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The government announced on the 30th that next year, public officials above the ministerial level and above will return 10% of their remuneration, and the remuneration of public officials above level 4 (secretary) will be frozen.
It is part of the intensive restructuring that was implemented to raise funds for next year’s budget.
The government has also decided to promote overall fiscal innovation in the future, such as introducing a fiscal rule that manages the ratio of the managed fiscal deficit to gross domestic product (GDP) to 3% or less and reorganizing local education financial grants.
◇ 10% return of ministerial level remuneration, freezing level 4 or higher… 1.7% increase for grade 5 and below
The government set the basis of next year’s budget plan to be ‘sound fiscal’ and proceeded with ‘expenditure restructuring’ of 24 trillion won, twice the size of the previous year’s expenditure restructuring.
As it is difficult to arbitrarily increase income, which is mainly made up of national taxes, it is intended to secure financial resources by limiting expenditures as much as possible.
Spending restructuring is a more powerful method than the existing spending restructuring that checks the execution status and filters out similar and duplicate projects.
In this situation, the government announced a policy to return and freeze public officials’ remuneration, saying that the public sector will take the lead and share the suffering.
Deputy ministers and above will return 10% of their remuneration, and those with 4 and above will freeze their remuneration.
However, the remuneration of civil servants below level 5 will be increased by 1.7%.
At the same time, 48 out of 246 committees that receive finances will be consolidated and 33 will be abolished.
◇ Reduced loss compensation budget… Decrease direct financing for policy finance and private-centered support for start-ups
In addition to reducing public sector spending, the government restructured spending by normalizing temporary spending, re-establishing the roles of the government and the private sector, and improving fiscal investment efficiency.
The quarantine budget and the budget for support for loss compensation for small businesses due to the novel coronavirus infection (COVID-19) will be normalized according to the situation of daily recovery. It means reducing the budget that has been temporarily increased significantly.
What the private sector can do among the projects that used to be financed by the government will be shifted to the private sector.
The elderly job project will reduce public-type jobs for simple labor and change it to expand social services and private-type jobs.
In the business start-up support project, the project selected directly by the government or public institutions will be changed to link the participation of the private sector and universities.
Policy finance Direct loans will be reduced. Direct loans for high-credit classes that can be procured from the private sector are converted to secondary protection.
Industrial and digital infrastructure-related projects such as solar power and smart factories will also reduce government spending and shift the focus to the private sector.
For projects with low market demand, such as hydrogen passenger car supply projects, the level of support will be reduced, and the priorities of budget injection projects will be adjusted in consideration of environmental changes.
The project promotion system and support method will also be reorganized, such as the integration and abolition of work-learning parallel centers with overlapping functions.
Deputy Prime Minister Choo, ‘Financial rules are…’◇ Introduction of ‘strict’ fiscal rules… Reorganization of grants and limiting of other exemptions
The government has come up with more fundamental measures to improve the efficiency of future fiscal management as well as next year’s budget.
The fiscal rules, which had been rejected by the previous government, are made simpler and stricter, and the introduction is promoted once more.
The management fiscal deficit ratio to GDP is managed to 3% or less, but if the national debt-to-GDP ratio exceeds 60%, the managed fiscal balance deficit ratio is further tightened to 2% or less.
The limits of the rules are specified in the law, and the rules are exempted in unavoidable circumstances such as an economic crisis, but when the crisis is over, fiscal consolidation measures are established and immediately returned to the rules standards.
The amendment to the National Finance Act, which includes the introduction of fiscal rules, aims to pass the regular National Assembly this year.
To reflect social changes such as a decrease in the school-age population, local education financial grants will be reformed.
The goal of the reorganization is to create a special account to support higher and lifelong education, which can be used to strengthen the competitiveness of local universities by using education tax among the grants.
A preliminary feasibility study (anticipation) establishes a mechanism to prevent excessive exemption. Among the simple improvement/maintenance projects to increase the utility of existing facilities, projects that include new facilities or extend existing facilities are excluded from exemption.
For private investment, the target facilities are diversified to increase from KRW 5 trillion to more than KRW 7 trillion per year.
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