Appendix G

Appendix G

Letter of 19^th September 1997 to the Chief Executive
tendering advice on the Administration's review of
leave passage arrangements

19^th September 1997

The Honourable TUNG Chee Hwa
The Chief Executive of the
Hong Kong Special Administrative Region
of the People's Republic of China
Chief Executive's Office
Hong Kong

Dear Sir,

Review of Leave Passage Arrangements

We have been invited by the Administration to advise, under Clause 1(e) of our Terms of Reference, on its proposal to adopt a new basis for revising the rates of Leave Passage Allowance for eligible officers.

BACKGROUND

2.Overseas officers and their dependants are eligible for leave passages of an appropriate class for either a direct or an indirect air route between Hong Kong and the officer's country of origin or any other destination. The officer may either be given air tickets or use his Leave Passage Allowance (which is an amount equal to the dollar value of the passage to which he is entitled) to pay for air fare and related travelling expenses. With effect from November 1981, all local directorate officers and their families are also eligible for overseas leave passages at rates similar to that given to overseas officers whose country of origin is UK.

3.A breakdown of the leave passage entitlement of eligible officers is appended below -

Overseas Officers
Pay Point	Leave Terms	Entitled Class of Travel	Frequency
D7 and above	Annual Leave	First Class	annual
MPS 45 - D6	Annual Leave	Economy Class	annual
MPS 34 - 44	Modified Annual Leave	Economy Class (Excursion)	annual
MPS 34 - 44	Vacation Leave	Economy Class	every 2¹/₂ years
MPS 33 and below	Vacation Leave	Economy Class	every 2¹/₂years

Local Directorate Officers
Pay Point	Leave Terms	Entitled Class of Travel	Frequency
D7 and above	Annual Leave	First Class	annual
D4 - D6	Annual Leave	Economy Class	annual
D1 - D3	Vacation Leave	Economy Class	biennial

AIR PASSAGE AGREEMENT

4.Since 1958, the Government has entered into an agreement with British Airways giving it the exclusive right to carry all Government officers and children of eligible officers for school passages between Hong Kong and the United Kingdom. The Air Passage Agreement (APA) was modified in 1980 to allow Cathay Pacific Airways also to carry Government sponsored passengers on the same route. The APA was revised on 14th April 1992 whereby all duty and school passages were covered exclusively by the Agreement. It also provided that officers taking leave passages on the UK route could make use of contract fares. As for duty and school passages on non-UK routes, the published fares would be used. The APA may be terminated by giving six months' notice.

LINKING OF LEAVE PASSAGE ALLOW ANCE TO AIR FARES

5.Under the current arrangements, the Leave Passage Allowance (LPA) for officers of different countries of origin is linked to the price of published air fares for the respective routes. For officers on the HK-UK route (mainly overseas officers whose country of origin is UK and all local directorate officers), the value of their LPA is pegged to the value of contract fares under the APA, and for those officers whose leave passage entitlement is Economy Class, their LPA has been pegged, for historical reasons, to the value of discounted Business Class fare.

PROBLEMS

6.The Administration considers that the current arrangement of linking LPA with published air fares, in particular contract fares under the APA, needs to be revised for the following reasons -

	(a)	if the School Passage Allowance proposal (on which the Commission's advice was sought separately) is implemented, contract fares will no longer be available following the termination of the APA;
	(b)	as a result of the Director of Audit's report, the Public Accounts Committee of the then Legislative Council commented in January 1997 that, inter alia, the pegging of Economy Class passage for UK officers and local directorate officers to the discounted Business Class fare under the APA provided the officers with benefits in excess of their entitlement;
	(c)	the pegging of the LPA in respect of UK officers eligible for Economy Class travel to the discounted Business Class fare such that officers could enjoy upgrade to Business Class is a historical anomaly. The price gap between contract fare and the highest Economy Class fare has widened over the years (from initially some 7% in the early 80's to the current 46%) and the difference is now hard to justify; and
	(d)	about 95% of eligible officers now use the LPA to cover package tours and other holiday expenses including accommodation and car hire. It will be logical to delink from the contract air fare rates and to base future revisions of LPA on changes in Hang Seng Consumer Price Index (CPI) for package tour.

THE ADMINISTRATION'S PROPOSAL

7.The Administration proposes to rationalise the provision of LPA as follows -

(a)

the officer's passage entitlement should be in accordance with the provisions in his Memorandum on Conditions of Service and in Civil Service Regulations;

(b)

the initial rate of LPA will be set at the prevailing rate payable to an officer in the respective pay bands at the date of implementation;

(c)

future revision of LPA will be made in April every year with reference to price changes of package tours, as measured by the year-on-year change in such prices within the Hang Seng CPI for the 12-month period ending February of the year;

(d)

in the event that the entire amount of LPA for a full cycle is insufficient for an officer on overseas terms to procure a standard passage, the officer may request for the provision of an air ticket of his entitled class by a direct route between HK and his country of origin in lieu of LPA for that cycle; and

(e)

more flexibility to be introduced which includes

increasing the limit of unused LPA for which an officer or his/her eligible family member could carry forward or transfer from other members' accounts

allowing the use of LPA for passages taken during public holidays, casual leave or basic leave on one occasion during any leave cycle. For overseas officers, split passage arrangement is at present only extended to those on annual leave terms. The proposed relaxation will facilitate those on vacation leave terms (all non-directorate overseas officers) to take short holidays within their 2¹/₂ years tour.

STAFF CONSULTATION

8.The Administration has consulted the Staff Sides of the Senior Civil Service Council, the Police Force Council and the Disciplined Services Consultative Council. They support the new proposals, subject to Government agreeing to ensure that overseas officers are able to return to their country of origin in line with their terms of employment.

FINANCIAL IMPLICATIONS

9.As the proposal involves only a change of the basis for revising the LPA rates, with no change to the initial rates (which will continue to be the prevailing rates), the Administration does not expect any immediate savings. However, having regard to the past trend which shows that the rate of increase of CPI is generally lower than that of contract fares, the Administration expects that savings would be realised in the long term. The additional administrative work which would arise from the proposals would be absorbed within existing resources.

IMPLEMENTATION

10.The Administration intends to implement the revised leave passage arrangements with effect from 1st January 1998.

COMMISSION'S VIEWS AND RECOMMENDATIONS

11.We see no objection to the Administration's decision to delink the LPA from the contract air fare rates. This is a logical step to take following the Director of Audit's comment that the link has resulted in excessive benefits to officers who are normally entitled to Economy Class passage. The Administration's proposal to base future revisions of LPA on changes in the Hang Seng CPI for package tour is also a reasonable one, considering that about 95% of eligible officers now use LPA to cover package tours and other permitted holiday expenses.

12.We note the Administration's decision to set the initial rate of the new LPA at the prevailing rate, despite the Director of Audit's criticism of this rate. In justifying its decision, the Administration maintains that in making changes to terms and conditions of service, it is important to keep to the established practice of preserving the benefits enjoyed by serving officers.

13.Our view is that the Administration has to strike a balance between the Audit comment and their concern for fairness to staff. We appreciate that, in the present circumstances, this may not be easy. Suffice to say, however, that we are content with the Administration's proposed course of action as we have been assured that the Finance Committee of the Provisional Legislative Council will be consulted on this matter before the Administration formally implements its proposals.

CONCLUSION

14.In conclusion, we support the Administration's proposal to adopt a new basis for revising the Leave Passage Allowance as set out in paragraph above.

Yours faithfully,

(Sidney Gordon)
Chairman
for and on behalf of
Members of the Standing Commission
on Civil Service Salaries & Conditions of Service

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