Press Releases

Proposal to freeze CSSA, SSA standard rates

The Government proposes to freeze the standard payment rates under the Comprehensive Social Security Assistance (CSSA) and the Social Security Allowance (SSA) schemes at their present levels, despite the fact that the combined inflation adjustments made in the past two years were 6.5 per cent higher than what was necessary to maintain the purchasing power of the standard payments.

Announcing this today (Monday), a spokesman for the Health and Welfare Bureau said that as Hong Kong had undergone a period of exceptional economic adjustment in the past 18 months or so, the Government considered it undesirable to implement a 6.5 per cent downward adjustment from 1 August 1999.

He said a downward adjustment would affect not only CSSA recipients but also SSA recipients who were either elderly or severely disabled people. For these people, the SSA allowance may be providing a useful supplement to their household budget during this period of economic difficulties.

Furthermore, due to the 4.8 per cent increase in standard payment rates in last year, the extent of downward adjustment now required is in fact larger than the actual negative inflation in 1998-99. Some CSSA and SSA recipients, especially the elderly and disabled, may find it difficult to adapt to a 6.5 per cent downward adjustment if it is to be implemented at one go from 1 August 1999.

"In view of these, we propose to freeze the standard payment rates under the CSSA and SSA schemes at their existing levels until inflation in subsequent years catches up," the spokesman said, adding that a 6.5 per cent reduction in standard rates from 1 August would result in reduced Government expenditure of $707 million in 1999-2000, or $1,062 million in a full year.

The standard payment rates of the two schemes are adjusted annually in anticipation of the forecast movement of the Social Security Assistance Index of Prices (SSAIP) in the following year. The original intention was to adjust the standard payment rates in advance to maintain the purchasing power of the social security payments.

In the annual inflation adjustment exercise in 1998, the Finance Committee agreed to increase the standard payment rates by 4.8 per cent from 1 April 1998 in anticipation of the projected increase in SSAIP for 1998-99. The Finance Committee was also informed then that there had been an over-projection of SSAIP inflation rate of 1.5 per cent in 1997-98.

Under the existing mechanism, if the forecast increase in SSAIP proves to be different from the actual increase, the Government would take the difference into account in calculating the adjustment for the following year.

To give CSSA and SSA recipients the benefit of a full 4.8 per cent increase in the standard payment rates, the Finance Committee agreed to the Government's proposal then to defer the subsequent revision date by four months to 1 August 1999, hoping that the inflation between April and July 1999 could make up for the 1.5 per cent overshoot in 1997-98.

However, the actual movement of SSAIP for 1998-99 turned out to be minus 0.2 per cent and, as a result, there had been a total overshoot of 6.5 per cent.

The spokesman pointed out that the rapid growth in social security expenditure in recent years, particularly CSSA, remained a concern of the community. He cited statistics to show that CSSA expenditure had increased from $2.4 billion in 1993-94 to $13 billion in 1998-99 and to an estimated $15.5 billion in 1999-2000.

"The current proposal not to bring down the rates to reflect the over-projection on compassionate grounds and its consequential impact on CSSA/SSA expenditure in the following years until inflation catches up will create added pressure in this area of spending," he said.

The spokesman also announced that in future, when the effects of the over-projection had been fully offset, the Government would consider making annual adjustments to the rates based on the actual year-on-year SSAIP movements in the previous year.

"We propose to take the actual SSAIP movement in the 12-month period from May in the previous year to April of the year as the reference period for inflation adjustment.

"This will allow sufficient time for submission to the Finance Committee to adjust the standard payment rates on 1 August annually," the spokesman said. The proposals will be submitted to the Finance Committee for approval shortly.

End/Monday, 14 June 1999

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