e.g. licences, fees, and interest contribute a relatively small amount.

Expenditure on personal emoluments has increased considerably over the years and this is the main reason why the Urban Council is running into deficit. During the 5-year period 1977-78 to 1981-82 the cost of personal emoluments is expected to increase by $271 million or 103%; most of this increase is the result of salary revisions over which the Urban Council has no control as the pay scales for Civil Servants are set by Government. However, in order to control expenditure even further on this subhead, the department this year has set up a Departmental Establishment Committee which critically examines all proposed posts; this is under the overall purview of the Council's Administration Select Committee.

There has also been a large increase in expenditure on capital works and special expenditure which totalled only $8.7 million in 1973/74. This is likely to be in excess of $200 million in the current financial year and $250 million in 1981/82. This year, the department has set up a Capital Works Priority Committee which is responsible for, inter alia, putting forward recommenda- | tions to the Urban Council on priorities in expenditure for the next five years within the ceiling of $977 million approved by the Standing Committee; this ceiling figure is a considerable reduction from the $1,744 million included in the original Five Year Forecast 1980/81 to 1984/85 prepared in June 1980. Despite the measures that have already been taken to tighten up on the expenditure of the Urban Council, they are not by themselves sufficient to avoid deficits over the next five years.

The Government has been repeatedly asked by the Urban Council for assistance on its financial requirements. This could be given in three different ways. Firstly, the Government could pay an annual grant to the Urban Council to compensate for the loss of rate income as a result of the decision not to re-value properties with effect from 1.4.80. Secondly, the Government could make a grant to the Urban Council to take into account the fact that expenditure on personal emoluments (over which the Urban Council has relatively little control) has increased at a faster pace than rate income; this

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is also referred to as indexation and 'pegging the rate'. Thirdly, the Government could transfer a share of the general rate to the Urban Council so as to reduce the impact of any rate increase required by the Urban Council next year.

In the absence of assistance from the Government to alleviate the Council's expected deficits, it is likely that the Urban Council will require to increase its rate percentage from 4% to 8% with effect from 1 April 1981. Once the department's estimates have been finalized, the Government will be asked to review the question of a grant or a share of the Government's rate income as an alternative to this substantial increase in the rates.

MR. YOUNG (in Cantonese):-Mr. Chairman, as there will be deficits in the current year and also in the coming year, obviously the Urban Council will need to increase its rate income. If we increase our revenue from other sources, say, for instance, by increasing hawker licence fees, to diminish the need for the Urban Council to subsidize them from our rates income, would this be effective, and solve the problem?

MR. CHEONG-LEEN (in English):-I am afraid that this will not help too much because there is a heavy subsidy in the management of hawker affairs, and the subsidy is at present about 70%, and even though there is at present consideration being given to revise hawker fees, there would still be a heavy subsidy. The present subsidy is in the region of $40 m., but even with any increase of hawker fees and other licence fees, that will not be too significant.

MOTION

MRS. GRACE HO, CHAIRMAN OF THE ENVIRONMENTAL HYGIENE SELECT COM- MITTEE, moved the following motion:-

'RESOLVED that the Offensive Trades (Amendment) (No. 2) By-laws 1980 and the Declaration of Offensive Trades in the Urban Areas be made under sections 49 and 48 of the Public Health and Urban Services Ordin- ance, Cap. 132 respectively.'

She said (in English):-Mr. Chairman, as Chairman of the Environmental Hygiene Select Committee, I rise to move the motion in my name. The Offensive Trades (Amendment) (No. 2) By-laws 1980 now before the Council, when adpoted, will serve to delete the provisions for zoning of offensive trade areas in the urban areas and to increase the penalties for carrying on offensive trades without licences and other offences contravening the Offensive Trades By-laws so that they will be in line with current penalties for similar food offences under the provisions of the Public Health and Urban Services Ordinance. The proposed revision of the Declaration of Offensive Trades in the Urban Areas is to up-date this list which will involve:-

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