Research Fellow Lee Sun-hwa has proposed an institutional reform plan for government subsidies in the welfare sector as a strategy to respond to the national challenges i.e. expanding welfare and strengthening autonomy.
In this report, her proposal includes that (1) cash-benefit basic welfare projects requiring national standards, such as livelihood benefits and basic pension, should be promoted mainly by the central government at its own discretion and financial responsibility; (2) a decentralized framework should be introduced to expand the discretion of local governments for regional, diversified, on-site projects; (3) different welfare projects covering the same beneficiaries should be integrated or linked; and (4) projects with vague and indefinite purposes should be clarified for orientation with social consensus – they might be integrated if needed.
Three alternative strategies were suggested to improve the government welfare funding system from the perspective of fiscal neutrality, in addition to the adjustment proposals for individual welfare subsidies: first, central grant programs for other sectors may be downscaled by the burden of welfare expenditure in the central government budget; second, the funding balance between welfare and education may be adjusted so that local governments can expand joint projects with local offices of education with savings from the cash-benefit welfares; and third, financial resources may be tuned within the subsidy budget of Ministry of Health and Welfare under the principle of that “cash benefits are centralized and social services are localized”.
“The more diversified government functions, the more important it is to make decisions about the supply of public goods or to configure the supply scheme and delivery system,” said Lee. “Efficiency of welfare funding projects can be achieved by political and administrative decentralization in which the central and local governments build a new platform of inter-governmental authority and financial relationship for solving social and economic problems as lateral partners.”