Modernization of the assessment of the effectiveness of public spending on the provision of targeted social benefits in the context of achieving the national goal of reducing poverty in Russia

Romaikin Pavel Denisovich ORCID: 0009-0006-3423-4405 Student; Department of Public Finance; Financial University under the Government of the Russian Federation 49/2 Leningradsky Ave., Moscow, 125167, Russia p.romaikin@mail.ru Other publications by this author

Introduction

Currently, Russia is actively modernizing social support for the population ^[1,2,3], taking place in the context of achieving national development goals. One of the most important national goals enshrined in Decree of the President of Russia dated 05/07/2024 No. 309 "On the National Development Goals of the Russian Federation for the period up to 2030 and for the future up to 2036" is formulated as "reducing poverty below 7 percent by 2030 and below 5 percent by 2036, including the poverty level of large families families up to 12 percent by 2030 and up to 8 percent by 2036."

It should be noted that over the past 10 years, the poverty rate of the population as a whole in Russia has been at the level of 10-13%, with a tendency to increase in 2012-2015, followed by a reduction in poverty in 2016-2022 in the context of an extensive expansion of the social support architecture ^[4]. Thus, the creation in 2017-2023 of an integrated system of targeted benefits for children under 17 and the organization of federal co-financing of the social contract from 2020 required an increase in federal budget expenditures by 1.49 trillion rubles (in 2024 prices), which in accordance with the Federal Law "On the Federal Budget for 2024 and for the planning period 2025 and 2026 years" dated 11/27/2023 No. 540-FZ amounts to 20% of all social (under section 10 "Social Policy") expenditures of the federal budget. This expansion of support has led to a positive trend in the poverty rate: a decrease from 12.9% in 2017 to 9.0% in 2022. However, in the context of achieving a poverty level of 7% by 2030 (the indicator of the national development goal), only two thirds of the result was achieved in 2022: the poverty level decreased by 3.9% out of 5.9% required. At the same time, in the conditions of modern restructuring of the Russian economy, there are objective factors that allow us to question the further possibility of a large-scale increase in social expenditures of the budgets of the budgetary system of the Russian Federation. External budget constraints related to the sanctions pressure on the Russian economy and the federal budget deficit planned for 2024-2026 do not allow, in the absence of the necessary revenue base ^[5], to carry out an additional increase in social obligations, which was previously possible in the conditions of surplus budgets 2018-2019 and 2021.

In this regard, work is being updated on alternative scenarios for the development of a targeted social support system, one of which is the redistribution of budget funds between existing financial support instruments by changing the parameters of their purpose and based on an assessment of their social and budgetary effectiveness.

Literature review

Evaluating the effectiveness of public spending is one of the most difficult issues of public finance management. In the domestic and foreign scientific literature, the assessment of the effectiveness of expenditures to overcome poverty of the population is carried out within a single methodological framework, despite the fact that specific calculated indicators and other aspects of the assessment may differ. Some authors quantify the final effects of benefit payments expressed through indicators of poverty and inequality reduction ^[6], others focus on the share of budget expenditures brought to the poor ^[7], while others consider the problem through the prism of the administrative effectiveness of social benefits, expressed in the cost of targeting recipients ^[8]. At the same time, it is consensually assumed that effective spending programs to overcome poverty are characterized by high targeting of funds, i.e. they allow budget funds to be directed to objectively needy recipients and thereby significantly affect the reduction of poverty and income deficit of the population ^[9,10,11,12]. Thus, the assessment of the effectiveness of targeted social benefits is usually based on the direction of analysis of end effects (social efficiency) and analysis of financial aspects of budget allocation (budget efficiency). It is also important to note that in studies devoted to achieving the national development goals of the Russian Federation, the emphasis is often on the problems of program-oriented management ^[13], and not on its subject.

It should be noted that the methods currently available in Russian practice for evaluating the effectiveness of public spending are not sectoral in nature, but are concentrated around program-oriented tools in general. In the assessment methods used by the Accounting Chamber of the Russian Federation (approved by the Board of the Accounting Chamber of the Russian Federation dated 03/09/2022 No. 11K (1536)) and the Ministry of Economic Development of the Russian Federation (Decree of the Government of the Russian Federation dated 05/15/2023 No. 752), it is assumed that industry specifics are taken into account when analyzing the degree of achievement of targets that correspond to the scope of program-targeted tools. Of course, this approach allows us to compare the effectiveness of tools that differ in their final socio-economic effects and thus, in theory, contributes to the justification of managerial decisions on the redistribution of funds between program-targeted tools (less often) and their structural elements (more often). Nevertheless, the value of the target indicator analyzed in these methods is not always determined only by the results of the activities of program-targeted tools. For example, in addition to social benefits, the poverty rate of the population is influenced by external factors for the social support system ^[14] related to the level of economic growth and the distribution of its results. First of all, the increase in the real wage level observed in Russia in 2016-2023 (during this period, the real accrued wages of employees increased by 38.4%) ^[15] led to an increase in the level of labor incomes of the population and a reduction in poverty. Thus, the methods currently used do not allow us to assess the factor contribution of the social support system as a whole and individual social benefits to reducing poverty in the presence of an alternative labor channel for income growth.

Taking into account the above, the methods of evaluating the effectiveness of program-targeted budget expenditure management tools require sectoral modernization. In terms of assessing the effectiveness of spending on overcoming poverty, in order to ensure the possibility of fine-tuning social benefits, it is advisable to expand the existing effectiveness assessment with additional indicators.

Methodology

Based on the directions described above for evaluating the effectiveness of public spending on the financial provision of targeted social benefits, the author proposes to supplement the existing assessment methods with indicators of social and budgetary efficiency.

In the case of estimating budget expenditures to overcome poverty, the immediate result is the number of recipients of targeted social benefits. The corresponding social effect is associated with a reduction in the number of poor people ^[16,17]. The indicator Δ1 proposed by the author characterizes the proportion of recipients of payments who came out of poverty after receiving an appropriate social transfer. The author proposes to calculate the indicator Δ1 using the following formula:

where:

POPAT (people out of poverty after transfer) – the number of citizens whose per capita incomes have reached or exceeded the subsistence minimum after receiving targeted social benefits, people.;

PIPBT (people in poverty before transfer) – the number of citizens whose average per capita income was below the subsistence minimum before receiving targeted social benefits, people.

The indicator Δ1 takes a value from 0 to 1, where the value 1 characterizes the most socially effective expenses, since they allow to completely overcome the poverty of the population.

At the same time, according to the Budget Code of the Russian Federation (Article 34), the principle of effective use of budgetary funds consists of two components: efficiency and economy. In accordance with these areas of assessment of budgetary efficiency, the author has formed two corresponding indicators of budgetary effectiveness (Δ2) and budgetary economy (Δ3) of expenditures to overcome poverty of the population.

The indicator Δ2 proposed by the author should be calculated using the following formula:

where:

IPS (income poverty spending) – the amount of expenses within the framework of providing targeted social benefits aimed at directly reducing the income deficit of the population, RUB.;

TPS (total poverty spending) – the total amount of expenses for providing targeted social benefits, RUB.

The indicator Δ2 takes a value from 0 to 1, where the value 1 characterizes the most effective expenditures, since they are completely aimed at reducing the income deficit of the population, i.e. they allow to reduce it as much as possible with a given amount of budget expenditures.

It is proposed to calculate the proposed indicator Δ3 using the following formula:

where:

TPSPOPAT (total poverty spending) – the total cost of providing targeted social benefits for recipients whose average per capita income exceeded the subsistence minimum after receiving targeted social benefits, RUB.;

IDBTPOPAT (income deficit before transfers) – income deficit of citizens whose per capita income exceeded the subsistence minimum after receiving targeted social benefits, before receiving targeted social benefits, RUB.

The indicator Δ3 takes a value greater than or equal to 1, where the value 1 characterizes the most economical expenses, since they correspond to the amount of the pre-transfer income deficit of recipients of payments who came out of poverty after receiving them.

Results and discussion

The calculation of the proposed performance indicators was carried out by the author for a monthly allowance in connection with the birth and upbringing of a child under 17 years old. The choice of this payment is justified both by its most important place in the structure of social expenditures of the federal budget (financial support for payments is 80% of targeted and 17% of all social expenditures of the federal budget in 2024), and by the uniformity of payment parameters (size and right of receipt), which allows achieving high accuracy of analysis when using Rosstat data instead of limited in plan access to departmental data on the personalized distribution of payments. Thus, families with children under the age of 17, whose per capita income is below the regional subsistence minimum, are eligible to receive payments. The amount of the specified payment is set at a fixed amount of 50%, 75% or 100% of the regional subsistence minimum of the child, depending on the average per capita income of the recipient household. If the amount of payment of 50% does not allow increasing the average per capita household income to the minimum subsistence level, then such a household is entitled to a payment of 75% and, by analogy, 100% of the regional minimum subsistence level of the child.

At the preliminary stage of calculation, based on Rosstat data, the author determined the estimated amount of federal budget expenditures for the provision of social benefits corresponding to the parameters of benefits in connection with the birth and upbringing of a child under 17 years of age (EPR). The calculated expenditure volumes were analytically divided into targeted and non-targeted funds (Table 1). Targeted funds are understood as the amount of money allocated for financial support of social benefits, which reduces the income deficit of recipients, and under non–targeted funds - the amount of money that citizens receive leads to an increase in the average per capita income of the recipient above the subsistence level.

Table 1 – Assessment of the targeting of expenditures within the framework of the financial support of the EPR

*PMR – the child's living wage

**d/x – household

Source: author's calculations according to Rosstat data ^[18,19,20]

The results of the calculations shown in Table 1 indicate the presence in the structure of expenses for ensuring the EPR of funds allocated to exceed the income of recipients of the subsistence minimum (165. 02 billion rubles. or 16.3%). In the case of the analyzed payment, these funds arise due to the discreteness of the size of the assignments, since citizens receiving payments in the amount of 50% and 75% of the subsistence minimum a priori overcome poverty based on the rules for assigning benefits (otherwise they would have been assigned the maximum payment).

Based on the data obtained and in accordance with the proposed indicators (formulas 1-3), the values of the budgetary and social efficiency of the corresponding public expenditures for the EPR were determined (Table 2).

Table 2 – Calculation of the proposed author's indicators

Source: author's calculations according to Rosstat data ^[18,19,20]

The obtained values allow us to draw the following conclusions. Firstly, the values of the indicator Δ1 are lower than the value of the indicator Δ2. This indicates that the income deficit of the population has decreased to a greater extent than the poverty level. From the point of view of the final social effect, this ratio of indicators suggests that despite the preservation of a relatively large proportion of recipients of payments in the poverty zone, the depth of their income deficit has significantly decreased. The absolute value of this decrease can be estimated based on the input data for calculating the indicator: out of 847.48 billion rubles of targeted funds, the poor after social transfers accounted for 402.43 billion rubles, which corresponds to 70% of the initial income deficit of the specified group of recipients, equal to 574.43 billion rubles.

Secondly, the values of the indicator Δ3 and Δ2 are combined (but from different sides) they lag behind the unit by more than 15%. This means that, on the one hand, the income deficit of the least well-off citizens was not fully financed from the means of payment, whereas the more well-off recipients had a post-transfer surplus of income relative to the subsistence minimum, which allows us to talk about possible options for redistributing funds without increasing total budget expenditures.

Since the author's calculations have shown the comparability of expenditures directed to the financial provision of universal benefits with the general level of income deficit of low-income households with children, it seems consistent to move from discrete amounts of payments to their "continuous" accrual, depending on the income level of citizens. So, 847.48 billion rubles. of the funds allocated for financial support of monthly payments in connection with the birth and upbringing of a child, they were aimed at reducing the income deficit of recipient households, while the latter amounted to 1019.48 billion rubles. Thus, the post-transfer (residual) income deficit amounted to 172 billion rubles (= 1019.48 - 847.48 billion rubles). In turn, 604.47 billion rubles were sent to recipients who subsequently left the poverty zone, while the real pre-transfer income deficit of the specified group of recipients amounted to 445.05 billion rubles. Thus, for the recipients, a surplus of 159.4 billion rubles was financed (= 604.47 - 445.05 billion rubles), caused by a discrete mechanism for its appointment. The specified surplus amounts to 92.7% of the remaining income deficit, i.e., with targeted redistribution, it allows to cover it with additional necessary expenses of 12.6 billion rubles. (1.2% of the total amount of funds allocated to ensure payment).

Thus, the proposed redistribution of funds by determining the amount of payment based on the size of the income deficit of a household with children will completely reduce this income deficit without sending significant additional federal budget funds for these purposes. Thus, this redistribution makes it possible not only to achieve the indicator of the national development goal in terms of large-scale poverty (12 percent by 2030 and up to 8 percent by 2036), but also to overcome this poverty altogether with a given need criterion.

Thanks. The author thanks Igor Viktorovich Balynin, PhD, Associate Professor, Associate Professor of the Department of Public Finance, Faculty of Finance, Financial University under the Government of the Russian Federation for his assistance in conducting scientific research.