For discussion
FCR(98-99)10
on 3 April 1998
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 -
- to approve an increase in the standard payments under the Comprehensive Social Security Assistance Scheme to elderly recipients by $380 (to be adjusted for inflation in accordance with (b) below) with retrospective effect from 1 April 1998;
- 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 retrospective effect from 1 April 1998;
- to approve revised levels of maximum rent allowance under the Comprehensive Social Security Assistance Scheme with retrospective effect from 1 April 1998;
- to note the financial implications of (a), (b) and (c) above, estimated at $1,276.9 million in annually recurrent expenditure; and
- to delegate to the Secretary for the Treasury the authority to approve future annual revisions to the levels of maximum rent allowance under the Comprehensive Social Security Assistance Scheme in accordance with the movement of the rent index for private housing of the Consumer Price Index (A).
PROBLEM
We need to improve financial support available to elderly recipients under the Comprehensive Social Security Assistance (CSSA) Scheme to meet their psycho-social needs. We also need to adjust the standard payments under the CSSA Scheme and the Social Security Allowance (SSA) Scheme as well as the maximum rent allowance for CSSA rent paying households to maintain the purchasing power of these payments.
PROPOSAL
2. We propose to increase with retrospective effect from 1 April 1998 -
- by $380 the monthly standard CSSA payments for all elderly recipients;
- by 4.8% the standard payments under the CSSA (including (a) above) and SSA Schemes to take account of inflation; and
- by 8.8% the maximum rent allowance under the CSSA Scheme.
3. If Members approve the above proposals, the rates of standard payments under the CSSA and SSA Schemes and the levels of maximum rent allowance under the CSSA Scheme will be as follows -
|
Category
|
Existing
($)
|
Proposed
($)
|
|
Single
person
|
Family
member
|
Single
person
|
Family member |
|
|
|
|
|
|
Standard monthly rate
|
|
|
|
|
|
|
|
|
|
|
Elderly person aged 60 or above (Note)
|
|
|
|
|
|
|
|
|
|
|
Able-bodied / 50% disabled
|
2,060
|
1,920
|
2,555
|
2,410 |
|
100% disabled
|
2,575
|
2,230
|
3,095
|
2,735 |
|
Requiring constant attendance
|
3,775
|
3,425
|
4,355
|
3,990 |
|
|
|
|
|
|
Able-bodied adult aged under 60
|
|
|
|
|
|
|
|
|
|
|
Single parent/Family carer
|
-
|
1,875
|
-
|
1,965 |
|
Others
|
1,720
|
1,535
|
1,805
|
1,610 |
|
|
|
|
|
|
Ill health/Disabled adult aged under 60
|
|
|
|
|
|
|
|
|
|
|
Ill health / 50% disabled
|
2,060
|
1,875
|
2,160
|
1,965 |
|
100% disabled
|
2,575
|
2,230
|
2,700
|
2,335 |
|
Requiring constant attendance
|
3,775
|
3,425
|
3,955
|
3,590 |
|
|
|
|
|
|
Child
|
|
|
|
|
|
|
|
|
|
|
Able-bodied
|
2,060
|
1,715
|
2,160
|
1,795 |
|
50% disabled
|
2,750
|
2,395
|
2,880
|
2,510 |
|
100% disabled
|
3,265
|
2,915
|
3,420
|
3,055 |
|
Requiring constant attendance
|
4,455
|
4,115
|
4,670
|
4,315 |
|
|
|
|
|
Note: The proposed rates are calculated by adding $380 to the existing monthly standard rates for the elderly, and then adjusting the rates upwards by the proposed inflation-related increase of 4.8%.
|
Category
|
Existing
($)
|
Proposed
($) |
|
|
|
|
Long term annual supplement (for those households in receipt of CSSA for 12 months or more)
|
|
|
|
|
|
|
Single person
|
1,530
|
1,605 |
|
|
|
|
Family comprising two to four members
|
3,060
|
3,210 |
|
|
|
|
Family comprising five or more members (please refer to paragraph 9 below)
|
4,305
|
4,305 |
|
|
|
|
Single parent supplement
|
245
|
255 |
|
|
|
|
Meal allowance per month (for students attending full-day school and taking lunch away from home)
|
210
|
220 |
|
Standard Payments under the SSA Scheme
|
|
|
Old Age Allowance
|
|
|
|
|
|
|
normal rate
(for those aged between 65 and 69)
|
595
|
625 |
|
|
|
|
higher rate
(for those aged 70 and over)
|
675
|
705 |
|
|
|
|
Disability Allowance
|
|
|
|
|
|
|
normal rate
|
1,200
|
1,260 |
|
|
|
|
higher rate
(for those in need of constant attendance)
|
2,400
|
2,520 |
|
Maximum Rent Allowance under the CSSA Scheme
|
|
|
Number of
eligible members
in the household
|
Existing level
($ per month)
|
Proposed level
($ per month) |
|
|
|
|
1
|
1,420
|
1,545 |
|
|
|
|
2
|
2,860
|
3,110 |
|
|
|
|
3
|
3,730
|
4,060 |
|
|
|
|
4
|
3,970
|
4,320 |
|
|
|
|
5
|
3,975
|
4,325 |
|
|
|
|
6 or above
|
4,970
|
5,405 |
4. We also propose to delegate to the Secretary for the Treasury the authority to approve future annual revisions to the levels of maximum rent allowance under the CSSA Scheme in accordance with the movement of the rent index for private housing of the Consumer Price Index (A) (CPI(A)).
JUSTIFICATION
Increase in standard CSSA payments for the elderly
5. The survey study commissioned by the Director of Social Welfare (DSW) indicated that a fair proportion of elderly recipients spent varying amounts of their CSSA payments on psycho-social needs such as eating-out, soup ingredients, medication, social activities, newspapers and magazines and various other social activities which are not essential needs of living that the CSSA standard payments seek to provide for. As part of our efforts to encourage the elderly to continue to lead a healthy and socially active life after their retirement, the Chief Executive announced in his 1997 Policy Address that we would increase CSSA payment to the elderly. We take this opportunity to subsume the Chinese New Year Grant and the Social and Recreational Grant, which total $550 and are paid to the elderly once every year, under the revised monthly standard payment, thereby providing the elderly with an increase of $380 per month (to be further adjusted for inflation from 1 April 1998 along with other standard payments). All elderly CSSA recipients, including those who have opted to join the Portable CSSA Scheme will benefit. After the across-the-board inflation adjustment as proposed in paragraph 2(b), the standard monthly payment for a single elderly will increase from $2,060 to $2,555 and for an elderly couple from $3,840 to $4,820 with effect from 1 April 1998.
Standard Payments under the CSSA and SSA Schemes
6. To maintain their purchasing power, we revise the rates of standard payments under the CSSA and SSA Schemes annually in accordance with the forecast increase in the Social Security Assistance Index of Prices (SSAIP). Since discrepancies between the forecast increase and the actual outturn are inevitable, it is a well established principle that if the forecast increase proves to be different from the actual increase, we should take the difference into account in calculating the adjustment for the following year.
7. Members approved, vide FCR(96-97)118, an adjustment to the CSSA/SSA rates for 1997-98 on the basis of a forecast increase of 6.5% in the SSAIP. This increase is intended to maintain the purchasing power of the rates for the various standard payments up to 31 March 1998 on the assumption that inflation in 1997-98 would be 6.5%. In the event, the actual increase turned out to be 5.0%. This has emanated from a situation where general inflation has turned out to be more moderate than earlier expected, partly as a result of the easing in the economy in the latter part of the year. We had therefore over-estimated the rate of inflation by 1.5 percentage points which means that the rates are now at levels higher than are strictly necessary to maintain their purchasing power by the same margin. Having regard to past trends and factors that might affect future price movement, the Government Economist forecasts the SSAIP for 1998-99 to increase by 4.8% over 1997-98. Following the above-mentioned principle to account for the projection discrepancy in the inflationary increase for the subsequent year, we would need to adjust the CSSA/SSA rates by 3.3% only for 1998-99, that is, deducting last year's over-estimate of 1.5% from the forecast increase of 4.8% for this year in order to maintain their purchasing power up to end March 1999.
8. We have considered the alternative of giving CSSA/SSA recipients the benefit of a full 4.8% increase with effect from 1 April 1998 on the understanding that this inflationary increase would maintain the purchasing power of the allowances for a longer period. Given an SSAIP forecast increase of 4.8% for the 12-month period of 1998-99 and the over-estimate of 1.5% for 1997-98, a straight line projection would indicate that an adjustment to the rates by the full 4.8% would be adequate to maintain the purchasing power of the existing CSSA/SSA allowances for about 16 months, say up to end July 1999. Balancing the interests of CSSA/SSA recipients and the financial implications, and having regard to the prevailing circumstances, we propose an increase of 4.8% in the standard payments under the CSSA and SSA Schemes (with the exception of the Long Term Supplement (LTS) for a family comprising five or more members as explained in paragraph 9 below) with retrospective effect from 1 April 1998 but this inflation adjustment would cover the period until end July 1999. That is to say, we will next review and adjust as appropriate the standard payments for inflation to take effect from 1 August 1999.
9. With regard to the LTS, the 1996 Review of the CSSA Scheme revealed that the annualised expenditure on replacement of major durable items by larger families (i.e. those with five or more members) is much less than the corresponding annual LTS and is in effect not significantly different from that of families with two to four members. The Review concluded that we should freeze the rate for such larger households at the then newly revised 1996-97 level until it equates with that for families with two to four members. The LTS rate for families with five or more members was subsequently frozen in 1997-98. Under the existing arrangements, CSSA recipients could where necessary apply for discretionary grants for replacement of durable household items. Records of Social Welfare Department indicated that freezing of LTS rate for larger families in 1997-98 had not led to a surge in requests for discretionary grants for replacing durable household items, thereby confirming that the current level of LTS rate for larger families is not inadequate. We therefore propose that the LTS rate for a family with five or more members should remain unchanged in this exercise.
Maximum Rent Allowance (MRA) under the CSSA Scheme
10. Rent allowance is payable as a special grant to CSSA recipients to meet the cost of accommodation. The amount of the allowance is the actual rent paid or the prescribed maximum levels, whichever is the less. Members approved, vide FCR(96-97)118, the current (1997-98) levels of MRA, pursuant to the movement of the rent index for private housing of the CPI(A). A recent analysis of the rent paid by CSSA households in private housing shows that the 1997-98 MRA levels broadly cover the rent paid by 90% of these rent-paying households.
11. Experience in the past two years since the 1996 Review of the CSSA Scheme has indicated that the rate of increase in the rent paid by CSSA households in private tenements is generally in line with the movement of CPI(A) rent index. This shows that the CPI(A) rent index for private housing is an appropriate benchmark for annual adjustment of the MRA to maintain the purchasing power of this special allowance. Having regard to the movement of the rent index for private housing of the CPI(A) over the past 12 months, DSW proposes to increase the MRA by 8.8% with effect from 1 April 1998. The Director further proposes that Members delegate to the Secretary for the Treasury the authority to revise annually, thereafter, the MRA levels in future in accordance with the movement of CPI(A) rent index for private housing, as in the case of other annual revisions to certain financial limits and special grants under the CSSA Scheme which are also approved by the Secretary for the Treasury under delegated authority in accordance with the mechanisms as approved by Finance Committee where appropriate.
FINANCIAL IMPLICATIONS
12. We estimate that the foregoing proposals will lead to an estimated additional recurrent expenditure of $1,276.9 million per year, broken down as follows -
|
|
|
$ million |
|
|
|
|
|
(a)
|
|
$380 (at 1997-98 price level) increase in standard payments to elderly CSSA recipients
|
590.0 |
|
|
|
|
|
(b)
|
|
4.8% increase in CSSA standard payments (including the inflationary adjustment to the improvement in (a) above)
|
425.6 |
|
|
|
|
|
(c)
|
|
4.8% increase in SSA standard payments
|
216.0 |
|
|
|
|
(d)
|
|
8.8% increase in MRA under the CSSA Scheme
|
45.3 |
|
|
Total
|
1,276.9 |
13. We have not allowed for the proposed price adjustments for CSSA and SSA Schemes in the respective subheads in the 1998-99 draft Estimates. This is in line with our normal practice whereby we allow for additional provision required for price adjustments during the year under Head 106 Miscellaneous Services Subhead 251 Additional commitments. Subject to Members' approval of the revised rates, we shall seek the total supplementary provision required under the respective CSSA and SSA subheads during 1998-99 towards the end of the financial year.
BACKGROUND INFORMATION
14. The social security system comprises two major schemes : the CSSA Scheme and the SSA Scheme. An explanatory note is at the Enclosure.
15. 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 -
- we use the SSAIP rather than the Consumer Price Index (CPI) since the SSAIP measures inflation according to the expenditure pattern of CSSA recipients. It consists of the same items as the CPI, except for those items such as rent, which are covered by special grants' under the CSSA Scheme. The Census and Statistics Department compiles SSAIP on a monthly basis;
- we would continue to make inflation adjustments on the basis of the forecast increase in the SSAIP. This would avoid putting CSSA recipients in the disadvantageous position of only catching up with past inflation; and
- 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. In view of the change of the annual revision date to 1 August, we will correspondingly adjust the six-month reference period for the purpose of measuring increases in the SSAIP.
16. As regards the MRA under the CSSA Scheme, it is payable as a special grant' to CSSA recipients to meet the cost of accommodation. The amount of the allowance is the actual rent paid or the maximum levels prescribed under the CSSA Scheme, whichever is the less.
Health and Welfare Bureau
March 1998
Enclosure to FCR(98-99)10
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 assist such individuals or families in meeting essential and special needs of livelihood. The aim of the Social Security Allowance (SSA) Scheme is to help the severely disabled and the elderly to meet special needs arising from disability and/or 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 except that 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 aged between 15 and 59, if unemployed and in normal health, are expected to seek work actively by registering for employment assistance with the Labour Department.
4. Starting from 1 April 1997, elderly persons aged 60 or above, who have been in receipt of CSSA continuously for three years, may join the Portable CSSA Scheme whereby they are allowed to continue to receive their monthly standard payments and annual long-term supplement should they choose to retire permanently to Guangdong.
Comprehensive Social Security Assistance Scheme
5. 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 payable.
6. The Scheme embraces different standard payments to meet the basic and general 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 for the replacement of household and durable goods. A monthly supplement is also paid to single parents in recognition of the special difficulties they face in bringing up families on their own without the support of spouses. 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.
Social Security Allowance Scheme
7. Four allowances are payable under this scheme as follows -
- Normal Disability Allowance
For severely disabled persons who, broadly speaking, suffer from a 100% loss of earning capacity, or who are profoundly deaf.
- 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.
- Normal Old Age Allowance
For persons aged between 65 and 69 whose income and assets do not exceed the prescribed levels.
- Higher Old Age Allowance
For persons aged 70 or over.
