Article by Prime Minister Vladimir Putin in the Komsomolskaya Pravda newspaper
Article by Prime Minister Vladimir Putin in the Komsomolskaya Pravda newspaper
Building justice: A social policy for Russia
Russia is a social welfare state. We have a much higher level of social guarantees than countries with a comparable level of labour productivity and per capita incomes. In the past few years, spending on the social sphere has accounted for over 50% of overall budgetary spending. In the past four years alone, it has gone up by 50% in absolute terms. Its percentage share of GDP has increased from 21% to 27%. The 2008-2009 downturn failed to undermine any of these social guarantees. Moreover, during this period the wages of public sector employees actually went up, as did pensions and other social payments. But Russian citizens are by no means satisfied with the current situation, and their dissatisfaction is perfectly justified.
Social policy has many objectives and many dimensions. It entails providing support for the poor and those who are unable to earn a living for valid reasons. It means implementing social mobility and providing a level playing field for every person on the basis of his or her capabilities and talents. The effectiveness of social policy is measured by whether popular opinion believes the society we live in is a just one or not.
I will not discuss the obvious successes. We have made great strides in improving the situation in the demographic sphere, in pensions and in reducing poverty. We have achieved tangible results in the fields of education, healthcare and culture.
But today we have to discuss the as yet unresolved issues, as well as the objectives which must form the agenda for the next stage of Russia’s development.
Firstly. Many people are unable to make use of their professional knowledge, to find a job that offers them a decent salary and enables them to develop and build a career. Our system of social mobility functions badly and inconsistently, starting from the education system. This problem has worsened considerably in the past few years, at a time when most young specialists have been graduating from universities and entering the labour market.
Secondly. The glaring income disparity is unacceptably high. Every eighth Russian citizen still lives below the official poverty line.
Thirdly. The perception of the ordinary needs and opportunities of the average Russian household has changed dramatically in the first decade of the 21st century. Only 10-12 years ago, people's main goal was simply to stay above the official poverty line. At that time, entire social groups, pensioners mostly, were forced to exist below that line. Today, the bulk of the population is making entirely different demands, something to which the social sphere has so far failed to adapt. People, primarily the “middle class,” well-educated and well-paid individuals, are dissatisfied with the level of social services on the whole. The quality of education and healthcare is still quite low, despite higher budgetary allocations. Services that you have to pay for in these areas are still rife. The goal of creating a comfortable living environment is still a long way off.
Fourthly. The decline in the national workforce and an increasingly ageing population means the efficiency of social spending has to be increased. We simply have no choice, if we want to preserve and improve the situation.
The social dimension of the economy
People of different vocations, including businesspeople, workers, specialists and state employees, must be given the opportunities to realise their potential, as well as opportunities for professional and social growth.
Firstly. Every specialist, every engineer, agronomist, economist and designer, must be give the chance not only to work in their chosen field but to build a professional career. This means that they must be constantly working to improve their qualifications and skills and studying new applied technologies and production processes. At the same time, the qualifications and aptitudes of each specialist must be clearly visible to employees.
As far back as 2006 we agreed with business associations that they will undertake to create a system of professional qualifications. Unfortunately, this has produced very modest results. Only 69 standards have been approved in five years. This is a drop in the ocean, to put it mildly. It appears that we overestimated the interest of major corporations in the national system of qualifications open to small and medium businesses. This means we have to tackle this issue on a national level and involve all the resources of the state.
I suggest that the government teams up with business and professional associations and the country’s leading universities and adopts a national plan for the development of professional standards and the creation of an open database of members of professional associations before the year is out.
Secondly. Every country looks upon its teachers, doctors, scientists and cultural workers as the backbone of the “creative class”, as the people who contribute to the sustained development of society and serve as the pillar of public morality.
We will without fail improve the efficiency of our education and healthcare systems. We will put a stop to the situation where we finance blatantly poorly performing agencies through sheer inertia. But this work has been going on since the 1990s. Organisational and economic reforms have been implemented, managerial systems changed, and external assessment mechanisms introduced. This has so far failed to lead to any noticeable changes in the quality of education or healthcare. It appears that we have overlooked the most important factor -- the motivation of the specialists working in these sectors.
I believe that healthcare and education reforms are only possible when they guarantee decent pay for public sector professionals. A doctor, teacher or professor should be able to earn enough on their basic jobs not to have to seek outside earnings. If we fail to fulfill this condition our efforts to change the organisation of the economic mechanisms and renew the material base of these sectors will come to nothing.
The quality of medical care, educational programmes and scientific research can be efficiently controlled only by relying on the authority of the professional community. Society has the right to expect the restoration of professional morality, self-management and self-purification of professional collectives as it reviews its relations with the medical, teaching and scientific communities.
Public sector pay should be linked to the specific conditions of regional jobs markets. After all, people don't compare their salaries with abstract figures in a statistical handbook, but with what their neighbours and acquaintances earn and what they themselves could earn by moving from the public to the private sector.
A mechanical rise in pay for one and all does not work. It is necessary to take more account of the qualifications and professional ratings of employees for their salaries. This means that basic pay should be combined with a more rapid increase in incentive bonuses and supplemental payments.
We have made the first step towards concluding an efficient contract with teachers – this is a million people. Beginning this year, the legal entities of the Federation must, with federal budget support, ensure that the average salary of a teacher is no lower than the average in the region’s economy.
Starting on September 1, we will raise the pay of lecturers in state educational establishments – up to the average salary for the region. In the course of 2013-2018, the average salary of professors and lecturers will be gradually increased twofold to double the average in the economy. Increased pay must be provided immediately for those with a research background and who enjoy the respect of students and graduates. Each year the proportion of such top professionals will grow. By singling out the best and most deserving lecturers, we can guarantee the continuous renewal of higher school personnel.
Resources for the implementation of this objective will be provided by the state – through regular increases in the normative funding for higher education programmes. College and university rectors will be made individually responsible for its implementation – we will insert appropriate provisions into their contracts.
In the same way, the pay of faculty members will be gradually increased over the course of several years – lecturers in colleges and professional lyceums, production training instructors, other teachers, doctors, paramedical personnel, research workers in the Russian Academy of Sciences and state scientific centres, and staff of cultural institutions. In the case of doctors and researchers, the target for 2018 is the same as for higher school lecturers – 200% of the average pay across the region.
The implementation of this objective will require considerable resources – up to 1.5% of GDP a year. Making use of the significant internal reserves of industries is important here – in particular, restructuring ineffective organisations and programmes. Such restructuring could provide as much as one third of the required funds.
In the final analysis, salaries should be paid not for belonging to a certain institution, but for making a real contribution to science, education, healthcare or culture, and for providing specific services to society. The heads of colleges, universities, medical and research establishments should be obliged to report their incomes on the same lines as those introduced earlier for state corporations.
Thirdly. A no less significant problem is the professional qualifications and social feelings of workers – those people who make up the backbone of any economy.
Long gone are the days when workers had low standards of living and levels of education. Today’s worker is a responsible person executing complicated and ever changing technical requirements. At a time when competitive businesses are regularly updating their technologies and low-quality goods are quickly forced out of the market – workers’ qualifications, outlook, professional pride and ability to constantly learn things have become the decisive factor in staying competitive.
Meanwhile some business owners and managers continue to behave as though they were living at the turn of the last century. As if one can establish oneself in the market by skimping on one's employees. Between 2004 and 2010, the economy saw a sizeable (17%) increase in the percentage of workers employed in conditions that did not meet the required standards of hygiene. The proportion of these types of jobs rose from 21% to 29%.
Together with the trade unions we have to consider legislation to broaden the participation of workers in the management of enterprises. This kind of participation is practiced, for example, in Germany in the form of what are known as works councils. In Russia, such councils could be responsible for organising daily staff routines – from drawing up work schedules to making plans for social safety nets in the event of the closure of a particular plant, or providing staff training.
The skilled jobs market is in need of serious change. We have to provide social mobility within workers' professions. Russia needs to reestablish its labour aristocracy. By 2020, this aristocracy should make up at least one third of skilled workers – about ten million people (25 million including their families).
Skilled workers must be included in the national system of professional qualifications. Assessment of their professional competencies and obtaining new qualifications should not be restricted to isolated enterprises, as is the case now. This will improve workers’ chances on the job market, increase their mobility and, ultimately, raise their pay.
Fourthly. We make little if any provision on the jobs market to help those people who have the same talents and same desire to work and earn money, but who find it difficult to fit into standard employment conditions. These are above all people with disabilities (wheelchair users, the visually impaired, those with impaired hearing, and members of certain other health groups).
In recent years, we have adopted a series of decisions on tax incentives for employers hiring people with disabilities. The government, together with the public bodies concerned, should assess the efficacy of these measures by the end of the year – and, if necessary, take further steps in this area.
In the next few years, we must create a system to help every disabled person who is able and willing to learn and work find their educational and professional niche in life: from specialised educational programmes to jobs adapted to an individual's specific requirements.
Fifthly. Businessmen still lack confidence in our society. This is largely a legacy of the 1990s, when business as a career, on the one hand, often involved risking one's life because of the criminal gangs who operated with impunity, and, on the other hand, frequently came down to nothing more than dividing up state property. This led to mistrust of businessmen from many people, while businessmen felt mistrust of society and the state.
Many of our citizens still have a tendency to regard any substantial property as ill-gotten gains and see big businessmen as high society personages rather than as creative drivers of the country’s development (admittedly some businessmen do give grounds for these suspicions).
Theirs must be a story not just of success, but of justified success from the perspective of others, a hard-won success, coupled with an ability to take risks and assume responsibility for others.
There is already a massive section of people in Russian business who are set for change and want to live the new way. These are small and medium-sized businessmen, and second or third tier managers. These people are well aware of the inefficiency of the current business model.
The young business elite stands a good chance in the next decade – to manage a new type of private corporations, which will accumulate the money of tens and hundreds of thousands of people like them on the Russian stock market. These are public corporations, they have no individual owner and are therefore resistant to corruption and vested bureaucratic interests.
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While incomes are growing, the gap between the richest and the poorest population groups is decreasing too slowly. Income disparity in Russia is comparable to that in the Untied States but is considerably higher than in Western Europe. A certain degree of income differentiation is logical for a mature market economy, but too large a gap can be seen as inequality and can fuel social tensions. Hence our priority is to reduce material inequality by making social policy more targeted and effective, but above all by giving people an opportunity to earn enough to ensure a desirable level of income.
Oil and gas revenue is not channelled into the economy uniformly. We cannot stretch the government’s redistribution capacity any further. I am sure that we must develop new economic sectors and continue to develop the processing sector, agriculture and modern transport and intellectual services. This will allow us to perceive Russia as a more equitable country where everyone earns his or her income with their own labour and talent.
And the government will provide targeted assistance to those who cannot earn an income or are too young to work.
Pensions and social assistance
About 60% of all families receive government payments and benefits. We have increased pensions considerably and will continue to raise them so the increases will not be outpaced by inflation. However, assisting families with children is becoming a priority.
The government is taking measures to support families’ desire to have two or more children. These measures, in particular maternity capital, have produced the first positive results: the birth rate has increased, which is a positive factor. However, mothers with more children, especially three or four children, often cannot work and the parents cannot buy their children the things their peers from only-child families receive. There can be problems even when a young family has its first child because the parents have yet to become established in their professions and have to rent housing.
It is absolutely unacceptable for the birth of a child to bring a family to the edge of poverty. A national goal for the next three or four years is to make this totally impossible. Today the regional governments approve the size of most child benefits, and it should be said that they are scandalously small in many regions.
In 2006, I proposed a package of measures to encourage the birth of a second child, including the allocation of maternity capital that is regularly adjusted to inflation. Practice has shown that these measures are bringing positive results. I think the time is right to take the next step: I propose introducing special benefits for the birth of a third and subsequent children in the regions where the population continues to decline, in the amount of a child subsistence minimum payable until the child reaches three years of age. In practical terms, this would amount to about 7,000 roubles a month. The federal budget will help those regions that introduce this allowance by providing up to 90% of the required funding in 2013, provided the regions gradually increase their contribution to 50% by 2018. This is only the beginning; we should wait to see how the programme fares. If it fares well and the economic conditions favour further development, we will consider ways to help other regions too. It is worth recalling that in the Soviet period various support measures were also provided to individual groups of regions, for example to the Russian Far East.
I expect regions with high budget revenues to contribute to this initiative substantially, by shouldering the bulk of the expenditures or increasing allocations to families with children.
However, such assistance should not be provided to families with high incomes. It would be correct to grant such assistance upon request. Families where per capita income is not higher than the average in their region will have the right to apply for such child allowances. These benefits would be provided without protracted prior verification, but local tax agencies would conduct random audits of the income of benefit recipients, for example, paying special attention to owners of expensive real estate. I believe that we should eventually use this approach in providing other payments to the poor.
We should not stop improving our pension system either.
Retirement insurance can perhaps be described as one of our best achievements and also the biggest headache. We spend over 10% of our GDP, or 25% of the “enlarged government’s” budget on pensions.
When the economy crashed in the 1990s, we had only one option – to increase the income of our senior citizens to the subsistence level. The very first year after we launched the reforms, in 1992, the real size of pensions shrank by half compared to the year before. After a period when we made feeble attempts to increase pensions through indexing and additional payments, the 1998 crisis provoked a new pension collapse. It was not enough to live on.
It took us more than ten years to restore a reasonable pension rate. Recovering the pay and the general income level was not completed until the mid-2000s, but pensions were restored to the pre-crisis level of the 1990s only in 2010, thanks to pension rights valorisation and additional payments that increased the smallest pensions to pensioners’ subsistence level. Debts must be repaid. The Russian government has repaid this debt.
Some wonder why the government increased pensions in 2009, soon after the presidential election. They argue that had the government done it today, this would have determined the election results because pensioners are the most active part of the electorate. I can tell them that we did it as soon as we could, as soon as we had the first economic opportunity to do so. Any other decision would have been immoral.
Pensions will certainly continue to grow. And – I want to say it again – I am still against increasing the retirement age. However, we should take into account the interests of those who plan to continue working upon reaching the retirement age, who receive a large salary and so would like to delay drawing their pensions in order to increase them. We should stipulate this possibility without undue delay.
We should draft a fundamentally new pension policy for the middle class so as to give people broader opportunities for making a responsible choice of scenarios for resolving their problems. Solutions to problems should not be found by the government alone but by people jointly with the government and with the assistance of the government.
This presupposes developing the funded portion of the pension system, something that has not worked efficiently so far. The profitability of pension accruals is low, which explains their low appeal. However, unless the funded component is increased, we will not be able to reduce the unacceptably large gap between the salaries of the typical members of the middle class and their retirement pensions. The government can and must pay its retired workers enough for meals, medicines, clothes and other basic necessities. But can high-salaried professionals who spend lavishly instead of saving for the future demand that the government maintain their habitual living standards upon retirement? In the absence of the funded component, this can be only done with deductions from the salaries of those who are still working. But the ratio of workers to pensioners (support ratio) will decrease considerably in the coming years.
At the same time, it is impossible to fully rely on one’s savings. When the issue at hand is providing for senior citizens, the government must not only ensure the safety of pension accruals but also their sustainable profitability. If and when it is necessary, it should also complement them with government funding.
Education and culture
Our system of education should be able to meet the challenges of the times, but this does not mean that we will give up our most important achievement – the accessibility of education. But we are definitely experiencing some problems related to the quality of education.
Therefore, I see the following immediate national priorities.
Firstly, in the space of the next four years we must get rid of waiting lists at preschools and kindergartens, by for example increasing the number of places in private, corporate and family day care centres. The sanitary and other regulations that currently impede the development of such programmes need to be reviewed. Preschools should be locally available. The organisers and teachers at private kindergartens should be included in the municipal systems of financial and methodological support.
Secondly, we need to ensure social equality in education. It is already common practice to select children for the most prestigious schools as early as the first school year, and that selection often boils down to competition between parents. On the other hand, there are a number of big city schools with consistently poor results, where there are practically no outstanding grade A students or pupils who take part in academic olympiads, but they do have a lot of students with learning disabilities or disruptive behaviour, or whose first language is not Russian. In this way, schools stop working as a medium for social advancement, and begin reproducing and reinforcing social differences instead.
Children should not become hostages to their families’ social status or cultural sophistication. Schools working in difficult social conditions – as opposed to prestigious “gymnasiums” and “lyceums” which for the most part only work with socially stable children – must be given special support, including methodology, staff and financial assistance.
Thirdly, in recent decades, the system of supplementary education for children has lost a large part of its human and financial resources. Only half of schoolchildren now attend extracurricular arts or sports groups, and only a quarter of them attend free of charge. In fact children’s sport, which has always been important for socialization, has been seriously cut back. Although the number of clubs and training centres for children is growing, most of them are geared towards high-performance sports, which leads to early selection and screening of children.
The system of supplementary education should become the government’s responsibility as before – by that I mean the regional governments, although the federal government should also provide financial support. The salaries of teachers who work in this system should be gradually raised to the level of school teachers, as their professional qualifications as sports coaches and arts teachers are just as high. As a result of our policies, we expect to boost the proportion of students involved in extracurricular programmes to 70%-75% by 2018, with half of them receiving these services free of charge.
Fourthly, school curricula and methodologies have to be revised because there is no hiding from the fact that we are lagging behind in those areas. New high school standards have to provide general access to five or six educational profile courses to match teenagers’ preferences and plans for the future.
We must play to our strengths. Russia has traditionally had strong mathematics schools at universities and the Academy of Sciences. We could set ourselves the target of raising the level of mathematics teaching in our schools to be the best in the world within the next 10 years. That would give our country a strong competitive edge.
Fifthly, we must streamline the system of state benefits for university students. Those students who are in need of financial support and who would not be able to continue their education without it, should receive a monthly allowance for their living costs – that is, provided that they achieve good marks. This means an additional 5,000 roubles on top of what they currently get from the government. This support should at least be provided to first and second year students who need to devote themselves to full-time study without getting distracted by financial concerns. In fact students themselves should keep a close watch on how this system works, because they know precisely how their classmates live and what their incomes are, and they cannot be taken in by fake certificates. At the same time, we will continue providing scholarships and grants to those who show outstanding results in their studies and research work.
Sixth point, we will continue improving the Unified State Examination system. This practice has come under a lot of criticism of late, most of it justified, including problems of transparency in a number of regions, and questions as to what extent it reflects a school leaver’s knowledge and skills. This system should be revised both in terms of methodology and organisation. Independent public observers should monitor the process to avoid abuses and distortion of results, while at the same time preserving the system’s advantages and rational core. By this I mean an independent evaluation of the quality of children’s knowledge and the work of their teachers. But most importantly, this system will give students from rural areas and remote regions, as well as from families with varied income levels an opportunity to get into the best regional and federal universities.
Seventh, I cannot agree with the opinion that universities should cut admissions to higher education institutes in order to send the majority of school leavers to vocational schools and associate programmes. This proposal does not take into account young people’s wishes and plans which are in fact constructive and beneficial to society. At the same time, we should discourage the practice where university graduates fail to find jobs that correspond to their specialization, and in fact they do not even try, and simply accept jobs where they are required to learn new skills all over again. This happens because the number and distribution of government-financed places in Russian universities do not match the demands of the labour market. School leavers also see the discrepancy, and, while being admitted to government-financed programmes, they do not even intend using what they are being trained for in their future careers. They do not even have the required skills for that. Starting from their third year, more than a half of full-time students rarely attend classes because they find jobs – often full-time as well – which have nothing to do with their degrees. This means we are wasting a quarter of government financing of education, over 100 billion roubles a year.
We must restore the prestige of Russian universities and the high quality of education. It is unacceptable to admit students onto government-financed programmes if they do not have the required knowledge and skills to cope with the curriculum, especially in complicated areas such as engineering. We need to create a system in which only the best students in the required subjects or winners of competitions in those subjects will be admitted to government-financed programmes.
The curricula, especially the applied parts of them, should be developed jointly with employers’ unions. Along with other developed economies, Russia has already found the ideal format for training professionals in applied competencies. I am referring to the applied baccalaureate option which combines basic education with specific qualifications that comply with market demands. We must develop this practice consistently. Applied baccalaureate degrees should make up 30%-40% of university graduates by 2018.
Eighth, we must establish basic order within the system of higher education. There is a large number of higher educational institutions on the market (including state-run universities) that are in direct violation of the human right to receive good-quality knowledge. Rosobrnadzor (the Federal Service for Supervision of Education and Science) has been ineffective in this respect. I suggest that between 2012 and 2014 our leading universities, with the help of scientists from the Russian Academy of Sciences and international experts, conduct an audit of all higher professional education curricula, primarily those in the fields of economics, law, management and sociology.
Higher educational institutions that have lost labour markets for their graduates and fail to engage in serious research will be joined to strong universities with established faculties and traditions. This process is already under way. The government will allocate additional funds for the restoration of scientific schools and for necessary additional training of students from the "joined" institutions.
Ninth, we must revive the prestige and relevance of training in applied skills, and to tie them to concrete technologies that are represented on the market. As a rule, this kind of instruction should be based on a fully-fledged secondary-school education. In this event, no more than one year or even six months will be needed, instead of three or four years like now. But what will unfold will be a very intense training effort at real workplaces involving the best professionals as instructors. An individual will be able to go in for this kind of training as often as he needs, rather than just once. The government will join hands with employers in order to establish such centres. Vocational lyceums and colleges will become multi-disciplinary centres offering training in a wide range of curricula. To be sure, this should be done with caution so as to avoid ruining the existing forms where they are effective and people are pleased with them.
Investment in education will be our key budget priority. Not only does education mean that we are training a workforce for the economy, it is also a crucial factor in the social development of society, one that shapes our values and unites us. In this sense, the role of education is inextricable with that of culture.
It must be admitted that we have paid insufficient attention to cultural development in the last decade. We were reassured, on the one hand, by a growing solvent demand for concert and theatre attendance, and on the other, by the proliferation of access to the Internet which, among other things, offers very decent cultural assets. Certainly, the government, for its part, has encouraged artistic endeavours and supported museums, libraries and other cultural establishments. But the scale of these activities did not keep up with the growth of the commercial component of leisure activities. Shows aired by federal TV channels have become excessively commercialised (and many say outright that they are vulgar).
As a result, we see a growing gap between support for and consumption of culture: the number of museums and theatres has increased since 1990, while their attendance has declined.
It would be wrong to suppress commercially orientated activities in this sphere by administrative means. When all is said and done, people vote with their money. But the mission of culture and the arts can by no means be limited to this, and the government, jointly with patrons of the arts, has a duty to create the necessary conditions for the implementation of this mission.
First, we must ensure that each citizen enjoys broad and unrestricted access to national and global cultural values. The government will support the creation of public electronic libraries, as well as museum and theatre Internet resources; it will purchase the rights to the free distribution on the Internet of outstanding films and plays.
Second, cultural practices should regain their key role as leisure organisations. We will promote a system of amateur creative activities starting from secondary school, where the position of children's creative work organiser should be introduced (in each particular case the position can be filled by a film director, a painter, a choreographer or a musician), and allocate other needed resources. The important thing is that children should become familiar with Russia's national culture while still in school.
Large and mid-sized cities will extend museum visiting hours until late at night. "Museum nights" have been a success in Moscow and other cities.
The government will pay special attention to how museums, theatres, libraries and creative societies operate in small towns, where there is the greatest deficiency of cultural pastimes. The Ministry of Culture together with heads of regions should draft a government cultural development programme for small towns and put it up for broad discussion by the intellectual community.
Given that a considerable part of museum's treasures remain in repositories rather than on display, our national museums should organise a mobile pool that will fill the galleries in small and mid-sized towns, thereby enabling many people to partake of high culture.
Third, we will increase funding for a system of grants to be provided, via competitions, to individual cultural figures and artistic companies, including youth organisations. We should borrow the practice of inviting young artists from different countries and providing them with scholarships, conditions for work, and opportunities to communicate with each other. Many cities in Europe have centres of this kind that are major contributors not only to the quality of the cultural environment but also to efforts to disseminate natural cultures across the world. For our part, we will expand scholarship programmes for young Russian artists, who will have a chance to work in new cities and regions.
Fourth, digital television makes it possible to organise national specialised channels. We must have channels dedicated to classical music, theatre, visual art and architecture, literature, history and more. And, of course, we should have several channels of "children's classics" for every age group.
A fundamentally new legal framework for developing the Russian healthcare system was created in 2011, a well-defined mechanism for the fair distribution of funding to healthcare institutions. Patients will be given an opportunity to choose a doctor and a medical facility. It might take several years for this legal framework to take full effect. In the meantime, a number of problems in the healthcare system will have to be resolved.
First. Patients are not satisfied with the quality of medical services provided. This is mainly due to insufficient qualification of doctors and nurses. In addition to ensuring that medical personnel earn competitive wages, it is necessary to assess their professional qualifications within the next four years and to complete it with an updated programme for further training. Professional medical associations must play a crucial role in these assessments.
Second. A substantial part of upgrading medical services has to do with arranging medical aid. Outpatient treatment is in most cases much more convenient and cheaper for the government. This is why outpatient treatment makes up a larger share of total medical assistance in other developed countries than it does in Russia.
But as we make effort to improve medical services, we should consider that their effectiveness depends on the medication that is used. We must work out a thorough roadmap towards an enhanced supply of medication. Otherwise we will just end up spending a great deal of money on what will amount to a "gift" to the foreign pharmaceutical industry. We have already adopted a programme to develop the Russian pharmaceutical industry and production of medical equipment, and have allotted a huge amount of money for that, over 120 billion roubles. Now we must work on making sure this production reaches the market and on the system of consumer information. The latter is the responsibility of doctors and professional associations rather than of medication and equipment manufacturers.
Third. We must work on raising the degree of each individual's responsibility for his or her own health. Otherwise no amount of money will ever be enough. According to statistics, 80% of people in Russia do not exercise while 65% drink or smoke regularly and 60% have medical check-ups only if they are ill. Polls indicate, however, that most people believe they look after their health.
Fourth. Protecting health means preventing disease in the first place. A healthy lifestyle is a key aspect here. We will create conditions for free sports facilities that are close to home or work, and combat drug addiction, alcohol abuse and smoking.
Since the Soviet period, availability of housing for Russian citizens has increased by 40%, up to 22 square metres per person. The share of communal flats has decreased by 75%. But if we compare this to European countries and the United States, this is a modest improvement. The cost of housing is exorbitant and has been subject to unreasonable increase. Only a quarter of our people have an opportunity to build or buy new property. The experts evaluate that in 1989, a person could collect enough money for a 54-sq m flat in two and a half years if that person saved his or her entire salary each month. Now you need four and a half years to do the same, considering that the relative cost of the majority of goods has dropped and their availability is higher. It is the lower availability of housing that is seen by our people as an aspect that determines a lower quality of life as compared to the Soviet period. The lack of prospects in this respect makes people change the priorities in their lives.
Today, we assist war veterans, servicemen and new families to buy property. We help people move from rundown houses where the conditions are unlivable. We determined that we will be able to allot an additional 30 billion roubles for housing for war veterans by the end of 2012. I would like to mention that we will continue this practice – for new families with children, in particular.
This is not enough, however. The middle class must have an opportunity to buy property through mortgages. Currently mortgages are not available to the majority of the middle class, especially in big cities where housing costs are unreasonably high.
What do we suggest?
First, we must reduce the cost of construction – but not through cutting builders’ wages or the money spent on occupational safety, but by reducing the price of construction materials and preventing artificial price inflation as a result of corrupt practices. The construction business is now virtually buried under a mountain of necessary approvals. It seems as though construction companies spend two thirds of their money and time on overcoming various bureaucratic hurdles instead of spending it on production.
We will introduce a competitive order for expert assessment of construction projects. Many projects have been waiting around to be assessed for years. Contractors may request assessment by both public and private experts. We will cut back on excessive approval and inspection procedures, with construction companies only able to hand in respective notifications, which should help cut expenses.
We must also prevent artificial monopolies among construction companies and suppliers of construction materials at the regional level. For example, there is a monopoly for sand and gravel quarries in some regions. For some reason, these quarries are often owned by relatives and friends of the people who once headed these regions.
In total, we can cut the cost of modern comfortable housing at least by 20% and even by 30% in some regions.
Second, we should introduce a large amount of land into economic circulation through expansion of metropolitan areas, construction of local road and infrastructure networks (I mentioned this in my article on the economy) and by taking them away from those public organisations that never use them. There is no such thing as "untouchable" property. The land must be given to those contractors that build cost-effective housing, including for public facilities that will be provided free-of-charge (in exchange for restricting the sale price of the property). The government will present a relevant programme no later than this autumn.
Third. Mortgage payments must decrease along with lowering inflation rates. We must think about developing mortgage lending institutions such as the building societies that they have in Germany. We started a series of pilot projects in the regions and we will continue to expand them. And last but not least, we will increase support of young families and public sector workers in covering mortgage interest. The money that is left over after completion of the Olympic facilities in Sochi and APEC facilities in Russia’s Far East, and after the completion of the housing programme for servicemen, could be used for these purposes.
Fourth. In addition to providing future homeowners with more opportunities to buy an apartment, we also need to create a civilised rental market. Anywhere from one-third to one-half of families in most European countries rent housing all their lives and don’t feel disadvantaged in any way. For us to get there, we need to encourage the establishment of specialised companies run by developers and independent operators. We need to develop standard contracts guaranteeing rights of long-term tenants. Today, all people who rent have to be prepared to vacate premises on short notice.
I believe this is important also because affordable housing is an important prerequisite for improving the territorial mobility of our citizens and enhancing economic competition between urban areas and regions.
We will proceed to develop a non-profit rental market for prospective low-income tenants.
Taken together, these measures will make new housing affordable for 60% of Russian families by 2020 as opposed to the current 25%, and resolve the issue in full by 2030.
Housing and utilities
Housing and utilities infrastructure is a particularly painful problem for our country. Utilities bills account for a tangible and admittedly growing part of total household spending. Today, consumers are covering over 90% of the so-called economically justified tariff, but there’s no end to what providers are asking for in terms of payments. The quality of a large number of services ranging from janitorial services and upkeep of adjacent areas to housing repairs is far inferior to the price that they charge for them.
Information coming from many regions clearly shows that the problem lies in local monopolies and lack of control over providers of such services. It’s also about the inability or unwillingness of local authorities to establish competition on this market. Therefore, unsophisticated customers, most often older people with low incomes, are the ones who suffer most when they have to deal with a monopoly one on one.
Regional and local authorities must properly organise the provision of quality housing services and be accountable for this work. You can do this in two ways: subsidise your pet company using budget funds or apply yourself and make the utilities market in a particular urban area attractive to a large number of competing firms.
We need to join efforts and get things right in the utilities sector.
First. Consumers need to be educated in the legal and economic fundamentals of the provision of housing services. We need to support the establishment of a network of non-profit organisations to organise customers so that they can protect their rights and monitor whether utilities companies meet their obligations.
Second. We will establish social standards for using utilities resources, which will help streamline utilities payments. It’s important to develop compensatory measures to protect senior citizens living on their own in large flats provided that they have lived there for over ten years.
Third. We won’t be able to upgrade the housing and utilities system if budget and utility bill payments remain our only source of financing. The establishment of favourable conditions for private investors is the key to resolve all issues involved in the modernisation of the utilities sector. The goal of private businesses in the utilities sector is to implement large-scale infrastructure projects as opposed to patching holes with money from utility payments. The cost of utilities will be set for at least the next three years, and tariffs will be calculated based on a formula that needs to be simple enough to be understood both by consumers and investors. Most importantly, tariffs will depend on the quality and reliability of the services provided.
Conservation of Russia
Our territory is home to about 40% of the world’s natural resources, whereas the population of Russia makes only 2% of the global population. I believe the conclusion is clear. Should we fail to carry out a large-scale and long-term project for demographic development, the buildup of human resources and territorial development, we risk becoming an “empty space” in global terms, and then our fate will be determined by someone else, not us.
Russia’s population is 143 million. Experts say that if we keep things unchanged and fail to come up with any new measures, it will shrink to 107 million by 2050. Conversely, if we manage to formulate and implement an effective and comprehensive population conservation strategy, Russia’s population will grow to 154 million. Therefore, the historical price of the choice between action and inaction is almost 50 million human lives within the next 40 years.
First. The issue is about supporting families with many children. I have mentioned earlier the measures to overcome temporary poverty resulting from the birth of a third child.
A special programme for improving housing conditions for families with three or more children must be in place as well.
We will come up with additional solutions, such as flexible hours, telecommuting, nurseries and kindergartens, to promote employment of women with children, which will make it possible to combine motherhood with professional activities. A woman re-joining the workforce after the maternity leave should have the opportunity to attend career advancement training, while the employer that hires her should be provided with some form of assistance from the state.
Second. In order for us to be able to address demographic problems, we will objectively need to pursue smart immigration policies built on clear-cut requirements and criteria that preclude potential ethnic, cultural and other risks. We will need about 300,000 immigrant workers a year. First and foremost, we will focus on our compatriots living abroad, highly skilled foreign specialists and promising young people.
We have already launched a programme for the relocation of our compatriots to Russia. Let’s be frank: it didn’t work out for us as we planned. We should get back to this issue now that we are in a new stage of national development, and come up with a more effective and comprehensive set of measures to support people who are willing to return to their historic homeland.
I have already mentioned in my article on ethnic policy that the key prerequisite for anyone willing to work and live in Russia is the ability to respect our cultural traditions and values. I suggest removing all restrictions for foreign nationals who want to attend our professional training institutions provided they have passed the exams and are pursuing studies in the Russian language. We should greatly simplify the process of obtaining a residence permit and later Russian citizenship for graduates of our universities who work in their respective professions.
We should build our social, economic, immigration, humanitarian, cultural, educational, environmental and legislative policies around the promotion of human capital in Russia – not just during election campaigns, but for the long term, a historical perspective in the true sense of the term.
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The key problem of Russian social policy is not about the amount of resources we use to address social challenges, but the effectiveness and the focus of the measures being implemented. We need to change the situation in the near future, eliminate all sources of loss in the social sector when resources are being wasted or sent to those who can manage without them instead of being sent to the people who need them desperately; when we support institutions out of habit without paying any attention to how their work benefits people; when we have the interests of those who work at social institutions above the interests of those for whom they work.
We must reverse this situation in this decade. Each rouble spent on the social sphere must ‘produce justice.’ A just society and economy are the prerequisites of our sustainable development during these years.