Finance minister: More clarity needed in state budget drafting

Finance minister Keit Pentus-Rosimannus (Reform).
Finance minister Keit Pentus-Rosimannus (Reform). Source: Siim Lõvi /ERR

While activity-based approaches to the state budget are not going to be disposed of completely, the 2022 state budget, whose processing starts after the summer, the recent 2022-2025 state budget strategy demonstrates the budget needs to be prepared in more detail, finance minister Keit Pentus-Rosimannus (Reform) says.

Pentus-Rosimannus says that one of the issues with the state budgets of the last few years is that they have been couched in too general terms.

The finance minister said that this affected: "Not only the Riigikogu, but also the government itself, and the Ministry of Finance; it is quite time-consuming and energy-consuming to have to see and decipher the actual use of tax money behind the program labels."

This was not due to the principle of activity-based budgeting, where resources are allocated based on results, Pentus-Rosimannus added.

"The activity-based budget is not to blame for the loss of a more detailed view of the use of tax money. The two must be in direct harmony, and complement each other," she said. 

Chancellor of Justice Ülle Madise recently said that this year's state budget expenditures have been presented at such a general level that the budget does not provide a clear overview of what the money is actually being used for.

Madise's words followed an approach to her by Pentus-Rosimannus' party-mate, MP Aivar Sõerd, who said the state could abandon the activity-based budget could be abandoned, since a budget prepared with an excessive degree of generalization does not allow the Riigikogu to fulfill its constitutional obligation in having a say in the budget procedure.

The finance minister said that: "Parliament must be able to make amendments, in essence, to set the direction of the budget, and this is, and must be, another inherent feature of a parliamentary state."

"This means that the budgetary picture as presented to the Riigikogu must allow this," she added, saying that it should include both objectives of a budgetary entry, results of these objectives and a detailed view of the distribution of tax money.

The state budget process starts in the September preceding its year of entry, when it is discussed at cabinet level, and the budgetary picture already needs to be clearer at this stage, Pentus-Rosimannus said.

The 2022 budget will be the first to be compiled by the Reform/Center coalition, which recently unveiled its state budget strategy from then through to 2026, which itself contains areas where there is a lack of clarity, Pentus-Rosimannus says.

While micro-management was not a desirable state of affairs, Pentus-Rosimannus said, neither was a too-narrow view of individual sectors of the budget at the expense of the bigger picture, which she said has also happened.

While removing the activity-based approach wholesale would not be needed, she said – adding several previous budgets have been clearer – a more detailed and comprehensive explanation of what is done with tax money in a specific area of ​​governance is still required, she said.

Of concrete examples, the minister said: "The most curious example of what can happen with a very high level of generalization is certainly the case in the latest state budget strategy, where a billion in non-existent money, i.e. these famous 'unfurnished cuts', were written-in, due to a lack of more detailed write-offs. Such a situation must no longer arise in the Republic of Estonia."

Once a state budget bill has been agreed and drawn up by the government, it goes to the Riigikogu for debating, amendments and voting, with a view to passing it before year-end, ahead of the year in question itself. In practice, the budget bill usually passes shortly before the Rigiikogu breaks up for Christmas.


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Editor: Andrew Whyte

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