On February 19, the Lithuanian Free Market Institute (LFMI) presented proposals for revising social policy in Lithuania. These proposals were formulated based on an in-depth analysis of the quality, structure and development of social policy in Lithuania, commissioned by the Ministry of Social Security and Labour. An analytical report on the research results along with policy recommendations were presented at a seminar at the Ministry of Social Security and Labour.

The research was aimed at exploring and generalising social policy measures, evaluating their effectiveness and defining future priorities. The research focused on the areas affecting the largest share of the population: the pension system, employment policy, family support, and social insurance benefits. Our specific interest was to look at those measures which are intended to cover certain social risks, such as a loss of sources of income caused by unemployment, illness and old age or increased expenditures caused by an increase in the number of family dependants.

The main conclusions of the research were presented by LFMI's policy analyst Audronė Morkūnienė. She pointed out that the objectives of social policy are too broadly defined in the government's programme. They are paternalistic and fail to define the role of the state in social policy. The government thus gives people hope that it will takes care of them in any circumstances.

In the absence of clearly defined objectives, the provision of social aid is scrappy and fragmentary: efforts and resources are dissipated on many different needs and no palpable results are ever achieved in any of them, the expert said. The current social policies are oriented towards offsetting the consequences rather than meeting the main purpose of any social policy pursued by the state: people's material welfare. The primary concern of the state should be to create conditions for people to take care of themselves so they would not require state support. The most effective way to achieve this is by removing barriers to employment and economic activity. If social aid were confined to such goals, it would be oriented towards those segments of the population who have no means to take care of themselves. The main conclusion derived from the research is that social policy needs wholesale change, Audronė Morkūnienė said.

LFMI's senior policy analyst Rūta Vainienė spoke about social policy and taxes. The tax burden has increased to reach close to 40 percent today. This manifestation of the state's life reduces the income of every person in the country by expropriating part of it. Everyone is impoverished as a result through no fault of his or anyone else's.

Rūta Vainienė challenged the popular belief that if budget resources collected from taxes were properly used, redistribution would occur in one direction, from the rich to the poor. Due to the so-called tax incidence, however, the tax burden falls most heavily on ordinary people and consumers, who have no one to shift their taxes on, Rūta Vainienė said.

The conclusions state that it is inexpedient to use the tax system in pursuing social objectives. Fewer and lower taxes, coupled with simpler application, are the keys to improving social attitudes, enhancing social security and preventing social problems. A neutral and easily administered tax system would ensure adequate budget revenues and at the same time reduce demand for them.

LFMI's policy analyst Guoda Steponavičienė looked at the provision of concessions as a means of social policy. The presentation focused on concessions for transport services as well as compensations for heating and hot water. When the latter are granted, the expert said, carriers lose interest in the quality of the services they provide. What interests them is the municipality but not the passenger. The quality of the services thus declines, causing misery for consumers.

Now that changes in prices are much more moderate, Guoda Steponavičienė noted, it would make sense to scrap social aid in favour of concessions for certain segments of the population. This would facilitate a shift to a transparent system of social assistance whereby aid would be provided in cash for low-income individuals on a formal means-tested basis. In the context of European integration, the expert added, the restructuring of the energy sector and transport services will be inevitable.

Social implications of employment policy were analysed by LFMI's legal expert Remigijus Šimašius. Despite the fact that employment regulations are in most cases aimed at preventing social risks and reducing poverty, restrictions placed on voluntary agreements and the imposition of mandatory administrative norms may give only partial, short-term benefits to a narrow interest group. Long-term social effects of such restraints are negative, Šimašius argued.

In addition to analysis, LFMI commissioned a sociological survey among 2,000 Lithuanian citizens to elicit their attitudes to social policy. To present, and compare, a wider spectrum of opinions, the survey also targeted 100 opinion leaders and 25 experts in social security, including policy makers and executives. The findings were presented by Laima Žilinskienė, head of the Baltijos Tyrimai (Baltic Research) company.

A closing presentation from LFMI's President Elena Leontjeva dealt with the interaction of social and economic policies in the pursuit of people's welfare. The author stressed that people's welfare depends mostly on the conditions for private business, or conditions to start a business, to get employed, and to create wealth.

As the state makes it its goal to achieve maximum well-being for people, it should shape all its policies so as to best reflect free market principles, because under a free market people have the best opportunities to start a business, to find jobs, and to create prosperity, Elena Leontjeva said. So far, the consequences of state policies have been contrary to these aims. To reverse the trend, the state should stop sending people paternalistic signals and pave the way for alternative measures, private insurance and family solidarity.

The presentations follow.

Prepared by Aras Lukšas