Publication: Monitor Volume: 3 Issue: 119

On June 17 the Russian Duma rejected the government’s proposed packet of six laws reforming social welfare, the main thrust of which was a reduction in the special benefits in housing, transport and pensions for certain categories of citizens, especially state employees. Deputy Prime Minister Oleg Sysuev argued that the elimination of some of these benefits, such as free housing for families of war veterans, could save 30 trillion rubles this year, which would be directed to the benefit the really poor. (ORT, RTR, June 17; Kommersant-daily, June 18)

The reform aims to break a pattern inherited from the Soviet era, when many benefits were provided to all citizens irrespective of their family’s financial status, on top of which hundreds of special privileges were granted to certain categories of citizens. These benefits are so numerous that it is beyond the capacity of the state to actually pay them, so they exist largely on paper. Social spending as a percent of the federal budget rose from 26 percent in 1992 to 45 percent in 1996, and Sysuev estimates that, of the 400 trillion rubles of benefits theoretically available, only 70 trillion will actually be paid this year. At the same time 22 percent of the population, some 35 million people, are living below the minimum subsistence level and are urgently in need of state help. (RIA Novosti, June 5)

Logical though these arguments may be, critics argue against quick adoption of hastily-prepared social reforms in response to the government’s immediate need to save money — in order to meet its promise to pay off pension arrears by July 1, for example. In an effort to stave off complaints that the government is trying to balance the budget at the expense of the indigent, the draft law tried to target the powerful and not just the poor. The draft proposed to radically curtail special transport and housing benefits for officials of the power ministries (from the police, customs officers, etc.) Deputies were to be limited to 12 free trips a year, and top government officials (Sysuev himself included) would have to use regular plane flights.

However, the draft also included some less-popular steps, such as limiting federally-paid child allowances to children under the age of three. Benefits for older children, currently 57,000 rubles ($10) a month, would be the responsibility of regional authorities. This measure would save the federal budget 25 trillion rubles this year. Sysuev admitted that many regions have not paid any child payments since 1995, but said that removing the legal obligation to pay for all children until age 16 would enable the regions to go over to means-tested benefits.

Despite a positive recommendation from the Duma’s labor and social affairs committee, on June 17 the reform package was voted down. It was supported by deputies from the Liberal Democratic Party and "Russia is Our Home", but opposed by Yabloko and the Communists. Its fate will now become part of the protracted political bargaining between the Duma and the government over the new tax code and budget sequestration.

Russian Budget Cliffhanger Continues.