Tim Hamlett's Hong Kong

PUBLISHED : Wednesday, 13 February, 2008, 12:00am
UPDATED : Wednesday, 13 February, 2008, 12:00am

A veteran journalist and Baptist University academic, Tim looks at the issues facing the city. E-mail him at hamlett@hkbu.edu.hk

With all due respect to our headline writing department, I thought Monday's announcement that the coming budget would 'please all' was a bit optimistic. No doubt there is some difficulty in condensing government-speak such as, 'Mr Tsang intended to share the fruits of the strong economy with all the people, while also helping the needy through specific measures'.

That sounds like good news, but in practice this is not how things work. If, for example, the budget abolishes the duty on wine, that will certainly please some people, including me, the wine industry, hotel operators, restaurateurs and so on. But it will displease local puritans, one of whom opined on the letters page the other day that wine was 'just another drug'. Less volubly, the news will probably not be welcomed by the beer industry, because it will cut the price difference between the most expensive beers and the cheapest wines. People who just want to get plastered cheaply may change their tipple of choice.

No doubt some people will bewail the absence of a goods and services tax, though it is difficult in the present circumstances to see why the government needs a new tax of any kind.

A more knotty problem is going to be the matter of help for the aged. At the moment, if you are over 70 the government pays you the princely sum of HK$705 a month on a no-questions-asked basis. There is also a slightly less munificent HK$625 a month for the 65-plus age group, but this is means-tested. You have to prove an acceptable level of poverty to qualify.

According to the nameless official who always appears in stories of this kind, the new arrangement will probably include an increase in both allowances, but the new levels will be means-tested. Rich people over 70 will still be able to claim the HK$705.

Mr Nameless went on to say: 'We cannot let the elderly enjoy a rise in their so-called fruit money regardless of their wealth.' He added that the administration had to take a prudent (this is the usual budget euphemism for parsimonious) approach because the city faced an ageing problem.

In a sense, this little handout is a trivial matter. Elderly people living in serious poverty are much more affected by changes in social security payments than in 'fruit money', or for that matter the medical vouchers, which are also expected to creep up a bit.

The problem here is that officials tackling this matter seem to have done little homework. There is a wealth of international experience on ways of delivering welfare to needy groups, and the situation is not as simple as Mr Nameless seems to think it is.

Two questions have to be asked when considering how to deliver money to the needy. What proportion of the intended recipients are not getting the money intended for them? And, how much of the money is going to people outside the target group?

The requirements for good answers conflict with each other. To achieve good coverage, you want to make it easy to collect the money; to achieve accurate targeting, you want to make it difficult.

A means test is one solution, but means tests always result in a large number of eligible people not collecting the allowance to which they are entitled. They do not understand the forms, are intimidated by government offices, resent the idea of 'charity' or just think the whole thing too much trouble.

The means test itself requires staff, time, money and paperwork. While cutting the amount of money paid out, it increases the overheads in paying it. So if we can keep the amount of overpayment down, it may actually be cheaper to be generous.

It is quite easy to discourage seriously wealthy people from claiming trivial amounts of money. We could, for example, require that the money be collected personally every month from government offices in unsalubrious parts of town.

We could also try naming and shaming. A few pictures on the internet of millionaires queueing for their fruit money should get the message across.

Meanwhile, there is the matter of the so-called ageing problem. This is, strictly speaking, not a problem unless we do nothing about it. The average age of the population is increasing. The population of elderly, accordingly, is expected to be a larger proportion of the whole. There are more promising responses to this prospect than means-testing government payments to the elderly.

Many of us would be happy, for example, to reduce the dependent population by working longer. It is curious that the official expectation seems to be that we will collapse gratefully into the arms of the MPF at 65. Yet staff of government-funded organisations are required to retire at the age of 60. Do we want people to support themselves or not?