Hong Kong's massive surpluses could fund pension scheme
What kind of a study on universal pensions puts forward proposals which are all financially unsustainable?
The headline news about giving everyone over the age of 65 a HK$3,000 monthly payment is far less important than the question of where the money would come from.
Of the six proposals contained in the government-commissioned study, only three are realistic in that they involve active contributions - 2.5 per cent of salary from workers and 2.5 per cent from bosses. They also propose new taxes. But even these funds would run dry in three decades from now. The study's leader, Nelson Chow Wing-sun of the University of Hong Kong, and his team have gone out of their way to estimate how quickly money would run out. This gives you the impression that far from wanting to create a universal pension, the government is looking for justifications not to do it.
But to do it, either we all pay more taxes and/or the government would have to inject funds into the pension scheme beyond the meagre HK$50 billion proposed to get it going. We need to ask about the trillions sitting in the Exchange Fund, the government's fiscal reserves and money from land sales which goes into infrastructure development.
The Exchange Fund now stands at HK$3 trillion. About HK$800 billion is kept to support the US dollar peg while the rest mostly consists of the government's reserves and the fund's accumulated surpluses. Monetary Authority chief Norman Chan Tak-lam says every penny is needed to defend the peg in a crisis.
But is there a limit to this accumulation beyond which the excess could be used for other purposes? The International Monetary Fund, for example, has criticised the government for keeping this much reserve relative to our GDP. Meanwhile, officials take the same miserly attitude about our capital works fund. Do we really have so much more to build for a developed economy other than to physically integrate with the mainland? Or should we use some of that money for the welfare of our own citizens?
It's difficult to know whether we could afford a universal pension without knowing what to do with our massive surpluses controlled by intransigent mandarins.