For discussion FCR(95-96)127
on 9 February 1996

ITEM FOR FINANCE COMMITTEE

HEAD 170 - SOCIAL WELFARE DEPARTMENT
Subhead 179 Comprehensive social security assistance scheme
Subhead 180 Social security allowance scheme

Members are invited -

1. to approve revised rates of standard payments under the Comprehensive Social Security Assistance scheme and the Social Security Allowance scheme to take account of inflation with effect from 1 April 1996; and
2. to note the financial implications estimated at $593.2 million in annually recurrent expenditure.

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PROBLEM
PROPOSAL

Comprehensive Social Security Assistance

JUSTIFICATION
FINANCIAL IMPLICATIONS
BACKGROUND INFORMATION
Social Security System

Introduction
Eligibility
Comprehensive Social Security Assistance scheme
Social Security Allowance scheme

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PROBLEM

We need to adjust the standard payments under the Comprehensive Social Security Assistance (CSSA) scheme and the Social Security Allowance (SSA) scheme to maintain the purchasing power of these payments.

PROPOSAL

2. We propose an increase of 7% in the standard payments under the CSSA and the SSA schemes to take account of inflation with effect from 1 April 1996.

3. If Members approve the proposal, the rates of standard payments under the CSSA and the SSA schemes will be as follows -

Comprehensive Social Security Assistance

JUSTIFICATION

4. To maintain their purchasing power, we revise the rates of standard payments under the CSSA and the SSA schemes annually in line with the forecast increase in the Social Security Assistance Index of Prices (SSAIP). If the forecast increase proves to be different from the actual increase, the difference will normally be taken into account in calculating the adjustment for the following year. However, in the previous three years when on each occasion the actual increase turned out to be smaller than the forecast increase, we have not deducted the over-estimate of the preceding year from the forecast increase for the following year so as to give CSSA recipients the full benefit of the forecast increase.

5. Members approved the existing rates in February 1995 on the basis of a forecast increase of 8.5% in the SSAIP between the middle of 1994-95 and the middle 1995-96. The actual increase was 6.2%. We therefore over-estimated the rate of inflation by 2.3%. Having regard to past trends and factors that might affect future price movement, the Government Economist forecasts that the SSAIP will rise by 7% from the middle of 1995-96 to the middle of 1996-97.

6. To deduct last year’s over-estimate of 2.3% from the forecast increase of 7% for this year would give a rate adjustment of 4.7% across the board. However, in line with recent years’ practice, we feel that we should discount this factor in determining the rate of adjustment for 1996-97. Accordingly, we propose a 7% adjustment across the board.

FINANCIAL IMPLICATIONS

7. On the basis of the current projection of caseload for 1996-97, we estimate that the proposal will result in additional recurrent expenditure of $593.2 million per year, broken down as follows -

8. In line with normal practice, we do not allow for price adjustments in the original Estimates. Therefore, the relevant subheads for the CSSA and SSA schemes in the 1996-97 draft Estimates will not include specific provision for the across-the-board inflation adjustment. As usual, we would deal with any net additional provision that may be required during 1996-97, including any additional requirement for non-standard payments, through supplementary provision.

BACKGROUND INFORMATION

9. The social security system comprises two schemes : the CSSA scheme and the SSA scheme. An explanatory note is at the Enclosure.

10. In considering the annual rate adjustment on 11 March 1994, vide FCR(93-94)147, Members noted the methodology for making inflation adjustments to the standard payments under the CSSA and SSA schemes which has the following key features -

1. we use the SSAIP, rather than the Consumer Price Index (CPI), since the SSAIP is based on the expenditure pattern of CSSA recipients. It consists of the same items as the CPI, with the exception of items such as rent, which are paid separately in the form of special grants under the CSSA scheme. It is compiled by the Census and Statistics Department on a monthly basis;
2. we would continue to make inflation adjustments on the basis of the forecast increase in the SSAIP. This would avoid CSSA recipients being put in the disadvantaged position of only catching up with past inflation; and
3. we would measure increases in the SSAIP by comparing the average index for the six-month period from July to December in the previous year with that forecast for the same period in the current year.

11. The Governor announced in his 1995 Policy Address a number of proposed improvements to the rates of CSSA standard payments from 1 April 1996. These proposals will be the subject of a separate submission to Members for approval in due course.

Health and Welfare Branch
January 1996

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Enclosure to FCR(95-96)127

Social Security System

Introduction

The social security system provides a safety net for individuals or families suffering financial hardship for various reasons, such as old age, disability, illness, unemployment, low earnings, etc. The aim of the Comprehensive Social Security Assistance (CSSA) scheme is to bring the income of such individuals or families up to a level where basic and special needs can be met. The aim of the Social Security Allowance (SSA) scheme is to help the severely disabled and the elderly to meet the special needs which arise from disability and old age. A person can receive either assistance under the CSSA scheme or one of the allowances under the SSA scheme.

Eligibility

2. Both schemes are non-contributory. The CSSA scheme is means-tested. Applicants for SSA are not subject to a means test; but persons aged between 65 and 69 claiming the Old Age Allowance have to declare that their income and assets do not exceed the prescribed levels.

3. There are residence requirements for both schemes. In addition, applicants for CSSA, if unemployed and in normal health, are expected to seek work actively by registering for employment assistance with the Labour Department for at least one month after the date of application.

Comprehensive Social Security Assistance scheme

4. The amount of assistance is determined by the resources and needs of the applicant. The difference between the applicant’s income and his total needs as determined by reference to certain prescribed levels, will be the amount of assistance given.

5. The scheme embraces different standard payments to meet the basic needs of broad categories of recipients. In addition, an annual long-term supplement is paid to those who have been receiving assistance continuously for more than 12 months. Apart from these standard payments, a wide range of non-standard payments in the form of special grants are payable to meet the specific needs of an individual client or family. They include payments to cover such expenses as rent, school fees and other educational expenses, medically recommended diets, spectacles and dentures.

Social Security Allowance scheme

6. Four allowances are payable under this scheme as follows -

1. Normal Disability Allowance

   For severely disabled persons who, broadly speaking, suffer from a 100% loss of earning capacity, or who are profoundly deaf.

2. Higher Disability Allowance

   For severely disabled persons who require constant attendance from others in their daily life but are not receiving such care in a government or subvented institution or a medical institution under the Hospital Authority.

3. Normal Old Age Allowance

   For persons aged between 65 and 69 whose income and assets do not exceed the prescribed levels.

4. Higher Old Age Allowance

   For persons aged 70 or over.

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