On reforming social security, the time for hard work has arrived

The government and ruling parties, which proposed an integrated reform of the social security and tax systems in June this year, have now begun efforts to work out the concrete details and put their plan in place.

The Headquarters of the Government and Ruling Parties for Social Security Reform has been established with Prime Minister Yoshihiko Noda as its head. At its first meeting, Noda said, “I will tackle the reform with unflagging resolve.”

The reform headquarters is scheduled to come up with a conclusion on the reform by the end of the year. Noda has already made a point of calling the conclusion a “rough draft.”

That is because it is impossible to pass legislation without at least some support from opposition parties in the current divided Diet situation. Noda apparently plans to finalize an outline of the comprehensive reform by incorporating opinions of the opposition parties into the rough draft. If so, discussions within the headquarters should be concluded as soon as possible to quickly start discussions with the opposition parties.

The main focus of the discussions will be how to take concrete steps toward the consumption tax hike. It has been already decided that the consumption tax rate will be gradually raised to 10 percent by the mid-2010s.

If the rate is to be raised in two steps from the current 5 percent, when will those raises occur, and how many percentage points will each of them add? Even if some degree of consideration for economic conditions causes an adjustment to the raises when they are made in the future, the government and ruling parties should clarify their stance on the matter at present.

Within the Democratic Party of Japan, quite a few Diet members oppose raising the consumption tax rate. Former DPJ President Ichiro Ozawa and his aides are prime examples. We wonder if they have considered the risk of not raising the rate.

The DPJ’s task force and the Health, Labor and Welfare Ministry’s council have already compiled reports on reform of the pension, health care and other systems, but they have both merits and demerits.

On pension system reform, the government had previously postponed a measure to cut pension payments in line with a decline in prices. Because of this, pension payments are now 2.5 percent higher than they should be. It has been decided that this situation will be gradually corrected. We praise this decision.

However, the reports contain few other items about streamlining systems or calling on the public to bear greater burdens such as this. In general, the reports call for measures to improve various benefits.

The reports mostly shelve reform that asks the public to endure pain. For instance, medical fees paid at hospital counters for people aged 70 to 74 have been provisionally set at 10 percent of the total treatment fee. A measure to raise that to 20 percent, as stipulated by a relevant law, is likely to be shelved this time.

According to the government’s June set of proposals for the comprehensive reform of the social security and tax systems, about 3.8 trillion yen will be needed to improve social security programs in fiscal 2015. The government planned to save nearly 1.2 trillion yen by such measures as trimming benefits and would pay for another 2.7 trillion yen through the consumption tax hike.

However, if the amount to be saved shrinks, it will be impossible to make ends meet. The consumption tax revenue must also be used for funds to raise the government’s share of contributions to the basic pension fund from the current one-third to half. Therefore, a revenue shortfall is possible even if the consumption tax rate is made 10 percent.

To what extent can the government and ruling parties’ discussions within the reform headquarters improve each measure in ways that will serve the nation’s interest from a broad perspective? We urge Noda to take the initiative, living up to his remark, “I will be in the vanguard position to lead discussions.”

(The Yomiuri Shimbun)

(Asia News Network)