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Government and ruling parties agree on 5-year plan calling for cuts in welfare- and education-related spending

The government and ruling parties on June 26 held a meeting on economic and fiscal reform and agreed to drastically cut government expenditure by 11.4 trillion yen to 14.3 trillion yen over the next five years.

Calling for a balance to be obtained by fiscal 2011, the plan proposes a 1.6 trillion yen cut in spending on social services over the next five years to the detriment of recipients of welfare benefits and employment insurance.

The plan estimates revenue shortfalls at 16.5 trillion yen for fiscal 2011 and calls for 2-5 trillion yen to be secured by increasing tax revenues. If the increase in tax revenues is to be achieved through raising the consumption tax rate, an increase of one or two percentage points (from the present five percent) will be necessary.

On June 22, Prime Minister Koizumi Jun'ichiro stated, "If the government calls for drastic spending cuts, there will arise the argument that a tax increase would be better," suggesting that cuts in welfare-related spending should be followed by a consumption tax rate increase.

The outline calls for cutting 1.6 trillion yen in social services, 2.6 trillion yen in personnel costs, 3.9~5.6 trillion yen in public investment, and 3.3~4.5 trillion yen in other spending programs including education.

Specifically, the plan calls for the government share in unemployment benefit payments to be reviewed or even abolished. Faced with the sharp recent increase in the number of welfare benefit recipients, it stresses the need to make a comprehensive review of the system with the view of enforcing changes from next year.

Also, the new plan will inevitably lead to an increase in the nursing care insurance premium.

It calls for cutting about 10,000 teachers and staff members involved in compulsory education over the next five years, and nursing funding for national universities as well as government assistance to private universities that have shortfalls in student enrollment.
- Akahata, June 27, 2006