Isamaa and Center Party quarrel over their promises

Helir-Valdor Seeder. Photo: Erik Prozes

Representatives of the Center Party, EKRE and Isamaa coalition, back from their summer vacation, asserted after the day-long meeting on Monday essentially the same that they had written in the coalition agreement already in April: the promises regarding the 2nd pillar pension reform and the extraordinary pension increase will be kept. But several factors obstruct keeping the promises.

The Isamaa reform plan of the 2nd pillar pensions is full of unsolved details and question marks, while the Center Party’s promise to increase pensions is costly. The tension is further increased by the fact that EKRE serving as an arbiter has already kept one important promise to its voters – lowing the alcohol excise. The Center Party and Isamaa, on the other hand, have not.

“The Center Party promised an extraordinary pension increase and we naturally support it in the government,” stressed Minister of Social Affairs, Centrists Tanel Kiik. Yet it is known that the Center Party’s costly promise requires a lot of money. Although the Centrists try to offer other solutions, the Center Party’s keeping the promise will largely depend on Isamaa’s ability to keep its own promise. “The extraordinary pension rise could be carried out on account of other tax revenues. The 2020 opportunities will become clear during the handling of the budget talks; in 2021 we shall study these two matters together, tax revenues and the share of the social tax released from the 2nd pillar,” Kiik explained.

But keeping Isamaa’s election promise is technically much more complicated. While the coalition agreement dedicates nearly a whole page on the 2nd pillar reform, the Center Party promise is covered by a single sentence: extraordinary pension increase will improve the living standards and welfare of the elderly. When, and how much, the document does not tell us. Isamaa, on the other hand, has set an ambitions milestone for realizing the 2nd pillar reform: January 1, 2020, which is only five months away. This is why three ministries instead of previous two have been involved in the process. While the Center Party-headed Ministry of Social Affairs and the EKRE-led Ministry of Financial Affairs used to play a major role in keeping Isamaa’s promise, it was announced after Monday’s meeting that the Ministry of Justice has been included as well; it is headed by Isamaa’s Raivo Aeg.

Yet there are many loose ends. As far as Postimees can tell, the only agreement reached so far concerns carrying out the reform as a whole so that the public could have adequate information about the terms for giving up the 2nd pillar. But precise details concerning the legal and practical aspects of giving up the 2nd pillar, the payment of the money, investment accounts as well as the preparedness of the financial institutions, state registries and IT systems, have not yet been established. The risk analysis and a list of problems resulting from giving up the 2nd pillar are also absent.

A separate issue concerns those, who have already retired and receive payments, but want to go along with the changes. “How can we legally grant them the opportunity to exit from the 2nd pillar system and withdraw their money – is it legally possible?” explained Helir-Valdor Seeder, chairman of Isamaa and one of the architects of the pension reform.

Keeping various promises related to the pension reform has also caused stress within the coalition. Center MP Tõnis Mölder, chairman of the parliamentary social affairs committee, claimed for instance that Isamaa leader Helir-Valdor Seeder opposes the extraordinary pension rise. Seeder rejected the claim and in turn accused the Centrists of sabotage.

“I have received an impression in recent days that Minister of Social Affairs Tanel Kiik and chairman of the social affairs committee Tõnis Mölder have begin to delay the drafting of the laws, that they are trying to link them together artificially to produce a sort of cluster law which is legally very complicated and opaque and thus they are undermining and obstructing the emergency pension rise,” Seeder said. In fact, Kiik has been the champion of linking the pension rise and pension reform this week, stressing that both moves should be carried out together: if a certain number of people give up the 2nd pillar, it is imperative to carry out the pension increase. According to Mölder, the extraordinary pension increase must be carries out a soon as possible. “There can be no delay or disagreement over that issue,” he stressed. Mölder advanced an ultimatum on Tuesday: no 2nd pillar reform without extraordinary pension rise.

Seeder in turn describes the Centrists’ statements as producing confusion and causing obstruction, which may lead to the failure to carry out either initiative or both. “I hope very much that the positions expressed by Tanel Kiik and Tõnis Mölder – categorical,  contrary, obstructing the passing of laws – are not the Centre Party positions and the party’s actual policy,” he said.

In the opinion of Priit Sibul, member of the social affairs committee, one change would not rule out the other but it is important that they are handled in a logical order. “It is not reasonable to cause a 200 million gap in the state budget. Isamaa certainly would not agree to cover current expenses on account of the future or from loans,” he stressed. Therefore: first the 2nd pillar reform and then the extraordinary pension rise.

While realizing the extraordinary pension rise depends on the economic forecast and partly on the 2nd pillar pension reform, it would be difficult to predict the people’s response to the reform. Seeder is slightly more optimistic on that issue, saying that people leaving the 2nd pillar and paying their social tax to the 1st pillar or the state pension fund would bring extra money which would permit the pension rise. “No one has the illegal plan of using the money coming to the pension fund via the social tax for any other purpose but paying the pensions,” he emphasized.

If Isamaa’s basic promise to voters should go unfulfilled for some reason, it would not mean blocking the extraordinary pension rise, Seeder says. Several questions on law amendments regarding the extraordinary pension increase also went unanswered on Monday: would the basic share be increased, should the entire amount be directed in the basic share, would it also concern the children’s coefficient or would there be some other solution.” Coalition members may have different opinions about that,” Seeder said.

According to Seeder, the pension reform debate could reach the government within a month. The idea is to pass it during the autumn session so that it could come in force on January 1, 2020.