For discussion FCR(96-97)3
on 12 April 1996

ITEM FOR FINANCE COMMITTEE

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

Members are invited -

1. to approve a package of improvements to the Comprehensive Social Security Assistance Scheme with retrospective effect from 1 April 1996;
2. to note the financial implications of (a) above, estimated at $475 million in annually recurrent expenditure; and
3. to delegate to the Secretary for the Treasury the authority to approve future annual revisions of the asset limits and the maximum level of disregarded earnings under the Comprehensive Social Security Assistance Scheme in accordance with the mechanisms set out in paragraph 16.

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PROBLEM
PROPOSAL
JUSTIFICATION

Real increases in standard rates for specific categories of recipients
New special grants for the elderly
Flat rate grant for students for selected items of school-related expenses
Maximum rent allowance
Asset limits
Disregarded earnings
Delegation of authority to the Secretary for the Treasury

FINANCIAL IMPLICATIONS
BACKGROUND INFORMATION
The Comprehensive Social Security Assistance Scheme

Introduction
Eligibility
Payment

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PROBLEM

We need to introduce improvements to the Comprehensive Social Security Assistance (CSSA) Scheme following a comprehensive Review completed recently.

PROPOSAL

2. We propose the following improvements to the CSSA Scheme with retrospective effect from 1 April 1996 -

1. to increase the standard rates for able-bodied adults, elderly persons living in a family and 50% disabled adults living in a family;
2. to introduce a special grant of $320 a year for recreational and social activities and a Chinese New Year special grant of $200 a year for elderly recipients;
3. to introduce a flat rate grant for students for selected items of school-related expenses;
4. to increase the levels of maximum rent allowance;
5. to revise the asset limits; and
6. to raise the maximum level of disregarded earnings from $1,210 to $1,615 per month.

3. We also propose to delegate to the Secretary for the Treasury the power to authorize annual revisions to items (e) and (f) above in accordance with the mechanisms set out in paragraph 16.

JUSTIFICATION

Real increases in standard rates for specific categories of recipients

4. We have reviewed the standard rates for different categories of recipients by drawing on the 12-month data from the Household Expenditure Survey which ended in September 1995. For the purpose of the Review, we compared the current levels of CSSA benefits with the actual spending patterns of CSSA recipients and of those in the low income groups. As a cross-check, we also compared the current levels of CSSA benefits with the cost of baskets of goods and services constructed to represent the basic needs for food and non-food items of various categories of CSSA customers. The results of both comparisons indicate the need to increase the standard rates for certain categories of recipients, namely, elderly persons living in a family, 50% disabled adults living in a family and able-bodied adults.

5. Broadly speaking, there are two categories of able-bodied adults under the CSSA Scheme. One category covers single parents, family carers and adults in ill-health who are unable and not expected to work; a substantial increase in their CSSA rates should not create a disincentive to work. The other category covers those who are able and expected to work. For these people, the level of CSSA payments should be sufficiently lower than the monthly wages earned by the lowest paid workers so as to avoid creating any disincentive to work.

6. Based on the findings and the considerations set out above, we propose to increase the monthly standard rates -

1. by $600 for single parents, family carers and adults in ill-health;
2. by $300 for other able-bodied adults who are expected to work;
3. by $180 for elderly persons living in a family; and
4. by $140 for the 50% disabled adults living in a family.

We shall adjust the above increases for inflation by 7% as approved by Members on 9 February 1996 in considering FCR(95-96)127.

7. If Members approve the proposals, the revised standard rates for these specific categories of recipients with effect from 1 April 1996, inclusive of the 7% inflation adjustment approved, will be as follows -

New special grants for the elderly

8. To encourage socialisation, we recommend that a special grant of $320 a year be payable to elderly recipients for social and recreational activities on a reimbursement basis. We also recommend introducing a special grant of $200 a year for elderly recipients to cover extra expenses incurred by them during the Chinese New Year.

Flat rate grant for students for selected items of school-related expenses

9. To overcome problems faced by students on CSSA when applying for special grants for school-related expenses, we recommend the introduction of a flat rate grant for selected items of such expenses (i.e. books, stationery, school uniforms, miscellaneous and minor one-off expenses). We shall set the grant at a level whereby 90% of the recipients will receive no less than what they are receiving under the current system. We shall have arrangements in place to meet the needs of those students whose actual expenses exceed the flat rate grant.

10. Accordingly, from the 1996-97 school year, we shall provide flat rate grants for selected items of school-related expenses to students up to the upper secondary level at the following rates -

At these rates, most students will receive an average additional payment of about $1,500 a year.

Maximum rent allowance

11. The Review concluded that the method of setting the maximum rent allowance at levels equivalent to 150% of the highest public housing rents, previously endorsed by Members, was no longer appropriate for CSSA recipients living in private housing. In order to ensure that the rent allowance would cover the actual rents paid by the great majority of CSSA households living in private housing, the maximum levels should reflect the actual rents paid by the 90th percentile of these households. To achieve this objective and based on an analysis of rents currently paid by CSSA recipients living in private housing, we propose to increase the levels of maximum rent allowance as follows -

Asset limits

12. For the purpose of determining eligibility for CSSA under the current system, we classify capital assets into two categories, namely,

1. cash, savings, investments, easily realizable assets and valuable possessions; and
2. real property not occupied by the applicant.

13. The Review recommended that the existing system should be simplified by removing the category of real property not occupied by the applicant. At the same time, the existing limit for cash, savings, investments, easily realizable assets and valuable possessions for a single person should be raised from $26,650 to $33,000. An additional $16,500 should be allowed for each additional eligible member of a household.

14. Accordingly, the asset limits for one-person to six-person households in 1996-97 will be as follows -

Disregarded earnings

15. On 17 February 1995, when considering FCR(94-95)115, Members approved the proposal to raise the maximum level of disregarded earnings from $835 to $1,115 per month to provide CSSA recipients with a greater incentive to enter and remain in the labour market. That level is equivalent to 100% of the monthly standard rate for a single able-bodied adult. Subject to Members’ approval of the improvement to the standard rate for a single able-bodied adult to $1,615 per month, we propose to increase the maximum level of disregarded earnings from $1,210 to $1,615 per month.

Delegation of authority to the Secretary for the Treasury

16. We shall seek Members’ approval for annual adjustments to CSSA standard rates and the rent allowance. In order to maintain the real value of asset limits and disregarded earnings, we propose that Members delegate to the Secretary for the Treasury the authority to revise them annually according to the following mechanisms -

1. for asset limits, in accordance with the movement of the Consumer Price Index (A) (CPI(A)); and
2. for the maximum level of disregarded earnings, at a level equivalent to 100% of the standard rate for single able-bodied adults.

As regards the new special grants for the elderly and students, the Director of Social Welfare will exercise his discretionary power in relation to special grants under the present system to adjust the payment rates annually in accordance with the CPI(A).

FINANCIAL IMPLICATIONS

17. On the basis of the current projections of caseload for 1996-97, we estimate that the proposals will result in additional recurrent expenditure of $475 million a year, broken down as follows -

18. In the 1996-97 draft Estimates, we have included sufficient provision under Head 170 Social Welfare Department Subhead 179 Comprehensive social security assistance scheme for implementing improvements to the CSSA standard rates as announced by the Governor in his 1995 Policy Address. We have earmarked funds under Head 106 Miscellaneous Services Subhead 251 Additional commitments for the further improvements announced by the Financial Secretary and the across-the-board inflation adjustment. In line with our normal practice, we shall seek the total supplementary provision required under Subhead 179 towards the end of the 1996-97 financial year.

BACKGROUND INFORMATION

19. The CSSA Scheme provides a safety net for individuals and families who are unable to support themselves financially. An explanatory note is at the Enclosure.

20. In his 1994 Policy Address, the Governor asked the Secretary for Health and Welfare to conduct an in-depth study of the CSSA Scheme to assess how effectively the current arrangements and the benefits it provides are meeting the needs of its customers. For this purpose, a Steering Group was set up in March 1995 under the chairmanship of the Director of Social Welfare.

21. Based on the interim results of the Review, the Governor announced in his 1995 Policy Address improvements to the standard rates for certain categories of CSSA recipients to be effective from 1 April 1996 at an estimated cost of $300 million a year.

22. The Steering Group completed the Review of the CSSA Scheme in February 1996. Based on the detailed findings and recommendations of the Review, the Financial Secretary announced in his Budget Speech on 6 March 1996 additional improvements to the CSSA Scheme which would cost an extra $200 million a year (including the additional staff required). We published the Report on the Review of CSSA Scheme on 8 March 1996 and distributed it to Members on the same day.

Health and Welfare Branch
April 1996

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Enclosure to FCR(96-97)3

The Comprehensive Social Security Assistance Scheme

Introduction

The Comprehensive Social Security Assistance Scheme provides a safety net for individuals or families suffering from financial hardship for reasons such as old age, disability, illness, unemployment, low earnings, etc. It aims to bring the income of such individuals or families up to a prescribed level where essential and special needs can be met.

Eligibility

2. The Scheme is non-contributory and means-tested. There is no fixed income level for determining eligibility. Applicants are required to satisfy a one-year residence requirement. In addition, unemployed adults in normal health and available for work are expected to seek work actively by registering for employment assistance with the Labour Department.

Payment

3. The Scheme embraces different standard rates to meet the basic needs, such as food, fuel and light, clothing and footwear, of broad categories of recipients.

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

5. In addition, a monthly supplement is paid to single parents in recognition of the special difficulties they face in bringing up families on their own without the support of spouses. An annual long-term supplement is paid to those who have been receiving assistance continuously for more than 12 months for the replacement of household and durable goods.

6. 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 or family. They include payments to cover such expenses as rent, school fees and other educational expenses, medically recommended diets, spectacles and dentures.

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