IN A BIZARRE turn of events, employers and trade unions have come together under a common agenda: to attack the government on its handling of the social insurance fund.
As of July 1, retirement age in the public sector has been upped from 60 to 63 on a voluntary basis; this arrangement will remain in place until July 1, 2008, when retirement will become mandatory at the age of 63.
Implementation of the measure will take place in stages: civil servants who turn 60 between July 1 and December 31, 2006, have to retire at the age of 61; those who turn 60 between January 1, 2007 and June 30, 2008, will be obliged to retire two years later.
Extending the age of retirement is seen by the government as a crucial factor in its convergence plan, which aims at improving public finances in time to join the euro.
The change would also help to bail out the ailing social insurance fund, which has a £2 billion deficit and is at risk of collapse by 2011.
Meanwhile the government is planning a string of other measures to raise contributions to the fund, such as increased payments from the self-employed and stricter controls on undeclared work.
The main employers association OEV and trade unions PEO and SEK now say that successive governments are to blame for the fund’s mammoth deficit. They say the state borrows heavily from the fund to finance other projects, using the cash to present a rosier picture of public finances.
In their view, that is the main reason why the social insurance fund has been spiralling out of control for decades. And they have called on the government to immediately pay back what it owes. They also point to a study, according to which the measures for retirement age will help but ultimately not make the fund viable.
Government Spokesman Kypros Chrysostomides yesterday begged to differ; he said that the money borrowed from the fund was invested in government bonds, which generate nearly £300 million a year in dividends.
He went on to wonder what would happen if, hypothetically, the government were suddenly to pump £2 billion into the social insurance fund.
“I wonder how the committee managing the fund would handle that kind of money,” he remarked.
“Thankfully, a past proposal to invest the fund’s cash in the stock market was not accepted,” Chrysostomides said, implying that previous governments had worse ideas than the present administration.
Asked by a journalist whether the government felt it was doing the fund “a favour” by investing in government bonds, Chrystostomides said:
“I think that if you look at it comparatively, as far as the income generated from investing the amounts borrowed is concerned, then yes, we did the fund an important service.”
The state currently employs 35,845 permanent staff, 2,899 temporary and 8,581 hourly-wage personnel, which in 2005 are expected to absorb £912.15 million in wages and £183.45 million in pensions and bonuses.
On top of that, taxpayers last year paid around £37 million in civil service overtime costs.
