Balancing commitments and realities

Civil servants who have been in the government for 25 years or more might never have thought that their pension arrangement would ever be an issue.

Was it not already guaranteed in the employment contract when they signed it with a readiness to spend the best years of their lives to serve the public? So why suddenly all the discussions about civil service pensions?

Civil servants can be forgiven for raising the question.

Surely, these pension talks in reference to the remuneration packages for those employed prior to mid-2000 are not brought up by civil service unionists or top officials enjoying the perpetual benefits but others not benefiting from the privilege.

It could be a case of sour grapes -- but is it groundless to raise the subject for debate?

Not necessarily, in view of the fiscal black hole that it would take Financial Secretary Paul Chan Mo-po several years to start restoring the balance - the best case scenario if he really could actually achieve such a mammoth task.

Civil service statistics show that a quarter of the civil servants currently with the government were recruited before mid-2000 and employed on the old promises that they would get a pension until their final breath after retirement.

While a little more than HK$50 billion is committed to paying retired civil servants pensions this financial year, the sum is forecast to increase steadily over the next 10 years as life expectancy lengthens due to improved medical services and an increase in the number of retiring civil servants.

It is estimated that, based on today's value, the government would have to set aside HK$559 billion for the payment of civil service pensions for the next 10 years, which is undoubtedly a heavy burden for any administration caught in a fiscal trap.

The situation is not unique to the Hong Kong government.

Governments around the world face similar struggles,with some responding to the challenges by raising the retirement age to minimize their pension obligations.

For example, France passed a law two years ago to raise the retirement age from 62 to 64. As a result, the country plunged into a state of chaos as trade unions called general strikes in protest. Britain is also raising the statutory pension age to 67 by stages.

Is it impossible for the Hong Kong government to follow suit to pass a law to empower it to raise the retirement age of civil servants to chip away some pension responsibilities? Nothing is politically impossible these days.

That being said, this would be extremely unpopular among 45,000 civil servants hired on the old terms and could be challenged legally.

It is true that doing so would involve many downsides. For the time being, it would be more pragmatic for the financial secretary to begin with cutting back spending in less controversial areas.

As I mentioned recently, non-local students pursuing higher education in the city are not paying enough to cover the full cost although they are paying fees higher than their local counterparts.

Should they be charged the full costs?

In addition, Chan may also consider reducing medical benefits for retired civil servants.