TNAG-0789-FCO40-993-Development-of-social-policy-in-Hong-Kong-proposed-contribut-1978 — Page 31

CONFIDENTIAL

HKK 234/1

RECEIVED IN REGISTRY NO. 51

3 1 OCT 1978

DESK OFFICER

INDEX

PA

REGIOTRY Action Ten

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BACKGROUND NOTE

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SOCIAL SECURITY SCHEME IN HONG KONG

Year

1. In para 26 of the 1976 Planning Paper on Hong Kong, it was proposed that a scheme of extended social benefits should be agreed by January 1978 for introduction in a series of steps by the end of 1980. Mr J S Heppel of the DHSS was asked to return to Hong Kong (having spent 2 years previously working on the Public Assistance scheme there) to "point the way to a viable and acceptable development of Social Security in Hong Kong" To his letter of 24 March he attached a list of the topics he would be investigating, including at B1(b) the introduction of a scheme of contributory benefits.

2.

On 30 July 1977 the Governor sent the draft of the Social Welfare review, largely the work of Mr Heppel. The scheme prop- osed would be semi-voluntary and contributory. Employees would be under no obligation to join, but employers could not contract out if their workers wished to join, without providing comparable benefits through a private scheme. The aim of the proposals was to provide assistance to those unable to work due to sickness or injury and to pay a limited sum to the heirs of any participant in the scheme who died before the age of 60. The deficiencies of the Paper are pointed out in Mr Stewart's submission of 9 August 1977, the main ones being the lack of provision for unemployment benefit, the insufficient provision for retirement benefits (the employer's contribution being low at 2%), the stringent financial restraints imposed (the extension to Social Services never increasing Government expenditure by more than 21% in any year) and the 3 year delay in the amplementation of the contributory scheme. Lord Goronwy-Roberts' comments were included in FCO TelNo 624 of 10 August. The Governor's reply (HK TelNo 820 of 12 August) allowed for the extension of the scheme at a later date, and claimed that the introduction of unemployment benefits would delay the introduction of the scheme. The Green Paper emerged in November 1977.

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3.

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In February 1978 the Government Actuary's Department (GAD) reported on the financial implications of the scheme, and Mr Hurst's report (OLA) of March 1978 indicated that the scheme as it stood was inadequate (paras 30-35 refer). Mr Stewart's submission of 15 March 1978 contains an account of the main criticisms raised by GAD and Mr Hurst.

4. Hong Kong's response of 10 April indicated that there was more public support for a compulsory scheme (41% of employees favoured compulsory participation) than had been thought and also that the Public Assistance Scheme might be undermined by the contributory scheme. Hong Kong also showed reluctance to introduce sickness benefits without a waiting period.

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