Government approves €641-million coronavirus supplementary budget

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Stenbock House in Tallinn, seat of the Estonian government. Source: Kaupo Kalda/ Stenbock House

The government has approved a bill providing a €641-million supplementary budget aimed at combating the ongoing effects of the coronavirus pandemic, with a focus on the health-care sector, education and local government.

The budget is the second of its kind issued in response to the pandemic; last April the previous administration issued an even larger supplementary budget, and did not rule out issuing a second additional budget later that year.

The government says the budget will help the economy and everyday life to resume quickly, once restrictions are lifted.

The supplementary budget was approved at a remote sitting Wednesday evening and will be put before the Riigikogu for a vote today, Thursday.

Prime Minister Kaja Kallas (Reform) said: "The health care crisis, which we have all been together in for a long time now, has created significant, and sometimes unprecedented, challenges to the Estonian health care, social protection and education systems, the population's incomes, and the viability of our companies."

Prime Minister: Short-term package aimed at getting country back on its feet

"At the same time, the crisis has not affected all spheres of life. As a result, new state aid measures must be for the short-term, but also correctly and accurately targeted. The supplementary budget is a 'painkiller', in order for the economy and normal life in Estonia to recover as soon as possible after easing of restrictions," Kallas went on.

Details of those restrictions can be read here; they have installed virtual lock-down, with non-essential stores closed at all times, along with restaurants, cafes, bars and other catering businesses. Schools are also on general remote learning, with concerns about the effects of this on education also addressed in the new budget.

The regular budget for each year is issued at the end of the preceding year.

The supplementary budget contains measures aimed at businesses, while local authorities will be empowered to invest €96 million to help cover the costs caused by the crisis.

Close to 90 percent of the budget comprises aid to the private sector and state agencies, in the form of wage support, local government investment and other components.

The remainder largely pertains to operating expenses, predominantly in the health-care sector, which has been particularly over-burdened in the current, third and largest wave of coronavirus cases.

Over €14 million towards education sector

€14.4 million is earmarked for the education ministry, in helping pupils get up to speed after their education has been interrupted by distance learning complications and other issues. Ensuring adequate computer facilities and internet speeds and access, and also help with mental health issues, are also supported in this education ministry component.

€117 million goes towards compensation for the temporary suspension of state contributions to the so-called second pillar of the Estonian pension scheme, referring to employer/employee contributions (the state old age pension is the "first pillar", while private pension schemes are the third-ed.).

Membership of the second pillar was made optional by the previous Center/EKRE/Isamaa coalition (and was the pet project of the third of these parties), a policy which has seen 119,684 – 15 percent of second pillar members – apply to leave the pillar by the end of this month.

Supplementary budget expenditures and subsidies amount to €641 million, but as tax rebates also have to be factored-in, the negative impact on the nominal general government budget position is smaller, ERR reports, with the cost to the government standing at €453 million, or 1.6 percent of GDP. 

Health-care sector, sick pay, wage compensation

The Ministry of Finance is due to publish its spring forecast on April 5, which will make the government's budgetary position clearer.

€150 is earmarked for healthcare, with €52 million of that on extra costs the pandemic has brought to hospitals, ambulance services and other facilities, over €20 million for testing, €30 million on vaccine procurement and administration and €26.5 million to top up the Health Insurance Fund's (Haigekassa) reserve.

The latter will be leaned upon further due to state sick pay starting from day six of a period of illness rather than after day nine as before. The new system, which entered in force in January, requires only one sick-pay-free day as opposed to the previous three, the rationale being that employees who may have contracted COVID-19 were reluctant to stay home if this resulted in them being out-of-pocket. Employers cover sick pay from day two to five, actually one day less than they previously had been required to cover, even though the sick pay period kicks in earlier.

€12 million is earmarked for sick pay costs, while additional funding will also be provided to the Health Board (Terviseamet) towards crisis management costs, drugs relating to COVID-19 (such as Remdesivir – ed.), public awareness campaigns and IT solutions.

Business support

€102.2 million is going to the Unemployment Insurance Fund (Töötukassa) towards a €140.1-million salary top-up scheme, which helps employers pay staff wages instead of having to lay them off; again, a similar scheme was in operation last year.

€25 million in support is being channeled vie Enterprise Estonia to the blighted tourist sector. While these businesses, including hotels, spa centers and caterers, have no customers, they still have high overheads.

A further €19 million will go to businesses whose activities are demonstrably heavily hit by the latest round of restrictions, with a view to them surviving this period and getting back to normal service once the regulations are lifted (currently set to run until mid-April earliest -ed.).

Commercial bus operators will receive a subsidy of €4 million to compensate for ticket revenue. 

Sport and culture

Of the remaining components, €6 million will go towards summer camps aimed at helping children get their education up to speed following issues with remote learning, and the same amount for private schools, kindergartens and care providers.

Local governments will get €46 million, including €15 million aimed at mitigating reduced revenues (mainly arising from falling income taxes and kindergarten and hobby school fees) twinned with increased costs.

€30 million goes towards local government investments directed at the particular municipality's needs, including improvements to ventilation, energy efficiency improvements and demolition of municipal buildings which are surplus to requirements.

Finally, culture and sport (the latter falls under the culture ministry's remit) will get €42 million in aid towards unavoidable costs, with a separate €5.3 million earmarked for the film industry, and €6.7 million in support for freelance creatives.

The Riigikogu votes on the bill on Thursday.

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Editor: Andrew Whyte

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