Following is a question by the Hon Nick Chan and a written reply by the Secretary for Financial Services and the Treasury, Mr Christopher Hui, in the Legislative Council today (March 25):
 
Question:
 
     There are views that despite the increasing burden on middle-class families in terms of children's education, housing costs, healthcare expenditure, professional enhancement and retirement protection, the Government's existing measures (such as introducing the child allowance, increasing the ceiling amount for concessionary deductions allowable for home loan interest and domestic rent, and providing further education subsidies and vocational training) have failed to adequately respond to the actual needs of the middle class. In this connection, will the Government inform this Council:
 
(1) given that, in reply to a Member's question at the special meeting of the Finance Committee on January 16 this year, the Government advised that it would comprehensively examine whether to allow members of the public to withdraw part of their Mandatory Provident Fund (MPF) savings for a home purchase, of the specific contents and timetable of the study; and whether it will simultaneously explore the feasibility of utilising MPF for other purposes in support of the middle class;
 
(2) apart from the existing basic child allowance and additional child allowance in the year of birth, whether it will explore increasing the child allowance based on the number of children (such as raising the allowance by a certain percentage for each additional child) to ease the burden of child-rearing on middle-class families; if it will, of the details and the implementation timetable; if not, the reasons for that;
 
(3) apart from the existing dependent parent allowance and dependent grandparent allowance, whether it will consider introducing other tax deductions for taking care of the elderly, such as an "allowance for expenses on elderly home care" for hiring foreign domestic helpers or using local domiciliary nursing services;
 
(4) whether it will consider afresh setting a definition for "the middle class" to facilitate the establishment of a "middle class commission" dedicated to studying the predicament faced by middle-class people and formulating measures targeting middle-class people in such areas as education, housing, healthcare, career development and retirement protection, so as to ease their burden; and
 
(5) whether it will consider reintroducing the Sandwich Class Housing Scheme or a similar scheme to provide reasonably-priced housing options in convenient locations, thereby helping middle-class people achieve their goal of having a settled home within their means?
 
Reply:
 
President,
 
     Upon consultation with the Housing Department on the fifth item, our reply to the Hon Nick Chan's question is as follows:
 
(1) The purpose of the Mandatory Provident Fund (MPF) System is to assist the Hong Kong working population in accumulating savings for their retirement. Allowing scheme members to withdraw part of their MPF benefits early for home purchases, education, medical care, etc, will cause an impact on their retirement protection. MPF is a long-term investment with compounding effect, designed to allow MPF benefits to accumulate steadily during the working life of scheme members. Therefore, MPF benefits should be preserved as far as possible and only be withdrawn upon retirement of the employed persons. If the Government were to relax the preservation requirement on MPF benefits and allow scheme members to make early withdrawals to meet their home ownership, education, medical needs, etc, scheme members will lose the opportunity for their MPF benefits to accumulate for value growth, thereby undermining their basic retirement protection. The Government currently has no plan to expand the use of MPF or revise the grounds of allowing early withdrawals of MPF benefits.
 
(2) and (3) When considering whether to adjust tax measures (including tax bands, tax rates, introduction of new tax allowances and deductions), the Government must carefully examine the effectiveness of such policy proposals and their impact on public finance, while taking into account social, economic, and other public policy considerations, striking a balance between pursuing policies and maintaining healthy public finance.
 
     To alleviate the burden of taxpayers raising children and encourage childbirth, the Government proposed in the 2025 Policy Address and the 2026-27 Budget to extend the claim period of the additional child allowance for newborns from one year to two years, and to increase the child allowance and additional child allowance from $130,000 to $140,000 with effect from the year of assessment 2026/27. It is estimated that the two measures will benefit 16 000 taxpayers and 360 000 taxpayers respectively, resulting in a total government revenue forgone of about $980 million annually. If child allowance is increased based on the number of children, for example, increasing the allowance to $280,000 for the second child and to $560,000 for the third to ninth children, it is estimated that Government revenue will further decrease by about $2.8 billion annually. The Government has already proposed an increase in child allowance and additional child allowance as well as an extension of the claim period for additional child allowance. Increasing child allowance based on the number of children has limited effect on encouraging taxpayers who currently do not have children. Given the above and taking into consideration the sustainability and long-term affordability of public finance, we currently have no plan to further adjust the child allowance system.
 
     In addition, to alleviate the burden of taxpayers in supporting the elderly, the Government has proposed in the 2026-27 Budget to increase the dependent parent/grandparent allowance from $50,000 to $55,000 (for dependents aged 60 or above, or disabled), and from $25,000 to $27,500 (for dependents aged 55 or above but below 60) with effect from the year of assessment 2026/27. Those who reside with their parents or grandparents throughout the whole year will continue to enjoy double allowance, which is $110,000 (for dependents aged 60 or above, or disabled) and $55,000 (for dependents aged 55 or above but below 60). The deduction ceiling for elderly residential care expenses will also be increased from $100,000 to $110,000 per eligible parent/grandparent. Taxpayers can benefit regardless of whether the dependents reside with them or in a residential care home. It is estimated that the measures will benefit about 830 000 taxpayers, resulting in a government revenue forgone of about $970 million annually. The Government currently has no plan to introduce additional tax concessionary measures for elderly care.
 
(4) "Middle class" is a loosely-defined term that generally refers to one's economic background, academic qualification, income or asset level. Meanwhile, it may also reflect one's living condition, lifestyle or values. There is no unified criterion to define "middle class" in society, nor is there one internationally. Therefore, establishing a clear and specific definition for "middle class" and formulating targeted policy measures to meet their specific needs may not be the most appropriate and effective approach. Adopting a broad definition may also not facilitate policy formulation.
 
     In respect of taxation, the 2025 Policy Address and the 2026-27 Budget proposed a series of measures to help reduce the tax burden of taxpayers (including the middle class), enabling them to have more disposable income for various aspects such as children's education, housing, and medical care. Details are provided in the Annex. The Government has always been concerned about and attentive to the needs of people from different sectors of society (including the middle class), and will continue to formulate appropriate policy measures as in the past.
 
(5) In the 1990s, the Government once commissioned the Hong Kong Housing Society to launch the Sandwich Class Housing Scheme (SCHS). SCHS provided affordable housing to families whose income was above the income limit of the Home Ownership Scheme (HOS) of the Hong Kong Housing Authority but who were unable to afford private housing. Following the Government's repositioned housing policy in 2002, SCHS came to an end in 2003. At present, the Government assists higher-income persons who are not eligible for HOS and yet cannot afford private housing to achieve home ownership through Starter Homes for Hong Kong Residents (SH) projects. The Urban Renewal Authority has launched the first two SH projects (i.e. eResidence Towers 1 and 2, and eResidence Tower 3) with a total of over 600 SH units sold. In addition, the Government is taking forward a few SH projects, the exact details and estimated completion dates of which would be announced at appropriate junctures.

Ends/Wednesday, March 25, 2026
Issued at HKT 12:20

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