Archive for the ‘Universal Transfers’ Category

UK pension reform

Sunday, January 24th, 2016

The government of the United Kingdom apparently is drafting yet another reform of the country’s complex pension system, to be revealed in its forthcoming March budget. The Financial Times, in yesterday’s Weekend edition, published an editorial supporting continued tax relief for retirement savings, provided that relief be set at a fixed rate (25% or 33%, for example) instead of the current system, which provides the greatest incentives for those with highest incomes.

The change to tax relief at a fixed rate would level incentives for those who pay taxes in bands that vary from 20% to 45%, but would provide no incentives for the poorest, who pay no tax at all. Elimination of all tax relief on retirement savings, combined with introduction of a basic, non-contributory universal pension would be simpler, and more efficient, in my opinion.

Here are highlights from the editorial, followed by my comments. (more…)

retired Hong Kong politician supports a universal pension

Wednesday, January 20th, 2016

Former University of Hong Kong Council Chairperson Edward Leong Che-hung has said that he was disappointed with the policy address given by the Chief Executive Leung Chun-ying last Wednesday. ….

Leong, who was formerly the Chairperson of the [government’s] Elderly Commission, praised the speech for outlining measures such as installing seats at bus stations, but also said that it failed to address the most important issue for elderly people, which was the demand for a universal pension plan. Leong thought the universal pension plan should not involve a review of  people’s finances and that people should not adopt a “pocket it first” attitude by accepting the “those with financial needs” approach, under which the pension would only be paid to those with assets of HK$80,000 [US$10,220] or less. [Emphasis added.]

Karen Cheung,”Former HKU Council chair ‘disappointed’ with policy address, tells public to give his successor time“, Hong Kong Free Press, 19 January 2016.

Edward Leong Che-hung, a politically active medical doctor, was born in Hong Kong (1939). He was member of the Legislative Council (Hong Kong’s parliament) from September 1988 to September 2000. The article reports his opinions on other issues as well.

edward leong

the struggle for single-payer health care

Monday, January 18th, 2016

The US has nearly universal, single-payer health insurance for everyone from age 65. The programme is known as Medicare. It is not quite universal because there is a requirement that the beneficiary (or spouse) have a minimum of forty quarters (ten years) of contributions to Social Security.

I have long thought that the easiest way to achieve universal health insurance coverage in the United States is to give Medicare benefits to everyone: remove the contribution requirement and lower the age of eligibility to zero. A social scientist at the University of Chicago points out that achieving this, though technically simple, is not easy to do. Why? Because policy changes create losers and winners. The losers will oppose the reform. If they have sufficient power and wealth, they may successfully block the change.

But doesn’t the “winners and losers” argument apply equally to the Patient Protection and Affordable Care Act, known as Obamacare? And Medicare does have the advantage that it is easier to explain to voters.

For whatever reason, only two US candidates for president endorse Medicare for all: one Democrat (Bernie Sanders) and one Republican (Donald Trump).

Harold Pollack, in an online column, provides insights into why legislating single-payer health insurance is difficult in the United States.

The Hillary Clinton campaign is taking some hard knocks from liberals over its maladroit attacks on Bernie Sanders’ single-payer proposal. In one sense, the knocks are well-deserved. Even if single-payer markedly lowers medical expenditures, … a tax increase of at least 8 percent of GDP would likely be required to finance it.

Yet as proponents rightly observe, these taxes would replace many visible and invisible ways we now provide to support a health sector that consume more than 17 percent of our economy. ….

The pitch for single-payer is admirably simple: We cover every (legal) resident. We mail a Medicare card to everyone. Everyone is covered. That’s a lot easier to explain and market than it is to explain the convoluted structures of Medicaid and state marketplace plans. ….

[There is a problem, though.] A huge reform that creates millions of winners creates millions of losers, too.

As with ACA [Obamacare], the biggest winners would be relatively disorganized low-income people in greatest need of help. The potential losers would include some of the most powerful and organized constituencies in America: workers who now receive generous tax expenditures for good private coverage, and affluent people who would face large tax increases to finance a single-payer system.

Harold Pollack, “Here’s why creating single-payer health care in America is so hard“, Vox, 16 January 2016.

Harold Pollack is a professor at the University of Chicago School of Social Service Administration.

Surprisingly, Professor Pollack fails to mention that Republican candidate Donald Trump supports a single-payer system, and has words of praise for the health-care systems of Canada and Scotland. Unsurprisingly, though, Trump is often rather vague when answering questions on this topic.

Hong Kong march for universal pensions

Saturday, January 2nd, 2016

Approximately 4,000 protesters marched in Hong Kong on New Year’s Day against government’s wasteful spending and failure to implement a universal age pension in the territory.

Thousands of protesters marched on New Year’s Day against government spending on “white elephant” infrastructure projects. Demonstrators also called for a universal pension scheme.

…. This year’s rally was not organised by the usual host, the Civil Human Rights Front, but by some 40 civil organisations. ….

[Mr Wong, a bus driver participating in the march,] said that there should be a pension scheme without means-testing and that everyone should be able to receive it. “Does the government want us to spend our money for our burial before getting a pension?” he said. ….

The government issued a statement saying that it “is determined and committed to enhancing the well-being of elderly people,” …. The government added that it encourages the public to make good use of the six-month consultation period to express their views on how to improve Hong Kong’s retirement protection system.

Kris Cheng, “Annual march against gov’t ‘white elephant’ projects and pension policy attracts thousands“, Hong Kong Free Press, 1 January 2016.

HK march's organisersOrganisers of the Hong Kong march. Photo: HKFP.

promoting universal pensions in Hong Kong

Friday, January 1st, 2016

Hong Kong newspapers are at last publishing well-written op-ed columns in support of universal pensions. The following column is one of the best I have seen. The much longer, full column can be downloaded at the link.

With all due respect, I believe the government is deliberately misleading the public or even generating class conflict by offering two mutually exclusive alternatives: the “regardless of rich or poor” option and the “those with financial needs” option. ….

And so, it suggests, an enhanced version of the existing Old Age Living Allowance in which anybody over 65 with a net worth of less than HK$80,000 [US$10,320] will be eligible for a monthly allowance of HK$3,250 [US$420]  should be enough to meet the needs of our aging society. ….

No matter whether the limit is set at HK$80,000, HK$100,000 or HK$60,000, there will always be a significant portion of our elderly population who find themselves left out of the social safety net, and their indignation will grow, as they feel they are being penalized just because they have saved some money in their bank accounts for retirement.

As our government is trying to polarize the public on the issue of retirement protection, then we should ask: why does the means test apply only to retirement protection but not education and healthcare?

If the administration doesn’t mind allowing kids from wealthy families to enjoy free education and rich adults to enjoy public healthcare services, then why does it have such great reservations about letting the elderly with some money in their bank accounts be entitled to non-means-tested retirement benefits as well?

How can the government justify holding a double standard on these equally important policy areas that all require a long-term public financial commitment? ….

To make matters worse, in order to demonize universal retirement schemes and swing public opinion its way, the government is always citing examples of western countries that are deep in debt to prove its argument that universal pension schemes don’t work.

Meanwhile, it deliberately hides the fact that some countries, like Singapore, that provide their people with universal retirement protection are nonetheless financially sound.

I completely agree that the implementation of a universal retirement scheme will have far-reaching implications for public finances, and therefore the administration must proceed with caution and any proposal must be subject to thorough discussion in our society before being put into practice.

However, the government should at least be honest and provide us the real picture for discussion — so that members of the public can make their own judgment based on real facts — rather than resorting to scare tactics, such as threatening tax hikes, to steer public opinion in its favour.

Joseph Wong Wing-ping, “Say no to an enhanced Old Age Living Allowance“, EJ Insight, 31 December 2015.

Joseph Wong (born 1948) is a career civil servant and professor at the City University of Hong Kong.

The Chinese version of this article appeared in the Hong Kong Economic Journal on 30 December 2015. It was translated from Chinese to English by Alan Lee.

consultation on universal pensions in Hong Kong

Thursday, December 31st, 2015

The government of Hong Kong last week released a consultation paper on universal pensions. The initial response from concerned citizens, understandably, has been quite negative.

That the administration approached [Professor Nelson] Chow a couple of years ago and commissioned him to lead an extensive study into the subject [of universal pensions] has proven to be nothing more than a publicity stunt in an apparent effort to create an impression that it is taking public demand for a universal retirement scheme very seriously, when in fact it is not.

Worse still, after the government found that the report had not been written to its taste, [Chief Secretary Carrie] Lam simply shrugged off the entire report and showed a complete disdain in public for Chow’s professional advice.

Her cutting remarks once again demonstrated her arrogance and inflated ego and spoke volumes about how sincere the government really is in seeking public views on this matter.

Feeling compelled to expose the government’s pack of lies and prevent the public from being misled, the 180 academics who had taken part in Chow’s study decided to boycott the government consultation and conduct their own, to give the public a real picture of the true options they can have regarding universal pension schemes.

Aih Ching-tin, “Fake consultation on universal pension scheme doomed to failure“, EJ Insight (Hong Kong), 31 December 2015.

Click on the link above to access the full column. This article was initially published on 29 December in the Hong Kong Economic Journal. The translation from Chinese to English is by Alan Lee.

Hong Kong debates a universal pension option

Friday, December 25th, 2015

At last the government of Hong Kong has initiated a debate on Professor Nelson Wong’s recommendation, sixteen months ago, of a monthly pension for all residents of Hong Kong from age 65. The government is offering a means-tested pension as an alternative to Wong’s universal benefit.

Here are excerpts – with links to the full columns – from articles published in Hong Kong newspapers on the 24th and 25th of December, 2015. (more…)

consultation begins on pension reform in Hong Kong

Wednesday, December 23rd, 2015

Last year, on August 20th, a research team headed by Professor Nelson Chow of the University of Hong Kong submitted to the government of Hong Kong a Report it had commissioned. The Report recommended giving all residents aged 65 and older – rich or poor – a monthly “non means-tested pension” in the amount of HK$3,000 (roughly US$387 at the time). The universal pension would replace the means-tested benefits of older persons living in poverty.

Sixteen months later (22 December 2015), the government announced the beginning of a six-month period of consultation, based on the Chow Report’s recommended universal pension and an alternative, means-tested benefit.

This long-awaited government reaction is not encouraging for proponents of universal age pensions in Hong Kong.

The public consultation paper released on Tuesday … outlines two approaches towards implementing the scheme. Under the “regardless of rich or poor” [universal] approach, every elderly person over 65 years old would receive HK$3,230 [US$417] each month.

Chief Secretary Carrie Lam Cheng Yuet-ngor said that, under this approach, … the standard salaries tax rate may have to be raised from 15 to 23.3 percent, and the profits tax rate may have to be raised from 16.5 to 20.7 percent, in order to cover the cost.

Under the “those with financial need” [means-tested] approach, single elderly persons and elderly couples with less than HK$80,000 [US$10,320] and HK$125,000 [US$16,125] of assets respectively, would receive HK$3,230 [US$417] each month. ….

The government said in the paper that it has “reservations” about the “regardless of rich or poor” [universal] approach, which may cost almost ten times as much as the “those with financial need” [means-tested] approach. It added that the latter approach would require a tax increase of less than one percent. ….

Nelson Chow Wing-sun, … [principle author of the August 2014 Report], said the government was wrong in asking the public to choose between the options. ….

He said the [universal] approach would only incur HK$10 billion of extra cost per year, which is 2.5 percent of the government’s current annual expenditure.

“The public would have to decide whether that is acceptable or not,” Chow said that the approach could ensure that more than a million retirees in Hong Kong at the present moment would have a regular reliable income. ….

The figures given on tax increases were “nonsense”, and the government did not want to implement a universal pension scheme at all, he added.

Kris Cheng, “Government starts universal pension consultation, warns of tax rises“, Hong Kong Free Press, 22 December 2015.

a proposal for pension reform in Hong Kong

Monday, December 21st, 2015

There is widespread support for universal pensions in Hong Kong. Disturbingly, however, there is no agreement on what a “universal pension” might be. My definition of “universal pension” is a flat benefit that goes to every elderly person, regardless of assets, income or history of contributions. This is the universal pension recommended more than a year ago in a government-commissioned report.

An op-ed today, in Hong Kong’s English-language newspaper of record, recommends something different: a “universal” system that is contributory, with some sort of top-up or minimum pension guarantee for those with insufficient contributions to qualify for an adequate pension. At present Hong Kong’s Mandatory Provident Fund (MPF) provides workers a lump sum (return of contributions with interest), but no pension, once they reach retirement age. Almost no-one in Hong Kong retires with an income- or contribution-related pension.

Christine Fang says it’s no longer enough to plug the loopholes, as our ageing society demands that the government commits itself to no less than universal retirement protection.

The Mandatory Provident Fund [MPF] has largely failed to ensure sufficient financial resources for employees and does not cover the non-working population, such as housewives. Many elderly people lacking a stable income do not apply for [means-tested] Comprehensive Social Security Assistance (CSSA) due to its labelling effect – in particular, the requirement for a “bad son” statement, in which the children of the applicant had to declare they would not provide support for their parent. ….

Securing a basic livelihood in old age concerns every citizen. It should not be considered an anti-poverty measure. It is misleading for the government to reframe the need for universal protection as giving out money from the public coffers, “regardless of rich or poor”. ….

Hong Kong lacks a publicly managed contributory social insurance scheme that may offer collective risk pooling and a minimum guaranteed basic livelihood. Proponents of the collective scheme advocate shared responsibility and three-way contributions, from the government, employers and employees. How to distribute the responsibility, or whether part of the mandatory MPF payment should be siphoned off to contribute to a government-managed social insurance scheme is something that should be publicly debated.

Christine Fang Meng-sang, “Why Hong Kong’s pension provisions need a total reboot“, South China Morning Post, 21 December 2015.

Ms Fang is a professor of practice at the University of Hong Kong, Faculty of Social Science.

two-tiered versus universal provision of healthcare

Sunday, November 15th, 2015

This weekend’s edition of the Financial Times contains a letter that repeats a common, but erroneous argument levied against universal healthcare. Why insist that everyone receive the same standard of service, even those who able and willing to pay some portion of the higher standard of service they desire?

Sir, It is about time someone in an influential position raised the issue of other forms of revenue for National Health Service funding. I and many colleagues of mine who have lived and worked in The Netherlands and France are tired of hearing about the NHS funding problems, which continue to arise because of the ideological obsession of all our political parties with their belief that medical care must be free to everybody. This is no doubt because of their fear of losing votes if they suggest otherwise.

Those of us fortunate enough to enjoy a reasonable level of private income would be well prepared to contribute to this important service through, for example, GP attendance fees and top up private insurance arrangements as occurs in the Netherlands. It would not be difficult to determine an individual’s private income through the tax authorities and fix an appropriate level above which he or she must make some form of private contribution to the NHS.

Michael Speer, “Obsessed with idea that healthcare must be free“, letter to the editor, Financial Times, 14 November 2015 (metered paywall).

Britain’s National Health Service (NHS) is financed entirely with general government revenue. No-one is forced to use NHS, but if a taxpayer chooses to go to a private clinic or hospital, he or she must pay the entire expense out-of-pocket, either directly or by purchasing private insurance. This is the system that Mr Speer dislikes.

I was about to write a letter to the editor asking why, if people like Mr Speer are willing to contribute to the cost of their own medical care, they are not also willing to contribute to Her Majesty’s treasury in order to alleviate the chronic under-funding of the National Health Service?

I then saw that there was no need to draft a letter, for the Financial Times published the following response from another reader:

Sir, …. Are those people who are reluctant to pay more tax happy to pay into expensive private health insurance, their contributions covering not just healthcare costs but shareholder profits? Are they happy to discover that certain pre-existing conditions are excluded from cover? And if, taking all that into account, they feel better off than paying the extra taxes, are they really content to see the poor, unable to afford the insurances, appointment charges or other suggested costs, receiving only some basic treatment?

Peter Cave “Why is paying tax worse than paying premiums?“, Financial Times, 14 November 2015 (metered paywall).

I did not include the first part of Mr Cave’s letter, as his argument is clear without it. I would emphasize even more, however, the point that allowing the wealthy to pay top-ups for better treatment inevitably lowers standards for treatment of the poor. It is the interest of the poor that the wealthy not be excluded from Britain’s NHS nor (with the same reasoning) from government-funded schools.