II. Reading

1. Read the article through without a dictionary and try to grasp the main idea. Social reform to phase out perks

Moscow News, N24 (3931), June 21-27.2000, p.2

The following is Deputy Prime Minister Yalentina Matviyenko's first interview since her appointment to the new Cabinet.

- Two and a half years ago, when you were appointed Deputy Prime Minister, you also granted your first interview to MN. Your main thesis at the time was this: Social policy must not be a policy of privileges and exemptions. Today, however, there are 150 various privileged categories in Russia and about 100 million people entitled to benefits. Have you changed your views perhaps?

- No, my views are still the same.

- Then you've failed to carry out your program?

- I can't quite accept that either. After all, there've been a few success stories.

- Such as?

- For example, the Duma passed a framework Law on State Welfare System. This document for the first time introduces a welfare benefit for families living below the official subsistence level.

- Did this help cut the number of welfare benefits?

- It certainly did. The law set a very strict procedure regulating welfare payments. Now only families living below the minimum of subsistence may claim them. And only if this is a result of objective circumstances. For instance, a family with a lot of dependants, children, invalids, or retirees. Incidentally, the State Duma has already passed a law on child benefits for 1999 to be paid to families with per capita incomes below the subsistence level. Thanks to the new approach, this year we managed to sharply reduce the number of people entitled to the so-called child benefits and support families in low income brackets. We are determined to keep this agreement next year. There are more draft laws along the same lines; they are well elaborated and, hopefully, will eventually be passed.

- I agree that this is an important law, but the system has not changed radically, has it?

- There are objective reasons for that. Remember that the Primakov government came in the wake of the August crisis. We were rushed off our feet trying to cope, what with benefit, pension, and wage arrears. It was naive to expect that we could consistently follow a coherent strategy under such conditions. We had to explain to the nation what it was all about. After all, the psychology of law-makers and the public at large has to be changed.

- Have the conditions changed now?

- They have. For several months in a row we have seen steady economic growth. Also, there is political stability. I'm sure that this is a unique chance for social reform. If we do not go ahead with it now, we will continue to spread ourselves thin.

- People are just beginning to recover from the default and you are proposing a radical social reform.

- Let us get our terminology right. It is only the underlying social policy concept that is subject to radical change, but there will be no radical reform.

- Is this feasible?

- Absolutely. Yes, strategically speaking, social policy will change. It's not only that all sorts of privileges and exemptions will be abolished without fail. The main social policy objective will be to stimulate growth of income. And as people's personal incomes grow, their spending on what is now formally assumed to be free or almost free-medical services, education, housing and utilities-will also grow. It is important to stress, however, that the income has to grow before the spending does. This is a matter of principle.

- Few people would disagree. But the government would be in a position to put in place effective mechanisms to implement it? And how can they possibly be created when the social sphere, along with the entire Russian economy, is operating in the shadow?

- We took that into account. This is why at the first stage we are going to straighten out the personal income business. It is not only about wages, it is also about income from stocks, real estate, and so forth - most of which is simply ignored now. Do you know, for example, that statistically, Russians spend three times more than what they officially earn? We hope that the tax reform started by the government will help turn the situation around in the very near future. And then it will become clear who is able to support himself and who needs assistance from the state. Please note, what we are talking about is not enforcement but a setup where it will be economically unprofitable for people to conceal their real incomes.

- Even under the best possible scenario, it is difficult to expect incomes to grow quickly and a considerably greater number of people to become self-supporting soon. How in these circumstances could social reform be accelerated?

- It doesn't even need to be accelerated. In fact, it might even have to be slowed down somewhat if the growth of income is not fast enough. Our fundamental position is this: The reform must not disadvantage people.

- Are you sure that this principle will be followed?

- This is not just my personal opinion-it's the firm position of the government.

- It doesn't seem to make sense. You say no one must be put at a disadvantage but you are going to abolish all privileges. As a result, you will get 100 million people whose interests will be trod upon very noticeably.

- Let us set the record straight. First of all, not all welfare programs will be abolished.

- You will have to choose the needy of the neediest?

- We will identify those who cannot get by without assistance from the state.

- What kind of people do you have in mind?

- In addition to families whose income is below the subsistence level, these are war veterans and invalids, disabled people, children and victims of political reprisals. The 2001 budget already stipulates that these benefits will be the federal government's responsibility. Up until now they have been paid from regional budget. We think that this practice is wrong. There must be no difference in this respect between well-to-do Moscow and the Far East that lives off subsidies.

- What benefits are to be abolished?

- We propose the abolishment of all benefits on the professional principle. You believe that a colonel should enjoy better living standards than a teacher? They pay him accordingly. Instead we provide all sorts of perks: free travel, housing benefits, reduced telephone and other utility rates, and so forth. Now 80 % of public transport passengers are entitled to some form of exemptions. No wonder our city buses are on their last legs.

- The abolishment of privileges will be accompanied by compensation in the form of higher wages. Right?

- Yes, and this goes to confirm the aforementioned principle: The reform must not affect living standards. The rationale behind this system is to encourage people to earn more. Moreover, the money that a person invests in the public health sector or in housing will be working in these spheres. This is direct investment and we are all interested in this.