Not forging ahead on retirement

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 SCMP-LoseLosetypically 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.

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12 Responses to Not forging ahead on retirement

  1. oldgit says:

    The Civil Service pension liabilities are so big a 3/4 of a trillion that HK will never be able to afford to pay anyone else a pension. The Civil Service made sure they came first by entrenching their pay in the Basic Law.

  2. Old Newcomer says:

    A contributory pension scheme (something like the MPF but designed to actually work) is the obvious long-term solution – as the British term National Insurance suggests, this type of scheme pays for itself in the long run (if the government keeps its greedy hands out of the kitty). The problem is the current older generation who have not paid into the scheme. However, Hong Kong, with its vast fiscal reserves, should easily be able to afford to cover this funding gap if it stops spending the money on massive mega-projects that no one here wanted or asked for. Problem solved, and the only ones unhappy are the Chinese leadership who push Hong Kong into these unnecessary prestige projects, and the construction lobby which benefits hugely from them. Even the latter group can be mollified by expanding housing construction in place of bridges and high-speed railways, thereby addressing another of Hong Kong’s real problems.

  3. Cassowary says:

    Government: “Would you like a stick of half-chewed gum or a Lamborghini that you have to pay for yourself?”
    Public: “Uh…neither?”
    Government: “Oh well then, you get bupkis! Merry Christmas!”
    Public: “WTF!?!”
    Government: “Don’t blame me, you guys didn’t reach a consensus.”

    I think there are only 2 rational responses:
    1) Call their bluff. Organise a campaign to send in thousands of responses supporting the option they obviously don’t want you to pick.

    2) Treat the consultation with the dignity it deserves and flood them with absurdist submissions. The pension should be paid out entirely in crates of Ferrero Rochers. The pension should apply only to retired Jockey Club racehorses. The means test should consist of putting old folk in an arena and making them fight to the death. We should deploy the military-grade shrink ray the PLA is obviously hiding so that the elderly can be literally accommodated in shoeboxes. Think of how much money we’d save. They’d hardly eat anything! Point and laugh as civil servants scratch their heads trying to categorise these responses.

  4. C.Law says:

    “Interestingly, it works out at a GST of less than 5%, which sounds pretty reasonable”…..
    Sure does, but the problem with GST is that experience in other countries has shown that the introduction of a “reasonable” GST inevitably leads to an unreasonable GST in due course. Although we can all agree that the tax base is too narrow, a GST is to be avoided at all costs!

  5. PD says:

    Whither HK?

    The elephant in the room is 2047, and what happens to our trillions and trillions then.

    A tunnel from HSBC to Macau to spirit the cash out? ICAC helicopter gunships on the rooftops? Or just lie back (bend over?) and try to enjoy it?

  6. reductio says:

    This kind of non-debate reminds me of CY’s attempts to build in the country parks: do you want:

    (a) more affordable homes or
    (b) keep the country parks.

    To which the obvious response is “we’ll have both, thanks” which we can do if we use abandoned schools, scrap the small house policy, and use industrial buildings. And build on private golf courses. Do the government think we are complete retards? (Don’t answer).

  7. Old Newcomer says:

    Arguments that Hong Kong’s tax base is too small usually ignore the hidden tax that everyone pays because of our runaway property prices. Most of the government’s tax revenue is derived from property transactions. Rent a home and you are paying a share of the landlord’s stamp duty and other property taxes. Go shopping and you are doing the same thing via the retailer. The lower income groups do not avoid tax, they just pay it indirectly.

  8. C.Law says:

    Old Newcomer, that’s half right but ignores the outrageous profits the property interests make out of the high property prices. We do indeed pay the equivalent of higher taxes but most of it goes to the property interests instead of the Government. Not forgetting that the biggest retailers are also part of the same property conglomerates.

  9. Enid Fenby says:

    Pensions should be given as a right for Hong Kong people putting up with the grandeeocracy which has caused them to become old and sick before their time. A special levy on the property companies would solve the problem. Socialism is coming. The unexpected is always upon us.

  10. Old Newcomer says:

    @Dr Enid (for it is obviously he) – Hong Kong has many problems, but I wonder how you square the world’s longest – or second longest depending on which figures you refer to – life expectancy with your claim of our crappy government causing people to “become old and sick before their time”. That’s one of the few things they can’t be blamed for.

  11. Nimby says:

    Old Private Beach:

    Perhaps the government shouldn’t take credit for genetics any more than it can with HK’s administrated area being restricted by the Nanjing treaty either, nor for all the hospitals built long ago (by the colonials). According to a relative who works at the Hospital Authority statistics dept, the following is mostly down to genetics and the close proximity of emergency room equipped hospitals. Hong Kong is full of extremely unhealthy and miserable elderly living(?) with one foot in the grave for far, far longer than elsewhere where they can get statistical data for comparison. Many of the local retirement homes(?) for the low income make things work by rotating up to 1/3 of their customers into hospital beds so they can hot bunk** out the bed spaces. Thus 30 bunk beds can serve 40 residents.

    I say shouldn’t, but just like Eddie Ng is happy to appropriate credit for all the money parents spent as a hidden tax on cram schools & tutors (like our own Dr. Jekyll), the politico running HK’s 2nd biggest budget is a happy to take credit for serendipitous(?) accidents not of their making while ignoring the misery that follows in their wake.

    **hot bunking is an old navy term for shared bunk beds on vessels where spaces is at a premium like submarines. A sailor coming off shift would tumble into a bed still warm from the heat of the previous occupant.

  12. Laguna Lurker says:

    I love the government’s choice of the verb “forging”, which can be interpreted pretty much as one sees fit.

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