TNAG-0750-FCO40-954-Visits-of-Sir-Murray-MacLehose--Governor-of-Hong-Kong--to-UK-1978 — Page 19

CONFIDENTIAL

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Background Brief I

The Proposed Sickness, Injury and Death Benefits Insurance Scheme

1.

The Governor is hoping soon to put to the Executive Council a draft White Paper proposing the introduction of a Social Security Insurance Scheme. This will follow the lines of last year's Green Paper with the important differences that participation in the scheme will be compulsory and provision will, we understand, be made for a retirement benefit. The original proposal was that the scheme would be voluntary as far as employees were concerned, but would be compulsory for employers if their workers wanted it.

2. We understand that the White Paper will propose that the scheme should be funded by equal contributions by employees and employers based on a percentage of individual wages. There will be no Government contribution, apart from the cost of administering the scheme. This method of funding will have a regressive effect on income distribution in Hong Kong; to offset this, we believe that a Government contribution is

essential. We have therefore recently again impressed on

the Governor that we should like to see a Government con-

tribution to the scheme. He has replied that to introduce

such a measure now could cause delay or damage to the scheme

as a whole. He is particularly concerned not to put the project in jeopardy since he is by no means certain that the scheme even in its present form will gain public support. We also understand that the White Paper will contain no

provision for the introduction of a non-means tested unemployment benefit something to which we have asked the Governor to give serious thought in the past.

3. It may be that the Governor over-estimates the problems; but we appreciate that the scheme needs to be acceptable to Hong Kong public opinion as a whole. We see advantages in getting the Hong Kong proposals off the ground as soon as possible but our agreement to this effect should be subject to an understanding by the Governor that our objectives of a non-means tested unemployment benefit and a Government

/contribution

CONFIDENTIAL