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Following is a question by the Hon Emily Lau and a written reply by the Financial Secretary, Mr John C Tsang, in the Legislative Council today (December 19):
Question:
According to the statistics released by the Census and Statistics Department on November 22, the year-on-year increases in the prices of pork and beef in the Composite Consumer Price Index for October were 28.3% and 31.3% respectively. Moreover, Ng Fung Hong Limited raised the wholesale price of live pigs by 8% in late November, and there is pressure for beef prices to rise because of the unstable supply of live cattle to Hong Kong. I have learnt that rising fresh food prices have imposed a heavy burden on the grass roots. In this connection, will the Executive Authorities inform this Council:
(a) of the measures in place to tackle the surge in fresh food prices;
(b) whether they have assessed the impact of the sharp rise in fresh food prices on the grass roots; if so, of the assessment results; and
(c) of the measures in place to ease the economic pressure arising from the rise in fresh food prices on the grass roots?
Reply:
Madam President,
After consolidating the responses from the Secretary for Food and Health and the Secretary for Labour and Welfare, I set out my reply as follows:
(a) Hong Kong produces only a small portion of the food consumed locally and we have to import nearly all of our food, including fresh food, from the Mainland or many other places. Food prices are determined by the market and will inevitably fluctuate with factors such as movements in the exchange rates as well as changes in market demand and supply in other parts of the world. As Hong Kong does not impose tariffs or other taxes 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 consumers 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 impact of rising food prices on the grassroots can be estimated based on the household expenditure patterns obtained in the "2004/05 Household Expenditure Survey" conducted by the Census and Statistics Department. Households in the first and second deciles (i.e. the lowest and second lowest 10% expenditure groups) spent, on average, 35.7% and 33.8% respectively of their expenditure on food, including their expenditures on basic foodstuffs and meals bought away from home. In October, food prices rose by 7.4% over a year earlier, of which basic foodstuffs by 13.1% and meals bought away from home by 3.2%. As a result, households in the first and second deciles would have to increase their total household expenditure by 2.6% and 2.5% respectively if they are to maintain the same level of food consumption. For reference, households covered by the Consumer Price Index (A) (CPI(A)), which relates to households with relatively low expenditure and accounts for about 50% of all households in Hong Kong, spent about 32.1% on food and would incur an increase of 2.4% in expenditure compared to a year earlier due to food inflation.
Specifically, the impact of the recent large increases in pork and beef prices on household budget can also be assessed. Households in the first and second deciles spent 2.5% and 2.2% respectively of their budget on fresh pork, and both groups spent 0.3% of their budget on fresh beef. In October, pork and beef prices rose by about 28% and 31% respectively over a year earlier. Assuming that these households would not substitute fresh pork and beef with food items of lower price increases, they had to increase their total household expenditure by 0.8% and 0.7% respectively, compared to 0.5% for CPI(A) households, due to these price increases.
The Government will continue to keep track of the food price trend and its impacts on households especially those at grassroots level.
(c) The Government is very concerned about the well-being of the grassroots (including low-income workers, needy elders and the other disadvantaged groups), and fully understands that recent price rises, particularly increase in fresh food prices, have brought pressure to their livelihood. The Government has put forward a number of measures since early this year. These measures have helped relieve the burden brought about by inflationary pressures on the public. They include the public housing rental waiver in February; rates concession in the second and third quarter; rent reduction for public housing rental since August; as well as the implementation of the Pre-Primary Education Voucher Scheme in September. These measures would altogether lower the increase in the Composite Consumer Price Index (CCPI) for 2007 by 0.9 of a percentage point. On top of this, the rates concession in the last quarter of the financial year 2007/08 as announced in the Policy Address would render a further relief to the burden of households and will directly suppress the CCPI in 2008 by 0.3 of a percentage point. In addition, the Labour and Welfare Bureau has sought funding approval from the Finance Committee last week to increase the standard payment rates of Comprehensive Social Security Assistance (CSSA) by 2.8%, in accordance with the established mechanism to maintain the purchasing power of the payment. If movement of the Social Security Assistance Index of Prices and other economic indicators pointed to persistent high inflation, the Administration might consider seeking approval for additional inflationary adjustments to the standard rates of CSSA, ahead of the annual adjustment cycle.
We will continue to monitor the price trend, and review in a timely manner the adequacy of the support provided to the underprivileged. The Government is conducting a comprehensive consultation on the 2008/09 Budget and will consider if there is a need to roll out relevant measures to ease the economic burden of the needy.
At the same time, the Government would continue to alleviate poverty. With regard to the one-year pilot Transport Support Scheme for remote districts launched in June this year, the Government previously planned to conduct a comprehensive review after one year of implementation (i.e. in mid-2008). However, in response to public feedback, the Labour Department has advanced the review to gauge the progress of implementation and explore the possibility of relaxing the eligibility criteria. Meanwhile, we have also stepped up publicity to promote the Scheme.
In the long run, the most effective and fundamental way to improve the conditions of the grassroots is to foster overall economic development to create new employment opportunities, which will in turn raise the income of the grassroots and keep down inflation pressures. Thanks to the economic recovery and sustained economic growth over the past few years, there has been a continuous decline in the number of low-income employees. This shows that promoting economic growth and creating employment is a move in the right direction. Pushing ahead with the 10 large-scale infrastructure projects will bring about many employment opportunities. We will also strengthen and integrate employment and training/retraining services to enhance the ability of the disadvantaged to achieve self-reliance and adapt to economic restructuring. Moreover, the Administration will try new modes, including promotion of tripartite partnership among the business, the community and the Government to develop social enterprises, so as to help low-skilled workers with employment difficulties to re-enter the labour market.
Ends/Wednesday, December 19, 2007
Issued at HKT 12:30
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