Policy Address

The Way Forward

198. This is the first systematic territory-wide discussion on retirement protection by the Government since our return to the Motherland. It is both pragmatic and resolute for the Government to put forward a series of measures to optimise the existing multi-pillar system, in particular the three pillars of social security, the MPF and public services, which involve an additional annual recurrent government expenditure of over $9 billion on average in the coming 10 years and one-off expenditure of $6 billion. Besides, as employers may need to make provisions for LSPs, the tax revenue of the Government may also be affected. It is difficult to precisely predict the actual impact at this stage, but tax revenue forgone in the coming 10 years may amount to $18 billion. When the Government no longer subsidises employers in the 11th year, it may forgo up to $2.6 billion in tax revenue per annum and such loss will continue. In the face of the challenges posed by an ageing population, these substantial public finance commitments not only demonstrate the determination and sincerity of the Government, but also take into account the affordability of the Government and employers, as well as maintain a balance between the interests of employers and employees.

199. On measures to enhance the OALA and healthcare services, the Government will implement them as soon as possible subject to funding approval by the LegCo. As for the proposal to abolish the “offsetting” arrangement, we will discuss in detail with the business and labour sectors, MPF trustees and relevant advisory bodies in the coming three months, and finalise our proposal by the end of June. We hope all parties can properly resolve this thorny problem in a spirit of mutual respect and understanding, and foster a constructive interaction between employers and employees in the future.

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