Fiasco for democracy? Switzerland miscalculates by billions

Opponents of the pension reform that raised the retirement age for women in 2022 are now calling for the vote to be repeated. Keystone-SDA / Peter Klaunzer

The Swiss government has made at least three errors in calculations on issues that matter to voters in the past ten years. Politicians warn this is endangering public trust in one of the most trusted governments in the world.

On Tuesday, the Federal Social Insurance Office admitted that it had got its sums seriously wrong for projected expenditure for the old-age and survivor insurance (OASI – known as AHV/AVS). In 2033, the annual payment is likely to be around CHF4 billion ($4.7 billion) less, which is around 6% lower, than original estimates.

This is good news on the one hand: the state-managed insurance system is in a better financial position than expected.

But the error has caused a political outcry. The Swiss Federation of Trade Unions warned of a loss of confidence in the reliability of official information on pensions. The centre-right Radical-Liberal Party called the miscalculation a “fiasco” and started pointing fingersExternal link at government ministers in charge.

For her part, on Tuesday Interior Minister Elisabeth Baume-Schneider ordered an inquiry into the reason behind the mistake.

The boisterous reaction from politicians isn’t just in response to this specific mistake. In the past ten years the government has admitted at least three miscalculations on major political issues. Just last year the Federal Statistical Office made a programming error that led the strengths of political parties to be incorrectly reported on election Sunday. This made it look like one party was ahead of another when it wasn’t, which could have had an impact on the composition of the seven-member Federal Council.

In 2019, the government admitted a more serious mistake. It found that it had estimated that only 80,000 couples would be affected by a marriage penalty ahead of a nationwide vote on the topic in 2016. The government later revealed it was actually 454,000 couples.

Switzerland has some of the highest levels of public trust in government, in part because of its long tradition of direct democracy. Voters, who cast their ballots four times a year, rely on government calculations for projections that inform debate and decisions on voting matters. Changes to such projections could change voting outcomes, which is why errors are so unsettling.

This past March, Swiss voters approved a 13th monthly pension payment after vigorous debate. This was based on the projected OASI expenditure. The new calculation is unlikely to have affected the results because it showed that there was more money available in the old-age insurance fund.

But what if the results were the opposite, and the new calculation showed a deficit? This could have changed the results. Left-wing parties are already arguing that the error calls into question voters’ approval of a separate ballot item in 2022 to raise the retirement age for women.

While unusual, it isn’t unheard of for referendums to be annulled. In 2019, Switzerland’s highest court annulled the vote on the marriage penalty because of the miscalculation. As of now, there is no decision on whether the 13th pension vote nor the vote on the retirement age for women meet the criteria for annulment.

Problems with projections

How much the latest miscalculation debacle threatens wider trust in government is still to be seen. Projections are notoriously problematic and increasingly complex. The error in the OASI was due to two incorrect formulas in the program code, which comprises more than 70,000 rows.

The calculation also depends not only on the number of retired people but also on their life expectancy, the salary they have earned to date, their assets, and their marital status. These factors are difficult to predict given rapid demographic changes, new medical discoveries, and the economy.

This is made even more complicated by the fact that Switzerland has become more integrated in the global economy, making it more susceptible to crises, Sean Müller, a political scientist specialising in direct democracy at the University of Lausanne, told SWI swissinfo.ch.

“Forecasts are naturally difficult to make because unforeseen events keep cropping up,” he said. “Even an accident involving a ship in the Suez Canal has an impact on prices in the local supermarket in Switzerland.”

Federalism also complicates things. Each canton has a different corporate tax rate, school system and budget for infrastructure.

“Mistakes happen to everyone. What is disturbing is the absolute conviction with which supposedly rock-solid figures are forecast, even though they are often based on many assumptions, formulas and insufficient data,” Müller said. He suggests that forecasts be more clearly identified as such and the data and calculations should always be provided so that a critical discussion can take place.

What is important above all is that “errors are communicated transparently, and people try to learn from them”, Müller said.

Edited by Balz Rigendinger/ts