Vice PM Pavlo Rozenko: We reveal large number of pseudo-IDPs
Vice Prime Minister Pavlo Rozenko in an exclusive interview with UNIAN explained how he had gotten into Groysman’s government and what the area of his responsibility is. He also voiced his own assessment of ex-minister Abromavicius’s move and commented on the preliminary results of verification of social benefits, naming the problems regarding payments to the internally displaced persons (IDPs) and outlining the prospects for pension reform.
You are one of the few ministers who jumped from Yatsenyuk’s government into the Cabinet led by Groysman. Would you tell us how that happened? Did Groysman invite you or maybe someone persistently recommended you?
I think that I needed no real recommendation, because I have long been around in the Ukrainian politics. At the time of formation of Groysman’s government, everyone knew and assessed positively the results of my team in the Ministry of Social Policy over the last year and four months. I have met with Groysman many times at various events, meetings and conferences, and I think Volodymyr Groysman needed no more advertising, PR or recommendations in my regard as he should have already shaped his opinion about me.
Besides, I have never denied that I was and still am a representative of the Bloc of Petro Poroshenko. When discussing the issue of a new government at a faction meeting, my colleagues were highly appreciative of my work and supported my nomination.
Did the new head of government put forward any requirements when you were invited to the post of a vice prime minister?
There were no special requirements. Mr Groysman knows me and knows about my work. Moreover, for over a year and a half, I’ve been working closely with his team, which remained in Vinnitsa, in particular, with Andriy Reva, the new Minister of Social Policy. My tasks were defined very clearly – to be a curator of the ministries of social policy, health, and culture. Those were specific, absolutely clear, and routine tasks, nothing pathetic, no sentiments. I haven’t heard anything extraordinary from the prime minister, and neither from the president, whom I also met during the negotiation process.
In the field of social policy, everything seems clear, but what about the Ministry of Health and Ministry of Culture – were there really no questions?
Identifying and working out clear directions of reform is actually the ministers’ prerogative as well as their teams’. My task is to omit pointing at what must be done. I am mostly a communicator. Everybody understands that, for example, a health care reform is not just a matter of the health ministry. It affects both social policy and public finance, regional policy and national security issues, and so on. I will be directly involved in working out reforms in the areas of my responsibility and monitor their implementation.
That is, a creation of a new layer of government made of six deputy prime ministers is due to the need for an interministerial coordination in the implementation of reforms?
Yes, of course. But in fact, the range of tasks of vice-premiers varies. For example, Stepan Kubiv and Hennadiy Zubko are simultaneously the ministers. Their activities are more focused on the work of individual ministries. Ivanna Klympush-Tsintsadze has a separate direction - European integration. Therefore, she coordinates the activities of all ministries and other agencies in the field of European integration. Thus, there are not so many "interagency coordinators." As for the debate on whether six vice prime ministers is a lot - only time will tell. In my view, such number is justified.
When you were offered to monitor the activities of as much as three ministries – did you first refuse?
I was "hired" by a coalition and a prime minister to perform certain functions. When they said I was going to join the government, I was told that these were my functions. They asked me whether I was willing to go take up a post of a deputy prime minister and oversee three areas. I had no objections.
Was there an option to remain a minister of social policy?
You know, I’m really a team player. During the negotiations I had a clear position: I am not running around asking for anything, asking for positions and imposing myself. After all perfectly know I can be effective both in government and beyond. So I was not bargaining. I was saying that I would work at a position where the team of the Bloc of Petro Poroshenko, the prime minister, and the president will determine.
When I was offered a new position, I did not set any additional conditions. Moreover, at the same time, a nomination for a new minister of social policy emerged: Andriy Reva. I had no objections.
However, you are the only one who is still without a full team. I mean the Ministry of Health, where the minister has not yet been appointed...
This is a very problematic issue and an unpleasant situation. It is no secret that around this ministry, various shady schemes have been built up over decades. A lot of different interests and spheres of influence are intertwined there. In such a situation, it is extremely difficult for the deputy ministers, for me and for the whole government with no minister being appointed.
Is it true that this position was offered to more than ten officials, but everyone declined the offer?
There were not many people wishing to join the government, which would be forced to pass hard and unpopular steps. Especially the Ministry of Health. This is not just a ministry. There's a lot of various influences there.
Indeed, there were candidates for the post of a health minister, but then these candidates declined the offer. Vitaliy Shafranskiy was appointed an acting Minister. But knowing the bureaucratic system from within, I understand that it will be very difficult for him to lead the ministry in this status for a long time. I therefore urge the officials at all levels to resolve the issue and appoint the minister as soon as possible.
Is there an option of appointing Shafranskiy a minister?
I met with several candidates for a minister’s post, including the head of the medical department of the Defense Ministry Andriy Verba. His candidacy was discussed at Cabinet and within the coalition factions. But the final decision has not yet been taken. Negotiations are continuing on a daily basis, and I hope that the nominee will be chosen soon.
Perhaps such a small number of people willing to become a minister is in particular because of the scandal with former Minister of Economic Development Aivaras Abromavicius… For when you become a minister, you may get persistent recommendations to appoint a specific person to become your deputy…
Of course, I cannot deny that some MPs may propose candidates for a particular position. But I do not consider these recommendations a pressure on ministers. Neither the President nor the Prime Minister, nor the Deputy Prime Minister, nor the MPs imposed any appointments upon me or forced me to hire anyone. Even if there were such attempts, I believe that it’s impossible to compel the minister to do anything without his own consent and good will.
But you know, it is often the case that someone’s inefficiency is covered up with the statements claiming that particular officials hindered their work, imposed and dictated something from outside the ministry. I think that behind such rhetoric lies more reluctance to take responsibility than the facts of pressure and influence.
Do the ministers in your area of responsibility discuss with you the candidates for their deputies’ posts? Or do they choose them on their own and you only agree with the nominations because you work as a team?
Of course, the ministers bear 100% responsibility for the work of their ministries. Therefore, they have the right to form their own team. But we must take into account the fact that the people who are working in the ministries at the level of deputy ministers and heads of central authorities, for the most part, are people who came after the Maidan. They are representative of a new democratic government. So my only request to all ministers is for them to have a reasoned position for each case of dismissal of these people. That’s because it is not normal when patriots and professionals will be thrown out.
Actually, it is a normal practice when the decision on the appointment of top-level officials (deputy ministers, heads of central executive bodies) is agreed at least with a profile deputy prime minister.
One of the controversial issues today is verification of social benefits. The Finance Ministry claims there are hundreds of billions allocated for social needs and there is a considerable potential for abuse. In turn, you say there is a much smaller amount of social payments and that no significant abuse is possible. Why is there such a discrepancy in the estimates? Can you specifically describe the types of social assistance that fall under the verification and how much the state spends on these payments today?
I think that this is an all absolutely artificial debate that is being spun by the media. But, as a deputy prime minister, it is frustrating to me when various ministries provide the media with completely unverified and sometimes outright false information. We spoke with Finance Minister Oleksandr Danylyuk and Social Policy Minister Andriy Reva agreeing that such practice should be stopped. In fact, there is no intrigue in this issue. Everyone is interested in the process of verification: the Ministry of Social Policy, the Ministry of Finance, the Pension Fund, social security funds, and local authorities. Our common task is to prevent social payments to "dead souls," to prevent double-triple payments, so that the people who are wealthy enough didn’t get privileges, so that the people who have considerable shadow income did not receive social assistance, etc.
We have one goal, and all the figures regarding verification should be approved by all participants. We have to work as one. If the Ministry of Finance, the SBU, or the prosecutors find some specific systemic problems, we must sit down together and resolve them. Communication or discussion between various ministries through the media is unacceptable.
The first thing I did when our team came in the Ministry of Social Policy was conducting verification of benefits and pensions. We did it in 2015. We checked all payments and benefits. Moreover, the new system of subsidies was constructed in a way to prevent misuse of funds and illegal payments. We’ve never advertised our system of verification, we held no press conferences. We were doing our job, quietly and professionally. Perhaps this was our mistake. Because when the budget process started in 2016, some experts, in order to justify the need for cuts in social benefits and pensions, began to spin the hysteria for the public, claiming that the Pension Fund and the Ministry of Social Policy Ministry have plenty of “dead souls” and double payments, just as it was in Georgia before verification. Huge figures were called – around UAH 15-30 billion, which was allegedly unlawfully paid. This hysteria has been lasting for the past six months. I did not want to deal with rumors, so I said: if you do not trust the Ministry of Social Policy, please conduct verification with the hands of the Ministry of Finance. In March, the Ministry of Social Policy and the Pension Fund handed over all the databases to the Ministry of Finance.
Today, it is almost confirmed that there are no systemic problems in the implementation of social benefits and pensions. There is no massive double payment or payment to "dead souls." I believe we should stop feeding the hysteria on this issue and recognize that the Ministry of Social Policy and the Pension Fund have once efficiently conducted work on verification. To date, all social benefits and pensions are received only by real and legal recipients.
What payments did the Ministry of Social Policy check in 2015?
All payments without exception. The only thing we had a problem with was the payments to IDPs. We could not and won’t be able to resolve that problem autonomously, only via our databases.
Is the Finance Ministry now verifying the payments?
Finance Ministry is actually doing the same job as we had. But they also use some indirect methods that may allow for an additional discovery of illegal payments.
When the Finance Ministry in the days of Natalie Jaresko was only starting preparation for verification, some said this may save up to UAH 5 billion for the budget. When you performed verification in the Ministry of Social Policy, what was the amount of revealed violations?
I personally never called unverified figures, I even made no forecasts. For I certainly know that it is always possible to find isolated cases. But stating "multibillion illegal payments" is purely unprofessional. For example, during our verification in 2015 there were about 80,000 questionable cases in the Pension Fund. It may seem like a big number, but of 13 million pensioners, it is only 0.6% of all cases. That is, it will not be UAH 5 billion, and it will certainly not be those UAH 15-30 billion, which the so-called “independent experts” have been talking about. Such a significant saving of money is simply impossible with the isolated cases that we have.
However, there is another field for significant abuse, of which I have spoken repeatedly. These are the payments to pseudo-IDPs. On cessation of illegal payments in this area we have been actively working together with the Security Service of Ukraine, the Prosecutor's Office, the Interior Ministry, and the border guards. This is here that we find a large number of people illegally receiving payments from the pension fund and the social services as “assistance to IDPs.”
You recently tasked the Finance Ministry, the Pension Fund, and social protection authorities to report on the results of verification. The media published a letter from the Ministry of Finance about the first results of verification in March-April, and based on these data, they make predictions about possible abuse in general. What are the deadlines for verification and when will we know the exact figures?
I cannot explain where the media got this letter. In contrast, data from the Ministry of Finance, the Pension Fund, and the Ministry of Social Policy indicate that there are no double payments or payments to "dead souls." Everything else is just extrapolation.
As far as I know, the Ministry of Finance revealed that 12,000 people receive social assistance with lost passports...
Indeed, there are several thousand of such cases now submitted by the Finance Ministry for further checks to the Pension Fund and the Ministry of Social Policy. But ask yourself: is the loss of a passport one of the grounds for termination of payments? No, it’s not. We have no right to stop paying pensions or social assistance because people have lost their passports. This is in no way a violation of applicable law.
Under current law, the loss of a passport does not oblige the person to inform the pension fund or social services. Therefore, loss of passport does not mean the payments are illegal. But I will set up a meeting of the representatives of the Ministry of Finance, the Ministry of Social Policy, the Pension Fund, and the Ministry of Interior to work out further joint action on such facts.
But when will the verification end? Has the Ministry of Finance sent you a letter with the first results?
By June 1, I think the bulk of the work will have been done. But once again, I stress that the publication of any data on verification is unacceptable before its completion and further verification of all figures with all the authorities involved. Spinning preliminary data which were not agreed is just an irritant for the public, causing distrust in the social assistance system and the process of verification. I hope for support and understanding of all ministers and heads of agencies involved in the process.
That is, it’s unclear when the verification will be completed, isn’t it?
The verification process will not be completed, as it will be a continuous process. Social benefits are paid each month. The verification process is a regular monitoring and mutual control, which will last permanently.
You said that the major abuse may regard payments to the IDPs. Are they being checked now and if so, who is conducting such verification?
There is an abuse regarding the status of an IDP. Entitled to social benefits and pensions are only those people who have moved to and now reside in the government-controlled territory and have documents proving the fact of their registration with the local migration services. Social services are unable to monitor whether the recipients actually live on government-controlled territories without the help of the Security Service, the Migration Service, the Interior Ministry and the border guards.
Last year, there were isolated cases. Then the active work of the Ministry of Social Policy and the Security Service began. The latter wanted to prevent the funds from the Ukrainian budget from being transferred in such way to the terrorists. We were handed lists of 450,000 people who, according to the Security Service, the Migration Service, and the border guards, do not reside in the government-controlled territory.
This is for 2015?
Were the payments to these people stopped?
The payments were halted. But the number of people from the list, who receive social assistance as IDPs, is small. This proves once again that it’s mostly the actual IDPs who receive corresponding assistance. But in the pension cases, payments were suspended to almost 450,000 people.
But we also understand that SBU lists can be wrong, and the lists could have people on them who actually are IDPs. So we allowed such people to apply for restoration of benefits. Over a three-month period, around 80,000 people of 450,000 applied. This number is not final, and it will obviously increase.
But on the one hand, it is important for us to stop illegal payments, and on the other – to define how the schemes were set up for such massive wrongful payments. On this issue, I personally appealed to the Security Service and other law enforcement agencies. And today, more than 60 criminal cases were opened against the officials who registered assistance cases en masse, for the people who never moved to the government-controlled territory.
And where are these officials from?
As of today, only the data on five regions have been processed: Zaporizhia, Kharkiv, Dnipro, and government-controlled parts of Luhansk and Donetsk regions. Benefits are issued not at the level of the headquarters of the Ministry of Social Policy or the Pension Fund, but by local authorities. So these schemes were obviously built up at a local level.
How does the Migration Service determine whether a person lives in a particular area? For example, what if a person has lived in a government-controlled area for three months, receiving help, and then he left for three months to guard his house in the area of ATO?
The relevant regulations of the government clearly define the mechanism for such verification. They are not working alone, but with the Interior Ministry, and they have an opportunity to clearly establish who breaks the laws. If I am not mistaken, the person is deemed a non-resident on the government-controlled territory if they are missing for 60 days. Unfortunately, we have not enough information from the Migration Service so we are forced today to suspend payment only upon the submission of the SBU.
What about subsidies? This year, the number of recipients of subsidies will increase from 5.5 to 9 million households. Are you planning to increase the number of inspections?
This is a question of efficient use of resources. There were such proposals. If we, together with the Finance Ministry, find resources for remuneration of the auditors, it can be done. But it may happen that the funds we will save due to these inspections will equal the pay to the auditors. From the experience of previous years: you can chase fleas and look for isolated cases, but we are more interested whether there are systemic problems with subsidies.
Does the Government plan to tie to income not only subsidies but also other social benefits?
We already have almost all social payments and benefits tied to income. Benefits for utility services are only received by the poor. On January 1, we tied the assistance to single mothers to their income as well.
And what about the benefits for large families or payments for child birth?
Large families were also tied to income as well as the children of war and other beneficiaries. The only benefit unties remains the right to free public transportation. But this is a serious issue that needs serious reform. There should rather be monetization of such benefit.
And as for the child birth, I personally oppose tying the payment to income. That’s because this payment is the investment of the state in this child.
Let's move on to the issue of pension reform. A new draft law on the cumulative level of pensions which was submitted recently provides for its introduction on July 1, 2017, although the previous bill had the earlier date set – January 1, 2017...
Given the pace of the performance of the Verkhovna Rada and a difficult path of the previous bill through the Rada debate, ambitious plans to introduce a three-tier pension system with two cumulative levels from January 1 of next year is unlikely by terms. If the law is adopted, we will still need to implement a number of organizational measures, including in the Pension Fund. So to get this system operating, we need at least six months.
I also want to note that the changes apply not only to the term of introduction of a funded system. Still, this is a slightly different bill than the one introduced in Parliament a year ago. We listened to the experts and MPs and made significant adjustments in terms of the functioning of the second level, the cumulative one. Today, all parties acknowledge that we have significantly improved the bill, compared to the previous document.
In particular, we changed the system of contributions to the funded system due to the fact that there was a decrease in a single social contribution from 40% to 22%. Earlier we planned that contributions will be paid by the employer and gradually increase from 2% to 7% of salary. But we can’t increase the single social contribution for employers, and neither can we reduce it, undermining the budget the Pension Fund which sees deficit. That’s why contributions to the funded system will be made from the salary of the employee. We will gradually increase them from 2% to 5% along with the growth in wages. That is according to the latest finalized version of the bill submitted to the parliament.
If we need six months for the implementation from July 1, 2017, of a funded pension system, it means that the deputies have time until the end of this year to pass an appropriate law, don’t they?
Yes. I think it will be enough time.
And has the International Monetary Fund agreed to this bill and such terms?
We will be discussing it with the IMF. The IMF more interested not in the introduction of a funded system (that they do not object), but they are concerned more with the budget spending on pensions and the balance of payments in the solidarity pension system. They insist on reform and transformation of this pension system.
But how do they see this reform?
It's hard to explain it in a nutshell. Now I had a few hours of another round of negotiations with the IMF, and we agreed that we would try to reach a common vision on the strategy and tactics of solidarity pension reform.
So, this may be the case that the bill you have submitted will be recalled or some amendments will be introduced regarding the solidarity system?
It has already incorporated some changes to the solidarity system. For example, the Pension Fund will be relieved of payments uncharacteristic to it [including those related to financing pensions granted on preferential terms and seniority]. I do not rule out that there will be a parallel process going on. That is, we will be offering the parliament to pass this bill and, along with the IMF, we will be working out other approaches to reforming the solidarity system in a separate bill. And we will be able to say that a complete pension reform will take place after both bills are voted for. But I think our bill, which has already been submitted to Parliament, has no contradictions with the work that we will be carrying out with the IMF. It will be complementary.
Dmytro Sydorenko (UNIAN)