Pension is further and further: has the project of social state been curtailed?
New proposals by Russia's financial authorities indicate the collapse of the ‘socially responsible’ state model, formed in recent ‘fat years’
News about 'the belt-tightening' on the social front have been streaming in the last days and one is worse than the other. They talk about the raising of taxes and the retirement age, they cut social spending, and it tells about a possible actual freezing of salaries. The economic analyst of Realnoe Vremya online newspaper Albert Bikbov believes that we are being prepared for a radical reshaping of the social policy that has been formed in the last before 'the oil shock' years. What are the proposals, and what revolutions are taking place in developed countries on the social front?
Not to 'burn reserves'
On Wednesday, the senators of the Russian Federation adopted the law on raising the retirement age for the officials. In the case of the signing of the document by Russian President Vladimir Putin it will enter into force on 1 January 2017. The new law provides a gradual increase in the retirement age (by 6 months each year) for public officials: for men — up to 65 years and for women – up to 63 years.
The raising of the retirement age for the officials will allow significantly reducing budget expenditures of the Pension Fund of Russia (PFR). An approximate reduction in expenditures of PFR in 2016 will be more than 622 million rubles.
The raising of the retirement age for officials is only a prelude for an upcoming total increase for all citizens. It is still unlikely that they will tell it openly, but our government will not restrain themselves after the presidential elections on 11 March 2018. Because the amount of savings from pension payments will be crazy — trillions of rubles. In 2015, the average life expectancy of men in Russia increased up to 65.81 years, women — up to 76.61. So, the men can forget about pensions.
In the meantime, any talks from government officials about raising taxes or raising the retirement age until 2018 will be muted — you can 'burn the reserves' during 1-2 years, in other words — to spend the accumulated funds in sovereign oil and gas funds. In April of the current year, the Reserve Fund of the Russian Federation spent 390 billion rubles for financing of deficiency of the federal budget. By 2018, our reserves at the current rate of spending runs out, and then they will have to find new sources to cover the budget deficit. One of them could be a tax reform after the presidential elections in 2018: there are already leaks from the government about a possible increase in VAT and personal income tax — in particular, VAT will be increased from 18% to 20%, the income tax rate may be increased from the current 13% to 20%. Also, they discuss the project of transition to a progressive scale of taxation.
Pension or death
A moratorium is a moratorium, but the population is needed to be prepared for the worst — so recently the head of the Finance Ministry advised Russian citizens to save for retirement on their own.
We are talking about the announced in April and developed by the Ministry of Finance of the Russian Federation and the Central Bank of Russia new concept of the new pension system development. The text of a new pension concept, yet behind the scenes, is being discussed in the government, but according to the leaks from the government sources, the picture is going to be more than radical.
The concept involves the elimination of the mandatory saving system and the creation of a system of individual pension capital, which implies the conversion of pension savings into the private property of citizens. A saving component of the pension system will be voluntary, with a gradual entry. A retirement savings account can be opened either in pension funds or commercial banks. Funds in the accounts — a pension capital (by analogy with a maternal capital) will be inherited and can be withdrawn when you save a certain amount, for example, for medical purposes.
Besides, the concept provides:
- a phased but rapid increase in the retirement age up to 65 years for both men and women;
- refusing from the payment of pensions (or its fixed part) to working pensioners;
- cancellation of benefits for employees of dangerous, harmful and other extreme industries, if they are not against an extreme and continue to work in inhuman conditions;
- abolition of mandatory funded pension, allocating 22% of all contributions to the Pension Fund from 2019;
- establishing a uniform tariff the contributions to the social funds, abolishing a regressive scale, to transfer the collection of insurance contributions to the tax service.
It is clear that this set will not be allowed entering into force until March 2018, but the vector has already been determined and started to be implemented (at least in the actual implementation of raising the retirement age for officials).
Can't survive without novation
At the same time, the published revised draft of the macroeconomic forecast of the Ministry of Economy of the Russian Federation for 2016-2019 suggests to 'freeze' public sector wages in the period of 2016-2017, which amid the inflationary processes will lead to absolute decline in their real level. According to Ministry, this will allow shifting from stagnation to growth of GDP in 2019, however, the incomes of the population will continue to shrink by 2.8% in 2016 and by 0.3% in 2017, and the number of poor will increase from 13.1% in 2015 to 13.9% in 2018.
What is happening? Why despite the pre-election moratorium, the high-ranking officials are gushing 'cannibalistic' ideas.
But the thing is not even in the oil prices. It's much more deeper. It needs something to be done with the entire social sphere — the impoverishing due to falling of export revenues and increasing of military and police expenditures state can no longer 'feed' the social sphere at the same level, as it was in 'fat times'. And this is added by the fact that in Russia, as elsewhere in the world, the ageing of the population has acquired a stable character, and the demand for social services has been steadily increasing. The economy simply does not withstand this burden – it is needed to create a radically new model of welfare state. In other words, Russia has faced (in addition to 'the oil shock') not with the problems of the crisis of post-Soviet social system but with a much deeper problem of the crisis of industrial society.
It is the social sphere where all developed countries are facing the powerful challenge — and who correctly answers it they will receive a powerful advantage in the post-industrial world. And they are reacting to it — now there are a large number of innovations particularly in the social policy.