In search of a social budget

After submitting a slightly revised draft of the 2004 budget for the second reading, the government embarked on a so-called public relations campaign to prove its greater social character. Apparently, the government has ignored the clause in the Law On the State Budget for 2003 setting the minimum wage at UAH 237 as of December 1, 2003 and instead proposed setting a minimum monthly wage of UAH 205 starting January 1, 2004, and to restore, from March 1, 2004, the position-related proportions in the remuneration of public-sector employees. Apparently, the government is backtracking from its commitment to solve one of the most problematic social issues.

Meanwhile, addressing a press conference at the Finance Ministry last week, Deputy Finance Minister Anatoly Miarkovsky was eager to prove the contrary and enumerated numerous budget items envisioning increased social spending. As a closing argument he even cited a figure of 52%, which was meant to give those present some idea about the social component of the budget. In principle, the government, which has undertaken to carry out both a pension and tax reform in one year, can claim credit for this. But what about the less protected citizens who, under law, were to have their minimum wages increased up to UAH 237 as of December 1 and will instead receive UAH 205 starting January 1 next year? Why has the government lacked enough so-called social orientation when considering this particular budget item? The Day has not received a clear answer to this question from the deputy minister. Anatoly Lukyanenko, aide to First Vice Premier cum Finance Minister Mykola Azarov, made things somewhat clearer. According to him, those who receive minimum wages and are eager to reproach the government and Finance Ministry should choose between what seems more, but not in fact get a raise, and what is real. “Few will choose [wage] arrears,” Lukyanenko told The Day. But one may argue with this, considering that the government is presently showing its ability to repay debts using this year’s budget. Among those favored by the government are Chornobyl victims (a special targeted aid scheme has been introduced for them, which rules out embezzlement of funds) along with coal miners, who will receive their back wages, salaries, and even compensation of budgetary underfunding for the previous years. Who would object to this? However, instead of last year this is being done only now. This is no doubt an effective pre-election move by Premier Victor Yanukovych, who is thus fulfilling his promises to his fellow Donbas residents.

Meanwhile, it turns out that nobody, except the law, has promised anything to the Ukrainian teachers, who are shaping the country’s future generations. However, the law, under which teachers’ wages may not be less than the average salary in the industry, is not being fulfilled. Indignant teachers en masse file their complaints in courts, which rule in their favor. As a result, the country’s schools face closures (the courts freeze accounts, pay back wages to the plaintiffs, and leave the remaining teachers without salaries). The government knows about this problem, but does nothing to solve it on the level of the budget, and passes the buck to local authorities. Meanwhile, the revenues of local budgets have been significantly overstated, according to Myroslav Pitsyk, vice president of the Association of Towns and Communities of Ukraine. In his view, the introduction of a 13% flat tax for individuals will cause a heavy drain on the local budgets. Mr. Pitsyk believes that, all things considered, the bodies of local self-government can themselves conclude whether the budget is socially oriented or not. Thus far their conclusion does not tally with that of the government.

Other independent experts also point to the inadequate social level of the budget. Thus, in a comment to The Day, Valery Lytvytsky, aide to the NBU governor, enumerated a few positive decisions, but stressed that the budget deficit growth envisioned by the government does not meet the social needs of the country, since only fifty million hryvnias has been allocated under this item for social programs. “It’s not enough,” he said. Moreover, according to Lytvytsky, the government has been quite shortsighted in planning the measures to increase social protection. For example, the nominal GDP growth up to UAH 283 billion is expected to be achieved by way of adjusting the inflation rate from 6% to 6.7%. This means that all Ukraine’s citizens will have an inflation tax imposed on them. “Social consequences of this step will not be to the citizens’ good,” Lytvytsky is convinced.