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CIVIL SERVICE REFORM - CONSULTATION DOCUMENT

12 May 1999

Appointments Division
Civil Service Bureau
Government Secretariat
10/F, West Wing, Central Government Offices
11 Ice House Street, Central
Hong Kong

Dear Sirs,

CIVIL SERVICE REFORM - CONSULTATION DOCUMENT

We are writing with our comments on the above consultation paper.

Most of the reform proposals are of a human resources nature and concern the rank and file of the Civil Service. As such, many of the reforms are unobjectionable, and if implemented, helpful.

However, the reform is being conducted at the wrong level. If the Civil Services performance is unsatisfactory and it is losing public confidence - which we believe to be the case - the responsibility for this lies with the senior ranks, not with the rank and file. The main problem is that the policy secretaries, and the Chief Executive himself, are failing to accept responsibility for their mistakes. This in turn is due to the absence of any proper system of accountability of the executive to the people. Meaningful reform of the Civil Service must start by addressing this fundamental issue of accountability to the people.

The second fundamental issue that must be addressed is the separation of the policy-making level of the Civil Service - which should be politicised and politically accountable - from the bureaucracy - which should be politically neutral. Such separation can be achieved by removing the post of Policy Secretary from the Civil Service proper. Policy Secretaries are politicians and should be accountable for their actions, to the extent of losing their jobs in case of failure of their policies. This would be equivalent to the ministerial system practised in virtually all democracies.

We attach for your reference an article from our newsletter which sets out more comprehensively the full scope of reforms that we believe are needed in Government:
Reform of Government – towards an Agenda.

Thus the scope and aims of the exercise are much too modest. A much more fundamental review is needed along the lines set out above. And even the human resource issues covered by the present exercise should be addressed much more radically than they are in the paper. Further, the tone of the paper is such as to leave little confidence that even the modest reforms proposed will be carried out.

Our detailed comments on the consultation paper are as follows:

1. We wonder why the paper makes no reference to the various Civil Service management reform initiatives that have taken place over the years, such as the financial management initiatives of the mid-1980s, the Public Sector Reform announced in 1989, the performance pledges, departmental resource accounting, etc. Surely it would be logical to first consider what, if anything, was achieved under those exercises before embarking on a further exercise. Was anything achieved? Are there any lessons to be learnt in respect of the current exercise?
2. We also wonder why no reference is made to overseas experience of Civil Service reform. Such omission is surprising, because most developed countries have gone through major fundamental programmes to reform their civil service over the last couple of decades, and a wealth of experience is available for Hong Kong to tap. In many of these countries, activities formerly performed by the civil service have been privatised or contracted out to the private sector, or have been transferred to specialist agencies operating independently but in accordance with publicly determined objectives. No reference is made in the paper to these important overseas developments, which, on the face of it, are applicable to Hong Kong.
3. We find the above omission particularly surprising in view of the fact that the Financial Secretary referred in his budget to changes in the mode of providing public services. The changes he envisaged included privatisation, contracting out public services on a competitive basis, private sector participation, and corporatisation of government services. These initiatives, if carried out, will surely impact the civil service reforms proposed in the present consultation paper, and in fact require a much more radical approach.
4. We also question the appropriateness of the review being carried out by civil servants themselves. In other countries reform was often initiated by ministers – i.e. not civil servants - and made use of independent consultants and experts. We wonder why there appears to be no independent input in the present initiative.
5. No reference is made to the effect of policy of localisation, which whatever its merits, must have stripped the Civil Service of a significant part of the talent and experience that it formerly had.
6. Section 1.5 Principles of Reform. These purported "principles" are in fact all constraints or limits on the exercise. For example, it is proposed that the reforms must not affect stability, must be gradual, must take due account of broader considerations, etc, etc. While we would not deny that these six factors must come into consideration, we would not expect them to be elevated to the status of "principles". Giving them such status makes it easy for the civil service to resist reforms. For example, almost any measure could be represented as affecting "stability". Instead, we would expect as principles factors relating to external objectives: the need to ensure value for taxpayer’s money, the need to ensure performance, the need to ensure accountability, etc.
7. Section 1.6. Objectives. The objectives, while unobjectionable, are not ambitious or clear enough. They are incremental rather than fundamental, and are too vague for it to be clear whether, after implementation of the initiatives eventually adopted, they have been achieved or not.
8. Scope (1.7). As stated above, the scope is too narrow.
9. Entry system. We agree that employing new civil servants on agreement terms is a promising idea. However, it should be applied not only to new civil servants but also to existing ones. It is not acceptable that fundamental reforms of this nature should only apply to new recruits: this would mean that it would take a generation for the reforms to feed through the entire civil service. We are aware that in overseas jurisdictions, such as the UK, entire units have been forced to resign and reapply, under open competition, for their former jobs. Measures of this kind are needed, in appropriate places, to effect real change.
10. Appointment system (2.7). We support the recruitment of outsiders, on a competitive basis.
11. Permanent terms (2.8). We agree with the redefinition of "permanent" to ensure performance.
12. Retirement system (2.9). We support the idea of funding retirement payments to civil servants. At present, pension liabilities are unfunded, which means a very large hidden burden is passed on to future generations of taxpayers. This is unsound fiscal policy and unsustainable in the long run. Funding retirement payments to civil servants will inspire more confidence in civil servants that they will actually be paid when they retire. However, we would not agree with the conversion of the current pension (defined benefit) scheme to a provident fund (defined contribution) scheme. Notwithstanding that provident schemes are the norm in the private sector, a pension scheme meets the needs of the retiree much better, and need not be excessively expensive if sensibly framed.
13. Management-initiated retirement (2.12 and 13). In cases of unsatisfactory performance the non-performing staff should simply be fired, as they would be in the private sector, rather than merely forced to retire.
14. Pay principles (3.1). Broad comparability with the private sector may not be an appropriate objective since the nature of work, risks and rewards are so different. The difference has been highlighted by the current recession, in which many in private sector have lost their jobs, or suffered loss of salary, while the civil servants experience neither. Private sector salaries are a reference point, but substantial account must be taken of the fundamental differences between the public and private sectors.
15. Performance pay (3.5). We agree with the considerations set out. As regards cost-neutrality vis a vis the current system, this must not be taken to mean that any performance element should be restricted to the monetary equivalent of the current increments. This would result in the performance element being far too small. Rather, a substantial proportion of the current base salary should be converted into a performance element, and paid in accordance with performance. As concerns civil service remuneration as a whole, we suggest that the Singaporean system, of giving civil servants a bonus related to economic growth, and cutting their salaries in a recession, is worthy of consideration.
16. Fringe benefits (3.9). We agree that these should be encashed, and therefore, in effect, cease to exist, i.e. all civil servants should receive cash remuneration out of which they would fund all their housing, travel and other expenses themselves. This principle should not be restricted to new recruits, but should be introduced across the Civil Service.
17. Performance management (5.1). We suggest consideration be given to peer- and user assessments, to supplement assessments by the individual’s superior.

We hope that the above comments are helpful.

Thank you for your attention

Yours sincerely,

Alan LUNG Ka-lun
Chairman

Enclosure: "Reform of Government – towards an Agenda", HKDF Newsletter, Issue 9, December 1998