A proposal to end the standoff on the Old Age Allowance issue
Updated: 2012-10-09 07:13
By Ho Lok Sang(HK Edition)
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In my earlier discussions on family allowance, I have proposed a "graduated fading off" approach of benefits beyond an eligibility threshold. We can apply the same principle to end the standoff on the Old Age Allowance issue.
The government has proposed that the elderly poor aged 65 and over who satisfy an income and asset limit test would enjoy an old age allowance of HK$2,200 per month, up from HK$1,090. Virtually all political parties now are demanding that the proposed doubled allowance be extended to all elderly who meet the residency and age requirements. In support of that demand, legislators are threatening to vote down the proposal. If that should happen, it would be a serious let-down for the elderly, not to mention the another setback for the Leung administration.
According to the proposal, the more generous old age allowance is different in spirit from the non-means tested "fruit money", which was just raised to HK$1,090 per month for those aged 70 or above early this year. The means-tested HK$2,200 includes a poverty-relief element, and must therefore be targeted at those who truly are poor. For this reason, a means test is necessary.
The government has insisted that the income and asset test will be generous and administratively simple, requiring only a declaration from the elderly that their incomes and assets are no higher than the stated threshold requirements. In view of the rapidly aging population, abandoning all means tests will lead to an escalation of costs to unaffordable levels in the not too distant future.
The proposed income limit at HK$6,660 a month is indeed generous, especially in view of the fact that living allowances received from one's children, relatives, and friends will not be taken into account. The asset limit of HK$186,000 for one person cannot, however, be considered generous at all, if he does not own any real property.
The government is very generous in exempting a self-occupied property from counting as one's assets and not counting his imputed rental income (rent that he saves due to owning the property) as income. The proposal allows an elderly person who lives on his own property and enjoying a monthly income of say HK$6,500 to pocket a non-contributory HK$2,200 per month. This is clearly very generous. He would have HK$8,700 to spend and has no rent to pay. He is definitely quite well-off. It appears to me that the government is too generous to him.
However, consider an elderly person without income and without property living in a rented room, but having in his bank account HK$187,000. Such an elderly individual is definitely living in poverty while the elderly person described in the previous paragraph is not. But this elderly individual is ineligible to claim the HK$2,200. If he is below age 70, he cannot even collect HK$1,090.
The government is too mean to the latter and too generous to the former. To me, the government should assume that the elderly person owning his own flat already enjoys at least a HK$3,000 monthly income. Owning his own flat certainly will spare the elderly person amounting to at least HK$3,000. The government perhaps is doing the right thing not to count the self-occupied home as an asset, since it cannot expect an elderly person to sell his flat to maintain his living. But it is definitely too generous not counting his saved rent as income.
For an elderly person who does not own his own home, HK$186,000 is only a tiny amount. If he does not have an income, that amount of asset value can sustain him only for a short time, and it may be used up readily should he fall seriously ill. I would argue that failing this asset test should not disqualify him completely from poverty relief.
By being less generous on the homeowners by counting the saved rent (for administrative simplicity I would recommend setting a standard amount, such as HK$3,000) as income, we can be more generous to non-homeowners. For non-homeowners, I would not totally disenfranchise an elderly person from poverty relief simply because his assets exceed HK$186,000. I would reduce the poverty relief only by graduated amounts. Only when an elderly person's assets go beyond HK$286,000 would I totally cut off the poverty relief.
The Leung administration set out to serve the needy. It should take that extra step to distinguish the truly needy from the well-off. Being overly generous to some is not the same as being generous to all. Let us hope that the government, as well as the legislators, will act wisely, truly combining fiscal prudence with effective poverty relief.
The author is director of the Centre for Public Policy Studies, Lingnan University.
(HK Edition 10/09/2012 page3)