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LCQ20: Assistance to low-income people
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    Following is a written reply by the Secretary for Labour and Welfare, Mr Matthew Cheung Kin-chung, to a question by the Hon Frederick Fung on assistance provided to low-income people in the Legislative Council today (December 19):

Question:

     Regarding the assistance provided by the Government to low-income people, will the Government inform this Council whether:

(a) it has conducted a study to understand the impact of high inflation rate on low-income families; if it has, of the results of the study; and whether it will consider bringing in more food suppliers and assisting them in competing fairly with existing suppliers in the market, so as to help to curb inflation;

(b) it has assessed the impact on low-income families when the Social Security Assistance Index of Prices fails to reflect the actual high inflation rate, and whether it will consider resuming the adoption of the method whereby the rates of Comprehensive Social Security Assistance payments are determined on the basis of the inflation forecast for the following year, and shortening the cycle for adjusting such rates from one year to six months;

(c) it will waive public housing rents immediately, and waive the rates for the whole of the next financial year, and extend the rates concession to government rent to waive the government rent of the same quarter simultaneously, subject to a ceiling of $5,000 for both waivers for each tenement per quarter; and

(d) it will consider immediately increasing the rate of disability allowance, as well as increasing the rate of transport allowance for low-income families, and providing these families with food grants?

Reply:

Madam President,

     The Government is concerned about the recent noticeable upswing in the inflation rate and its impact on low-income families.  We have provided these families with targeted assistance through different policy areas.

(a) The inflation faced by households in the relatively low, medium and relatively high expenditure groups can be measured respectively by the Consumer Price Index (CPI)(A), CPI(B), and CPI(C) compiled by the Census and Statistics Department (C&SD).  In October 2007, the year-on-year inflation rates for these three groups of households were 2.9%, 3.2% and 3.5% respectively.  In other words, the costs of living for households covered by the CPI(A) (i.e. the households with relatively lower average expenditure) would have increased by 2.9% on average over a year earlier if they have maintained the same consumption basket without substituting the slower-price-increase items for faster-price-increase items.  The lower inflation rate faced by CPI(A) households was mainly due to their slower increase in housing costs largely attributable to the rent reduction for public rental housing from August.  However, the lower income households spend a larger proportion of their income on food and hence are more affected by the recent surge in food prices.  The Government will continue to keep track of the inflation trend and its impact on households, especially those at the grassroots level.

     On food supplies, Hong Kong produces only a small portion of the food consumed locally.  Instead, we have to import nearly all of our food, including fresh food, from other places in particular the Mainland which is our main source of supply.  This being the case, food prices are determined by the market and will inevitably fluctuate subject to factors such as movements in the exchange rates, prices in the country of origin and market demand in other parts of the world.  As Hong Kong does not impose tariffs on imported food, food prices will not be inflated due to this factor.  Food products from around the world can be imported into Hong Kong for distribution according to market demand as long as they are suitable for consumption.  This brings in a wide variety of food products at varying prices to meet the demand of local customers with different spending power.  As live and fresh food is mainly sourced from the Mainland, the Administration has maintained close contact with the relevant Mainland authorities in order to ensure a stable supply.

(b) The standard payment rates of the Comprehensive Social Security Assistance (CSSA) are adjusted according to the movement of the Social Security Assistance Index of Prices (SSAIP).  The Index, which reflects the expenditure pattern of CSSA households, is specially compiled by the C&SD on a monthly basis to measure inflation/deflation experienced by CSSA households.  It consists of the same items as the CPI, except that items which are covered by special grants under the CSSA Scheme (e.g. rent) or provided free by the Government (e.g. medical treatment at public hospitals or clinics in Hong Kong) are excluded.  The movement of the Index is used as a reference for making adjustments to CSSA standard payment rates to take account of price changes in order to maintain their purchasing power.

     The Government has been closely monitoring the movement of SSAIP.  The annual adjustment cycle takes into account the movement of the SSAIP for the past 12 months ending in October each year.  The new rates will be effected in February of the following year upon the approval by the Finance Committee (FC) of Legislative Council in December.  Last Friday (December 14), we sought funding approval from the FC to increase the standard payment rates of CSSA by 2.8% in accordance with the established mechanism to maintain the purchasing power of the payment.

     We cannot resume our previous practise of making adjustment to the CSSA standard payment rates on the basis of the forecast inflation.  No matter how thorough and sophisticated the forecast is being conducted, the discrepancies between the forecast and the actual inflation are inevitable and hence will have significant impact on Government expenditure.  For example, the additional Government expenditure incurred due to the cumulative over-provision of CSSA and Social Security Allowance (SSA) payment was $8.3 billion for the six years from 1999-2000 to 2004-2005.  Where there is any over-estimation of the SSAIP, the Government would need to adjust the payment downwards so as to offset the over-estimated increase.  The recipients may find it difficult to adapt to the downward adjustment.

     If movement of the SSAIP and other economic indicators pointed to persistent high inflation, the Administration would consider seeking approval for additional inflationary adjustments to the standard payment rates ahead of the annual adjustment cycle.

(c) Regarding public rental housing (PRH) rent, the Hong Kong Housing Authority (HA) has all along been giving full regard to the affordability of tenants when determining PRH rent.  A new income-based rent adjustment mechanism to better reflect PRH tenants・ affordability has now been put in place with the passage of the Housing (Amendment) Bill 2007 by the Legislative Council in June 2007.  To enable the new rent adjustment mechanism to operate effectively, the HA reduced PRH rent by 11.6% starting from August 2007.  In addition, as the Government has waived the rates for the first two quarters of 2007/08, the HA subsequently reduced the PRH rent at an amount equivalent to the rates concession so as to benefit PRH tenants.  Following the Government・s decision to further waive the rates for the last quarter of 2007/08, the HA will deduct an equivalent amount from the rent payable by PRH tenants for January to March 2008.  PRH tenants facing temporary financial hardship may apply for rent reduction under the Rent Assistance Scheme (RAS).  Upon the HA・s relaxation of the eligibility criteria for the RAS starting from August 2007, a greater number of needy tenants could benefit from the Scheme.

     The Financial Secretary is conducting the 2008-09 Budget consultation.  We note that there are requests from the public for rates exemption in the coming financial year.  The Financial Secretary will seriously consider the relevant suggestion in preparing his Budget.

     As regards the issue of government rent, it is the rent that the relevant owners are required to pay to the Government during the term of their land leases.  Its nature is different from that of rates, which are a kind of tax.  Therefore, it is not appropriate to compare the two.

(d) The Disability Allowance (DA) under the SSA Scheme is designed to provide a monthly cash allowance to Hong Kong residents who are severely disabled to meet their special needs arising from severe disability.  The rates of DA are adjusted according to the movement of the SSAIP.  We sought funding approval from the FC last Friday (December 14) to increase the rates of DA by 2.8% with effect from February 1, 2008, in accordance with the established mechanism.  The new rates of monthly payment will be $1,170 (Normal Rate) and $2,340 (Higher Rate).  As at end-November 2007, the number of DA recipients was 120 800.  The total Government expenditure on DA in 2006-07 was about $1.72 billion.

     The Government launched the pilot Transport Support Scheme for remote districts in June this year.  We originally planned to conduct a comprehensive review of the Scheme at the end of the one-year implementation (i.e. in mid-2008).  However, in response to the community concern, the Labour Department has advanced the timing and commenced the review to gauge the progress of implementation and explore the possibility of relaxing the eligibility criteria.  We have also stepped up publicity to promote the Scheme to encourage the needy unemployed and low-income employees to apply for the Scheme.

     There are non-governmental and local organisations providing temporary in-kind food assistance to assist individuals and families in need.  For example, the People・s Canteen and People・s Food Bank operated by St. James・ Settlement provide hot meals and dry ration to those in need (including people who are unemployed, of low income, street sleepers, etc) through a network of local charities and service units.

Ends/Wednesday, December 19, 2007
Issued at HKT 11:32

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