Government's budget strategy to cut corners on fixed costs

The "Superministry" complex in Tallinn, which houses the finance ministry. Source: Siim Lõvi/ERR

On Wednesday, the government reached an agreement on a four-year state budget strategy with Minister of Finance Keit-Pentus Rosimannus (Reform) saying there are cuts to be made on fixed costs.

The new budget strategy will work towards balancing the budget and cuts will be made in every area of government. Each sector will propose where savings can be made and the budget strategy will be approved next Thursday.

Among many things, the strategy also plans to increase salaries for teachers, cultural workers and emergency workers by at least 3 percent. Pentus-Rosimannus noted that the pay bump is possible if all government sectors agree to save money. She added that it is too early to think of the pay increase to continue over the coming years.

"We can look at the upcoming years on the arrival of new economic forecasts. As a message, I think this is good and necessary - that the most prioritized groups who have also made an effort during the crisis can have their salaries increased without increasing our budgetary deficit," the minister said.

Pentus-Rosimannus added that the details are still being discussed, which is why no exact sums can be published but some €25 million will be allocated for pay increases next year.

State to cut corners

The finance minister said one of the main goals year-on-year is to exit the budgetary deficit. Each ministry must decide where they can cut costs for that to happen, however.

"Right now, we can say that [on Tuesday], each member of the government cabinet was prepared to find cuts in next years' budgets. Since there is still a week before the budget strategy is approved, it means this entire week will see very detailed work on possible cuts in all government sectors," Pentus-Rosimannus noted.

"True, cutting costs is one of the most important tasks the government cabinet faces going forward," she added.

Operating costs such as management and staff costs are likely to be the first to be looked at, including training and posting expenses. "The desire to manage costs motivates further reforms and questions about if what is done, how many people do it and what is done with taxpayer money, if all that is justified and necessary," the minister noted.

Digital revolution to come from EU funding, fixed costs must be kept to a minimum

Institutions presented €398 million of additional applications in information and communications technology to the state budget strategy. The Ministry of Finance and the Ministry of Economic Affairs and Communications presented €299 million of the applications.

Pentus-Rosimannus said fixed costs in government fields can only increase if cuts are made elsewhere. Future investments can however be made using EU funding. A digital revolution is one of the largest sectors that EU funding allows.

"We must first see how it is most reasonable to use European money for the future and it is certainly possible, at least partly," the minister said. "There are no plans in the near future to continue to add money for daily state maintenance, we need to cut corners and not pick out sectors separately, we must see the big picture. It is possible but requires resources to be used more effectively in other areas."

Pentus-Rosimannus noted that it is important to be careful when supporting the economy in order to avoid overheating, since the investment level in the 2023-2025 period exceeds €2 billion yearly.

"This means we must seriously discuss this in the coming week. The worst thing that could happen is we contribute to the economy overheating in a few years and prices would then increase," the finance minister added.

Finance minister: Cuts are correct and necessary

Pentus-Rosimannus visited the studios of ETV's daily affairs show "Aktuaalne kaamera" on Wednesday and said the government is not planning to increase taxes, but the previous government's decision to slash diesel fuel duties will also not be reversed.

Show host Priit Kuusk asked the minister if there have been any thoughts of large-scale reforms to the budget, such as a hospital reform or reforming the national investment foundation (Enterprise Estonia) system.

"It is true that compounding Kredex and Enterprise Estonia is one of the changes that will be done in the coming years. Anything regarding healthcare can also be done with EU funding in the near future. In general, investments made during the budget strategy period will be increased to levels by EU money that investments have never been in Estonia. We are investing €2 billion yearly and even more. It is quite a lot," the minister responded.

She confirmed that there are no plans to add any new taxes or increase them, since there is a gradual increase of the total number of taxpayers. "We do not consider this approach right in the cabinet," the finance minister said.

Pentus-Rosimannus noted that there have been no decisions made on the previous government's decision to slash diesel fuel excise duties from €493 to €372 per 1,000 liters. The amendment to cut excise duties was made to last until the spring of 2022 and Pentus-Rosimannus said that since it was meant to be a crisis measure, it is likely not necessary to extend it from there.

Keit Pentus-Rosimannus. Source: Priit Mürk/ERR


Follow ERR News on Facebook and Twitter and never miss an update!

Editor: Kristjan Kallaste

Hea lugeja, näeme et kasutate vanemat brauseri versiooni või vähelevinud brauserit.

Parema ja terviklikuma kasutajakogemuse tagamiseks soovitame alla laadida uusim versioon mõnest meie toetatud brauserist: