DOI: https://doi.org/10.18371/fcaptp.v2i15.25055

Budgetary financing of the social risks: problems and prospects

В. І. Надрага

Abstract


Risks financing means providing preventive measures with financial resources in order to minimize losses in case of any adverse events.

Analysis of the functional structure of the consolidated budget shows that the increase in funding for social sectors is mainly due to increase in salaries of public sector employees. It is the result of inflation and the costs for utilities and energy. It caused the absence of a direct link between the increased levels of funding and the quality of social services for the population.  Social benefits do not solve completely the problem of vulnerable classes of population. Some of them even help to increase society stratification. Costs include both social and economic components, so it is necessary to clearly separate them according to their final destination.  The social component – is the cost for current population consumption. The economic component is associated with economic investments in human development. In this regard, the necessity to develop a theoretical model of the social risks financing is getting more and more important. It will allow not only separating the social and economic components, but also significantly improving the efficiency of the social costs.

The purpose of the paper is the scientific theoretical support of the conceptual base of the social risks financing in the context of the budget process.

In contrast to the uncertainty of the economic category, risk can be measured. Its quantitative measure is the probability of an unfavorable scenario. Actually, most attention is paid not only the likelihood of negative consequences, but financial terms of value at risk. It can be expressed by such indices as the maximum amount that can be lost due to changes in individual risk factor; an average value of losses according to the types of operations within a defined time period; the standard deviation of income and expenses and so on.

Accordingly, we can propound the two categories of risk criteria: performance sensitivity and probabilistic (statistical) values. The value at risk is the function of two parameters – the probability of adverse events occurrence and the extent of possible damages. In this context, the social risk is an objective probability of the event in the society, which breaks the established for the citizens’ socio-economic relations and leads to deterioration of their financial or social status.  The social risks include all adverse events in people's lives which are associated with certain forms of social relations, and therefore the economic foundations of the social sphere can be estimated on the analysis of the processes in the area of the social risk management.

The macroeconomic projections that outline the economic growth and increased revenues according to GDP, funds of payment for work, consumer price index and so on are the basis for the planning of public costs on the social services. However, it is important to determine the likely number of potential users of the social services according to the assessment of future changes in the structure of basic socio-demographic groups and vulnerable population classes. Information about the number and sex and age population contingent is the base for identifying promising state social costs. They include funding of pensions, benefits, budget support of educational and medical institutions network.

The social costs have been dominating in the budget expenditure ofUkrainefor the years of its independence without alternative. This tendency, under the certain conditions, can be considered positive, because it must promote the human development and improve people's lives.

Potential consumers of the social services in the future will undergo some significant changes. In particular, decline in birth rate and the impact of the structural factors will reduce the total number of children as consumers of the social services for families with children, educational infrastructure and public stationary boarding school. The total number of disabilities among adults and children will be reduced. However, the number of elderly will significantly increase in the result of rapid population aging.  Despite the opposite trends in these processes, the total number of social services users will decrease and their specific weight will increase, resulting in the increased levels of demo-economic load.

Prospective evaluation costs algorithm for social purposes should include the following:

- projected assessment of the number of people who will benefit from the social services;

- the level of public social costs per capita according to different types of consumers of the social services;

- indexation of public social costs;

- total costs on various social sectors;

- comparison of the required total costs on the social area with projected indices of economic development.

The main drawback of the current social policy inUkraineis its focus on population income support, mainly in the form of the social transfers. It does not pay attention at improving of the life quality. It ensures the equal access to the social services and their good quality. Choice of the social policy support priority for the poorest strata, needy, socially vulnerable, disabled is clearly justified from a moral point of view and meets the aims of the social state. However, in practice this results in the formation of dependency mentality of the most part of the society. It slows down the development of economic activity and does not contribute to the population competitiveness in the labor market.

The social costs efficiency improvement in the context of limited budget resources requires the introduction of the new management approaches to the social costs; interbudgetary relations improvement; determination of the degree of the key partners participation and authorities in the financing and administration of the social programs; the social services system diversification; implementation of the social standards completion; the introduction of criteria and indices for monitoring and evaluating the achievement of individual goals.

Keywords


social risks; budget; social sphere

References


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