KOGA Says! RENGO's Statement by General Secretary

Koga says!
Statement on "Basic Policies for Economic and Fiscal Management and Structural Reform 2006"

07 July 2006
RENGO’s Statement by General Secretary Koga
  1. Today, the government's Council on Economic and Fiscal Policy decided on its "Basic Policies for Economic and Fiscal Management and Structural Reform 2006" which the cabinet approved the same day. These will be the last of the Koizumi administration’s “thick-boned policies.”
    This package of policy guidelines sets goals for reform on a priority basis that the government will work for over the next decade of new challenge including: “enhancement of growth and competitiveness”, “restoring fiscal health,” as well as the “realization of a safe, reassuring, flexible, and diverse society.” However, in the pursuit of restoring fiscal health, it is highly uncertain whether it is possible to enhance growth and competitiveness and create a safe and reassuring society under expenditure cuts that threaten to destroy our citizen's jobs and the basis of their livelihoods or "expenditure and revenue integral reform" which only demonstrates the possibility of tax increases but offers no concrete plans.

  2. To restore fiscal health, the package offers as a general principle for reform deep cuts in annual spending such as a “thorough streamlining of government” as well as “slashes in expenditures without exception.” The package even touches on those contents that will lead to the destruction of our citizen's safety-nets; namely, revisions of the employment insurance system that include termination of state liability, livelihood assistance allowances in welfare, and the scope of public benefits for medical and long-term care. On the other hand, these Basic Policies were flexible in their target figures for slashing public investments as well as in other fields. Moreover, because the package did not go far enough in elabourating concrete measures, the government could first carry out only spending cuts that threaten the safety and security of our citizen’s lives. Cutting personnel costs in various areas is a matter of great concern that politics is pursuing unilaterally without any fundamental reform of the public servant system.
    Regarding revenue reform, in order to make up the difference between what is required to achieve a primary balance surplus and gains from spending cuts, the policy package showed the favorable stance toward tax hikes stating: "the obvious response should occur mainly through tax reforms," "fundamental, integrated reform covering the entire tax system is needed," yet, the policy package did not specify how this would be carried out, by what standard, or when. Concrete procedures for financial reconstruction reform are vague and RENGO finds the government lacking in fulfilling its responsibility to provide its citizens with an explanation.
    Regarding stable resources for social security, the Basic Policies also indicated that in principle "the current generation will broadly and equitably bear" social security costs and that the "resource should not be easily influenced by economic trends." The policies also strongly suggest tax hikes through raising consumption tax levels, saying (the government will) "study the appropriateness of matching benefits and resources when specifically characterizing consumption tax as a resource (for social security costs.)"  Taking into account that the redistribution of wealth through tax and social security is growing weaker, the government should study what the most effective benefit and burden system would be under general tax system revision and not only (consider raising) consumption tax which has a strong tendency to be regressive. They should especially focus on correcting unfairness in income taxation by levying upper income groups, investment income, and assets.
    It is commendable that (the Council) included perspectives for a balance of fiscal health restoration and growth enhancement, as well as a consideration of macro economics and flexibility on the basic idea of integrated expenditure and revenue reform. However, under the government's optimistic recognition of the economic climate, there is a real fear over the possible harmful influences of spending reductions or tax increases on economic growth has not been considered and that it is highly doubtful it will be effective.

  3. Regarding the ensuring of safety and reassurance and the realizing a flexible and diverse society, the guidelines seek comprehensive reform for the social security system, a second-chance support system, the promotion of comprehensive measures against the declining birthrate, etc.
    RENGO has already appealed for the promotion of integrated social security system reform, research into the effects of system reform to this point, review of provisions and burdens from both sides, and so forth. The government should establish a forum where labour and management can meet for discussion and continue to push ahead with integrated reform of the social security system which includes medical care, long-term care, and pensions.
    So far the government has demonstrated little understanding of the nation's current grave conditions in which social bipolarization and disparity are widening and becoming a serious problem. The government should swiftly commit itself in creating effective measures for a second-chance support system to achieve a “society that gives people a second chance.”

  4. These thick-boned policies will be materialized under the new administration. In order to curb widening disparities and correct bipolarization, we need to: establish a safety-net and a trustworthy social security system; create work rules; ensure the safety of our livelihoods; create new public services (public/citizen partnerships); all while bringing about a sustainable, global society. To do this, we must proceed with economic and fiscal management that will lead us out of the deflationary cycle and at the same time realize stable economic growth as well as fair and transparent tax system reform.
    RENGO will make these issues its urgent priority policies, opposing the government's thick-boned policies, and struggle with all its full might to realize a “safe and fair” society while it appeals to union members, workers, citizens, not to mention the government and political parties.