FCR(98-99)62

For discussion
on 15 January 1999

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 supplementary provision of -

  1. $1,645.8 million under Subhead 179 Comprehensive social security assistance scheme; and

  2. $244.3 million under Subhead 180 Social security allowance scheme.

PROBLEM

The approved provision for the Comprehensive Social Security Assistance (CSSA) and Social Security Allowance (SSA) Schemes are inadequate to meet increased expenditure in 1998-99.

PROPOSAL

2. The Director of Social Welfare (DSW) proposes supplementary provision of $1,645.8 million under Subhead 179 Comprehensive social security assistance scheme and $244.3 million under Subhead 180 Social security allowance scheme.

JUSTIFICATION

3. On the basis of the actual expenditure for the eight months from April to November 1998, DSW estimates that expenditure for the whole financial year on the CSSA and SSA Schemes will exceed the approved provision by $1,645.8 million and $244.3 million respectively, calculated as follows -



CSSAScheme
($ million) 		SSA Scheme
($ million)

(a) Expenditure from 1 April to30 November 1998 8,455.2 3,147.1

(b) Estimated expenditure from1 December 1998 to31 March 1999 4,669.6 1,598.0

(c) Estimated total expenditurefor 1998-99 [(a)+(b)] 13,124.8 4,745.1
Less(d) Approved provision 11,479.0 4,500.8

(e) Estimated shortfall [(c)-(d)] 1,645.8 244.3

CSSA Expenditure

4. Recent years saw a rapid growth in CSSA expenditure. In 1993-94, we spent $2,443 million on the CSSA Scheme. The expenditure rose to $9,441 million in 1997-98, an increase of nearly three times. This upward trend is due to the significant real improvements made to the scheme over the period and a significant increase in the number of paid cases. The trend of growth continues into 1998-99. The approved provision for the CSSA Scheme for the current financial year was $11,479 million. This is now clearly inadequate to meet the total expenditure for the year. We estimate that CSSA spending is likely to reach $13,125 million this year. This represents an excess of 14% over the approved provision which has to be met through supplementary provision.

5. The additional requirement of CSSA provision for 1998-99 is due partly to the across-the-board increase of 4.8% in the standard rates with effect from 1 April 1998 to take account of the then forecast inflation and the general price increases in special grants in the year. The increases in standard rate and special grant payments as a result of those adjustment amount to $419 million and $77 million respectively. However, the bulk of the additional provision sought in 1998-99 is due to the following reasons -

  1. Rapid Increase in CSSA Caseload and Number of Recipients

    The current levels of payment, coupled with the increased public awareness and changes in people's attitude toward CSSA, have resulted in a substantial growth in CSSA caseload in recent years. The rapid growth in CSSA cases and recipients registered so far this year results in the number of paid cases exceeding the projections made in support of the financial provision sought for CSSA in the 1998-99 approved Estimates. The estimate for the provision required for 1998-99 was based on an estimated increase of 15% in CSSA cases. But the actual number of cases has already increased by 15% from 184 400 to 211 700 between end March and end November 1998. Latest projections are a 20% increase in CSSA cases for 1998-99. The amount of supplementary provision required to meet this revised projection is $618 million.

  2. A Higher than Expected Average Payment Per Case

    Total CSSA expenditure is affected not only by the number of paid cases, but also the average payment per case which in turn is determined by the family size and profile of the recipient household. In recent years, we have seen a significant increase in the number of CSSA cases involving larger households. To illustrate, in 1995, single-person cases made up about 77% of our total caseload. But it dropped to about 65% in 1998. On the other hand, the share of CSSA families comprising three members or more increased from 12% in 1995 to 20% in 1998. While most of the elderly cases continue to be single-person cases, more family applicants come onto the CSSA Scheme under the categories of "unemployed", "single parents" or "low earnings". We saw a surge of such cases in the past few years with their share in the total CSSA cases growing from 14% in 1995 to 25% in 1998. As a result, the average number of recipient per CSSA case for all categories increased from 1.5 in 1995 to 1.7 in 1998. The increase in the average size of CSSA households means a higher average standard rate payment per case and has resulted in additional requirement for CSSA provision. With the increase in the number of recipients in each CSSA case, payment for special grants such as those for student-related expenses and rent also registered an increase.

    In estimating the provision required for 1998-99, we assumed an average payment of $5,090 per case ($4,860 at 1997-98 price level). Based on the actual payments up to November 1998, we expect the average payment per case to rise to $5,290, which is 3.9% higher than our earlier assumption. The increases in the average size of CSSA households and in special grants together account for $532 million of the supplementary provision required.

SSA Expenditure

6. As regards the SSA Scheme, the supplementary provision required is mainly due to an across-the-board increase of 4.8% in the rates of payment with effect from 1 April 1998 to take account of the forecast inflation, and the number of SSA recipients being slightly above our projection.

FINANCIAL IMPLICATIONS

7. We are seeking total supplementary provision of $1,890.1 million under Subheads 179 and 180. If Members approve the proposal, we shall offset the supplementary provision required by deleting an equivalent amount under Head 106 Miscellaneous Services Subhead 251 Additional commitments.

BACKGROUND INFORMATION

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

9. On 3 April l998, Members approved an across-the-board increase of 4.8% in the rates of standard payments under the CSSA and SSA Schemes to take account of inflation, and accepted the financial implications of $425.6 million a year for CSSA and $216 million a year for SSA. Members noted that these financial implications were estimated on the basis of the caseload prevailing at that time. We informed Members that we would seek supplementary provision, including any additional requirements for non-standard payments, later in the year.

10. We have carried out a review to examine the operation of the CSSA Scheme and recommended for public consultation a package of measures to help the unemployed recipients re-enter the labour market, and to remove from the system work disincentives to ensure that CSSA will not become a preferred option and a long-term shelter for the employable recipients. Subject to the views of the community collated from the public consultation ending 20 January 1999, we intend to implement our recommendations in 1999-2000.



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Health and Welfare Bureau
January 1999




Enclosure to FCR(98-99)62


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 prescribed level where essential 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.

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.

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 assessable income and his total needs as determined by reference to certain prescribed levels, will be the amount of assistance payable.

5. The CSSA 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.

6. With effect from 1 April 1997, elderly recipients aged 60 or above who are permanent Hong Kong residents and who have been receiving CSSA continuously for three years are allowed to continue to receive their monthly standard rate payment and annual long-term supplement if they choose to leave Hong Kong to take up permanent residence in Guangdong Province in the Mainland of China.

Social Security Allowance Scheme

7. 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.