Old age allowance
Commonly known as "fruit money", the old age allowance is a monthly cash subsidy the Hong Kong government pays to senior citizens aged 65-69 with low incomes, and all elderly citizens aged 70 and over. The Leung Chun-ying administration in 2012 proposed to introduce a new means-tested subsidy called the Old Age Living Allowance, which provides HK$2,200 per month for the needy only.
Benefits for elderly must go to those who truly need it
Michael Somerville says Hong Kong must not abandon its tested principle of welfare only for those who need it, and this includes old-age benefits
Hong Kong's strong tradition of respect for the elderly is truly admirable and is reflected in the passion with which the old-age allowance has been defended over the years by our community, which recognises it as an expression of gratitude for their contribution to society, not as a welfare benefit.
We are all now concerned that the rapid ageing of our society will place growing demands on our resources. In addition, we must address a widening wealth gap, which necessitates directing welfare where it is most needed.
No one doubts the good intentions of those who wish to augment the income of all retirees in their latter years, and the dislike of means testing is understandable. Unfortunately, the road to hell is paved with good intentions.
As Asian economies, Hong Kong included, have become more affluent, it is right that more resources be directed to social welfare, such as health, retirement and disability. We would do well, however, to learn the lessons of others. As Western countries grapple with serious government deficits and economic stagnation, two such mistakes stand out. The first is that politicians have made promises which future generations either cannot or struggle to honour; and the second is that welfare benefits have, for reasons of popular expediency, been universally applied with little regard to need. Unwinding what has been done is proving a painful challenge.
Hong Kong has so far avoided these problems. The core philosophy of our welfare, both government and private, has been to provide a safety net for those in need and to encourage self-reliance. Most Hong Kong people continue to favour this approach, though the more recent tendency to alleviate current concerns through handouts has been a worrying trend. We abandon at our peril the principle of directing welfare and other benefits where they are most needed.
Applying this principle to benefits for the elderly, priority should be given to those who have not been able to make adequate provision for their retirement and lack family support; to providing affordable health care; and to providing greatly enhanced dignity of life to those afflicted with the ailments of age. These in themselves will provide a massive challenge, and it is entirely wrong that the ability to address this challenge should be compromised by giving even a relatively modest universal retirement income to all, funded by the taxpayer from current revenue.
It is also entirely unfair to our young people to implement populist policies today that will place a disproportionate burden on them in the future. A universal benefit from the age of 70 of HK$2,200 a month may seem modest and affordable in the short term but no one should doubt that it will be under constant upward pressure and become a major unfunded burden to future generations even more serious than that of civil service pensions.
The government has a reputation for a lack of generosity in applying benefits and there may well be a case for less restrictive means-test criteria. But officials are absolutely right to insist on applying a means test to this proposed new benefit. Hong Kong people would be wise to give them support in this.
Michael Somerville is a consultant at the Business and Professionals Federation of Hong Kong