Andrei Tuch: SDE's coalition amendments – sounds good, now get it done (1)

Andrei Tuch
8/5/2015 12:48 PM
Category: Opinion

Just a few months after an election and the troubled formation of a new government, a junior partner seeks to make changes in the coalition framework. Andrei Tuch reads the dull political manifesto so you don't have to.

If there is any clear trend in Estonian politics this decade, it is the negative effect of entrenched party bosses. In a parliamentary republic like Estonia (or Germany, or Britain), a Prime Minister can remain in power theoretically indefinitely – and our previous PM was, in his time, the longest-serving leader in Europe. Party chairmen loathe retiring, even if it is for the greater good. So it was a remarkable thing when in May of this year, the old chairman of the Social Democrats decided to concede the party leadership to Jevgeni Ossinovski – an impressive young politician with a large burden of expectations (and, being the son of Estonia’s richest man, undoubtedly a large war chest).

Ossinovski, who had served as the Minister of Education in the previous cabinet, spared no time in making his presence felt, by proposing to re-negotiate the coalition agreement. The Social Democrats are a junior partner in the current government and the current blueprint was signed off by Sven Mikser, who led the party at the time. It took less than two months for Ossinovski’s SDE to publish a list of amendments that they would like to see.

While a change of leadership naturally (and hopefully!) brings about some change in policy, the proposed amendments are not exactly groundbreaking. Some of them are irrelevant nitpicks of wording; others demand something that already exists, somewhere in the depths of governmental guidelines. Still, the Social Democrats are continuing its tradition of publishing concise (if not sufficiently detailed) program statements, which is something the other parties ought to emulate.

SDE’s proposals can be generally split into two camps: money and politics.

The Money

Raise the tax-free minimum to 400 euros a month.

o This is double what the government has already committed to (205 euros, eventually, up from the current 154 euros). It is also, conveniently, right around the current coalitional commitment for the minimum wage.
o Only applies to personal income tax, not the rest of the payroll taxes.
o Would give employees a maximum of 46.32 euros per month in extra take-home pay, at no extra cost to employers.
o The budgetary shortfall is to be funded from increasing the income tax rate – presumably making it progressive, since the scheme is supposed to be a net benefit for everyone making below 1600 euros a month.

Higher salaries in education.

o Decent (unspecified) salaries for kindergarten workers.
o School teachers’ minimum salaries at 120% of the national average.
o Doctoral students’ stipends at 80% of the national average – no explanation why a postgraduate scientist is only two-thirds as valuable to the country as a rookie teacher…

Affordable electricity, fast Internet access and good roads for rural residents.

o Estonia’s electricity market has opened up in the last couple of years, so there is little scope for centralized regulation and subsidizing of energy prices.
o Universal broadband access is already a national policy.
o It’s common for Estonians to complain about the quality of their roads, but there has been a lot of EU money pumped into roadworks. Country lanes may not be as good as those in Finland, but they’re a hell of a lot better than in Latvia…

Municipal authorities must have the right to introduce local taxes.

o Unclear how this would make them more attractive to business investors.
o Given that only a handful of municipalities have the leverage to make this viable (a tourist tax in Saaremaa, a pollution tax in Ida-Virumaa?), and Tallinn’s attempt to introduce a local sales tax was incredibly unpopular and swiftly killed, this looks like a red herring – an outrageous demand that SDE will surely sacrifice in negotiations.

SDE’s claim is that the income tax exemption will significantly stimulate consumption and the local economy, improve people’s willingness to stay in small towns and villages rather than moving/emigrating, and create a surge in entrepreneurship and Estonia’s labor competitiveness. How much of that will be accomplished by giving people an extra 46 euros a month is debatable (for reference, the median monthly payout to employees at the end of last year was 757 euros – although it’s naturally lower in rural areas), especially since elsewhere in SDE’s list of amendments, they propose a drastic increase on alcohol tax.

Overall, this is a re-wording of SDE’s old and not particularly popular policies – and it carries the same moral hazard. Low-income voters need to keep paying tax, because that is the best way to force them to care about what their government is doing.

The Politics

Explicitly include the need for financial and administrative autonomy at the county and municipal level in the coalition agreement.

o At least one major government agency in each county.
o At least 3000 public-sector jobs that can be done remotely, out-of-office.
o New jobs created as a metric for a municipality’s success, to be used when assigning extra funds from the central budget.

A special law for the capital city.
• A law establishing the rights and obligations of village elders.

The expansion of county and municipal rights is certainly in line with classic Social Democratic values, but its relevance in today’s Estonia is questionable: municipalities have been merging to save on administrative costs, and creating more levels of government, with more bureaucratic jobs, is not the Estonian way.

The rest of this section includes lots of well-intentioned but nebulous statements, most of which invite a natural response: if SDE has been in the coalition for years, why haven’t they already implemented this stuff? It’s all reasonable, it’s all common sense, but it’s not something an established party should be proposing for the future – it’s what they should be boasting as their accomplishment, the results of their efforts over the last decade.

The Conclusion

SDE’s amendments are an interesting, but not very consequential event in a slow political season. There is nothing in them that fundamentally contradicts the spirit of the coalition framework, but where the proposals are specific, they are often good and worth implementing. But this is not an opposition’s shadow manifesto – it’s a policy statement from a party in power. It’s good when parties keep refining their platforms even outside of an election year, and the Social Democrats will only benefit from a leadership reshuffle. But the most use we can get out of this document is to keep it around until 2019, and then ask Ossinovski’s SDE: how much of this did you actually get done?

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