Yejeongcheo "Government underestimated Basic Pension last year and Livelihood Benefit this year"

2023 Budget Overview Analysis...
Welfare Budget 'Poorly Allocated'... Accuracy of Estimates Must Be Improved

[Asia Economy Sejong=Reporter Kwon Haeyoung] The government has been criticized for underestimating the budget for livelihood benefits, one of the mandatory expenditures, when drafting next year's budget. Since welfare-related mandatory expenditure projects require additional budget allocation if funds are insufficient, there are calls to improve the accuracy of estimates from the budget formulation stage.

According to the "2023 Budget Overview Analysis" released by the National Assembly Budget Office on the 31st, the government estimated the number of expected recipients of livelihood benefits in 2023 to be 1,092,472. This was calculated as a 1% increase compared to the end of 2021.

However, the number of livelihood benefit recipients had already reached 1,141,253 by the end of August this year, which is 4.5% higher than the government's 2023 estimate. Since the government gradually relaxed and abolished the support obligor criteria starting from October 2017, the number of livelihood benefit recipients has steadily increased every year, from 861,409 in 2019 to over 1.14 million currently. Correspondingly, the budget has also increased annually, from 4.65 trillion won in 2021 to 5.26 trillion won in 2022. Given that the number of recipients has not decreased in the past decade, it is highly likely that the recipient count will increase next year compared to this year. The government's underestimation of next year's recipient number compared to this year has led to criticism of "faulty estimation."

In particular, livelihood benefits are statutory mandatory expenditures that the government cannot arbitrarily reduce or increase, with next year's budget exceeding 6 trillion won. Since this project must be executed with secured funds even if the budget is insufficient, accuracy in estimation is required from the budget formulation stage.

Previously, the government also underestimated the budget for the basic pension, which, along with medical benefits and livelihood benefits, is one of the largest welfare budgets, and hastened to secure additional funds. When drafting the 2022 basic pension budget last year, the inflation rate was estimated at 0.5%, but as inflation rose sharply, the government decided early this year to increase the basic pension payment by 2.5%. However, at the time of drafting the 2022 budget, major institutions including the Bank of Korea had already predicted an inflation rate in the 2% range, making it difficult to avoid criticism regarding the accuracy of budget estimates, according to the National Assembly Budget Office. Ultimately, when the basic pension budget became insufficient this year, the government increased the related budget by 170 billion won through the second supplementary budget bill shortly after the new administration took office.

An official from the National Assembly Budget Office emphasized, "The government’s unrealistic estimation of the number of livelihood benefit recipients in the 2023 budget reduces the accuracy of budget calculations," adding, "For large-scale statutory mandatory expenditure budgets, it is necessary to conduct reasonable estimations and reflect them in budget formulation."

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