1 october, 2008 19:08  

"Our goal in the coming years must be to improve the performance of the basic, fundamental branches of the Russian economy: transport, fuel, energy, banking, farming, and others. We must make serious progress in building a system of national innovation, promote competition, and create reliable guarantees of ownership rights."

Vladimir Putin Cabinet meeting

Vladimir Putin's opening remarks:

Good afternoon.

Back in February of this year, at an expanded meeting of the State Council, I first formulated the need for a concept of long-term social and economic development in Russia through 2020. Work on this began immediately, with the Government, the experts and the Presidential Executive Office joining forces and working as one team despite the political campaigns at the time - a presidential election and the formation of a new cabinet.

At today's Cabinet meeting, we will examine a draft of the concept and the basic guidelines for the Government's activities in the next four years - through 2012.

I don't think I need to give you a detailed description of the documents, because, when adopted, they will be published in full. I will only stress some of the most important objectives mentioned in the concept.

First, we must raise the lifespan in Russia to 72-75 years, stabilise population numbers and reduce the death rate, above all among working-age people.

The real income of people must increase two to two and half times by 2020. Labour productivity in key industries must increase severalfold, preferably by three to four times, and in some industries even by five times. Power consumption in the economy is to be reduced by no less than 40%.

At the same time, I would like to draw your attention to things I consider most important.

We are adopting this concept amid a world financial crisis. Russia has been part of the global economy long enough to be deeply integrated into its international finance and energy structures and markets. Any symptoms of the crisis evident in world markets are also noticeable on our trading floors - that is clear and obvious, and we see them.

We should, of course, take them into account in our development plans, and will be doing so, but we will not abandon our plans or put them off indefinitely.

The current issues in the [global] economy began in the United States. The entire crisis, which has hit many economies and, saddest of all, the inability [of those responsible] to make adequate decisions are not a lack of responsibility shown by competent people, but a lack of responsibility provided by the system, a system which is known to have claimed leadership. We see that it is not only unable to provide leadership, but to even make adequate and absolutely necessary decisions to overcome the crisis.

But, as I said, this is no reason for us to overhaul our strategic plans. Yes, they can and will be adjusted, but we should draw a clear line between anti-crisis management and efforts to work on our long-term development goals.

The latest events have shown that in order to maintain stability the state should have considerable foreign exchange reserves and other safety nets. And we have them. But we should not rely on these safety cushions alone.

The main guarantee is a competitive and stable national economy, market institutions, effective government control mechanisms - wherever justified and necessary - and an up-to-date system of credit and finance, one which rests chiefly on internal resources and so is immune to global financial viruses.

Our goal in the coming years must be to improve the performance of the basic, fundamental branches of the Russian economy: transport, fuel, energy, banking, farming, and others. We must make serious progress in building a system of national innovation, promote competition, and create reliable guarantees of ownership rights.

It is necessary to fully utilise these new factors of economic growth, above all those connected with human potential and its development. We have said and heard it said many times that innovatory development is impossible without advances in science, education and the health services.

Every person should be able to fulfil his or her ambitions, and to build a firm social base for themselves and their families, not just today or tomorrow, but in the long run.

I am referring to quality education and health services, an effective labour market and an effective pension system. I would like to dwell on the latter at some length. A well-developed and reliable pension system is without exaggeration a must for every citizen of Russia, for every family.

I would like to inform you that yesterday we adopted a series of landmark decisions to improve the pension system. In 2009, the base pension of a working person will be increased two times - on March 1 and on December 1 - by 37.1% overall. The non-funded part of the pension will be indexed by 15.6% on April 1.

As a result, towards the end of 2009, the average social welfare pension ought not to be below the pensioner's subsistence level. From January 1, 2010, the pension rights acquired before 2002 will be indexed by an additional 10%, plus 1% in additional indexation for each year of work recorded before 1991. That is to say, we will begin addressing a problem which has been discussed so much. I mean an equitable estimate of people's work contribution during the Soviet period. Today, their pension levels are unacceptably low.

Incidentally, whenever I meet with parliamentary parties in the State Duma, we almost always discuss this subject in one way or another.

From now on, returns on pension's savings must outpace inflation. I am referring to the interest-earning capacity of the money that is invested in pension funds. As a result, the average size of the labour pension in 2010 will almost double compared with the 2008 current level. Incidentally, the labour pension - an old-age pension - is to grow even further. By 2020, its average size will reach three times the pensioner's subsistence level.

Now, regarding people who will start making pension payments after 2010. With a payment record of 30 years, the size of a pension at the time of pension collection must be no less than 40% of the wages from which contributions were made. Such a pension/wage ratio meets average European standards and those of the International Labour Organisation.

To achieve these objectives, it has been decided to switch from the Unified Social Tax to contributions paid under the mandatory pension insurance scheme at a flat rate of 26%. No insurance contributions will be paid from annual salaries in excess of 415,000 roubles. And even this sum is planned to be indexed as average wages grow across the country.

That is to say, people drawing high salaries - 415,000 roubles a year in this case - will pay no insurance contributions above this sum, but neither will they acquire pension rights to these sums. We took this step especially to ensure that people with small and average-size incomes do not pay for the pensions of those getting higher salaries.

With contributions for health and social insurance included, the overall tax will not exceed 34% of general wages.

I anticipate the response of the business community. First, please take note of what I am going to say. Second, I want to draw your attention to the conditions in which we are adopting these decisions - with seriously negative developments observed on the world financial markets.

All organisations, regardless of the industry they belong to, will have to adopt the new principles of contribution payment. As I said, business will certainly face extra costs following these changes. But I want to stress that simultaneous action will be taken to create mechanisms to avoid increasing the tax burden on business. Perhaps the National Welfare Fund might be drawn upon for this purpose, among other options.

I leave it to the Finance Ministry and the Economic Development Ministry to think the problem over and submit proposals.

Organisations that enjoy special tax privileges will have their increased contribution rates compensated for by the federal budget. This reference is to small-business units operating in the high-technology sectors of the economy. I mean precisely them and want this to be clearly understood from the outset. This also refers to agricultural producers. They, too, will be given special treatment. And that rule will be in effect through the course of a five-year interim period. Within that time, these industries and these businesses ought to be able to adapt to the new system.

I want to stress once more: the decisions we have taken are very crucial and not so simple, either for the state, or for employers, or for ordinary people.

But the central task - in this context, a dramatic increase in pensions for our citizens - can and must be fulfilled. I hope the above mechanisms will help to achieve it.

I ask the Finance Ministry, the Economic Development Ministry and the Health and Social Development Ministry to submit their proposals for the solution to these questions within the shortest time possible.

Now a few words about current affairs. Today, we are also to examine the Finance Ministry's proposals on amendments to the federal budget for 2008-2010. They concern, above all, the resources we must provide for measures to support the country's credit and finance system as it faces instability on world markets.

I want to mention a few figures - we have already discussed them, but I want to reiterate and articulate them again: 75 billion roubles have been allocated in authorised capital for Vnesheconombank, and 60 billion roubles for the Agency of Mortgage and Housing Credits. This is being done to ensure the normal function of the stock market. Also, the Government will have the right to draw up to 175 billion roubles from the budget to support the country's financial market.

The amendments will also solve the problems associated with depositing budget sums with commercial banks for periods beyond one fiscal year, that is, beyond January 1, as our business has asked. We will do this, and these funds can be drawn upon.

Next: The events in the Caucasus have once again stressed the importance of our efforts to strengthen the combat capability of our armed forces. It is planned to allocate an additional 80 billion roubles for the purchase of new weapons and military hardware and for stationing our troops where we consider it appropriate.

This is to compensate part of the loss suffered during military operations in the Caucasus, and, as I said, to acquire new equipment, because the compensation should be allocated on the basis of the new possibilities offered by our defence industry.

I asked the Finance Ministry to draft appropriate bills within the briefest time possible. I hope that what I have said above will be backed by State Duma deputies, of course, in contact with the Government, when explaining our decisions and bearing in mind the development prospects of the Russian economy. Very soon, the ministers concerned are to explain these decisions at the State Duma.

Now let us proceed.