15/05 Welfare reforms would cost 4 tril. yen

The Yomiuri Shimbun

Funding the government's planned social security reforms would increase expenditure on welfare by at least 2.7 trillion yen by 2015, according to the Health, Labor and Welfare Ministry.

The ministry cited the rapidly aging population and expected increase in payments to people with low incomes as the major reasons for the rising costs.

By 2025, the reforms would cost at least 4 trillion yen more than if the current system was maintained, the ministry said.

On Thursday, the ministry submitted its draft for social security reforms, including changes to the pension system, to a government panel chaired by Prime Minister Naoto Kan. The panel plans to formulate a proposal for integrated reforms of the social security and tax systems by the end of June.

If no reforms were made to the welfare system as it currently exists, expenditure on social security would be expected to increase by 1 trillion yen each year.

According to the ministry's estimates, the government will need an additional 600 billion yen by 2015 and 700 billion yen by 2025 to fund its planned pension system reforms, such as relaxing enrollment conditions for part-time and temporary workers in the employee pension scheme.

The ministry is discussing ways to finance the pension reforms, such as by cutting benefits for high-income earners. However, the options considered so far would not free up enough funds to balance the cost of implementing the changes, the ministry said.

The ministry expects the changes will add an additional 1.6 trillion yen to the cost of medical services and nursing care by 2015, and an extra 2.4 trillion yen by 2025, possibly more.

Costs will rise if the government implements new initiatives, such as having more doctors and nurses work in emergency departments at hospitals, and improving work conditions for nursing care workers. Demand for nursing care staff is expected to increase as the population ages.

An additional 600 billion yen by 2015 and 900 billion yen by 2025 will be needed for parental support and other initiatives related to child-rearing, the welfare ministry said. Among them is the integration of kindergartens and day care centers, which is aimed at shortening waiting lists for enrollment at such facilities.

In its initial budget for fiscal 2011, the government planned for total expenditure of 28.7 trillion yen on social security. However, the government has not secured sufficient revenue to implement that budget. In just the fields of basic pensions, medical care for the elderly and nursing care, the combined revenue shortfall is about 10 trillion yen.

If the government is to carry out integrated reform of the social security and tax systems, securing the financial resources needed is an obvious necessity.

(May. 15, 2011)