Government endorses 2021 state budget: Pensions, R&D funding to increase

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Minister of Finance Martin Helme (EKRE), Prime Minister Jüri Ratas (Center) and Isamaa chair Helir-Valdor Seeder.
Minister of Finance Martin Helme (EKRE), Prime Minister Jüri Ratas (Center) and Isamaa chair Helir-Valdor Seeder. Source: Ken Mürk/ERR

The government on Tuesday agreed on the state budget for 2021 with expenditures amounting to approximately €13 billion and revenues at over €11 billion. Funding for research will increase to 1 percent of GDP and pensions will rise.

Prime Minister Jüri Ratas (Center) said the purpose of the budget is to accelerate economic development, maintain healthcare and support those in need in the coronavirus crisis.

Investments by the government sector will amount to €1.9 billion euros next year. The country will bring in €1.4 billion in external funding and it plans to borrow  €2.4 billion.

The nominal deficit of the budget will equal 6.7 percent of GDP and the structural deficit 6.6 percent of GDP next year.

The budget bill will be submitted to the Riigikogu on Wednesday. The government also endorsed the state's budgetary strategy for the next four years. 

Ratas said the country plans to use the funds of the next budget period of the European Union as soon as possible, as well as the funds from the restart plan.

With the support of the European Union, the government wants to invest in health infrastructure and renovate several hospitals and medical centers. It is also planned to ensure the security of supply for crisis preparedness.

Research funding and pensions will rise

Research funding will rise to 1 percent of GDP next year and will remain there for the four-year budgetary strategy period. €7.8 million will be directed to the financing of higher education.

Finance Minister Martin Helme (EKRE) said the amount earmarked for research and development next year will grow by €56 million to €280 million. Funding for the sector under this year's state budget was 0.75 percent of GDP.

The state will spend an additional €66 million on defense expenditure over the next four years and will focus on increasing coastal protection capacity.

The construction of four lane highways is being prioritized and so is tarmacking gravel roads.

Almost €50 million will be used to increase pensions, which will increase by an average of €20 in 2021. 

Reorganization of the hospital network is to cost €545 million in total over the coming years. 

The government's debt burden will grow

Tax revenue will increase to €9.3 billion next year compared to €9 billion this year. The tax burden will fall to 32.7 percent of GDP next year, compared to 33.8 percent in 2020.

According to the plan, the government sector's structural deficit will contract to 4.9 percent of GDP and nominal deficit to 5.4 percent of GDP in 2022. In 2023, the structural deficit is estimated to equal 3.3 percent and the nominal deficit 4.3 percent of GDP, while in 2024 the structural deficit would be 1.3 percent and the nominal deficit 2.5 percent of GDP.

The government sector's debt burden will grow but will continue to be the lowest in the EU in 2021. The budget deficit that emerged as a result of the crisis, as well as the measures to enliven the economy are to be financed by means of issuing bonds and borrowing.  

In 2021, the government sector's debt burden will be €6.6 billion or 23.6 percent of GDP. According to the forecast, the state treasury will assume €2.3 billion in additional liabilities in the form of borrowings and loans in 2021.

This autumn, both the draft state budget for next year and the budget strategy for the next four years are being prepared at the same time. The goal of the budget strategy is to plan activities and money over the longer term, keeping in mind the government's priorities, future forecasts and global trends. 

The government usually endorses the budgetary strategy in the spring. However, an amendment made to the State Budget Act enables the government to postpone the endorsement of the budgetary strategy until the end of September due to the emergency situation declared in spring of this year.

The state budget reflects specific expenditures and revenues for the next year.

Old-age pension increases by €20 on average next year

The base amount of pension will increase by €16 and the pension supplement for raising children will be increased to a yearly rate of 1.5, which adds another €3.5 per child to a parent, spokespeople for the Ministry of Social Affairs said.

The national pension will grow by €30 to €251.61. The total sum to be allocated for next year's pension hike amounts to €49.4 million.

The increase in the additional pension supplement will grant extra income for pensioners who have raised one or more children born before Jan.1, 2013, for at least eight years. The pension supplement is paid to some 203,000 pensioners for altogether 429,000 children -- on average for two children per pension recipient.

A pensioner with an average number of years of pensionable service who has raised two children receives a pension of €528 and close to €46 in supplements, bringing the total pension to €571. From April 1, 2021, this person will see their total pension grow by €23 euros to €594.

The pension supplement for raising children is only paid to one parent or split between parents upon a corresponding agreement between them.

Those entitled to receive the national pension are people who have attained the pensionable age but do not have the pension qualifying period required for the old-age pension and have lived in Estonia for at least five years preceding the pension application. Such pension recipients number close to 3,000 in Estonia.

The minimum means of subsistence in Estonia in 2020 is €221.36.

The share of people aged 65 and over living in relative poverty in Estonia has been the highest in the European Union over the past years. According to data by Eurostat, 46.3 percent of the elderly in Estonia lived in relative poverty in 2018.

Meanwhile, Estonia's expenditure on the old-age pension of its citizens is among the lowest in Europe. The average old-age pension accounted for 42 percent of the average monthly net salary in Estonia in 2019. Said figure is the lowest among EU member states.

R&D expenditure to rise to 1 pct of GDP in 2021

The government will raise spending on research and development to a level equaling 1 percent of gross domestic product (GDP) next year. 

The Ministry of Education and Research stands to get €22.4 million of the additional amount of €56 million, meaning 40 percent.  

The additional money is to be spent for supporting young scientists, ensuring continuous growth in basic financing and research grants to support the sustainability of universities and research institutions and ease tight competition in the application for grants.

Simultaneously, support will be increased for research connected with the Estonian language, culture and education to ensure research and development activity that is necessary for the development of the Estonian cultural space, language and culture. 

Operating support for institutions of higher education will be increased by 5 percent to contribute to ensuring the availability of a new generation of researchers. 

In total €8 million has been earmarked for supporting pupils whose first language is not Estonian in obtaining fluency in the Estonian language, including €2.3 million for preschool children's institutions for teaching Estonian to children from non-Estonian families. 

A program aimed to provide a professional teacher of Estonian language to kindergarten groups with Russian as the language of learning aims to bring additionally 153 teachers of the Estonian language to work in Russian-language kindergartens. In the current academic year, the program will expand to 50 more kindergarten groups where the language of learning is Russian.

The program that reached junior grades of basic schools this year will continue also in the new year. 

Also the digital turnaround will continue next year. In addition to upgrades to the IT infrastructure of educational establishment and the acquisition of smart devices, attention will be paid to the development of e-learning tools, developing the digital competences of school teachers and university teachers, and provision of education technology support.

The acquisition, development and implementation of contemporary and innovative learning tools in general and vocational education stands to get six million euros, and the development and support of IT related activities and IT infrastructure €5.4 million.

A total of €4.7 million euros has been earmarked for moving on with the IT Academy program to develop IT curricula, facilitate the preparation of new IT teachers and support the sustainable development of said field as well as the success of the Estonian e-state. 

The sum total earmarked for teachers' pay in 2021 is €388 million, which enables to keep the estimated average wage of teachers at €1,540 a month, equal to 108 percent of the national average pay.

In addition, the state will continue providing €15 million to municipalities to keep the pay of kindergarten teachers at a level equaling 90 percent and the pay of kindergarten teachers with a  master's degree at a level equaling 100 percent of the minimum pay level for teachers in general education.

A total of €2.9 million has been earmarked for the payment of a one-off starting-up grant to teachers and support specialists taking up employment in their profession for the first time. The size of the grant is €12,783 per person, and starting from this year the entire amount is paid out at once to give young specialists a better starting position. 

An amount of €4.7 million has been earmarked for expanding workplace based learning. In collaboration with the Estonian Employers' Confederation, some 7,200 learners and 350 businesses are to be involved in the program by the end of 2021.

In addition, €3.4 million has been earmarked for refresher training and retraining of adults at vocational schools and universities. The ministry estimates that 11,000 more adults will start participating in retraining in 2021. 


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Editor: Helen Wright

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