Holding together as a country, nothing is impossible. Together we can do more, because it is characteristic to Estonia to be greater than our size and population, just like our famous writer Jaan Kross once stated. It means doing more than is expected of us, and even more than we expect of ourselves.
The government has just delivered the draft 2016 State Budget Act to Parliament, the volume of which is 8.9 billion euros. This is over 4 percent more than we planned with the state budget for 2015. We delivered a well-considered and responsible budget, which will make the life of Estonian people better. A budget which ensures security, contributes to the growth of income, and increases welfare for everyone, from children to the most dignified.
I wish for Estonia to become a country, where the Nordic standard of living and security have been achieved, but which is more socially flexible as well as technologically more dynamic. A state, which is well-protected and economically successful, open and tolerant to differences, ensures equal opportunities and values family. A country, where the European values are unwavering and which is firmly a part of the Western cultural area. Borrowing from the historian Niall Ferguson, we are part of the West which dusts off its strategy, learns to protect itself again, and stands united for its values in the world, just as it stood for abducted official Eston Kohver, who was freed last weekend.
Delivering the 2015 budget a year ago, I stressed that our security environment has changed and has done so long-term. Now, a year later, a war is still going on in Ukraine. Moreover, new threats have been added, which seem as if they are far, but to ignore them would be stupidly short-sighted. There is no doubt that what is happening behind Europe’s southern border, also directly affects how we live in Estonia – the war in Syria, conflict in Libya, and the rising of ISIS as a phenomenon.
In large part, these conflicts are specifically the reason why Europe is facing the greatest refugee crisis after World War II.
Well-thought-out national defense and strong alliances have ensured us with security and reassurance throughout the years. Estonian diplomats, national officials and politicians have continuously worked for it. Next to NATO membership, belonging to the European Union carries as great a responsibility. Talking about European values is suddenly no longer merely for appearances. Words must be affirmed with actions. The crisis has swelled so large that the entire responsibility cannot be left on the shoulders of those countries where the wartime refugees arrive. Estonia is not an isolated island which would be left untouched by what is happening elsewhere. Estonian European and value-based obligation is to contribute responsibly and in solidarity to the solving of the crisis. Regardless of whether by tying the shoelaces of a little child or helping someone on the ground – no person is greater than when he bows to help someone in need.
European values are a part of our identity. We follow certain principles and hold on tightly to the general principles of democracy. We have personal liberty and freedom of speech, we understand and respect each other, and we discuss, argue and are responsible for our words and actions. There is no place in Estonia – nor will be – for dishonesty or raising one’s own interests above the laws in force. Corruption on any level is a serious threat to our values and an axe-blow to the pillars of our state.
National security very important
To ensure Estonian national security we will continue contributing to Estonian national defense responsibly and continuously. Estonian contribution to national defense will also supersede the agreed NATO level of two per cent of gross domestic product next year. In addition to the two per cent we will cover the costs which are related to the persistent presence of NATO Allies in Estonia and strengthening NATO’s visible deterrence. Estonian security is certain, because we take national defense seriously and fulfil the promises given to our Allies.
As important as military defence, is national security. For there to be a maximally safe border between Estonia and Russia, we will invest 20 million euros into the construction of the border next year. We will also invest into the improvement of the training of Police and Border Guard officials, strengthen the capacity of rapid reaction and renew the equipment of internal security employees. We will do everything for the working conditions of the persons ensuring the security of our state to be motivating – the salary fund of the employees of the Police and Border Guard and Rescue Board will increase by four per cent next year.
All state authorities and actually the entire society must be ready to protect the Estonian state. We will continue implementing a comprehensive approach to defence, focusing on ensuring the continuous operation of vital services.
A few percentages of economic growth too little for Estonia
I find that a state can directly interfere with the economy as seldom as possible and only where it is necessary. But a state must create an environment for entrepreneurs that support economic growth, because the constant increase of welfare and income is only ensured by economic growth. In the comparison of the Eurozone countries Estonian economy is still growing fast, but are we satisfied with it?
No. A few percentages of growth are too little for Estonia.
To accelerate growth we will reduce labour taxes and contribute to increasing productivity, export, and investments. The increase of the tax-free minimum of the coming years has already been approved by Parliament, we will also reduce social tax in the next years. For our people to live longer and more healthily, we will continue taxing vices through increasing rates of alcohol and tobacco excise duty.
Economic growth is also contributed to if the state does not put an unnecessary administrative burden on companies’ shoulders, but is constantly looking for opportunities for making the public sector more efficient, simplifying rules and reducing bureaucracy. We consider it important to help those today who will lead the Estonian economic growth of tomorrow thanks to a clever specialisation. We will support companies in taking up use of new technologies and materials. We will help those who develop products and services with a great added value in cooperation with universities and research institutions. We see the big picture and prioritise education. We have agreed on the raising of teachers’ salary to 120 percent of the Estonian average and we will create preconditions so that scientists and engineers would have a secure next generation.
Public administration reform
Estonian working age population is declining and therefore the number of employees receiving a salary from the state can also not increase. In 2016 we will reduce the amount of state public servants, centralise support services, take e-services into use in a greater extent than so far, and reduce the management expenses of areas of government in the extent of 3 percent on average. We will direct the money saved primarily into the salary fund of those office-holders, the increase of the income and welfare of whom will serve our interests most. The salary fund of teachers, cultural workers, employees of internal security and social welfare will increase by 4 percent in the coming year, to which the entire saving achieved from the growth of efficiency will be added.
Registered unemployment has reduced by 4 percent and there are thousands of unfilled jobs across Estonia – right now is the best time to implement the work ability reform applied from the middle of 2016, which will also help people with reduced work ability into working life. Helping people that have so far been left aside into work will make Estonia healthier in many senses.
The most secure coping guarantee is a well-paid job. And even though unemployment is reducing in Estonia and salaries are growing, there are also those that need support from the state.
In January the allowance for the first and second child will increase from 45 euros to 50. In addition, the government will double the housing benefits of families with many children; invest into the creation of additional childcare places and into offering a care service for disabled children.
In 2016 tax-free income will increase from 154 euros to 170 euros. This means 2040 tax-free euros a year. In the new year, people with a lower income will get an opportunity to get back income tax paid on earnings during the year. The subsistence rate will significantly rise next year to support families that need the state’s support – it will increase from the current 90 euros to 130 euros per family member.
We will also not forget our elderly and those, who have contributed to promoting Estonian life with their work. For old age to be active and dignified, the average old age pension will increase by 5.7 per cent from 375 euros to 396 euros and will be tax-free in the future as well. We will significantly increase health insurance funds, to give a greater sense of security to people who have to take more care of their health due to advanced age.
Even though for the inhabitants of the majority of the world, Estonia is already a dream welfare society, we have plenty of things, which we can do even better. Our aim is to develop a country, where it is good to work, and from where there is no need to go look for work abroad. A country where the entire society is involved in creating and sharing the benefits of economic growth. A country that is known for a good business environment, creation-enriching world culture, and friendly people. The working document of next year’s public finance will help us take a little step closer to these aims in every field mentioned.
Taavi Rõivas is the prime minister of Estonia. The text is of a speech delived to the Parliament on Tuesday, September 29.
Editor: S. Tambur