TNAG-0788-FCO40-992-Development-of-social-policy-in-Hong-Kong-proposed-contribut-1978 — Page 31

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6 M Hunt

Mr Thompson

Mr Quaytrill 2674-

Mr Stewart

HONG KONG'S SOCIAL SECURITY SCHEME

1.

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Hong Kong's proposals were published in the Green Paper, November 1977. Our initial reaction was to view them as stepping stones to a more comprehensive scheme. This would include a non- means-tested unemployment benefit, which the Green Paper only hinted

at.

2. Hong Kong sent their proposals to the Government Actuary's Department (GAD) in February who wrote a report. The GAD had to make several assumptions through lack of information, but it made several telling points.

3. In particular it recommended against allowing employers and employees to contract in or out of the scheme and regarded it as "modest", with scope for additional private schemes. It also advocated an extension of the period of payments up to 6 months, but that benefits should not be increased for the time being. Furthermore it supported the idea that some machinery be set up to arbitrate on controversial schimes, and the principle that employees could withdraw their contributions upon leaving the job.

4.

We then asked GAD for advice on the inclusion of non-means- tested unemployment and retirement benefit, and for their estimate on the scale of benefits,given that both employer and employee should contribute HK$ 50 per month, (which is 5.6% of the average industrial wage). However, they have requested more information on Hong Kong's unemployment situation before commenting.

5.

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Hong Kong responded to the GAD by asking for details of the assumptions which they needed to make, although they agreed that it would be preferable not to allow contracting out. However, Hong Kong would appear to be reticent about introducing ☛ sickness benefits without a waiting period they want a flat rate of 30 days and also qualify the idea of increasing from 3 months benefit" if funds are available". They agree in general with the GAD about death benefit, no-claim bonus, and withdrawal of contributions; and also agree that their retirement scheme is only a method of enforced saving. Hong Kong have also asked GAD for advice on the minimum periods of limitations and age criteria, but have agreed to a higher level of contributions,(HK$ 60,) to match the higher earnings ceiling. But they remained concerned lest the Government should foot the administration bill for the scheme.

6.

Hong Kong now feel that there is more public support for a compulsory scheme than they thought (41% for, 48% against, according to the survey) but they still beleive that there are advantages in a voluntary scheme. They feel that a voluntary scheme would not under- mine the current Public Assistance scheme, and they are unwilling to risk the accusation that the Government is reducing expenditure by transferring PA clients to a contributory scheme.

CODE 18 - 77

21 April 1978

M J Upton

Hong Kong Dept