CY Leung policy address 2014

Lam convinced Leung to shelve plan to scrap MPF 'offsetting' mechanism: source

PUBLISHED : Thursday, 23 January, 2014, 3:23am
UPDATED : Thursday, 23 January, 2014, 4:17pm

Chief Secretary Carrie Lam Cheng Yuet-ngor persuaded her boss to ditch a plan to abolish the mechanism allowing employers to offset severance pay against their contributions to employees' Mandatory Provident Fund accounts, according to a person familiar with the issue.

She urged Chief Executive Leung Chun-ying to remove the proposal from his policy address, saying it would be "impracticable" because of the political pressure from big companies it would generate, the person said.

There had been widespread speculation that the move would be in the address, delivered last week, but Leung later said that had been a misunderstanding.

The source said Leung had wanted to abolish the offsetting mechanism but "Lam had a discussion with him … eventually the part was taken out from the final version of the address".

The apparent disagreement between the top duo once again pointed to tension at the highest levels of the government, highlighted last week by a public warning from finance minister John Tsang Chun-wah that Hong Kong could run out of money if its lavish spending continued. Tsang was speaking after Leung announced measures that would add HK$100 billion a year to recurrent expenditure.

No comment could be obtained from the Chief Executive's Office last night but a government source confirmed Lam had met Leung to discuss the issue before his policy address.

"They had a meeting specifically on the problem," the source said, but it "cannot be proved" that this was the decisive factor as business groups had also pressed Leung to ditch the plan.

"The business chambers asked to meet with Leung once they knew of his abolition plan … Leung's eagerness to include it in the address diminished after the meeting," the source said.

Under the system, employers can offset severance and long-service payments to employees against their contributions to an employee's MPF.

Labour minister Matthew Cheung Kin-chung said last week that the offsetting mechanism was included in a deal with employers, agreed to by employee representatives, to secure business leaders' agreement to establishing the MPF in 2003.

Treasury minister Professor Chan Ka-keung told the Legislative Council yesterday that the issue had to be examined "in a holistic and careful manner" because of its complexity and the competing interests in play.

Labour Party lawmaker Lee Cheuk-yan said that if Lam really had convinced Leung to ditch the plan, it showed she was helping businesses to further her own political ambitions.