Agenda: Draft guidelines for the budget policy and federal budget specifications for 2014 and the planning period for 2015 and 2016, plus 10 other issues.
Transcript:
Government meeting
Government meeting
Government meeting
Finance Minister Anton Siluanov reports at the Government meeting
Member of the Government Expert Council, Chairman of MDM Bank's Board of Directors Oleg Vyugin
Defence Minister Sergei Shoigu, Minister of Communications and Mass Media Nikolai Nikiforov, Minister for Civil Defence, Emergencies and Disaster Relief Vladimir Puchkov and Finance Minister Anton Siluanov before the government meeting
Defence Minister Sergei Shoigu, Deputy Prime Minister Sergei Prikhodko and Minister of Foreign Affairs Sergei Lavrov before the Government meeting
Minister of Education and Science Dmitry Livanov and Minister of Culture Vladimir Medinsky before the Government meeting
Central Bank chairman Elvira Nabiullina and Minister of Economic Development Alexei Ulyukayev before the Government meeting
Government meeting
Dmitry Medvedev: We'll start with the budget, of course. You know that we are already in the process of drafting a law on the federal budget for 2014 and the two following years and that the guidelines for it will be directly influenced by the President’s Budget Address, the Forecast of Russia’s Long-Term Socio-Economic Development to 2030, which we discussed, and the Policy Priorities of the Government until 2018.
Our priorities have not changed and include the fulfilment of our social obligations, guarantees of long-term stability of the pension system, implementation of major projects, including in infrastructure, as well as efficient management of government funds. At the same time, this budgetary cycle has a number of specific features. What are they?
Dmitry Medvedev: "Our priorities have not changed and include the fulfilment of our social obligations, guarantees of long-term stability of the pension system, implementation of major projects, including in infrastructure, as well as efficient management of government funds."
Government meeting
First, the macroeconomic indicators that form the basis of the draft budget differ from what we used last year, unfortunately, not for the better. The reason behind this is the general economic deterioration. There are short-term and also medium-term risks.
We must stipulate the sources for covering budget deficit if it exceeds our current forecasts. At the same time, the national debt must remain at a level safe for the economy.
Second, I would like to note that budget planning horizons have expanded considerably. We are drafting the budget simultaneously with the budget strategy, whose primary objective is to chart future parameters of the budget system. We must examine the draft strategy in September and submit these documents to the State Duma for consideration.
Dmitry Medvedev: We improve spending efficiency, largely by improving the state procurement system. The money thus saved will be used for maternity capital, monthly family benefits for the birth of the third child, salary rises in the healthcare, education, science and culture sectors, as well as rises in military pensions by at least 2% in excess of inflation levels, as required.
Third, the 2014-2016 federal budget has been drafted on the basis of 40 approved state programmes, which was our joint decision. Regional and municipal budgets must also gradually adopt the programme-based approach.
Fourth, we improve spending efficiency, largely by improving the state procurement system. The money thus saved will be used for maternity capital, monthly family benefits for the birth of the third child, salary rises in the healthcare, education, science and culture sectors, as well as rises in military pensions by at least 2% in excess of inflation levels, as required.
As for sovereign funds and pension savings, there are plans to use part of these resources for implementing major infrastructure projects and to invest them in the relevant national securities over the next three years on a payback basis. These projects must meet the following requirements: the investments must be recouped, they must yield the greatest possible multiplier effect and, hopefully, high profitability with justified risks. Of course, independent audits must also be conducted.
The implementation of federal targeted programmes is another element of state spending. The Minister of Economic Development will report on proposals to finance the federal targeted programmes in 2014-2016.
I firmly believe that cost-effective management of state finances is possible only if we ensure their openness and transparency during the budget process, as well as the public discussion of budgets of all levels, from drafting budgets to monitoring their spending volumes. This year, the federal budget is being drafted using the Electronic Budget data network for the first time. Next year, the budget will be implemented using this network for the first time.
As usual, we examine these major issues together with our experts. Today, I will give the floor to Mr Vyugin (Oleg Vyugin, Member of the Government Expert Council and Chairman of the Board of Directors at MDM Bank).
Dmitry Medvedev: "I firmly believe that cost-effective management of state finances is possible only if we ensure their openness and transparency during the budget process, as well as the public discussion of budgets of all levels, from drafting budgets to monitoring their spending volumes."
We will also examine the main budget parameters of state non-budgetary funds and assess the total level of revenues, expenditures and projected volumes for covering a possible deficit. We will also focus on improving the cost-effectiveness of social support and maintaining a well-balanced and transparent pension system.
We should proceed based on these considerations as we take decisions even in such a difficult demographic and macroeconomic situation as the one I just mentioned. I won’t go into details, I'll just tell you that the revenue of the Pension Fund is projected at 6.75 trillion roubles in 2014, and expenses at 6.72 trillion roubles. Accordingly, by year: in 2015 and 2016, both the revenue and the expenditure side will grow. The revenue of the Federal Mandatory Health Insurance Fund’s budget for 2014 is estimated at over 1.2 trillion roubles, and is adjusted upwards in 2015 and 2016. The cost of funding the mandatory health insurance system in the regions will amount to about 1.2 trillion roubles in 2014 as well. The expenses in 2015 and 2016 will be slightly below the revenue.
These funds should be used to increase financial support of the basic programme for mandatory health insurance, for a gradual increase in health workers’ pay, for carrying out annual check-ups of employed individuals, as well as children without parents and children in difficult life situations.
Dmitry Medvedev: The revenue of the Pension Fund is projected at 6.75 trillion roubles in 2014, and expenses at 6.72 trillion roubles. Accordingly, by year: in 2015 and 2016, both the revenue and the expenditure side will grow. The revenue of the Federal Mandatory Health Insurance Fund’s budget for 2014 is estimated at over 1.2 trillion roubles, and is adjusted upwards in 2015 and 2016. The cost of funding the mandatory health insurance system in the regions will amount to about 1.2 trillion roubles in 2014 as well. The expenses in 2015 and 2016 will be slightly below the revenue. These funds should be used to increase financial support of the basic programme for mandatory health insurance, for a gradual increase in health workers’ pay, for carrying out annual check-ups of employed individuals, as well as children without parents and children in difficult life situations.
Finally, the revenue of the Social Insurance Fund budget in 2014 is planned at about 570 billion roubles. It will grow accordingly in 2015 and 2016. The expenses are estimated at slightly below 587 billion roubles in 2014, and 2015 and 2016, respectively. The duties assigned to the fund regarding temporary disability insurance, maternity, accident and occupational disease insurance will be provided in full.
That briefly covers what I wanted to say in my opening remarks. Once again, I would like to emphasise that the budget process is continuing, it is now in the phase of drafting policy priorities, and will then follow the procedures that we have recently reviewed with you, colleagues, at a meeting of the Commission on Budget Projections. This process will end in the State Duma and the Federal Assembly.
I will now turn the floor over to the Finance Minister. Mr Siluanov, please go ahead.
Finance Minister Anton Siluanov reports at the Government meeting
Anton Siluanov: Mr Medvedev, colleagues, today we will be reviewing draft key characteristics of the budget and main fiscal policy priorities for 2014-2016, as well as the maximum amounts of budget appropriations for state programmes. Actually, this is not the draft budget, which we will be reviewing in detail in September. Today, we need to take a decision in order to bring the maximum amounts of appropriations to action agencies in charge of state programmes, and start distributing these funds among the priority areas.
A few words about the budget parameter that is based on the forecasted parameters. Mr Medvedev, as you have already said, the forecasted parameters are worse than projected in the previous budget cycle: the forecast for GDP growth rates, investment, exports, imports, and revenue – all the factors that directly impact budget revenues – have been revised down.
Anton Siluanov: "Budget projections are based on an innovation-based forecast scenario. It’s based on fairly optimistic hypotheses and provides for a reversal of negative trends and an acceleration of global growth in the second half of 2013, an increase in GDP growth from 2.4% in 2013 to 3.7% in 2014, and 4% in 2015 and 2016."
However, we believe that even this forecast is not without risk. As you may recall, budget projections are based on an innovation-based forecast scenario. It’s based on fairly optimistic hypotheses and provides for a reversal of negative trends and an acceleration of global growth in the second half of 2013, an increase in GDP growth from 2.4% in 2013 to 3.7% in 2014, and 4% in 2015 and 2016. The forecast includes accelerated investment growth, steady growth of consumption and so on. Therefore, as we look into the draft budget, we should keep in mind the fact that the budget parameters have been formed based on innovative projections and are, in fact, stretched very thin.
We are accustomed to the fact that refining the forecast will make it possible to increase forecasted revenue and, consequently, budget spending. We won’t have this opportunity this year. Moreover, in laying the basis for the budget today, which includes overly optimistic forecast parameters, we risk running into an even greater deficit in the next budget cycle and the need to tap into the Reserve Fund, thus undermining our plans to maintain a good cushion in the form of the Reserve Fund. Previously, we expected to have the Reserve Fund at 7% of the GDP in 2017. However, today we can only count on reaching these parameters in 2019.
We are not optimistic about the implementation of the budget in 2013. According to the Federal Tax Service and the Federal Customs Service, revenue shortfalls could reach – the figure is monstrous – up to 1 trillion roubles this year. We have questions about VAT, revenue tax, as well as the flow of privatisation proceeds as a source for financing the budget deficit. Therefore the administration issues are always on the agenda. We and the administrators of the Tax Service are monitoring the situation and adjusting tax collection plans on a weekly basis.
Thus, if these risks materialise (of course, I don't wish to see this happen), we will have to replace these shortfalls with oil and gas revenues this year. In this case, we won’t be able to form the Reserve Fund to the extent that we had originally planned for this year. Therefore, we must clearly realise that this year we won’t be able to adjust the budget upward. Second, based on the three-year forecast, we should revise our current commitments.
Anton Siluanov: "We expect that in 2016 the Reserve Fund will amount to 5.1% of GDP, including budget revenues."
We don’t have too much time left to prepare for a potential long-term deterioration of the situation, and the budget, which was adopted with large spending commitments, should already today... We should work on reducing these budget commitments not only in 2014-2016, but beyond as well.
Colleagues, allow me to say a few words about the key budget features. The budget parameters have been drafted under the assumption that the total budget in terms of revenue and expenses will be cut as a percentage of GDP. This is primarily due to the declining oil and gas revenues as a percentage of GDP. In 2013, this figure was 8.9%, in 2016 it will be 7.2%. We have already discussed this issue at a meeting of the budget commission.
We have reviewed certain budget characteristics, so I’ll give you several figures related to budget deficit. In 2014, the deficit will be 0.4% of GDP, in 2015 0.56%, and 0.6%. in 2016. As a matter of fact, we are still within 1% of GDP and we believe that this figure is perfectly acceptable under current conditions. Importantly, the budget’s dependence on oil and gas is declining (we discussed that, too), and the non-oil deficit will amount to 7.8% of GDP beginning in 2016.
Importantly, the baseline estimated price for oil that we used in our calculations of the 2014 budget will be $93 per barrel; $94 in 2015 and $95 in 2016. In our forecast, we used a price of about $100 per barrel, so all oil and gas revenue above this number will go to the reserve funds.
A few words about the forecast for the Reserve Fund. We expect that in 2016 the Reserve Fund will amount to 5.1% of GDP, including budget revenues. Once again, we are moving the threshold for replenishing the Reserve Fund to 7%. However, if we don’t hit the projected revenue or secure sources of budget funding, the forecast for the Reserve Fund in 2016 will be revised down to 3.8%. I believe that, on the one hand, we should focus on fulfilling the decisions that we have taken at the Government meeting, and, on the other hand, make sure that the budget is replenished as scheduled.
The total amount of funds in the National Wealth Fund (NWF) is almost unchanged. It has somewhat declined as a percentage of GDP, but, most importantly, we will begin to use funds of the NWF in infrastructure projects and boost the rate of return of this fund.
A few words about funding sources, if I may. We are planning to use net sources of funding from the domestic market in the amount of about 440 billion to 600 billion roubles. There’s nothing unusual about this amount. We are not going to reduce market liquidity and thus raise interest rates. This is normal financial policy. However, for some sources of funding, such as privatisation, we have put in the numbers that are just under one trillion roubles for the three-year period during the recent Government meeting. Our privatisation plans are tough, but selling the stocks as scheduled is the only way to finance the budget deficit. So, we need to get these shares ready for sale.
The debt will rise from 11.9% of GDP in 2013 to 12.8% of GDP in 2016. The most important budget-related matter in the next three years is reducing the expenses that we have in our three-year budget and reallocating them to new goals and objectives.
Anton Siluanov: "We plan to fund heavily the federal targeted programme Socioeconomic Development of the Russian Far East and Trans-Baikal Territory, increase support for other industries under our commitments, including an increase in funding the work to implement presidential executive orders. In just two years, the total amount of resources allocated from the federal budget for implementing the presidential executive orders will amount to about 2 trillion roubles."
First of all, we can get access to sizable resources if we reduce the amount of inter-budgetary transfers to state extra-budgetary funds, including at the expense of higher revenue this year (higher balances will be transferred to the next year), and implement the decisions that we have already taken to abolish certain benefits. The decision will be implemented as part of the reform of the current pension system. This will free up some resources from transfers of subsidies to the Pension Fund.
The second important source is a five-percent cut to the funds used for public procurement of goods, work and services. This will allow us to raise an additional 120 billion roubles or so annually.
The next issue is about having medical institutions switch to health insurance. We can already talk about reducing direct costs involved in maintaining federal healthcare institutions and using state extra-budgetary funds as sources of financing. This policy has been adopted in the law On Mandatory Health Insurance and should be implemented in accordance with the law.
There are a number of other suggestions for finding sources. What will these funds be used for? First, we suggest using them to increase the amount of maternal capital. We have planned yearly increases by about 140 billion roubles as compared with the base amount which is provided in the three-year budget.
Next, we plan to fund heavily the federal targeted programme Socioeconomic Development of the Russian Far East and Trans-Baikal Territory, increase support for other industries under our commitments, including an increase in funding the work to implement presidential executive orders. In just two years, the total amount of resources allocated from the federal budget for implementing the presidential executive orders will amount to about 2 trillion roubles. Using these resources and the reallocation of budget funds, we will be able to fully implement these executive orders. In addition, a number of decisions to build high-speed rail and stadiums and ensure proper organisation of the Olympic Games require additional sources of funding. We won’t be able to meet these new goals without streamlining and cutting our spending commitments.
Anton Siluanov: "The total budget spending in 2014 will amount to 27 trillion roubles. The highest priority and the highest spending is in education (10.9% of 36.6% of GDP which makes up the total amount of budgets of the budget system), healthcare (total budget spending is 9.5%, or 3.5% of GDP), and defence and security, which are fairly substantial in our country."
Colleagues, I know that we have held several meetings with ministries and departments. Some ministries are saying that total costs are not growing as was originally planned in the budget. Indeed, we need now to choose priorities and identify key tasks and sources of funding.
Mr Medvedev, colleagues, allow me a few words about budget spending, because it’s imperative that we talk about budget spending at all levels, as well as state extra-budgetary funds, when we develop a fiscal policy. Please be aware that the total budget spending in 2014 will amount to 27 trillion roubles. The highest priority and the highest spending is in education (10.9% of 36.6% of GDP which makes up the total amount of budgets of the budget system), healthcare (total budget spending is 9.5%, or 3.5% of GDP), and defence and security, which are fairly substantial in our country. In 2016, the amount of spending in real terms will stand at 112.4% as compared with 2013. The greatest growth will be in education (87%), culture (110.7%), and healthcare (82%). This is the growth in real terms, not accounting for inflation, for the period from 2013 to 2016.
Also, we started using other sources of funding for investment spending, which is not growing as fast as we would like them to.
But the resources of the National Wealfare Fund, and of pension savings and insurance companies, will also be used to maintain and encourage economic growth. Currently, we receive additional opportunities to use them for economic-development purposes.
I would like to say a few words about Russian regional budgets. So far, we believe that in 2014, overall budget volumes will reach about 9.4 trillion roubles, and that total budget revenues will annually grow by about 10% later on. In this regard, we believe that overall budget-deficit volumes will decrease somewhat, but still will remain sufficiently high. In 2012, the regional budget deficit totalled 278 billion roubles. We expect this figure to total about 100 billion in 2014, and we believe that budget deficit volumes will subsequently decrease.
And now, I would like to say a few words about our reserve expenditures, which have not been allocated in accordance with budget legislation. I am talking about the so-called tentatively approved expenditures, which will total 2.5% in 2015 and 5% in 2016, respectively. On what projects can we spend these tentatively approved expenditures that we stipulate? Their total volume will reach 380 billion roubles in 2015 and 818 billion roubles in 2017. First of all, these tentatively approved expenditures will be spent on indexing salaries, on military pensions and on the pay of military personnel. They will also be spent on maternity capital, on improving the remuneration system of federal employees and public servants and on other projects. Therefore we still have a certain resource totaling about 240 billion and 314 billion worth of tentatively approved expenditures, which will be allocated by us during the upcoming budget cycle.
Anton Siluanov: "TOverall budget volumes will reach about 9.4 trillion roubles, and that total budget revenues will annually grow by about 10% later on."
Mr Medvedev, colleagues. Today, we are truly approving the main parameters of the federal budget, which are a highly important aspect of our financial economic policy. We must abide by budgetary-policy principles, and we must maintain low budget-deficit and public-debt parameters. This serves as a guarantee that the Government’s stated economic-policy principles will be fulfilled. This is important, this represents trust factor, so that investors will trust our policy, and so that they will invest in the Russian economy. It would be impossible to attain our planned economic-growth rates without attracting private investment in the economy. Therefore, by maintaining restrictions and by accomplishing budget-maneuver objectives, we create favourable conditions for more cost-effective budget spending. At the same time, we preserve those budget restrictions that we have approved, and we also retain a sufficiently rigid and moderate budget policy.
Thank you for your attention.
Dmitry Medvedev: Thanks, Mr Siluanov. Before we begin the discussion, let’s hear from Oleg Vyugin. Mr Vyugin, go ahead please.
Member of the Government Expert Council, Chairman of MDM Bank's Board of Directors Oleg Vyugin
Oleg Vyugin (member of the Government Expert Council, Chairman of the Board of Directors of MDM Bank): Thank you. Mr Medvedev, colleagues. The draft budget policy priorities were reviewed by members of the Government Expert Council, and we noted the following points. Most importantly, we found the budget’s construction to be quite good, with a small deficit. The non-oil-and-gas deficit will possibly be reduced. Our assessment revealed that there are hidden budget risks.
The construction is based on the upper limits of realistic macroeconomic risk. In the period under review, the growth of the global economy, commodities markets, and fiscal markets will be very limited. This means that the forecasted prices for commodities and resources, on which the calculations are based, are rather optimistic and can only be revised downward. And although the spending side of the budget was planned with restraint, there are risks that the budget will not be properly executed due to a shortage of non-oil-and-gas revenues.
The draft is also characterised by significant inertia in the expenditure part. Maintaining the share of or supporting the growth of spending on national defence and law enforcement activities are prioritised. If we sum up the presidential executive orders and social spending at all levels of the budget system, we will see that they form the second major inertial component. The budget’s investment part, which is important for development, will evidently be reduced. This will hinder medium-term economic growth.
The Finance Minister reported that due to the macroeconomic situation we are messing around with the budget rule. We are disavowing it with different kinds of spending. Spending on privatisation is replaced, assets of the National Wealfare Fund are spent on investment. In all, the total volume of budgetary and quasi-budgetary expenses is not declining, but growing, and growing at rates that do not correspond to the medium-term outlook on the funding capabilities. I think the problem needs to be addressed in the budget strategy. And we need to understand how we will progress considering the risk posed by the state of the global economy, which is having a significant effect on Russia.
Central Bank chairman Elvira Nabiullina and Minister of Economic Development Alexei Ulyukayev before the Government meeting
And now about another ideological approach – the budget does away with using government debt as a tool to cover… I was going to say “cash risks”, but I will say time risks in changes in and losses of budget revenues. Government debt is not a tool of this kind. The other experts and I think that we should reconsider government debt as a financing tool under the budget strategy and probably as part of the revision of the three year budget.
And a small question we also think is fair to ask. There is the possibility of increasing budget revenues by raising taxes on tobacco products higher than is recommended by the tax policy priorities and in the draft document. This can bring in additional revenue and produce an additional social effect by protecting citizens’ health. Tobacco is much more expensive in economically less developed countries than Russia. We must make note of this.
And finally, the entire budget’s construction, including additional expenses related to investments and using reserve funds, should be reviewed again. I think we must be more careful in long-term planning of this kind. We should not take any abrupt actions in budget policy for one or two years, but in a strategic period of, say, five years, this should be done. Thanks for your attention.
Dmitry Medvedev: Thanks, Mr Vyugin.
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Minister of Labour and Social Protection Maxim Topilin speaks to journalists following a Government meeting
Maxim Topilin: Colleagues, we have considered drafts of the key parameters of the Pension Fund and Social Insurance Fund budgets for 2014-2016. Pension Fund revenues are expected at the level of 6.8, 7.4, and 8.2 trillion roubles in 2014, 2015 and 2016, respectively, which means increases of 6.5%, 9.3% and 10.8%. How are the revenues shaping up? The key point is that we are not planning to increase insurance premium rates or contributions to public pension funds. They will be at the level envisaged by the relevant laws.
Some insurance benefits have been preserved that will run out under the law. The important thing is that the Pension Fund budget will be formed taking into account the fact that starting from 2014 the contributors who have chosen the pay-as-you-go pension scheme (you may remember – 4% and 2%)… The budget will be formed under new circumstances: for those who choose the pay-as-you-go pension scheme, 4% will be contributed starting January 1, 2014, and only 2% will remain in the defined contribution system. Revenues are based on these parameters. They are transfers, of course. As is known, there are shortfalls in income in connection with the benefits I’ve mentioned, insurance premium benefits. There are Pension Fund carry-overs amounting to 130, 167 and 18 billion for the aforementioned years, which cover the Pension Fund deficit. And there are inter-budget transfers, which we are finalising with the Ministry of Finance. So far we have differences with the Ministry of Finance on this score, but we will remove them during the next month.
How will the pensions fare? We will increase the pensions like we have done in the past. Under the current legislation, we plan for two increases in 2014: on February 1 and April 1, by 5.5% and 3.3% respectively, or 9% in all. Naturally, this is higher than inflation, which means that real pensions will increase. We calculate the average amount of retirement pension at the level of 11,144 roubles in 2014 and over 13,200 in 2016, with a steady upward trend to continue in the years ahead. By 2014, social pensions are to increase by 15.2%. This adjustment is due to this year’s increase in the subsistence pension rate following the adoption last year of a new consumer basket.
As for the Social Insurance Fund, we’ve managed to balance it for the years to come. Instead of covering the deficit with transfers from federal coffers (as you probably remember, this has been the case in all previous years), 2014, 2015 and 2016 will see the Social Insurance Fund’s deficit covered by budget remainders. We would want this trend to continue, so we’ll carry on with our efforts to make the fund less dependent on the federal budget. In the years ahead, we’ll be financing the deficit with a year-end budget balance. This is a new kind of scheme that we’ll employ.
Welfare benefits will be increased by 5% to adjust for inflation which will be included in the budget in 2014.
Consequently, we’ll have a budget surplus in the work-related accident insurance segment. In 2016, it’s expected to reach nearly 17 billion roubles. This trend is also a positive one. We suggest that additional amendments should be drafted as part of the work on a new draft budget, to streamline laws related to work-related accidents, and that compensation rates for the loss of life as a result of such accidents should be dramatically increased. As of now, the compensation rate is 80,000 roubles, an amount financed with surplus insurance. This sum is inadequate, and we suggest raising it to one million. We believe this to be an expedient measure. Also, employers should contribute more money for measures to improve worker safety. Here, too, the rates are to be raised. We’ll be working toward that objective, as well. Thank you.
Question: I’ve got a specific question concerning the one million rouble compensation for accidents. If the compensation rate is to rise, does it mean that employers will be charging more?
Maxim Topilin: Charging what?
Remark: As premiums, I mean.
Maxim Topilin: I haven’t said a word about plans to increase work-related accident insurance premiums paid to the Social Insurance Fund, have I? No, the premiums will not be raised. What I said was that this type of insurance yields a surplus, something that enables us to increase spending.
Question: What decision was made on the budget ultimately?
Maxim Topilin: This isn’t a budget so far, just its main specifications. These have been approved in principle, and we’ll continue to work on all issues remaining to be addressed by the appropriate government agencies and ministries. We’ll need to restrain their appetites by adjusting outlays to the economic realities. But work is currently underway to get the draft budget on the table.
The Finance Ministry is expected to set upper limits on the 11th [of July], and we’ll then be working within those limits (work will continue through the 9th of August, I think). But some disagreements between ministries will remain nonetheless. Implementing presidential executive orders should be the priority, of course.
Earlier today we discussed implemented orders related to public-sector wages. I know my ministry’s budget, and I also know that in it, we can always dig up some additional funds if necessary. We should just try to be thrifty. There are situations where no additional funds can be found, of course. But one of the things we propose to the Finance Ministry is expanding employment programmes for job seekers with special needs. Currently we just subsidise the creation of jobs for disabled workers. But for such people to be able to get decent jobs, we need to provide them with support and on-the-job training as well. We can also offer co-financing for the regions next year under programmes aimed at providing career training for women on maternity leave. This, too, is in line with presidential orders. We could find necessary funds in the ministerial coffers and we propose that the Finance Ministry should do just that. We’re talking about an outlay of 1.5-2 billion roubles per year, which seems to be a moderate sum. We’ll be able to find that much money in the ministry. But we won’t be able to cover all expenses. For instance, we’re in no position to cover the costs of rehabilitation equipment. There’s a great deal of details involved here, and we’ll continue working on them. It’s clear that we should keep going rather than stand still.
Question: The Finance Ministry proposes that when drafting a budget, some spending should be reduced at the expense of working pensioners. The presentation suggests that starting in 2015, the base pension for working pensioners will be scrapped while the occupational pension for all those entitled will stop being adjusted to the rising inflation rate. Does the Labour Ministry approve of that idea? It implies that all working pensioners will be paid less, actually…
Maxim Topilin: No, the Labour Ministry is vehemently opposed to the idea. We are the architects of the new pension reform, but we haven’t come up with any such initiatives. We do not believe that, given current pension and salary levels, it would be possible to stop paying pensions to working pensioners. We suggest another option. Under our concept, a person who puts off pension payments and does not receive them for a certain number of years obtains a certain multiplier effect after retirement. For instance, pensions are set to grow by 50% in five years. But this does not mean that pensioners will not receive fixed basic pensions, as suggested by the Ministry of Finance.
As for indexation, we have agreed that we will slightly adjust the indexation mechanism. The basic pension segment, which is part of the pension-insurance sum, will be indexed in line with inflation levels, and the remaining pension-insurance sum will be indexed in accordance with inflation levels and Pension Fund revenues, just like is happening today. These parameters are currently being adjusted, but, on the other hand, we suggest introducing work-record coefficients and points starting in 2015. The Prime Minister has also supported this. Men and women with longer work records, of 30-35 years, can receive pensions over a ten-year period and it can be done not only for those who are currently applying for pensions but also for those who are already retired. This will make it possible to raise the pensions for those who are already retired. We have coordinated almost all parametres, except some details. We are currently coordinating this draft law.
Question: May I ask you about one more detail? Will the pension-accumulation plan stipulate 2% or 6% rates?
Maxim Topilin: It will stipulate the rates envisaged by the law.
Question: Six?
Maxim Topilin: The law now stipulates 2%, starting in 2014. Current legislation, which was passed in 2012, stipulates 2% rates starting in 2014.
Question: But the Ministry of Finance suggests 6%.
Maxim Topilin: When I answered the first question, I told you that Pension Fund parametres stipulated the provisions of the current legislation, or 2%, as of 2014. Consequently, you can choose four to two. If you have chosen a private pension fund, then you don’t have to write anything else, starting January 1, 2014. You should make this choice in 2013. The way you make this choice is as follows. If you have chosen a private pension fund, then you have opted for a pension-accumulation plan through this fund, and you don’t have to write anything. You will have to deduct 6% into the pension fund. If you prefer to keep silent and do not write anything, then you will have to deduct 4% into the pension-distribution system and 2% into the pension-accumulation system. The entire system precludes any abrupt moves and extra paperwork. If I have opted for a private pension fund, and if I want to deduct 4% into the solidary system, then I will have to write an application. This is the only case, and this is stipulated as of 2014.
But we have now drafted a law, which extends this deadline until 2014 and beyond for those who will come to work and sign work contracts, for young people. We have already coordinated this draft law with the Ministry of Economic Development. But we have failed to coordinate it with the Ministry of Finance, because this Ministry was under the impression that specific rates would be extended, but there is no provision for this.
Question: Earlier this week, the Trilateral Commission on the Regulation of Social and Labour Relations approved a draft law from the Ministry of Labour and Social Protection on limiting bonuses, severance payments and “golden parachutes” for top executives of state corporations and state companies…
Maxim Topilin: There are eight companies there. We have eight companies, to be more exact.
Question: Yes, and your bill also includes companies with state stakes of 50% and more…
Maxim Topilin: And not only top executives but also their deputies, chief accountants and members of managing companies.
Question: Yes, and why did this happen?
Maxim Topilin: You see, ministries and departments, including the Ministry of Finance and the Ministry of Economic Development, as well as employers and trade unions, deemed it appropriate to stipulate broader Labour Code restrictions during the dismissal of employees. The amount in question will total three to six months worth of salaries. We have also discussed this issue. We have submitted this proposal to the Presidential Executive Office. And, if the Presidential Executive Office (because this is a presidential instruction)decides that we are moving in the right direction, then we will issue the law in this form…
Question: This means that this proposal to expand the list of persons who… this proposal has not been coordinated with the Presidential Executive Office…
Maxim Topilin: The Government has been instructed to draft proposals on the draft law. We have submitted these proposals to the Presidential Executive Office.
Question: They are somewhat broader than that was meant by presidential instructions.
Maxim Topilin: I am telling you once again that we have submitted these proposals to the Presidential Executive Office. Yes, they are somewhat broader, but there are also three parliamentary draft laws, which are even tougher.
Question: The other day, the Head of the Federal Migration Service has proposed changing the current foreign-workforce quota-allocation procedure. What do you think about this proposal?
Maxim Topilin: We conduct permanent dialogue with the Federal Migration Service on this issue. What are we doing? As I see it, we are acting consistently. First, we have amended pension-insurance legislation, and we have introduced insurance-premium rates for foreigners as regards the Pension Fund. This was done last year. To date, we have drafted two laws, which stipulate temporary disability insurance for foreign citizens. Right now, foreign workers are much cheaper in Russia because they are virtually not covered by insurance premiums. This draft law is currently being coordinated with employers and trade unions.
Third, we have already submitted a draft law to the Ministry of Justice for coordination, which stipulates voluntary, rather than mandatory, medical insurance for foreigners. The Government will determine specific regulations, including insurance premiums and insurance coverage. This is similar to mandatory medical insurance, although it stipulates a slightly different method. We will therefore even out workforce prices.
Question: Do we need any quotas?
Maxim Topilin: As for quotas and the abolition of quotas, we emphatically oppose such proposals. We consider them to be absolutely incorrect and economically unjustified. There is a multitude of problems. A law authorising us to specify the so-called 783rd Resolution has already been signed. We have not yet received this resolution, which deals with the quota-formulation procedure. We are currently drafting these changes together with the Ministry of Economic Development and the Federal Migration Service. The relevant changes will improve quota-formulation procedures to a certain extent. But we emphatically oppose the abolition of quotas, because this would simply wreck the Russian labour market. We have no regulations governing the issue of patents, which was a good idea. Do you remember how patents for the employees of private individuals were suggested? Do you remember how it took a long time to conceive and assess this idea? Indeed, this idea aimed to legalise the workforce. But what results did it produce? Ask regional leaders in the North Caucasus. It turns out that most workers are employed by private individuals, and that they provide services to these individuals. But the relevant quotas do not list any workers. However, there are very many patent holders, despite the absence of quotas. This issue is not regulated, and no quotas are available. We are thinking of introducing quotas in this area. This situation has to be regulated somehow. Therefore we believe that this is incorrect, and it is our opinion that there is a certain division of authority. In my opinion, it would be necessary to more actively monitor the legal and illegal status of people in the Russian Federation. We would accomplish everything, if we were to address this issue. As I see it, the national situation would improve considerably, if everyone were to start taking care of his or her own business.
Question: You noted at a meeting with Mr Isayev (Andrei Isayev, Chairman of the State Duma Committee on Labour, Social Policy and Veterans’ Affairs) that a road map on raising the minimum statutory monthly pay will be drafted by July 1. Is this road map available, and how is it linked with this draft budget?
Maxim Topilin: It is not linked with the draft budget in any way. It has not yet been coordinated because it can be implemented only by resolving the issue of district regulation of salaries. You are familiar with this subject, right?When there are contradictions in the labour legislation, we still try to resolve this issue in a definitive way because there are many courts. We feel very uncomfortable in this situation but we realise that since the minimum wage is linked to the living wage, the issue cannot be solved without zonal regulation because the living wage always includes the minimum wage and it also always includes regional differentials. If we take the average living wage for the Russian Federation, the average regional differential and average hardship pay bonuses are part and parcel of it. They are included in the minimum wage under one article of the labour legislation; but there are other articles which say they are not. These are internal contradictions, unfortunately, this was done some time ago. Many experts said at the time that these legislative amendments were wrong but we have what we have.
So I believe we will continue our talks, meaning that by 2018 … We are setting ourselves the aim of bringing the minimum wage to the level of the living wage by 2018. The trade unions, of course, want this done sooner, while the employers a bit later. But we are setting this goal. I can say that the work will go on at least until 1 January next year. Thank you.
