WORLD

Checks and balance

Matthew Cheung argues that means testing for the proposed additional allowance for the elderly is needed to ensure the governments limited resources go to those really in need It is not and cannot be an open- ended, blank- cheque extension of the current fruit money
spending that are also important to society such as health care, social and welfare services, aged care, education and security. We thus need to adopt prudent fiscal management and balance these competing needs. The argument against a means test neglects the fact that, while there are people with genuine needs who could really do with an extra HK$ 1,100 or so each month as is proposed under the new plan there are also those aged 70 and above who really do not need it. If I have HK$ 1,000 to split between 10 people, how can I do the most good with that money? Do I split it evenly among all 10 people, or do I give it to those who need it most? The current fruit money takes the needs- blind approach of splitting the pie evenly among all recipients reaching 70 years of age. Let me stress that this will not change all in this age group can still receive the HK$ 1,090 a month in fruit money without having to declare their means. We know this payment is commonly regarded as a token recognition of the contribution to society that these people have made over many decades, and we consider this a fair approach. The new allowance, though, is an additional financial support measure for the elderly which aims to do the most good for those in greater need. With all the debate about a means test, it is worth noting that those aged between 65 and 69 who want to receive fruit money must already meet the rather liberal criteria regarding their financial means. These people will automatically qualify for the HK$ 2,200 allowance when it is introduced, and will continue to be eligible for it as long as the declaration of their income does not change. This leaves us with people aged 70 or above who are receiving fruit money and want to sign up for the new allowance. What are we asking them to do? Not much really.

We are asking them to sign a simple declaration of income and assets which, as mentioned already, is the same as that for the fruit money recipients of between 65 and 69 years old. These are the criteria: applicants should be aged 65 or above and meet residence requirements; for a single elderly person, the monthly income limit is HK$ 6,660 while the asset limit is HK$ 186,000; for a married couple, the monthly income limit is HK$ 10,520 while the asset limit is HK$ 281,000. Moreover, owner- occupied property and money received from family members, relatives or friends are excluded from the definition of assets and income. These are very liberal criteria designed to benefit as many people as possible, within reason and within the scope of limited government financial resources. We estimate that over 400,000 elderly people will be eligible for the oldage living allowance in the first year. The projected additional government spending for the first year would amount to some HK$ 6.2 billion which would be equivalent to a 14 per cent increase in recurrent welfare spending for 2012- 13, or a 2.3 per cent increase in the total recurrent government spending. Because of the ageing population, we estimate that spending on the new allowance would increase by about half to HK$ 9.6 billion in 10 years time. But if we do not require applicants to declare their means, the cost would jump immediately to almost HK$ 13.6 billion if we use 65 as the benchmark year, or HK $ 10 billion for a benchmark year of 70. With a rapidly growing elderly population, the extra financial costs will balloon in the future. An ageing population poses great challenges to our welfare and health care system. Demand for hospital beds, residential care places and community care services for the elderly will all increase. Against this background, we have to use

Alleviation of poverty among the elderly ranks highly on the governments agenda. To implement his election manifesto, the chief executive has announced a plan to introduce a new oldage living allowance of HK$ 2,200 per month for elderly people in need. Since then, there has been some misunderstanding about the objective of this new allowance, with the debate centring around why those aged 70 and above have to declare their financial means to receive the allowance. The argument goes that because those aged 70 or above already receive an old- age allowance ( commonly referred to as fruit money) without a means test, they should not have to satisfy a means test to receive the new allowance. What this argument glosses over is the fact that this is a new type of allowance, and its objective is entirely different from that of the fruit money. The new allowance also comes with new demands on financial resources. It is not and cannot be an openended, blank- cheque extension of the current fruit money because it is simply not the same thing it is a new allowance to alleviate elderly poverty. There are always limits on government spending plans. If we take an open- ended approach with the new allowance, as suggested, this will inevitably affect other areas of

our limited resources in a targeted and effective way. We will continue to enhance various non- cash- based social welfare, such as the heavily subsidised health care and welfare services, and public housing. When the new- term Legislative Council commences this week, we will brief the Legco panel on welfare services at the earliest opportunity about the new allowance and seek funding approval from the Finance Committee at its first meeting on October 26. If funding approval can be obtained within this month, the new allowance can be launched in the first quarter of next year and those eligible will receive a lump- sum payment in arrears from this month. Matthew Cheung Kin- chung is secretary for labour and welfare