In Cyprus, a draft bill to establish a guaranteed minimum income (GMI) benefit was voted on by the House of Representatives in July 2014. The GMI is seen as the cornerstone of current reform of the social security system, simplifying benefits and giving assistance to those most in need.

Background

On 10 July 2014, the House of Representatives voted on a draft bill to establish a legal framework for a guaranteed minimum income (GMI).

The Ministry of Labour, Welfare and Social Insurance (YEPKA), is the authority responsible for preparing and implementing the relevant legislation, passage of Law 109(I)/2014 ‘on the Minimum Guaranteed Income and Generally on Social Provision’. It is part of overall reform of the social welfare system. This was a pre-election commitment made current President Nikos Anastasiades and an obligation set out in the 2013 Memorandum of Understanding after Cyprus asked the International Monetary Fund for financial assistance. Reform has become an urgent priority given the deterioration of the economy and increased demand for social assistance and solidarity.

The labour ministry says the new policy is intended to correct the distortions of the previous system, specifically:

management of allowances by many different agencies;

lack of proper targeting;

overlapping of benefits;

time-consuming procedures for submission and processing of applications;

provision of benefits to citizens who are not in need of them;

failure to provide enough assistance to those really in need of it.

The creation of a GMI is considered to be a cornerstone of the new policy by ensuring a minimum decent standard of living, based on criteria such as income, property ownership and composition of the family, as well as any specific needs.

Basic provisions

Scope

Law 109(Ι)/2014 covers all EU citizens as well as Cypriots if, for five years before making an application for support, they have resided and still reside legally and continuously in the free areas of the Republic of Cyprus.

For third-country nationals (TCN), the legislation covers long-term residents (Law 129(I)2014 ‘On Aliens and Immigration’) and people whose legal status is based on the provisions of Law 59(I)/2014 ‘On Refugees’, with the exception of asylum seekers. The legislation also covers the victims of trafficking and exploitation of human beings in accordance with the provisions of Law 60(I)/2014 ‘On Preventing and Combating Trafficking and Exploitation of Human Beings and Protecting Victims Thereof’.

Included in the categories exempt from the law are the voluntarily unemployed and full-time students, with the exceptions of students who are orphans, who have disabilities or who, upon reaching the age of 18, were under the care of the director of social welfare services.

Criteria and conditions

The philosophy of the new legislation is to create a minimum standard of living through benefits granted after the resources of beneficiaries and their families have been examined; these resources include income, immovable property, bank deposits, stocks, bonds, securities, insurance policies, accounts receivable and other similar items owned by members of the family unit.

Income criteria taken into account are understood to mean: income of paid employees or self-employed people; amounts received as maintenance from a liable party; any pay supplement, grant or assistance received except for disability allowances; student grants and national guardsmen’s grants; any income from pensions or pension schemes except the allowance granted to assist low-income pensioners; any income from the development of family owned property such as income from rents or from interest.

The following allowances are also calculated as income: family allowance; single-parent family allowance; unemployment benefits; invalidity or disability pensions; foreign pensions and allowances; monthly pensions paid under the law ‘On relief for victims’ with the exception of the relevant disability allowances; Easter bonuses; grants and benefits from the Cyprus Agricultural Payments Organisation and the Department of Fisheries; monthly grants to veterans or to widows/widowers of veterans of World War II; and any allowance, grant or assistance provided it is not exempted from the law. Allowances paid in a lump sum each year are apportioned over a period of 12 months when GMI support is being calculated.

Family members’ total income should be lower than their total needs, measured against the GMI, for them to be eligible for help.

The monetary benefits available fall into two basic categories:

a monthly payment to bring the beneficiary’s income up to the level of the GMI;

monthly housing benefit, either as a rent allowance or as an allowance to cover interest on housing loans.

In both these categories, the amount of monetary benefit will vary according to the size and composition of the family. For adults living alone, it will ensure a minimum income of €480. Housing benefit will take into account the district of residence, and in the District of Paphos, for instance, it will be a minimum of €96.25 for adults living alone or childless couples. Beneficiaries of the GMI will also receive, as the case may be, municipal or other similar taxes and assistance in meeting emergency needs or caregiving needs.

Social dialogue

Despite YEPKA’s initial intention to conduct far-reaching social dialogue which was slated to begin in late February 2014, discussion of the terms and conditions for enacting the GMI was extremely short, beginning on 29 May 2014 and lasting less than a month. Although the GMI was ostensibly the focus of this public dialogue, there were only limited interventions from the social partners and civil society.

An interdisciplinary workshop organised by the Institute of Labour of Cyprus (INEK), was attended by representatives from around 30 trade union organisations. They discussed the contribution of the GMI to matters of social protection and GMI policies implemented in other EU countries.

Delegates made some criticisms of the GMI.

The legislation behind the GMI amends the substance of Law 95(I)/2006 on Public Assistance. Although important changes to the scope and criteria of the law mean that it covers groups such as the working poor and the long-term unemployed, a large number of potential beneficiaries are excluded by individual criteria such as calculation of property ownership on the basis of the family unit and the beneficiary’s age.

The amount of monetary benefit, set at a minimum of €480 a month for adults living alone, is enough to live on but not to live well on, and is only slightly more than the €452 paid previously on the basis of Law 95(I)/2006 on Public Assistance, which has not been adjusted since 2011.

The concept of minimum income set at €480 a month may lead to distortions in the labour market, driving down the wages of vulnerable categories of wage earners, such as third-country nationals and the low paid, with a risk of a further exacerbation of the problem of undeclared work.

While the law puts policies in place to assist people with disabilities, it fails to provide a solution to the special conditions and problems faced by people with disabilities. The costs created by disability are social costs, and should be borne by the state and kept completely separate from policies on poverty.

The procedure for submission of applications was judged by delegates to be complex and bureaucratic, requiring personal data in some cases that might pose a risk of stigmatising recipients. The majority of recipients of public assistance and low-paid pensioners will have to complete an application even if they do not meet the relevant criteria for the GMI.

Applications

A new body, the Service for Administration of Welfare Benefits, has been set up. It will be responsible for the implementation of the law on the GMI and for administering all social benefits paid by YEPKA.

The deadline for submission of applications for the GMI was 31 September 2014. Until the applications are processed, recipients of public assistance will retain all their rights on the basis of Law 95(I)/2006. YEPKA estimated that more than 90,000 applications would be received in all. However, data presented in the House of Representatives on 15 September 2014 show that 53,500 applications had been received: 22,150 pensioners, 18,000 recipients of public welfare, 10,500 unemployed people, 2,500 EU nationals and 350 third-country nationals.