Chapter 35 : Income

35.1 The two major freely disposable elements in the income of an institution engaged in higher education are that which does not come from the student, usually called grant, and that which does, usually called fees. For private institutions, grant is likely to be a minor component and fees the major source of income; for government subvented HEIs the reverse is true. In addition to grant and fees, an institution may receive money which can only be used for a specific purpose, such as the construction of a building or the conducting of a piece of research. For the effective planning of academic programmes, staff in an institution would clearly like to know their assured income as far ahead as possible. In the private sector and some parts of the subvented sector, however, that horizon is unlikely to be more than a year, and may be less. For UGC HEIs the prospect is longer.

35.2 The UGC operates, as far as recurrent grant is concerned, on a triennial cycle. Almost two years before the beginning of a triennium the UGC issues "start letters" giving broad policy guidelines and student numbers which the Committee has already agreed with the government. The institutions respond with uncosted academic development proposals which are then discussed between themselves and the Grants Committee. The UGC next issues formal "allocution letters" commenting on the proposals (the name arises because in the past the Chairman of the UGC gave the Committee's view in a spoken allocution to each institution's Council). In previous triennia the institutions subsequently provided costed proposals, and these formed the basis for discussion within the Committee and grant recommendations to government. With the adoption of a new funding methodology (see paragraph 37.2) the provision of costed proposals is likely to assume less importance. The final stages consist of government approval and the voting of funds, and the issue by the UGC of an "allocation letter" to each institution giving its block recurrent grant (see paragraphs 4.3 and 4.4) for each year of the triennium and commenting on possible developments. The Committee endeavours to send out the allocation letters about six months before the start of the triennium to which they refer. It is important to realise that in Hong Kong the recurrent grant is adjusted for inflation with respect to salaries.

35.3 The largest, and possibly only, source of income for private sector colleges is student fees, and even for subvented institutions they are important. Minimum fee levels in subvented institutions are set by government and current policy is to recover 18% of cost, although present levels are somewhat lower. The 18% has no firm logical foundation, although it is believed to be not dissimilar to recovery rates elsewhere in the world: the "cost" to which it is to be applied is, of course, controversial. In 1995-96 54% of students were eligible for grants or subsidised loans from the Student Financial Assistance Agency, and the net saving to Government was less than half of the fee income. A recent report to the agency (May 1996) states that help is not well targeted towards the most needy students, and proposes a new scheme.

35.4 Typical student fees are shown in Table 35.1. It will be seen that there is Table 35.1 Student Fees (1994-95)
Institution Level Fee (HK$) Period
UGC HEIs Sub-degree
Degree (Ug, TPg, RPg)
One year (FT)
One year (FT)
42 hours (PT)
HKIEd Sub-degree (Certificate) 8,700 One year (FT)
APA Sub-degree
Degree (Ug)
One year (FT)
One year (FT)
VTC Tech Colleges Sub-degree 15,300 One year (FT)
Shue Yan College/
Chu Hai College
One year (FT)
HKMA CPE 2,445 11 weeks (PT)

Source: UGC Secretariat and institutions concerned

  no differentiation as between subjects, although the costs of providing the teaching vary widely (see Table 36.2). In fact prior to 1974-75 there were differential fees, but in that year a uniform fee was introduced because of fears that student preference for low cost subjects could affect manpower provision. Government asked the UGC to reconsider the position in 1990 and the Committee advised against any change. One of the arguments for non-uniform fees is that students in the cheaper subjects are subsidising those in the more expensive ones. Using an overall figure of 18% (paragraph 35.3) and the unit costs of Table 36.2, with a weighted average factor of 1.69, the cost recovery through fees for a humanities student is 30%, compared with 6% for a medical student. When the UGC was asked to look at this issue in 1990, the corresponding figures were 15% and 3%.

35.6 The fact that government provides 94% of the cost of educating a medical student, but only 70% of the cost of educating a humanities student seems to us to be near the limits of toleration in terms of equity, particularly when bearing in mind future earning potential. We would not be opposed to a simple fee differentiation scheme, but the difference should not reflect true costs for the reason given in the previous paragraph, and would need to be accompanied by appropriate measures, including non-means-tested student loans, to ensure that no qualified student would be denied access to tertiary education through lack of means. For example, a fee differentiation where fees for laboratory subjects were 50% higher than those for non-laboratory subjects would lead to a recovery rate for humanities students and engineers of about 24%, most social science and science subjects near the average of 18%, and clinical medicine and dentistry of 8%. A differentiation of this kind should be limited to undergraduates, those on sub-degree courses and taught postgraduates paying standard fees. For many taught postgraduate courses, as we have already indicated in paragraph 35.4, a market-oriented approach is more suitable and should be encouraged. Research postgraduates, who all have very similar stipends, should pay a single fee at the lowest undergraduate level.

35.7 As well as their freely disposable (or at the least, readily vired) income from grant and fees, institutions receive income for specific purposes. When starting a major enterprise, such as a medical school, or asking an institution to respond to a new employment initiative, the UGC may for a number of years provide an earmarked or indicated grant, although the Committee will always, as soon as possible, subsume this within block grant. The UGC also keeps small sums for disbursement within a triennium for special purposes such as inter-institutional collaboration, language enhancement and teaching development.


Research in HEIs is supported largely by the UGC recurrent grant and the Research Grants Council (itself funded via the UGC), although there are other government and private sources. The research income from the various providers for new projects in 1994-95 is shown in Figure 35.2.

Table 35.2 Research Income for New Projects in UGC Institutions

Source HK$m
UGC 218
RGC 246
Charities 21
Government Depts 60
Industry and Commerce 41
Non-HK 6

Source: UGC Secretariat

  The main UGC contribution to research, which is not shown in Table 35.2, is staff time and infrastructure, including libraries, laboratories and equipment.

35.9 Income for capital works is usually provided only for individual projects, although the UGC does have an annual programme review. Its institutions are required each year to list, as far ahead as possible, their building needs, and to indicate those which they would wish to be implemented at an early date. The Committee examines the proposals with the help of the Director of Architectural Services (its technical adviser) and, after consulting the Secretary for Education and Manpower about available finance, makes recommendations to government on an annual programme. Individual schemes pass through three stages: approval in principle, with funds for site investigation and preliminary designs; full approval, with funds for detailed planning and tendering; leading to construction. Buildings have to meet UGC space norms (see paragraph 15.2). All other HEIs such as the APA and VTC Technical Colleges are funded for capital works on a project by project basis.

35.10 Capital projects can attract large sums from private or institutional donors: the contribution by the Jockey Club to the cost of the buildings for HKUST and the APA are examples, and student halls are a favourite gift. For donors to provide recurrent income is much rarer, except perhaps small sums for annual prizes. The Hong Kong Government has an enlightened policy of largely ignoring private donations when considering its own recurrent and capital provisions for higher education, and it is hoped that potential donors will be encouraged to do more. Private support for higher education, although very valuable, cannot however do more than improve quality at the margins: the major contribution will always be made by the taxpayer.


In Table 34.4 we showed total recurrent expenditure on higher education by type of provider. The corresponding income and its sources are shown in Tables 35.3 and 35.4.

Table 35.3 Total Recurrent Income of UGC-funded
Institutions including CPE (1994-95)

Government Subventions 7,628
Earmarked Research Grants 260
Tuition Fees 1,726
Other Income 1,022
Total 10,636

Source: UGC Secretariat

Table 35.4 Total Recurrent Income of non-UGC Providers (1994-95)

APA, TC & HKIEd(1) 1,135
Private Colleges(2) 350
CPE (mostly internal provision) 750

Notes: (1) the HKIEd did not join the UGC until 1996
(2) including OLI, Charitas Adult & Higher Education Service and Chui Hai College
Source: UGC Secretariat and institutions concerned

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