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4. I agree that the Governor may have some presentational difficulties in Executive Council: but the tone of the paper does appear to be "hard" and suspicious that to introduce even limited measures of income security will reduce the incentive to work (e.g. X and Y of para.17 and para.19). means-tested public assistance scheme is to remain "the central pillar of the social security system in Hong Kong" (para.12, page 5): the voluntary contributory sickness, injury and death benefit scheme is deficient in that it does not provide for periods of unemployment, and the benefits for retirement appear to have been given a secondary role (X of para. 35 and para. 36(b)(iv)). Having paid a 2% contribution all his working life, a man at 60 might expect more than a "no claims" bonus. The employers contribution of 2% is also unusually low: National Provident Funds in Africa, the Far East and the Pacific have usually been based on a 5% contribution by the employer (and 5% by the employee). A voluntary scheme must be made attractive if workers are to join and it will only be attractive if the benefits are reasonably generous, including benefits for old age.
5. My overall feeling is that the draft Paper represents only a small and unduly cautious advance. The "financial implications" (para.39) appear to be relatively insignificant and unlikely to have much impact on budgetary policy or taxation measures cf. Lord Goronwy-Roberts' request in para.11 of the record of his meeting with the Governor on 21 July 1976. Perhaps Mr Smith might comment on this aspect of the proposals. The major innovatory scheme referred to in paras. 35-37 of the draft Paper will be largely self- financing.
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4 August 1977
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Rootunt
HR G Hurst
Overseas Labour Adviser
Page 120Page 121
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