Steps towards a sustainable welfare system in Hungary

Based on its own existing work and that of others, the Budapest Intstitute has prepared a set of policy proposals entitled "Need a Scalpel Not an Axe: Towards a Sustainable Welfare System in Hungary".

The proposals aim to reduce labour supply disincentives, improve the targeting of welfare provisions and strengthen institutions that may curb unsustainable spending.

The proposed measures included the following:

Increase labour supply
1. reduce inflow to early pensions and other transfer schemes for the inactive
2. extend and enforce job search criteria to most transfers to the working age
3. shift funds from mainstream active labour market programmes to client centred schemes
4. increase day care facilities for children and shorten paid maternity leave
Improve targeting of social provisions
5. reduce administration costs by cutting number of benefit types
6. improve targeting of child benefits
7. reduce public transport subsidies for certain groups
8. remove gas price subsidy and introduce a better targeted maintenance allowance

9. remove 13th-month-pension with phasing out for the poorest

10. reduce loan subsidies for home-ownership
Develop institutions to ensure sustainability
11. set up council of senior economists to support prime minister
12. establish a single, integrated, freely accessible public procurement database
13. raise legal and political contraints to ad-hoc interventions into the pension system
14. strengthen the Budget Council
15. introduce programme-based budgeting with outcome-oriented planning and implementation

A more detailed English summary can be downloaded here.