Hong Kong taxpayers are left to pick up bill for MPF offsetting mechanism
Under the latest government plan, employers will receive HK$29 billion in subsidies over 25 years to keep their hands off the retirement funds of workers
Problems that can be solved by money are not really problems, so the saying goes. Our cash-rich government knows this too well and willingly splashes out whenever money can help. The deadlock over a long-running bid to scrap the much-criticised offsetting mechanism of the Mandatory Provident Fund scheme is an example. The proposed hefty subsidies for companies to ease their burden are still greeted with caution by business leaders. They also raises fundamental questions over the use of taxpayers’ money.
Under the plan reportedly approved by the Executive Council on Tuesday, taxpayers will foot HK$29 billion in MPF subsidies over 25 years, in return for business support in abolishing the arrangement that allows bosses to claw back contributions into workers’ retirement funds to cover long service and severance payments. Further details are not available at this stage, but the coverage, which requires further approval from the legislature, is even more generous than the original proposal of HK$17.2 billion over 12 years by Chief Executive Carrie Lam Cheng Yuet-ngor and the HK$7.9 billion over 10 years offered by her predecessor Leung Chun-ying last year.
Lam is to be commended for her commitment in scrapping the offsetting arrangement, which was an outstanding election pledge inherited from Leung. It was such a thorny issue that the Leung government could only broach it with a trade-off subsidy at the end of the term. But the labour and business sides remained unimpressed and are nowhere near a consensus after six years.
Thanks to our healthy public finances, the government can afford to offer generous monetary concessions to smooth opposition. The same approach is being used to win support in the chief executive’s bid to extend maternity leave from 10 to 14 weeks. The incentives look admirable from a labour perspective, but whether they are justified is open to debate. Against HK$1 trillion in fiscal reserves, a commitment of HK$29 billion over 25 years may not be too big a burden. But no political leader can say for sure that public finances will stay robust for a quarter of a century. Taxpayers are entitled to ask why they have to pay for benefits that are essentially the responsibility of employers. If officials tap into the public coffers whenever resistance arises, bosses will not dip into their own pockets to improve labour benefits in future. We also risk turning into a welfare state if the approach becomes the norm.
The offsetting mechanism should not have been in place in the first place. Over the past 15 years, nearly HK$32 billion of long service and severance payments have been offset from workers’ pension funds. Politically, it may be necessary to use public funds, but it’s a shame taxpayers are punished for such a bad mechanism.