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Reply:
Mr President,
The LegCo Manpower Panel was briefed on 8 December 1994 on the need to raise the rate of levy for the Pneumoconiosis Compensation Fund from 0.3% to 0.45%. The position of the levy was further discussed at the meeting on 3 January 1995. An increase in the rate of the levy is necessary to ensure that it will be able to meet its long-term commitments. The possible need for this second phase of increase was already made known to this Council when the rate of levy was last increased from 0.02% to 0.3% in July 1993.
If the rate of levy remains unchanged, it is estimated that the Fund will run into a deficit in 1996 and 1997. The Pneumoconiosis Compensation Fund Board will not then be able to meet the payments due to all eligible beneficiaries.
As regards the 3 specific questions, first, the impact of the proposed increase in the rate of the levy on the construction industry is not expected to be significant. Assuming that the proposed rate of levy comes into effect on 1.4.95, our preliminary assessment is that the operating costs of the construction industry will be increased by 0.006% in 1995, by 0.041% in 1997 and 0.071% in 1999. The construction sector has been consulted on this proposed increase through the Pneumoconiosis Compensation Fund Board on which the Hong Kong Construction Association is also represented.
Second, the proposed levy rate of 0.45%, if implemented, will be kept under regular review, having regard to the actual income and expenditure of the Pneumoconiosis Compensation Fund. However, barring any unforeseen downturn in the construction industry, it is estimated that a levy rate of 0.45% will ensure that the Fund maintains a healthy balance well into the year 2000. The situation will need to be reassessed if further development, improvements are made to benefits payable to pneumoconiotics under the scheme.
Finally, the Pneumoconiosis Compensation Scheme is a collective liability scheme established for the specific purpose of providing compensation to post- 1981 pneumoconiotics through the Pneumoconiosis Compensation Fund. The Fund is to be financed by a levy on the building and construction industry and the quarry industry where the bulk of pneumoconiosis cases are detected. For this reason, there is no question for Government to inject funds into the Fund for the sake of stabilising the levy rate. Nevertheless, as I have stated in the earlier part of my answer, we will keep the levy rate regularly under review to ensure that the Fund can continue to honour its financial commitments without difficulty. In this connection, both the financial position of the Fund and the impact on the construction industry will be closely monitored, so that they can be taken into account when there is a need to revise the rate of levy further.
End/Wednesday, January 18, 1995