The Great Fiscal Cliff Disaster Outrage Massacre of 2013, cont’d

A slightly tiresome, make-believe game of chicken plays itself out in the battle between the Hong Kong government and radical legislators filibustering the 2013-14 Budget. According to Financial Secretary John Tsang, failure to pass the bill on Wednesday could cause disruptions to welfare payments, health care, education, the courts and, of all things, electricity subsidies. It is an interesting list of items, carefully chosen to include something to affect most of us. Pro-establishment lawmakers parrot the official ‘fiscal cliff’ Armageddon line, while the radicals make the dubious claim that any forced cuts will be the government’s fault for not meeting their demands for a universal pension.

The pro-establishment camp demands that Legislative Council President Tsang Yok-sing uses parliamentary devices fair or foul to curtail the delaying tactics. The more moderate pro-democracy legislators insist on the sanctity of the legislative branch’s rights and liberties to check the executive. Tsang Yok-sing, though as pro-Beijing as they come, is reluctant to damage the Council’s powers (the Legco presidency has a funny effect on people).

The government might be tempted to cut off handouts to starving widows and orphans, switch off kidney patients’ dialysis machines and turn kids away from exam halls, in the hope that an angry population would take it out on Long Hair Leung Kwok-hung and his comrades. But to the extent that people would find it hard to believe serious cuts in day-to-day public services were necessary, it would be officials who would get the blame for playing politics at the community’s expense. So the government should blink first. But since it can’t meet the radicals’ demands, it can blink all it wants, to no avail. Perhaps we are just heading for some dull compromise – a few obscure bits of the bureaucracy closing for a day, and a vague official promise to rethink welfare for the elderly.

Former civil servant Mike Rowse proposes a HK$6,000-per-month universal pension in today’s South China Morning Post. Unlike the HK$3,000 plan put forward by an alliance of welfare and other groups last year, it might actually be enough for the indigent to live on. However, the idea is still flawed.

First, experience overseas shows that politicians like to increase entitlements but not the taxes that pay for them, with the inevitable result being government bankruptcy. At some point, the US, Japan, Europe, etc will have no choice but to abandon or drastically scale down the universal entitlement model. It’s simple arithmetic. (There are theoretical systems like the negative income tax, which put everyone on a lifelong state pension and take it from there. The days when Hong Kong – or Long Hair, perhaps – was that cutting-edge are sadly gone, if they ever existed.)

Second, Hong Kong’s demographics suggest a temporary, rather than perpetually growing, problem with old-age poverty. Future generations of retirees will have enjoyed far better levels of education, earnings and opportunities to save than those born and raised in the chaos of the 1920s-40s. We do need to transfer more wealth from rich young to poor old at the moment (as Chief Executive CY Leung conceded by doubling the Old Age Allowance), but that’s not a permanent state of affairs.

Mike Rowse, the Alliance for Universal Pension and many others have a hang-up about the concept of means-testing. Traditionally, Hong Kong bureaucrats have taken sadistic delight in making welfare application humiliating, but it doesn’t have to be so (as CY’s reform shows). The alternative to form-filling and verification is, on a net basis, subsidy of the rich(er) by the poor(er).

Having said all this, there are some intriguing unknowns and contradictions here, because our politicians and bureaucrats compartmentalize everything beyond recognition. For example, elderly welfare, a sales tax and health financing are all considered entirely separate subjects when they’re All The Same Thing.  So, it could be that the middle-aged middle class will be able to pay for their own retirement provided property prices don’t crash, while the young middle class won’t be able to pay for their own retirement unless property prices do crash. The people who got us into this mess are the ones on the biggest pensions of all.

Update: the filibuster is put out of its misery.

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13 Responses to The Great Fiscal Cliff Disaster Outrage Massacre of 2013, cont’d

  1. The most pointless filly buster in Hong Kong is Henry Tang.

    Old Age Pensions are human rights. There’s no discussion possible on such matters.

    They’re also rights because every should be compensated for living without real representation, welfare, breathable air, an adequate education system, watchable TV, listenable radio all their lives…why go on?

    Passons la-dessus.

    Let’s have a whip-round now though to keep those bloated pensions going to the poor civil servants. Now, they’re the kind of pensions no one has a right to. Let’s talk about them.

  2. pcatbar says:

    I have to say the final paragraph is as good as it gets in summing up this situation. Unfamiliar to shoe shining as I am I’ll say no more.

  3. maugrim says:

    I agree, the final paragraph says it all for me. BTW, are things getting petty or what? The expose that Long Hair may have been smoking in his office seems a trite over the top and seems to resonate with a petty vindictiveness that Brits and Chinese seem to share. I wonder who will be next tried for further transgressions? If I were Wong Yuk-man, I’d be washing my hands after visiting the toilet lest sneaks be about.

  4. Property Developer says:

    God, I wish those governing us had a tenth of the wit and wisdom, humility and commonsense, you display! I can only hope that some of it may seep through tortuous back-channels and escaping well water, and thence to the founts and torrents of power.

    Nevertheless, Dr George’s constant carping, namely that everyone else is to the right of him on the political spectrum, may have some relevance here. Means-testing and general bureaucratic obstruction are not mere epiphenomena in HK, but hold up the entire governmental superstructure. How else are we saved from every square inch of the territory being covered, several layers deep, in “small” big houses built by 3rd-generation, monolingual Britons?

    En clair, it would be useful to know how much — including index-linked pensions and the opportunity cost of the land tied up by the airconned, chauffeur-driven-to-the NT-in-lieu-of-NT-Allowance brigade — is spent on the means testing.

    (The weekly postman is about to depart, so I will end this missive here.)

  5. Real Tax Payer says:

    A good summary today Hemmers. Many thanks

    I only wish that our civil servants and Legco members had as much commonsense as people like you (and Jake, and Tom Holland, and a few others I could mention)

    Mike Rowse is also someone whose opinion I respect. At least he survived the govt ‘system warts and all’ and came out on top, even if that left him with some controversial opinions.

    $6K is indeed the minimum one needs to live on ( assuming one lives in an illegal extra-top-storey 100 sq ft shack with no air-con which one can rent for $1K/ month : our live-out Amah’s shared tiny apartment costs over $2K/ month )

    Some simple facts based on personal experience which I would like to share in a very constructive sense with my erudite fellow- commentators for some serious feedback (I am being very serious today / no jokes because this IS a serious matter – for us all )

    I – like everyone else – as a ‘RTP’ had to join the MPF in 12.2000.

    I (probably like almost everyone else, including nearly all my HK staff on the basis that we preferred to invest our savings OUR way rather than be ripped off by the MPF ) opted for the absolute minimum MPF payment = $1 p.m so my employer put in the same: total $2K p.m (the minimum went up slightly last year, but that that doesn’t affect the basic figures).

    I managed to retire early in 12.2012.

    12 years x 12 months x $2K p.m = $288K put in ( actually slightly more – lets say $300K)

    I opted for a conservative. safe INVESCO MPF scheme knowing that it would not do much right , but hoping that at least could not do much wrong with my money. Even so it was in negative actual vs invested funds by 2009 , but sprang back in 2010/11, and as a result when I cashed out of the MPF in 12.2012 (and f********g good riddance to the MPF / excuse my French) I got back , finally …. $450K!

    So – correct me if I’m wrong in my calculation method – but an average investment of $300K / 2 = $150K over 12 years earned me $150K profit = 100% total average interest.

    Divide that by 12 years = 8.3% average interest. Not bad actually, considering it was a conservative/ safe INVESCO MPF fund.

    But the point is that if I had nothing except the MPF for retirement , that $450K cash payment from the MPF would be all I had to live on for the rest of my – say – average 20 years of life = $1,875 p.m

    And that minimum contribution of $1K p.m. for me would qualify as maximum affordable contribution for almost all our lower-paid workers in HK ( even the dock strikers on their new minimum wage)

    (Remember that the MPF does not provide a pension: it only provides a lump sum pay-out which it’s up to me to re-invest for my pension , and where can I get more than 3-4% in a very safe long-term investment these days ? )

    So as a RTP in HK for over 30 years I am expected to live on roughly $2K p.m TOTAL pension for the rest of my life? I spend almost $1K p.m in management fees in the apartment I now own, and rates/ utilities etc take away another $1K .


    When I consider the $ dozen millions I have paid in taxes over the past 30 years I would consider it only fair to qualify for Mike Rowse’s proposed $6K p.m. pension when I’m 70.

    Which $6K p.m @ YO, just happens to roughly equal the UK pension I will get @ 65 ( roughly PDS 120 p.w.) as result of continuing class III UK DHSS pension contributions ever since leaving the land of hope and glory half my life ago. And the class III contributions were only ever at maximum about PDS 300 per YEAR all that time = HK$300 p.m.

    Far, far more justified to give the same basic $6K pension to those indigenous residents of HK who broke their backs creating HK’s economy in the 1950s and 1960’s on peanuts wages , and for whom I would happily pay my taxes IF ONLY those indigenous OAPs could get a fair share in the form of a real pension.

    As Hemmers correctly wrote :

    “The people who got us into this mess are the ones on the biggest pensions of all”.

  6. Real Tax Payer says:


    ” which $6K @ 70 YO” ….

  7. Bela on the bus says:

    Congrats RTP. This is the longest comment so far on any blog in East Asia.

  8. aghast says:

    @RTP ‘So as a RTP in HK for over 30 years I am expected to live on roughly $2K p.m TOTAL pension for the rest of my life? ‘

    No. Stop posturing, no-one ever said you were.

    The MPF was only ever supposed to be a part of planning for retirement, which should also include private pension schemes, family support and insurance, and a safety need for those in dire need.

    If I got 8.5% as a annual return, after fees, I’d think I was doing pretty well.

  9. Property Developer says:

    RTP, Presumably, then, we’ll have to take your moniker with a pinch of salt from now on?

    Also, you can’t just average 100% total interest over 12 years to get 8.3% pa, since it’s compound interest, without the aghast’s of this world jumping up and down.

    If you say that “indigenous” residents should get a reasonable pension, to ensure fairness indigenous male pure-blood indigenous villagers should get double; and those who were born here and have never gone abroad, triple.

  10. Bela Breathless says:


    JUST SAW..pant…REGINA in Admiralty Centre outside Watsons.

    I’m lying down now…deep breaths…

  11. Real Tax Payer says:

    @ ALL

    Just trying to state some basic facts about MPF realpolitik as grist for the mill

    Not posturing or whatever

    And of course I don’t depend on the MPF . But pity those who do have to do so ( including a 65 YO in our office who started the MPF at the same time I did , but on a small fraction of my salary)

    Welcome positive feedback

  12. Realist Revenue Receiver says:

    Get your popcorn ready Gents!

  13. Oneleggoalie says:

    Heh…”…longest comment…in East Asia…”
    Bella is such a cruel chick…she likes spanking we bet. And why not just hang The Duck so we can have closure ?

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