Fuel duty hike saga part II: Former economic adviser to PM speaks up (6)

Ruta Arumäe (Postimees/Scanpix)
4/17/2015 1:57 PM
Category: Economy

Public outrage caused by the coalition's decision to increase excise duty of liquid fuel and subsequent statements by Estonian Prime Minister Taavi Rõivas have forced him to apologize for the misinterpretation of his words, as if he had told people who are hit hardest by the price hike to buy more economic cars, but questions about the rationality of the decision remain.

"I am deeply sorry and I apologize for the headlines, purporting to quote me as saying that people in the rural areas should buy more economic cars, that offended people and offended myself," Rõivas said.

"I want to emphasize that I never used this wording, nor wished to convey such a message," he added.

Rõivas further reasoned that the constant changes in fuel prices, brought about by the changes in world petroleum prices and the euro-dollar exchange rate, are five to six times as large as the proposed excise duty hike. The latter is an important cover for increased child benefits, lower social taxes and several other promises made by the new coalition.

However, the rise of fuel excise duty will have an effect on all prices, leaving open the question as to how much people will actually benefit from all this. Is this not a case of first it giveth, then it taketh away?

"The rising prices will increase state profit's from VAT," opposition MP Kadri Simson (Center Party) said. "So, it could also be seen as an attempt to speed up price hikes, as that helps to fill the state budget. For the people, on the other hand, it means that the promised child benefits won't amount too much."

Rõivas, however, has said that the excise duty rise will not effect the general price level as dramatically as some claim. "We're talking about a quarter of a percent rise of the consumer price index in total," he said.

PM's former economic adviser speaks up

Nevertheless, the specific decision, and the government's economic policy in general, came under fire from Rõivas's former economic adviser Ruta Arumäe.

"The state's economic policy is governed by Excel tables, it's a zero-sum game," Arumäe wrote in an opinion article for Postimees. "No one is analyzing the consequences of these decisions and there is no general, governing idea on where the economy is heading."

"The tax hikes invented during coalition talks to counter the squeeze are not a strategy, but populism and stagnation," she continued, adding that piling up election promises and using excise duty to fund them, is a very bad idea.

Arumäe, who left the prime minister's office after four months in service, also claimed that the sole aim of Estonian economic policy is to improve the country's standing in various rankings and indexes, and lacks vision.

The Reform Party members Jürgen Ligi and Liina Kersna - the latter worked as the head of the prime minister's office at the time of Arumäe's employment - dismissed her criticism with claims that she simply failed to express her opinion when it really mattered.

Arumäe's predecessor and later Minister of Finance Maris Lauri said that the adviser is not someone people will come to for advice. "The adviser has to be active, communicate, ask questions and express opinions on her own initiative. If it becomes obvious that some things are not as they should be - and those things are many - you have to try to fix it," she said, adding that the adviser's opinion is usually not - at least not immediately - taken into consideration, and that is something one must take into account, for that is how things work in politics.

However, Arumäe's arguments have further alarmed the public. The number of people who have joined anti-excise-hike groups in Facebook is now close to 80,000 (although some are members of several different groups).

M. Oll

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