The state must jump over its own head to provide decent pensions while not burdening business with more tax. This is how Vladimir Putin commented on the changes in the social and tax systems planned for the next two years.
Opening an All-Russia Pension Forum, the prime minister said that Russia would have a deficit budget for the first time since 2000, but the state must fulfill its social obligations regardless of the circumstances. While pension increases have been discussed for many years, the living standards of the elderly still remain low. Putin recalled that plans to raise pensions were already discussed in September 2008.
"But at that moment the world financial crisis broke out," he said. "It was not our fault, but we were hit too."
There have been proposals, the prime minister said, to postpone a massive increase of pensions, but the government rejected that option. Retirement pensions will increase by 35% by the end of 2009, and beginning from January 1, the pension entitlements of people who worked during the Soviet era will be reassessed.
"As a result, the old-age retirement pension will exceed 8,000 roubles a month," the prime minister said. "While the average increase will be 1,100 roubles, for pensioners over the age of 70 it will be substantially higher, 1,600-1,700 roubles."
If the incomes of pensioners turn out to be below the subsistence minimum in a particular region, extra social benefits will be paid. The number of people who will receive such benefits is 5.7 million, mostly in regions with a high cost of living such as Siberia, the Far East and the Far North.
In total, the state will spend 10% of GDP to finance pensions and other social benefits in 2010 (GDP is the value of all final goods and services produced in the country).
"This is an unprecedented amount by any standards. We spend less than 3% of GDP on defence," the prime minister said.
He also stressed that the recalculation of pensions must be conducted without giving undue trouble to people: "They are elderly people and we cannot have them go from office to office." Later, Healthcare and Social Development Minister Tatyana Golikova promised that everything would be done automatically and pensioners would not have to submit applications to the Pension Fund. The prime minister, however, issued a warning: "Should the need arise to clarify the period of service, they may expand the staff and introduce longer work hours" (Pension Fund offices, Ed.).
The conversation then turned to the taxes that replenish the pension and other social funds. The Single Social Tax will be replaced with insurance contributions starting from 2010. The decision was final, Putin said yesterday. However, in order to allow business to recover from the crisis, insurance contributions will initially remain at the same level as the Single Social Tax (26%) and will only be increased to 34% in 2011. "The authorities and society should choose where to keep the money, whether give it to business or to pensioners," the prime minister explained. "In my opinion, we have made a Solomon's decision: no tax increases are planned for 2010."
In general, Putin said that business should look forward not only to tax cuts, but should modernise production and cut costs through innovation.
"It is necessary to fine-tune the pension system without overtaxing the economy, and to build relations between the centre and the regions. Doing all this at the same time is almost an impossible mission because some of these tasks are mutually contradictory," the prime minister admitted. "We have a saying that you can't jump over your own head, yet there are some people who do it. Good athletes jump 2.4 m and higher, way over their heads. We should do the same."
Valery Butayev