TNAG-0608-FCO40-756-Planning-paper-on-progress-made-on-social-security-in-Hong-K-1977 — Page 172

iii) How far should the Government go to encourage private provision

and self help? Should there be a salaries tax allowance (relief) for pension contributions? Should the withdrawal of tax relief on private insurance arrangements be reconsidered?

d) Long term (pensions etc) and short term (unemployment etc) benefits

i) What is the priority as between long term and short term benefits?

Where is the current and future need greatest? Where should management and financial resources be concentrated?

11) How far should there be a different approach for long term and

short term benefits? In particular, would a contributory social insurance system (for a limited period say, six months payments) be more appropriate for short term benefits? And would a non- contributory or provident fund approach be better for long term benefits? Would a pay as you go system be better for short term benefits and a funded system be better for long term benefits?

Economic implications

1) What would be the effect on taxable capacity and Government revenues of the choice between contributory and non-contributory benefits?

ii) What would be the value of funding? Would it be useful to the Hong

Kong economy?

iii) Is funding to be preferred to pay as you go?

Funding is less open to over-expenditure. But it means the current contributors paying for existing and their own future benefits, unless the Government bear the cost in the early years or the scheme has a long maturity date before benefits become payable. Pay-as-you-go is much more flexible: but by the same token less subject to built-in financial constraint.

iv) If there is to be a fund, should there be freedom of investment or

should it be invested in Government securities?

f) Priorities for planning

1) How far should the system aim to be redistributive? For example,

should the aim be to provide a flat rate benefit or an earnings related benefit; and in the latter case should the system be so arranged as to give a better return to the low paid? Should all earnings be taken into account (as in Saudi Arabia) or should there be an earnings ceiling (as in the UK) above which earnings are dis- regarded.

ii) How much emphasis should be placed on equity and fairness at the

expense of administrative simplicity? For example, a contributory system based on flat rate contributions (say HK a week per employee) is proportionately more expensive for the low paid than a system of earnings related contributions (say 5% of relevant earnings, not necessarily all earnings). But the latter is more complex and so oostly to administer.

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