My truth about assistance and retirement
The intervention of Giuliano Cazzola
I read in amazement the article by Pietro Gonella on the separation between social security and assistance. By now I have learned not to be surprised anymore by the three-card game in which the unions are practiced to cheat the accounts of the pension system, as if it were enough to move a figure from one game of the public budget to another to solve the problem of the sustainability of the system. same; as if we were stupid enough to provide Eurostat with wrong data in order to mortify the INPS.
But when I come across a person who wants to explain the need for separation with technical arguments, I feel offended, because this crazy idea has the same scientific value as "terrapiattism". And this is not the opinion of a scholar who contrasts the arrogance of others with his own, but who strives to abide by the rules, the rules of accounting and official sources. Let's start with the latter.
The technical committee appointed by the government, on input from the trade unions, to investigate the issue of the separation of social security from assistance, concluded its work with a document that reconstructs the terms of the problem and reaches a conclusion – among many thorough and correct – that should make text and sweep away from the debate a fraudulent operation such as the one that passes as a separation of the pension from the assistance (or vice versa) which could allow Italy to restore virginity to a pension system that has lost it for some time .
Before explaining the Committee's conclusions, a few premise are appropriate. The campaign was so intense that the idea of separation has risen into the empyrean of clichés, which are accepted as absolute truths. It's the same old story: when you pretend to have simple solutions to complex problems, you always look good.
In fact, what is the thesis of the "separators": we send to Brussels only the percentage (of GDP) of what is – according to them – purified pension expenditure (Gonella uses the adjective "pure") from that for assistance ( About 2% of GDP) and we are back to having the credentials with respect to the criticisms addressed to us.
But the statistics are compiled according to common rules and agreed at Eurostat. In fact, the Committee's document clarifies what Eurostat's criteria are for calculating pension expenditure. And following these criteria, the anomalous data of our system emerge. In theory, different rules can be adopted, but they must be done uniformly, together with the others. But the fundamental argument for denying the separatists is another. What is considered assistance under the Constitution?
We read paragraph 1 of article 38: "Every citizen unable to work and without the necessary means to live has the right to maintenance and social assistance". It is clear that – due to their very nature – the benefits that are recognized to citizens in those conditions are borne by general taxation. Here the concept has been reversed: assistance (Gonella also writes it) is all that is financed by the state budget and not by the resources deriving from social contributions.
The correct reasoning is yet another: pension expenditure – for a variety of reasons – is financed partly by the contribution of production and partly by transfers from the state budget, which are regular income like contributions, because it is the law that provides that certain services or part of them are covered with resources deriving from general taxation. If this were not the case, if the financing through transfers were enough to make what was social security assistance become assistance, in light of the massive taxation of social contributions that is announced (in an amount of 18 billion) in order to reduce the wedge, it should be concluded that also the pensions would pass from the pension empyrean to the assistance basement.
The point is made clear in the Commission document. "The Commission agrees that the funding channel for benefits (social contributions or general taxation) cannot be used as a criterion for quantifying social security expenditure for two reasons:
i) nothing prevents a social security expenditure from being financed through taxes instead of contributions, as demonstrated by the European comparison (and the Italian case itself, for example in the presence of forms of contribution relief);
ii) in Italy, general taxation also finances items clearly of a social security nature, as can be seen from the GIAS budget, the "Management of Welfare Interventions and Support for Social Security Management", established by art. 37 of the law n. 88 of 1989 within the INPS budget.
More generally, the intervention of general taxation through the GIAS fund and the system of treasury advances which the INPS periodically draws on has the purpose of financing / settling the financial imbalances of the body responsible for providing the benefits rather than give financial coverage to individual services. To confirm this, the Commission highlights a fact that the Italian debate does not seem to take into due account: in 2019 social contributions covered a share of social security expenditure equal to only 76.3%, continuing a tendential reduction in its coverage over the course of the last years".
It is therefore incorrect to say that care expenditure has increased; the truth is that – for various reasons – the contribution of transfers to finance pension spending has increased. Another reason cuts the bull's head: SEPARATION HAS ALREADY BEEN DONE.
The principle of separation between assistance and social security was implemented in law no. 88/1989 which reformed the structure of the INPS budget in this sense. In particular – in addition to the Management of temporary benefits, which provides benefits against involuntary unemployment, the ordinary Cig, the allowances to the family unit, the sickness and maternity assistance, within the sector of employees – was established ( art.37) the aforementioned Management of welfare and income support interventions (GIAS) which became the collector of contributions from the state budget to that of the INPS.
Thus, a series of benefits (social pensions, social security benefits, early retirement, part share for each month of pension, now also facilitations for retirees, etc.) were charged to the State, which also took on the burden of covering the debt accumulated by the Institute (17,650 billion lire in 1986 to cover the balance sheet deficit at 31 December of the Cig and partial coverage of the capital deficits at 31 December 1986 of the Fpld and the Direct Farmers Management (Cdcm) for 20 thousand billion lire in 1987 and 40 thousand in 1998). Thus, as early as 1989 the financial statements of the INPS managements were prepared according to the new directives, which provided for a functional recomposition of the activities with reference to their social security or non-social security nature.
To show the influence of the new rules, INPS himself formulated a very interesting simulation, showing that in a possible report for 1989, drawn up according to the previous criteria, the pension – understood as the sum of all pension schemes – instead of having a positive balance 155 billion lire (as resulted from the reform of the budget structure) – would have had a liability of over 11 thousand billion lire. In turn, the intervention by the state, instead of having a liability of 10 thousand billion, would have had an asset of 1,200 billion lire.
It should be recognized, however, that the effects of law no. 88/1989 were important in determining – albeit ope legis – a process of consolidation of the INPS balance sheet, both through the establishment of the Employee Section which, by merging Fpld and Gpt, ended up offsetting the liabilities of the former with the positive balance of the second and to achieve an overall positive result; both thanks to the GIAS which had the task of collecting the most critical services, charged to general taxation.
On the path of separating pension and assistance, two very important interventions should be noted: the first contained in law no. 449/1997 (the Finance Act for 1998); the second in law no. 448/1998 (the Finance Act for 1999).
In the first case, following a negotiation by the Prodi government with the trade unions, the boundaries between two sectors were redrawn, moving in the field of assistance (and therefore of fiscal financing), in addition to further transfers (for 1,773 billion lire) and the adjustment of the charges referred to in article 37 of law no. 88/89 (for 664 billion lire), the coverage of the disability pension charges before 1984 (for 6 thousand billion lire), of the Cdcm pension charges before 1989 (for 3.782 billion lire). It was also established that the State would guarantee full coverage to the GIAS, which from then on would be, by definition, in balance. So it happened.
Law no. 448 of the following year did the rest, in the sense that it established the overcoming of the practice of treasury advances, used in place of the transfers due and sanctioned the cancellation (article 35) of the previous debt accumulated for this purpose by the INPS.
It was an operation that eliminated an accounting debt of 160 thousand billion lire. The INPS budget received a significant benefit, in terms of operating result, as a result of the full financing of the GIAS; as for the patrimonial situation, it went from a negative figure of 99 thousand billion lire in 1997 to a positive one of 24 thousand billion lire at 31.12.1998 as a result of article 35 of law no. 448/1998 which established that the treasury advances granted by the State to INPS up to 31.12.1997 should be recognized ex post in definitive transfers.
Later other services merged into the GIAS (example: the shelf of the FS Fund – which undoubtedly constitutes a social security institution – travels in the order of over 4 billion euros a year) as the related tasks were transferred to the Inps. Therefore, after this set of operations that have left their mark on the national accounts, it is increasingly difficult to attribute, in principle, a benefit to the assistance sector rather than to the social security sector according to the canons of Article 38 of the Constitution. .
We can reconfirm, then and without fear of denial, that today welfare services are considered as such not on the basis of their nature, but if their financing is borne by contributions or by State transfers. But in this respect, general taxation has already taken on considerable burdens. In a nutshell: we could say that it “has already given”. You are asked to give more than what has been added in all these years (see the Ape package, the so-called fourteenth, etc.) and to charge for transfers from the state budget everything that the INPS budget does not can you cover? It is not prohibited.
In '98 it went beyond what had been agreed in '89. But at least let things be called by their names. And do not smuggle what is pension expenditure for assistance, for the sole purpose of representing a lower incidence on GDP. Assistance is not a burden on the pension. It is the latter that receives help from the other, through transfers from the state budget. The form below taken from the VIII Report of Social Security Itineraries indicates the amount of contributions that the State transfers to Gias, for the ambit provided for by law No. 88 of 1989, which we could define as the "mother" of the separation.
The amount to be borne by the GIAS for the year 2019 (we quote these data for ease of consultation, but the substance does not change in subsequent financial statements), transferred to the management to cover pension costs, equal to 78,428 million euros, relates to: to pension management for € 37,961 million, to which must be added € 11,495 million of the former INPDAP management; coverage of expenses for social allowances, social pensions and the related increases paid during the year for 4,720 million; charges of € 18,459 million for the management of civil invalids and € 4,555 million relating to the operating deficits of the management of employees of some INPS Special Funds (customs agents, consumption tax officers, port workers of Trieste and Genoa and workers ex FF.SS.); other expenses.
On the basis of the current regulatory framework, the interventions of the GIAS on pensions constitute the approach to the complex issue of the separation between pension and assistance achieved through the following interventions:
a) assumption of portions of the pension treatments charged to the individual managements relating to particular periods not covered by contributions or with reduced contributions, in order to favor their economic-financial equilibrium;
b) direct assumption of the pension burden of certain categories of treatment (pensions paid to CDCM before 1989; benefits to employees of the suppressed ENPAO; invalidity pensions before law 222/1984 and more);
c) direct disbursement of welfare benefits relating to disabled civilians, accompanying allowances, pensions and social allowances, fourteenth month's salary and additional amounts. pension charges maintenance of wages interventions in support of the family economic benefits deriving from reductions in social security charges relief from social security contributions and other concessions interventions other citizenship income and citizenship pension.
Among the interventions that initially the law 88/1989 and subsequently the many measures intervened in the matter have placed on the GIAS, the main ones in terms of importance and economic relevance are highlighted below:
• Portion of each month of pension whose burden – net of the portions paid to pensioners in the public sector employed by the former INPDAP management for 2,491 million – reached 21,409 million euros, compared to the 20,967 recorded in 2018;
• Portion of the pensions pursuant to art. 1, law n. 59/1991 (vintage pensions), equal to 506 million euros, down from 567 million in 2018; • Additional services art. 5, of Law 127/2007 (fourteenth monthly salary) equal to 1,595 million euros, down on the 1,689 million of the previous year;
• Portion of disability pensions prior to Law 222/1984 for a value of 5,444 million euros, compared to 5,332 million in 2018; etc.
Among the main interventions that initially the Law 88/1989 and subsequently the many measures intervened in the matter have placed against the GIAS, are highlighted below for the importance and economic relevance:
• Portion of each month of pension paid, the burden of which – net of the portions paid to pensioners in the public sector employed by the former INPDAP management for 2,388 million – reached 20,516 million euros, compared to the 20,328 recorded in 2016;
• Portion of the pensions pursuant to art. 1, Law 59/1991 (annual pensions), amounting to € 630 million, down from € 705 million in 2016;
• Additional services art. 5, l. 127/2007 (fourteenth monthly payment) equal to 1,777 million euros, an increase compared to the 894 million of the previous year;
• Portion of disability pensions before Law 222/1984 for a value of € 5,217 million, compared to € 5,171 million in 2016;
• Early retirement equal to 1,915 million euros, an increase compared to 1,666 million in 2016, of which 827 million relating to the pension installments of the safeguards for the severance pay (from the 2nd to the 8th, then to the 9th).
Obviously, with the logic whereby the State assumes with transfers (which constitute ordinary income like contributions) the services without coverage or with inadequate coverage, nothing prevents them from being identified, other measures entrusted to the coverage of transfers, but not it is said that the greater expense that is in any case dedicated to the quantum of pensions, if it manages to be labeled as assistance, becomes light and asexual like the angels. It disappears from the grocery bills.
It seems that only the services of the management supported by social contributions have the honor of calling themselves "social security" (it is only a theoretical reasoning because it is doubtful that they still exist) is a pure invention. In fact, paragraph 4 of article 38 states: "The tasks provided for in this article are provided by bodies and institutions established or integrated by the State".
It seems that it is secondary to know who pays. With all due respect to Mr. Pietro Gonella.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/la-mia-verita-su-assistenza-e-previdenza/ on Tue, 12 Jul 2022 05:37:40 +0000.