Thank you Katalin. Good afternoon, greetings to you all. I’m happy to see you again.
I don’t know how frequently the council meets, but I think I’m invited once a year. If you invited me more frequently, I would perhaps come to see you more often. One doesn’t barge in uninvited, but we should get together at the end of every year. Last year we did so, if you recall, because the end of the year is an important moment, a moment of truth – just as it is for every family or company budget. Until that moment people can say what they like, and we can fool ourselves and one another with all kinds of predictions, but when the end of the year approaches we must draw up our accounts, and the truth is revealed. Sometimes this is an unpleasant experience, while at other times it is pleasant.
If we look back to last year, our discussion was rather pleasant. At the time, we had to conclude that the rate of economic growth had not reached 3.5 per cent, which would have opened up the possibility of a pension supplement. As the rate was around 3 per cent, however, and there was money left in the coffers, the question was how pensioners could receive a share of this. You may remember this debate. And then the proposal emerged that pensioners should be given a one-off supplement before Christmas through the “Erzsébet Voucher” system. At the time there was heated debate over whether or not this was right, what pensioners would think, whether this supplement should be given in cash or in the form of vouchers, and how we should deal with this situation in general. And perhaps you also remember that at the time I was among the more cautious ones – as I am in general. Perhaps a prime minister can be expected to exercise some caution and, though I welcomed the possibility, I was more concerned about this idea. I was concerned at what pensioners would say about this new scheme, as the general belief is that pensioners and novel approaches are not in the same category in one’s head: one thinks that pensioners prefer the well-trodden path and tried-and-tested methods. Last year we introduced something new, and there was concern over how it would be received. There was a question over that, but pensioners were braver than I was, and those present here suggested that we should try it all the same. Nevertheless there were still some who said that if we tried it we would be taking a risk, because it was something novel, and we didn’t know how pensioners would receive it: as has happened so many times in the past, good intentions led to measures that in the end were not well received.
I could mention one such an example, and perhaps there are some here who remember it. How did it happen? In 1999, during our first government, we asked pensioners what they thought would be a fair pension increase: whether everyone should receive a flat-rate percentage increase, or whether those with lower pensions should receive a little more. At the time pensioners said that lower pensions should be increased by more. This is exactly what we did, but afterwards pensioners bit our heads off, complaining about the injustice of our meddling with the pension system in such a way. So it’s difficult to do something good in such a way that everyone feels that what’s happening is not only good, but also right, and satisfies their sense of justice. This Council is important for me, because when it comes to the end of the year it’s important for us to arrive at solutions that are just, and that proposals devised by people from the financial sphere or government leaders are also put to the test by pensioners.
There are many who don’t remember this, because seven years is a long time, so this year I’d like to repeat what I said last year: before the 2010 elections, when we were in a deep hole – if I can put it that way – we, the political forces in government today, concluded a deal with pensioners. We had a great many things in 2010, but money certainly wasn’t one of them. We concluded a deal which stated that we would try to put an end to economic policy based on austerity: the policy that our predecessors saw as the only possible method for the management of every economic crisis. So we pledged to put an end to austerity, and to put the country on a course of growth. We hoped that growth would create the financial foundations for preserving the value of pensions, and that we would preserve their value. Today this no longer seems like the noblest agreement, but it was a major undertaking in 2010, when over the previous year the value of pensions had been continuously eroded. An important aspect of our cooperation I’d like to mention is that I think that over the past seven years we’ve managed to honour our agreement to preserve the value of pensions. Indeed, if I look closely at the figures, from inside and out, I might even say that the value of pensions has increased – modestly, but tangibly. I believe that so far the agreements concluded with pensioners have been honoured, and this also gives us hope for today’s meeting.
Before I come to the specifics I’d like to make another observation. I vividly remember the period of austerity before 2010, because in Hungary austerity measures somehow go hand in hand with increasing debt. One would think that when there is a policy of austerity, at least government debt would decrease; but before 2010 there were austerity measures, and at the same time the government debt increased. My experience was that this is what most troubled senior citizens; this is a strange, as the time horizon over which people see the future varies from generation to generation, and the horizon of pensioners doesn’t seem to be the longest. And yet on the subject of the government debt it was always pensioners who were most outspoken in criticising its level. I thought long and hard over why this was. Now that government debt is falling, it’s important for me to be able to tell pensioners that, as far as I understand, you see this as a matter of honour. Those who after World War II and in the incredibly difficult nineteen-fifties, say, were able to rebuild the country from nothing and help it back on its feet cannot comprehend how, now that that things are so much better, it is conceivable that the younger generation is unable operate a state without government debt. They, after all, didn’t just operate a state, but rebuilt it from nothing. In my experience, for our senior citizens’ generation the government debt is a matter of honour, and they find it contemptible for someone to try to live off other people’s money instead of standing on their own two feet. Although this is not directly related to the issue of increasing pensions, my experience of this nonetheless leads me to stress that the ratio of government debt to the gross domestic product is declining year on year. Therefore when today we talk about the possibility of a rise in pensions, we do so in the knowledge that the background for the ability to increase pensions is provided by a parallel decrease in government debt as a percentage of the gross domestic product. So it will not be funded by debt: the pensions that senior citizens are entitled to will not be paid and increased from external funding, but through our own performance. My point is that that we should not only be happy about the money, but should also be proud that we – and Hungary – are now able to raise the necessary resources by relying on our own strength.
After this, if you will allow me, I’d also like to tell you how public finances stand at the end of the year. Of course the Finance Minister is always secretive, but in Cabinet meetings we usually get the truth out of him with cunning cross-questioning. And I can tell you – as after all, it’s his job to defend the budget – that the Hungarian economy will produce a rate of growth of around 4 per cent. We’re waiting for the figures for the third quarter, but we expect to see a figure which is unexpectedly good – at least unexpected for the general public. The second quarter was perhaps a little more sluggish than we would have liked, but as far as we can see, the third quarter will be close, and these figures provide us with certainty in our planning which allows us to discuss the issue of pensions. We can reckon on a rate of growth of around 3.9, 4, or 4.1 per cent. The secure background for today’s discussion is provided by the economic performance that we will achieve this year. Naturally, if things are going well it doesn’t mean that everyone can sit back and relax, but it means that there’s more work to do. As we’re expecting growth this year to be above 3.5 per cent, the question that we must then discuss and settle is that of the pension supplement. Last year, too, there were perhaps two things that we could be proud of. Last year we also agreed on a pension supplement, due to a higher than planned inflation rate. As required by law, we paid this sum in November, together with that month’s pension. This will also be the case this year. There’s an allowance which pensioners are entitled to, and which we must pay them in November – Kata [Katalin Novák] perhaps knows the exact figures on how much inflation exceeded its planned level. We have the necessary funds, and this sum is available, and is only awaiting delivery: the Finance Minister has promised us that the money is in a big sack in the corner of his office.
There was another thing we introduced last year, but perhaps “introduce” is the wrong word; anyway, before Christmas last year for the first time we were able to give every pensioner vouchers to the value of ten thousand forints. Of course a Finance Minister only sends out subtle signals, but from these I’ve inferred that there’s no reason why this shouldn’t be repeated this year. In other words, if the Seniors Council also agrees, I shall propose that we consider issuing ten thousand forints in “Erzsébet Vouchers” to every pensioner before Christmas, just as we did last year. This is what we had last year. And so now we come to the third thing: the pension supplement.
If you will allow me, before quoting specific figures I would like to say a few words about the philosophy behind this. I believe we haven’t had anything like this pension supplement, and so previously we have not had to consider its deeper context. If we think carefully about this, at the end of the day the pension supplement is a case of us all being in the same situation. By “us” I mean the whole country – pensioners included. If the Hungarian economy is doing better than we had reason to believe – producing a rate of growth above 3.5 per cent, which qualifies as an excellent result – it generates a surplus for the entire country: this manifests itself in wages, and in fewer people without work, who consequently have more money in their pockets. Because pensioners receive their pensions in a pension scheme, they are outside this circle, and they don’t automatically profit from the beneficial effect of economic growth. The pension supplement is based on the philosophy that if growth is higher than 3.5 per cent, pensioners should also share in this achievement. If I translate this into our conservative, national language and logic, the fact that we are one nation means that if the economically active part of the country is successful, this success should also be felt by those who are no longer active, but whose efforts contributed to enabling today’s workers to do well. I believe that this is the moral and principled basis of the pension supplement. And in my opinion this is an admirable institution.
Kata will perhaps be able to tell you something about this year’s figures. We can say with certainty, however, that growth is above 3.5 per cent, and in this respect it’s also worth looking at 2018. Naturally I believe that now we can congratulate one another on the achievement of being able to pay a pension supplement for the first time in the history of Hungary. This is unprecedented. Every fiscal year I ask the Finance Minister to submit a budget which enables everyone to take a step forward. No one wants to say that we’re already there, where we’d like to be – if indeed it’s humanly possible for anyone to be where they would like to be. This is a difficult ontological question, which we shouldn’t discuss now, but in essence it’s important that everyone should feel that they’ve taken a step forward, and that therefore their efforts are worthwhile. I believe that the pension supplement makes a good contribution to this. Although we’re going to talk about 2017 now, I suggest that we look a little further. As Parliament has already passed the budget, let’s look at 2018. If we look at 2018, the gross domestic product is set to increase by 4.3 per cent. This is slightly higher even than this year. When this year for the first time we pay a pension supplement, we should understand that there is good chance that there will also be a pension supplement in 2018. Incidentally, of course, a great many things can happen in 201; we haven’t come here to discuss that, but they can happen. But if things continue well and the country’s development trend is unbroken, then the supplement can be paid. Therefore everything that we will discuss and decide here on this will also apply to 2018.
Regardless of the possible outcomes of all sorts of events in 2018, I’d like to tell you that the plan is for growth to remain at this level. When we were in that deep hole in 2010 and the country’s economic rate of growth had been in negative territory for years, we set out to achieve economic growth. After that, the goal we set was that economic growth should reach 3 per cent. In terms of building the economy, the stage we’re at now is that the Government’s goal is for economic growth to remain between 3 and 5 per cent on a long-term basis. At 3.5 per cent there will be a pension supplement. And if we manage to increase our growth even further, we may reach the goal of the Hungarian economy growing at more than 5 per cent for a few years. That, however, is a topic for another committee, rather than ours – one that’s fundamentally concerned with innovation and modernisation. What follows from this is that no calculations that we have in front of us are based on a rate of growth below the 3.5 per cent pension supplement threshold.
We should look at what’s happening now not as a one-off event, but as an initial event which may continue. Equally in terms of its philosophy, I believe that it’s important to reaffirm that we are all in the same boat: it doesn’t matter if we’re young or old, if we’re well-to-do or poor, we’re all members of a single nation, and we all belong to the same community. We want to build a country in which every generation occupies a special place; we are thinking in terms of Hungary’s generations, and economic growth can reinforce this philosophy, this mentality. This is what you can expect – at least if it’s up to me.
Well, now for the pension supplement. There is a logic to its payment. There are experts among us who will tell you how payment of the pension supplement will happen, if the figures add up and a situation emerges in which we can make the payment. Perhaps they can also tell you the percentage of the pension supplement: it starts at 3.5 per cent, and we claim that the rate of growth will have reached 4.1 per cent by the end of the year. If I understand the situation correctly, this is the basis for calculation of the pension supplement for 2017. Today we’ve gathered together to discuss this issue, so that everyone can obtain all the relevant information, the details of which they will then be able to pass on within their own organisations.
Kata, did I talk about everything in my remit? I did? Well then, thank you very much for your attention. I’d like to say again that I have pleasant memories of our meeting last year. I think it was an important meeting and a major debate. You may remember that here there were debates in small groups. In my view, at our meeting last year we learnt that the axiom that no one can be wise on their own is also true in one’s later years. It is preferable to discuss matters, and to find a solution together, than to simply announce some good or bad news. I’d like to ask you to preserve this culture in the Seniors Council. We’ve always spoken to each other candidly here. Whenever I’ve picked up some information from you it’s always been useful to me – regardless of the item on the agenda at the time. I’m happy that we can be together here, and I urge anyone who has any general comments beyond the pension system – any comments concerning politics or economic policy – to share them with us without hesitation. It helps our work immensely.
Thank you for your attention. I’ll now give the floor to Katalin Novák.
