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Finance Ministry’s idea to cut social spending to save budget money draws cool response

August 21, 2013, 18:24 UTC+3 Zamyatina Tamara

MOSCOW, August 21 (Itar-Tass) - The Russian Finance Ministry is going to address President Vladimir Putin with a proposal for cancelling the federal program called “Maternity Capital” as of 2016 and to raise the age of retirement on pension.

Maternity capital is a form of government support for families after the birth or adoption of a second, third and each successive child, extended over 2007 through 2016. Originally, the sum of assistance was set at 250,000 roubles. Since then it has been repeatedly adjusted for inflation to reach 409,000 roubles (about 10,000 euros) in 2013.

As a means to compensate for future cancellation of maternity capital the Ministry of Finance has proposed measures to double childcare benefits and discounts to those families whose children spend daytime in childcare centres. Finance Ministry experts argue that the maternity capital program has exhausted itself as an incentive to childbearing.

The real factor that forces financial officials to push through such proposals is a serious slump in the Russian economy. The GDP stopped growing last May and it continued through June, the Economic Development Ministry says. In this period growth rates were close to zero.

The ongoing heavy floods in the Amur Region, in Russia’s Far East, and in some other parts of the country have turned the problem from bad to worse. The elimination of its effects would require mighty financial infusions into restoring to normal life in a territory greater than the whole of Europe.

In a situation like this scientists at the Higher School of Economics and the Russian Economics Academy and State Governance under the Russian President have advised the government to take some unpopular measures to contain budget costs.

Russia’s population at the moment is roughly 140 million. Retirees exceed 40 million. The pension fund is under tremendous pressures. Russia’s women are entitled to pensions starting from 55 years, and men, starting from 60.

The Finance Ministry’s idea is to start raising the retirement age gradually, by six months every year as of 2019. There are proposals for restricting the fixed size of the pension for highly salaried employees past the retirement age who keep working, and also to stop paying pensions to retirees who stay employed and keep getting high salaries and wages.

The Finance Ministry hopes that the implementation of the aforesaid measures will make it possible save 1.1 trillion roubles of Russian budget money in 2014 through 2016.

State Duma members are very negative about the Finance Ministry’s proposals to optimize budget spending by means of effecting a pension reform and cancelling the maternity capital.

“These proposals are aimed against Russians. We live in a very vast territory, we catastrophically lack people. According to estimates by the late Russian Academy of Sciences member, Sergei Kapitsa, there should be three times more of us than now,” the deputy head of the State Duma’s committee for the family, women’s and children’s affairs, Olga Yepifanova, of the A Just Russia faction, told the Russian News Service.

State Duma member, deputy secretary of the United Russia party’s General Council secretary, Andrei Isayev, is against the cancellation of the maternity capital, too.

“I believe that the maternity capital should stay. The terms of granting it may be discussed to see how to provide support for families with many children in the first place,” Isayev told ITAR-TASS. He recalled that the introduction of the maternity capital had helped bring about a turn for the better in the just recently catastrophic birth rates. Isayev also recalled that United Russia, just as President Vladimir Putin, was against a rise in the retirement age. “This means that all people who have earned a pension must have the right to retire at the age effective at the moment - 55 years and 60 years - if they wish to do so,” he said.

Public Chamber member, deputy rector of Russia’s Plekhanov Economic University, Sergei Markov, has told ITAR-TASS in an interview he was categorically against Finance Ministry proposals. He dismissed the intention to cancel the maternity capital as “politically impermissible.”

“The depopulation of Russia, the shrinkage of the titular ethnic group in particular, has just managed to be stopped. Cancelling an incentive to child bearing in a situation like this would be suicidal,” Markov said. He believes that with time the retirement age will be rising around the world.

“In Russia it will be possible to increase the retirement age only when the life expectancy rate has improved. Otherwise people will start dying before they can retire on pension. This is impermissible,” Markov said.

“The Ministry of Finance should give thought to how to increase incomes, and not lower budget spending. If the Ministry of Finance asks the government to introduce monopoly on the production and sales of alcohol, this would help raise several trillion roubles, not one,” he said.