Analysis: Generous social protection promises require tax changes

Road sign warning of a care home ahead. (Illustrative)
Road sign warning of a care home ahead. (Illustrative) Source: Olev Kenk/ERR

Märt Masso read political parties' election platforms and found them much more ideological than during the previous Riigikogu elections. Generous promises betray the fact that Estonia's social protection spending is among the lowest in Europe.

Moving into elections, it pays to take note of what future delegates prioritize in the field of social spending, which amounts to 17 percent of the Estonian GDP.

It seems that new parties' arrival on the scene has broadened people's choice. Promises sport a clearer ideological component compared to previous elections.

Parempoolsed's expectation of support being targeted rather than blanket is in sharp contrast with the Greens and the Social Democrats' principle of universal and unconditional social benefits.

Most parties conclude that the people want a generous welfare system and promise to hike funding of pensions and healthcare, which are the two most expensive social fields. The Center Party promises to hike long-time care spending to 2 percent of GDP, while the Greens want to raise healthcare spending to 9 percent of GDP.

Social spending modest

While population ageing and other developments might necessitate growing spending, the promises clash with the fact Estonia's current social spending is among the lowest in the EU.

However, generosity in social welfare would require a broader debate on how to finance it. Unfortunately, a tax debate does not seem to be on the agenda for these elections, even though it should. Instead, like during previous elections, it is suggested that growing expenses can be covered through higher efficiency.

Past experience tells us that this additional efficiency is usually not found following elections, while statistics suggests Estonia's social system is quite cost-effective as it is when compared to its peers. Therefore, parties should be bolder and more thorough in discussing potential avenues for cost-cutting. Several parties have mentioned a more results-based funding model, proposing such terms as a patient contract or optimal treatment path. But no more light has been shed on these new possibilities and the potential saving they could offer.

It is likely that parties realize the welfare system cannot be supported without additional resources. In several areas, including healthcare, it is hoped that people and companies are willing to pay more out of their own pockets to reduce the need for public services.

What they fail to say is that personal healthcare contributions can be facilitated through lower taxes. Since Estonia already has a modest tax burden and low social spending compared to other states, the cost-sharing component is already considerable.

New forms of working affecting tax receipt

Social protection in Estonia relies heavily on social tax and unemployment insurance tax receipt. Several parties find in their programs that unemployment insurance or health insurance systems should be changed considering new forms of working, such as platform work. That said, one gets the impression it is hoped that fine-tuning the former will be enough as no tax and benefit changes are prescribed to future-proof new forms of earning a living.

But it also needs to be said that parties are looking for ways to discuss systemic solutions. For example, both the Greens and Center raise the universal basic income question on the level of pilot projects. However, in a situation where which recent services such a new system would replace is not discussed, this can be classified as a populist decoy rather than a thought-out and systemic option.

Mental health mentioned in passing

Several parties are trying to highlight topics that have recently become important or regarding which there are heightened expectations in society. One such is mental health. The topic, which has a huge effect on people's ability to work, is usually included as a mandatory final item. But if mental health is merely mentioned as something that also matters, next to various other social problems, it makes it difficult for the voter to believe it is truly prioritized.

Similarly to previous elections, promises cover widely expected policy modifications, instead of changes that could effectively tackle specific problems. For example, promises include slashing taxes on employers' healthcare benefits, while analyses suggest it is not a very effective way to motivate more responsible health behavior. More and more people use innovative forms of working and do not have an employer in the usual sense, while public healthcare services are underfunded and there are not enough doctors for both public and private medicine.


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Editor: Kaupo Meiel, Marcus Turovski

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