One of the Hong Kong government’s methods to push (or deliberately kill off) a proposed policy is to launch a public consultation. This involves a document that defines the ‘problem’ as the bureaucrats want us to see it, and offers a handful of possible options. Every option has at least one major drawback guaranteed to make it unpopular or unworkable, except (when the idea is to push rather than kill a proposal) one – which miraculously solves the problem perfectly with win-wins all round. The public is then invited to comment, and of course pick the ‘correct’ answer.
We normally think of Hong Kong policymakers as hopelessly inept and incompetent. But they are highly skilled at these exercises in cynical manipulation. And they have possibly surpassed themselves with the latest – a public engagement on retirement protection. The consultation paper has the tagline ‘forging ahead’, by which of course they mean ‘getting bogged down and not going anywhere’.
Government policy on the elderly poor is essentially to wait for them to die. The current generation of old folk were born into the war, famine and chaos of the 1930s-40s and typically had limited education and job opportunities and few chances to save for retirement. These are the people we see today salvaging cardboard. Subsequent generations should be better able to look after themselves. So you could make a case for more-generous allowances for this cohort.
However, labour and social-welfare activists have long demanded a universal pension as a social-justice priority. For those who are in the pro-democracy camp, it is their one and only actual policy position other than electoral reform. Meanwhile, the bureaucrats and their friends in the ‘business community’ establishment abhor any extra recurrent public expenditure and foresee fiscal disaster looming because of the dreaded ‘aging society’. They want revenue to be stashed away in the reserves, spent on white-elephant infrastructure projects or earmarked for the civil servants’ own gargantuan pensions.
The proposals announced yesterday are making everyone unhappy and angry, as the bureaucrats intended. There are two extreme options. One is for a new means-tested allowance for the virtually penniless elderly (the officials are suggesting maximum assets of HK$80,000 and maximum monthly income of HK$7,340 – don’t ask why 340). It will barely make a dent in taxes. The other is for a universal pension that goes to everyone in retirement. Needless to say, this comes with the promise/threat of major tax increases.
The envisaged profits and salaries tax-hikes look big because the existing tax bases are so narrow – most companies and workers pay zero or just a few percent. We get a better idea of the burden of a universal pension from the estimate of what it would cost in terms of a sales tax. Interestingly, it works out at a GST of less than 5%, which sounds pretty reasonable. But the bureaucrats are banking on the pro-welfare lobby’s opposition to sales taxes (regressive, etc). The bureaucrats themselves detest the notion, as a GST could potentially replace land-based income, which helps keep housing costs high (a Good Thing) and generates revenues reserved for white-elephant infrastructure boondoggles (ditto).
As experience in Western countries shows, political pressure would soon push up a HK$3,320-a-month universal pension (which is too little to live on), so the costing is an issue (though didn’t seem to be a problem with the bridge/rail overruns). And most Hong Kong people will probably buy the government’s argument that it doesn’t make sense to redistribute wealth from workers to retirees ‘whether rich or poor’. The public engagement document is therefore overkill. Presumably, it is designed to ward off a more meaningful and targeted increase in assistance to the less-well-off elderly who genuinely need it. Still, they will make some extra cash gathering all the leftover copies of Retirement Protection – Forging Ahead for recycling.