6
TAL
12.
other
A more detailed consideration of the economic and implications of establishing a CPF is set out in the following sections of the paper.
Fiscal implications
13.
As stated above, the accumulated resources of a CPF could, if desired, be made available for public borrowing. Such borrowing might be used to enable the Government to run a capital or recurrent deficit or, for example, as an additional source of funding for the Housing Authority. At present the Authority relies largely upon loans on concessional terms from the Development Loan Fund to finance the public housing
programme (although the bulk of the outstanding public housing requirement is expected to be met over the next 10-12 years and the Housing Authority is moving gradually towards financial self-sufficiency).
14.
Against this, it would be inequitable to require the CPF to lend funds to Government more cheaply than any other source. Nor has it been necessary, other than on a very limited basis, for Government to resort to borrowing to meet fiscal deficits and on such occasions there has been no difficulty in borrowing from market sources.
sources. The Government has no intention of altering its current financial philosophy in favour of greater reliance
reliance upon deficit financing.
15.
In the event that Government did make use of a CPF as a source of funds, such action would lay it open to criticism on the grounds of operating a
of operating a form of disguised taxation and to pressure in the direction of less rational investment decisions and
consequent misallocation of
resources.
Labour market implications
16.
An important
feature
of a CPF is that the employee's entitlement to benefit is not dependent upon either continued service with a particular employer or length of service in a particular job. To this extent, a CPF has some advantage over legislation which links benefits specifically to length of service with a single employer.
17.
a
Because CPF contributions are normally levied as percentage of an employee's earnings, they would vary in proportion with earnings. The employer's contributions are thus a cost which varies with economic conditions and not a fixed overhead. Once the labour market adjusted, in terms of wages, employment, etc., to
has
the
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