Retirement payments would help fuel Hong Kong’s economy just as much as a third runway
Albert Cheng says government officials have presented the funds needed to finance a retirement scheme simply as an expense, in sharp contrast with the way major infrastructure projects are promoted
Few people would dispute that Hong Kong is in dire need of a much better retirement protection scheme for our ageing population. However, that is as far as the consensus goes. There is no compromise in sight on how to move forward.
Last year, the government commissioned Professor Nelson Chow Wing-sun of the University of Hong Kong to study how to tackle the problem. After spending a year comparing six different proposals, he recommended a universal retirement plan to cover all residents aged 65 or above in the form of a monthly allowance.
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Chief Secretary Carrie Lam Cheng Yuet-ngor, who heads the Commission on Poverty, accused Chow of being impractical. She dismissed his team’s recommendations as “unsustainable” and “made casually” without the benefit of “serious academic research”. That is an insult not only to the emeritus professor of social work, but also his peers. Some 180 academics have pledged to boycott the current engagement exercise on the topic.
The government listed two possibilities in its consultation paper. The first option is a universal “regardless of rich or poor” option with an uptick from HK$22.6 billion in 2015 to HK$56.3 billion in 2064, leading to an overall increase in expenditure of HK$2.39 trillion for 50 years. This is supposed to be feasible only by either introducing new taxes or raising current tax rates.
The second way is a non-universal “those with financial needs” option with an uptick from HK$2.5 billion in 2015 to HK$6 billion in 2064, leading to an overall increase in expenditure of HK$255.5 billion for 50 years. The paper uses an asset limit of HK$80,000 for a means test as a basis for discussion.
Officials have taken the money needed to finance the retirement options simply as expenses. This is in sharp contrast with the way they promote major infrastructure projects.
The consultation paper, titled “Retirement Protection, Forging Ahead”, was unveiled on December 22, the same day the Airport Authority released the findings of financial research on the proposed third runway for Hong Kong International Airport.
Airport Authority chief executive Fred Lam Tin-fuk told the media that the estimated total cost of
HK$141.5 billion was four per cent higher than the 2012 forecast. That takes into account the expected price inflation during the eight-year construction period, starting next year at the earliest.
Critics have questioned the need for a third runway, saying the money would be better spent on welfare, such as a non-means-tested pension scheme, as proposed by Chow.
Meanwhile, according to a financial study conducted by HSBC, the spending on the third runway would generate extra economic benefits of HK$455 billion over a five-decade period, creating 80,000 jobs.
Officials have failed to apply the same economic perspective in the debate on a universal retirement plan. Under the “regardless of rich or poor” approach, every citizen over 65 would receive HK$3,230 a month. Carrie Lam stressed the cost of this option, HK$2.4 trillion over the next 50 years, and warned that Hong Kong’s financial reserves might dry up by 2033.
READ MORE: War of words: Carrie Lam says Hong Kong government adviser on retirement protection doesn’t fully understand public financing
Yet, senior citizens would spend the monthly payments on food, clothing, travel, entertainment and other things. In other words, the amount should not just be written off; it would be pumped back into the economy, stimulating local activities. That is the flip side of the coin that officials do not want us to see.
Meanwhile, the government should at least introduce some stop-gap measures to ease the plight of elderly people in poverty. At present, the Old Age Living Allowance supplements the living expenses of those in need aged 65 or above. The monthly payment is HK$2,390. This should be raised to at least HK$3,000 regardless of the outcome of the dubious consultation exercise. While many may see this as inadequate, there can be no real objection to such immediate relief. Officials can make this happen quickly – in the next budget, on February 24.
Albert Cheng King-hon is a political commentator. [email protected]