Prime minister: Alternative to serious austerity proposals is tax hikes

Prime Minister Kaja Kallas (Reform).
Prime Minister Kaja Kallas (Reform). Source: Ken Mürk/ERR

Prime minister Kaja Kallas (Reform) has warned that if the public sector cannot make savings cuts, the burden will be placed on the private sector, via higher taxation. These cuts need to be in serious areas, instead of the frivolous suggestions she said had so far been made.

Kallas, who had just returned from a three-day trip to Ukraine, said Thursday that: "If the public sector does not agree to find any savings, to pull somewhere, the private sector will suffer. And the private sector has already suffered a lot from this crisis."

Other European countries have taken a similar approach, she added, saying that savings must be made across all ministries and the agencies under their purview.

State expenditures currently outstrip revenues, she said.

The call for spending cuts follow the recent cabinet discussions on the 2022-2025 state budget strategy.

"If we can't make savings, then the flip side is that taxes will have to be raised, just costs and revenues can't be that different," he added.

Current proposals are just at drawing board level, and cuts need to be serious, she added.

"I really want top executives in the public sector not to publicly offer savings that aim to mock, instead of cutting spending," the prime minister said.

What these dilettante proposed cuts were, in the prime minister's view, was not reported, though one recently tabled called for phasing out the Estonian Defense Forces (EDF) military orchestra, or merging it with the Police and Border Guard Board's (PPA) equivalent. This would, it is argued, saw around €1.4 million per annum. The government has proposed a €10-million reduction in defense operating costs, while leaving planned investments intact.

Reform hold the defense minister post via Kalle Laanet.

The prime minister also called opposition politicians pointing the finger at the current government for its austerity moves cynical, given the deficit that some of them have, she said, in the past run up.

Kallas also said that Estonia was ahead of the curve Europe-wide in its budget discussions so she had no concrete examples to cite of major cuts from other European countries, but the move towards austerity is the same in those countries too, she said.

Reform, who under Andrus Ansip were noted for their austerity approach during the last downturn over 10 years ago, are in office with Center, a party less noted for this approach. The previous Center/EKRE/Isamaa administration had primarily dealt with the arrival of the coronavirus pandemic via borrowing.

Kiik: Reform/Center coalition agreement said no tax hikes

Center's health minster both then and now, Tanel Kiik, said that while he was not opposed to a tax hike, the coalition deal struck between his party and Reform in January included an agreement not to increase taxes.

"My personal solution is a broader tax reform, which has been mainly supported by the Center Party / --- /, but in this view I agree that in the midst of the COVID-19 crisis, it would probably be difficult to make any major fundamental changes to the tax system," Kiik said of the matter.

Justice minister: Last administration's pension reform part of cause of budget deficit

Meanwhile, Reform's justice minister Maris Lauri said that one of the main causes of the current budgetary deficit is the pension reform the last administration enacted.

No concomitant expenditure was made, while the employer/employee contribution system to pension pots was made optional where it had previously been mandatory.

Lauri, who is also caretaker finance minister once Keit Pentus-Rosimannus (Reform) goes on maternity leave, said that the necessary cuts will be made over the summer, adding that patience is needed on the part of the public, to ensure the process was done adequately.

Foreign minister Eva-Maria Liimets (Center) also gave her opinion on the issue, saying that Estonia still contributes more than the 2 percent minimum of GDP required of NATO member states, and while her ministry will not make cuts as such, changes to the organization of Estonia's diplomatic missions will be enacted.

None of this will harm Estonia's image abroad, she said.


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Editor: Andrew Whyte

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