Poverty reduction in Latvia can become one of the declarative slogans mentioned in the critical documents of the national growth. Still, it actually reaches the people who really need social support only partially and conditionally. In fact, the Government must decide on the path poverty reduction should take: maintaining a system of universal support that does not have a common approach and supervision, or introduce a targeted approach genuinely based on individual needs for those who need it most. The State Audit Office has reached such a conclusion by conducting a performance audit to find out whether the social inclusion policy implemented in the country achieves its goals in terms of poverty reduction.
“For poverty reduction not to remain just one of the declarative slogans in the top hierarchical documents of the Government, it must also be a priority at the level of sectoral policies and local and regional governments by envisaging specific actions to achieve the goals set. Unfortunately, the findings of the audit reveal a fragmented, uncoordinated allocation of national and municipal funds not based on precise data for poverty reduction, which does not always reach those at risk of poverty and social exclusion,” admits Auditor General Elita Krūmiņa.
Incomplete data and lack of single supervision
There are no extensive data on individuals at the risk of poverty in Latvia. At present, one can obtain information on the risk of poverty among the people of retirement and pre-retirement age, large families, single-parent families, and children. In contrast, such information on the disabled people is only partially available. On the other hand, one does not analyse the information on such population groups as Roma, ex-prisoners, individuals with insufficient, low, or inadequate skills for the labour market at all. The State Audit Office considers that one requires determining first which population groups are exposed to poverty and then decide on specific measures to reduce their poverty.
Institutions involved in social inclusion policy aimed at poverty reduction also do not cooperate to the extent that their actions are genuinely useful and productive. The works of both the government and local and regional governments in identifying the population groups requiring social support and providing support are uncoordinated, often overlapping, and even contradictory. This situation has arisen mainly because the country does not have a single, coordinating planning document for poverty reduction. Still, the Ministry of Welfare, as the institution coordinating this policy, carries out supervision only at the level of its mandate.
When monitoring the Latvian National Reform Program “EU 2020” and the NDP2020 objectives, the Ministry of Economics and the Cross-Sectoral Coordination Centre only compile statistics. Still, they do not assess the impact of the measures chosen to reduce poverty. Finally, local and regional governments, which spend 249 million euros a year on social protection and pay a fifth of it in social benefits, act without any coordination with state aid and support, although exactly local and regional governments already have a functioning system in place, which helps assess the income and financial situation of applicants for relief. The State Audit Office encourages introducing exactly such a system based on the needs of individuals, which already operates in municipal social services, at the national level, which would enable the use of public funds more purposefully than before.
The government and local and regional governments push their own agenda
The Concept of the Minimum Income Level (Concept) approved by the Government in 2014 is the only coordinating policy document for poverty reduction at present aimed at introducing a single minimum income level, which would serve as a reference point for granting public and municipal support to the lowest-paid population stipulated within the social security system.
The leadership of a working group of the Ministry of Welfare has been drafting its implementation plan for almost five years. While writing the plan, the working group has mainly relied on discussions without initiating real reforms. It has assessed the municipal social support system, which is a very essential tool for poverty reduction, in terms of only three benefits: annual minimum income, housing benefit, and crisis benefit. The working group did not offer any solutions either to link the minimum income level (198 euros per month for the first individual in a household and 139 euros for the next ones) to real support for the population. In its turn, the Government allocated one-third of the planned funding for the Concept Implementation Plan 2020–2021 by envisaging increasing only specific supports.
In the auditors’ opinion, the introduction of the minimum income level required a comprehensive evaluation of the existing national and municipal support and its effectiveness, as well as the recording of overlapping in public and municipal aid. The audit data show that 21 local and regional governments included in the audit allocated 3.349 million euros voluntarily to various benefits in 2018, out of whose 52% reached the population without assessing their needs. For example, one has paid 26% for various holiday benefits and 39% for childbirth benefits, which also overlap with the childbirth benefit granted by the State Social Insurance Agency.
One also implements social inclusion measures anticipated at the level of sectoral policies in a non-interconnected manner detached from common national objectives, and they are not always sufficient. For example, Social Services Policy, which should provide support for the social reintegration of the homeless, does not envisage any measures for those people, while the Child and Family Rights Policy does not offer any targeted measures for single-parent families, which is one of the groups most at risk of poverty.
At the same time, several tax policy measures even run opposite to the national objective of reducing poverty. The COVID 19 crisis has already shown that employees in reduced tax regimes (micro-enterprises, the self-employed, royalty holders, and patent payers) are at risk of poverty and require urgent solutions because reduced compulsory national social security contributions have a direct impact on the amount of means of subsistence in case of unemployment, disability, and upcoming retirement age.