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Friday, June 1, 2012

Russia needs true family policy


MOSCOW — The unprecedented upswing of public interest in Russia's presidential elections opened a window of opportunities — quite unexpected but welcome — to see and discuss many socioeconomic problems in a more realistic manner.

There was prolonged and contentious dialogue in February and March between two high-ranking female functionaries of the officially recognized opposition parties — A Just Russia and the Liberal-Democratic Party of Russia. This debate highlighted, in many ways, the questionable social policies of the ruling United Russia party.

According to both women's views, there is no real family policy in Russia. The concept was compiled by the Duma but nothing followed. There are about seven departments in the government dealing with family matters (including home affairs, health care, culture and education), but no one bears actual responsibility for the quality of implemented policies.

The family policy expert from A Just Russia proposed to establish a special department for family affairs, but her counterpart only shrugged her shoulders: "What can be done if the ruling party remains uninterested?"

Both sides agreed that it is very bad when a sense of security in social life is absent and no one can be held responsible for it.

In Moscow, there is a 460-billion-ruble health fund that should be spent on repair work and renovation of clinics and hospitals. As stated in the debate, so far it is hardly possible to discover traces of its existence. Yet, the establishment of this fund was the ostensible reason used to raise the "social tax" from 28 to 34 percent. This tax represents a specific "social insurance contribution" paid to the budget by businesses for each employee, up to a cap of 463,000 rubles in salaries and wages per person on an annual basis.

In turn, the super-regressive scale of this tax has been criticized for giving the rich too much tax relief. Incomes up to 38,500 rubles were taxed at 34 percent, while any sum beyond this modest threshold were tax-free. From the aggregate sum of wages and salaries of about 13 trillion rubles, at least 2 trillion were not covered by the "social tax" — an annual loss of 700 billion rubles in budget revenues and a considerable untouched reserve for enhancing various social allowances (some of them humiliatingly small).

We may note that, since 2012, the rate of overall tax was reduced to 30 percent and the cap was raised to 512,000 rubles, while higher sums were burdened with an "additional contribution" of 10 percent. According to official estimates, it means an overall — albeit only slight — rise of "social insurance contributions" from companies to the government coffer.

All in all, the super-regressive and generally unjust character of this peculiar budget tool remains intact.

Women preparing to become mothers and those who have just given birth receive special consecutive allowances. So far, these allowances are not taxed, but the Duma is considering a bill that — if adopted — will introduce a 13 percent tax on these insignificant sums. Regrettably, budget expenditures would just go down by about 12 billion rubles — nothing in comparison to the aforementioned 700 billion lost in the process of collecting "social insurance contributions."

At the same time, debates about a "luxury tax" (which eventually would be applied to domestic real estate worth over $10 million and to expensive cars and motorboats) will lead to nothing and only stimulate the rich to buy real estate abroad and helicopters instead of Ferraris. If implemented, this tax could add about 1 to 2 percent to the federal budget (just 0.3 percent of GDP). The idea is to use this money for new allowances addressing the needs of about 100,000 "asocial" families in the country (those with drinking and/or drug-addicted parents) plus rehabilitation assistance instead of punishment and deprivation of paternal prerogatives.

Demographic problems and family issues are related, but they are not the same. For many families, the most essential needs are a good-paying job for each working parent and an apartment of their own (bought or received from the state under established rules).

At the same time, it is widely believed that to achieve a higher birthrate, Russia needs to adopt a much more nuanced policy, combining more generous allowances with improvements in health care facilities, an increase in the number of kindergartens, and better services.

During the privatization frenzy, many "nonprofile assets" of state enterprises (including kindergartens and sanitariums) were either sold out and re-profiled — into casinos and "interest clubs," etc., (often representing commercial establishments with questionable profiles) — or neglected. Now, many advocate a return to the practice of companies operating their own social and recreation facilities.

From 42 million families, only 15 million are "young families" (in which at least one parent is no more than 35 years old); it is to these families that 75 percent of all children are born. The country needs a "young family" federal program to stimulate childbirth within this group. Such programs exist in several republics and other territorial units, but on the federal level, all efforts are allegedly sabotaged by the ruling United Russia party.

The federal program "Housing" (2011-2015) includes the subprogram "Securing housing for young families." Special subsidies and credit facilities are provided for families with an adopted child or the second birth child. The weakness of this system lies in the overall high level of interest fees in the real estate and housing sphere (to get an 8 percent mortgage is considered a lucky strike).

No more than 20 years ago, there were 36 million teenagers in Russia; now there are just 27 million. Still there are not enough recreation facilities for them, especially in summer when schools are closed. The "summer camps" on school property, arranged in some cities during the June-September vacation period, are no remedy because typically they mean more hours each day on a hot tarmac in sometimes dangerous surroundings. Parents must arrange meals for their children during the day and bear other additional expenses.

Overall such "bringing-health-to-the-state" programs have little effect. In a few months, when school begins, clinical screening typically discloses newly adopted diseases that must be treated.

During budgetary debates, the opposition asked for 18 billion rubles to fund children's recreation and health care purposes but got only 5 billion. These funds are distributed mostly on the spot by municipal administrators, and it is a sad fact that a considerable part of this money disappears on the way to schools.

Probably the best way to optimize the use of social funds is to directly finance concrete family expenses (the recreation of children in sanitariums, at special family resorts and the like).

As a finishing touch in the public debate on family policies, a bold step was proposed: to introduce a special allowance of 100,000 rubles (over $3,000) paid in cash to each mother after each childbirth. With unprecedented new features, such a generous allowance would considerably differ from existing practices. But it seems this suggestion — like other useful ideas aired during the pre-election debates — will be soon forgotten in light of the already approved budget projections.

Andrey Borodaevskiy (annabo36@mail.ru), an expert on world economy and international economic relations, was a professor at Seinan Gakuin University, Fukuoka, from 1994 to 2007.


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