Tuesday, June 29, 2004. Page 1.
Veterans, Disabled Slated for Extra Aid
By Caroline McGregor Staff Writer Budget money allocated for World War II veterans will be 20 times greater and 10 times greater for the disabled, President Vladimir Putin said Monday as he tried to win support from a skeptical population for his plans to replace social welfare benefits with more transparent cash payments.
"I hope that the government and the Finance Ministry will be ready to implement these proposals, bearing in mind that the resources required are very large," Putin told top ministers, aides and advisers at a Kremlin meeting to discuss economic development.
Overall, monetary compensation for the canceled benefits is set to cost six times more than providing forms of noncash assistance to various categories of people, including -- but not limited to -- veterans, the disabled, pensioners, soldiers, single mothers, holders of Soviet labor medals, civil servants and survivors of the Nazi blockade of St. Petersburg in World War II.
Aid to these groups will swell within the budget from about $1 billion to about $6 billion.
The government is ready for increased spending to make the system less corrupt and "more effective," Deputy Prime Minister Alexander Zhukov said prior to Monday's meeting in televised comments.
Because money for social benefits is not given directly to the citizen but to an organization that distributes it, this money is easily embezzled, Zhukov said. The current system "is extremely lucrative for light-fingered officials," he said, adding that half of all the allocated funds go astray.
Next year's budget has set aside 170 billion rubles ($5.9 billion) for the payments, Health and Social Development Minister Mikhail Zurabov said Monday at a round-table meeting at the State Duma, Ekho Moskvy reported. This is six times more than the 27 billion rubles ($930,000) allocated to provide benefits in the 2003 budget last year, he said.
"$6 billion is only about 1 percent of next year's projected GDP. It's not a big amount," said Yevgeny Gavrilenkov, chief economist at the Troika Dialog brokerage, commenting on what he, like most analysts, sees as a necessary reform.
The plan to substitute cash payments for benefits -- like free public transportation, discounted phone service and electricity, free medication for the disabled, and subsidized apartments for government employees -- has met vigorous resistance from many fearful of changes to the country's social safety net.
About 1,000 people demonstrated outside the White House government headquarters after Putin proposed the change in May. The Communist Party pledged to mount a referendum to reverse the plan, even as the Kremlin rushed to introduce legislation making independent initiatives to hold referenda all but impossible. On Monday, Putin signed the bill into law.
Not all benefits will be compensated. Certain benefits will disappear as the system is streamlined and replaced by targeted assistance for those who really need it.
Many entitlements have remained on the books since the Soviet era without re-evaluation, and many go to people who do not need them. For example, all families, rich or poor, are eligible for state aid when a child is born.
The government estimates that 32 million people, or one-fifth of the population, will lose access to some or all of the subsidies they enjoy.
Putin and his government have defended the changes as a way to bring order to an amorphous system of costly perks and continue the transition to a market economy. They also argue that people living in rural areas do not have access to some benefits, like transportation and healthcare, and would be better served by a lump sum of money.
Yet many veterans and pensioners worry that the cash stipends, which range from about $20 to $120 per month, could be eaten away by inflation. Illustrating the complex classifications, the government has said that starting in 2005, those who hold government medals of honor would receive 3,500 rubles ($120) per month, veterans of wars would receive 1,500 rubles, while veterans of other armed conflicts would receive 1,100.
Putin on Monday singled out veterans specifically of World War II to receive the extra help.
Troika Dialog's Gavrilenkov noted that the number of veterans is small and shrinking every year, and Putin's intention to provide extra help to them in their last years is mainly a symbolic move to insulate them from anxiety associated with dismantling the social welfare system they have relied on.
In the face of public anxiety, Putin relaxed his line somewhat last week, saying some categories of citizens would be able to keep their rights to nonmonetary benefits.
"All decisions in this sphere ... must improve the situation of this group of citizens and make the system more socially weighted, more socially fair," Putin said at Monday's meeting.
The Duma is set to consider the government's cash-for-services plan in the first of three readings Friday. A final vote is scheduled for August. The system is intended to go into effect next year.
The United Russia majority supports the bill but intends to amend it, Duma Speaker Boris Gryzlov said Monday after a meeting between the faction and members of the government.
The bill's fate is not yet certain, however. Some United Russia deputies have expressed anxiety that support for the bill would jeopardize their chances of re-election, while the Duma's three minority parties have loudly vowed to fight the bill.
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