Government approves 2022 state budget

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Euros.
Euros. Source: Siim Lõvi /ERR

The Estonian government approved and will hand over to the Riigikogu the state budget for the next year, the volume of budget revenues is €13.13 billion, the volume of expenditures €13.64 billion and the volume of investments €716 million.

The tax burden next year will be 33.7 percent of gross domestic product (GDP), which is one percentage point less than this year's level. The general government debt burden will be €6.36 billion next year, or 19.7 percent of GDP, which is approximately 5 percentage points less than estimated in the spring, government spokespeople said.

The structural budget position of the general government is -2.6 percent of GDP, which is 0.8 percentage points better than planned in the spring.

This will be achieved both by the strong growth rate of the Estonian economy and by state reform. The nominal position is -2.2 percent of GDP, which would help Estonia comply with the budgetary rules of the European Union, which have been temporarily suspended during the COVID-19 crisis, already next year. In the spring, it was estimated that Estonia will achieve this goal only by 2024.

The salaries of healthcare workers, teachers, police officers, rescuers and cultural workers will increase next year. Healthcare workers will get a raise of over 7 percent for the minimum hourly wage of doctors and nurses and over 9 percent for care workers. The salaries of state-funded welfare service providers will also rise to the same level as nursing staff.

The minimum salary of teachers will increase by 7.3 percent in the new year, the total salary increase will cost €30 million. The salaries of cultural workers will increase by almost the same amount. The minimum wage of a front-line police officer will increase by almost 5 percent and the minimum wage of a rescuer by almost 12 percent - a total of €11.7 million will be directed to the area of internal security for the salary increase.

The government considers it important to eliminate the study gaps of schoolchildren that emerged at the height of the crisis and has earmarked €12 million for this purpose next year. An additional €10 million will be allocated to local governments for better access to children's hobby education. In addition, a culture program for basic school students will be implemented, the aim of which is to ensure better access to culture for basic school students across Estonia. Support for the production and distribution of Estonian films will increase by €2 million.

According to the government, the state budget pays systematic attention to solving mental health problems and helping the society's invisible victims. For example, €3 million will be directed to the development of children's mental health centers, funding for the induction year of clinical psychologists, and funding for the services of community psychologists in local governments.

In order to promote physical activity, €600,000 have been added to the state budget in order to implement measures to promote people's physical activity, because low physical activity is one of the biggest health risks in Estonian society.

A one-off amount of €16.1 million will be allocated for vaccination fees and the organization of temporary vaccination centers, vaccination readiness fees, the operation of mobile vaccination points, vaccination performance fees and telephone services. The state considers it important that vaccination be free of charge for all Estonians until the end of the epidemic.

The government will cancel the excise duty increase next year, temporarily keeping the excise duty at the 2020 level. From 2023, excise duties will not rise to a new level in one go, but their increase is planned across four years.

Economic growth has also increased the receipt of social tax, which is why the average old-age pension will increase to €590 per month next year. The government decided to additionally increase the support paid to a pensioner living alone from €115 to €200.

The government will increase funding for research and development (R&D) by a total of €40 million, which is necessary to keep funding for the sector at 1 percent of GDP. This means that in addition to the €11.3 million allocated in the spring under the state budget strategy, an additional €29.5 million was found in the fall to finance the sector. In total, this means R&D costs of around €300 million. According to the government spokespeople, research and development investments in Estonia have not been at this level before.

Of the additional funding, €16.3 million will be channeled through the Ministry of Education and Research to ensure the functioning of the research system, €16.3 million will be channeled through the Ministry of Economic Affairs and Communications to support R&D and innovation of businesses, and €8.2 million to knowledge-based sectoral policies.

The government will allocate an additional €30 million to maintaining the digital state and ensuring cyber security. The funding will ensure the maintenance of basic digital services, the sustainability of critical information systems and reduction of information and cyber security risks.

At the same time, the development leaps of the digital state will continue to be implemented. For example, the development of event services will continue to make communication and dealings with the state much easier and more proactive. The state is working for the wider introduction of so-called kratt solutions to ensure the efficiency of the public sector and provide a more convenient service to people. Efforts are being made to increase the public sector's use of cloud technologies, and the further development of common digital platforms, including X-Road and eID, will continue.

In addition, the broadband infrastructure support measure for high-speed internet access networks, launched in 2018, will be continued, which should enable nearly 40,000 households in rural areas to connect to the high-speed access network by the end of 2023. An additional €10 million from the European Union's Recovery and Resilience Facility (RRF) is planned for last-mile high-speed internet investments.

Defense costs will reach the highest ever level in Estonian history. Compared to this year's state budget, the government will spend €104 million more on national defense and defense spending will reach a record level - €750 million, exceeding 2.3 percent of GDP. The largest ever defense budget historically should help to fill national defense capability gaps faster and strengthen Estonia's security.

The government will promote the introduction of new technologies, including green technologies, in all sectors of the economy, from energy, industry, transport and agriculture to waste management and forestry. The state is moving towards more sustainable production and consumption and the development of waste management so that materials can be recycled. Businesses can apply for support to increase waste recycling and local governments to develop infrastructure for separately collected waste. The total amount of these grants is €4.5 million.

It is planned to support the introduction of low-emission vehicles from the sales revenue of greenhouse gas emission units for a total of €10 million, of which the amount of support in 2022 is €8 million. In addition, the state will invest next year in the commissioning of green gas, renovation and construction of district heating boilers, but also in arranging street lighting. The pilot project for electric buses will also continue and the first pilot project for the introduction of hydrogen in public transport will begin.

In order to make transport more environmentally friendly and to meet climate goals, the electrification of the existing railway will begin, so that by the end of 2024 it will be possible to travel by electric train to all major stations. Rail Baltic's design and construction activities and other large-scale road construction and maintenance works will also continue.

Making the public sector more efficient, combining similar activities and streamlining support services will continue next year. In order to provide better public services, the state is renewing their organization, both digitally and in direct communication. State buildings will continue to be built to bring services closer to citizens and businesses.

Around €50 million in labor and economic costs will be saved in all areas of governance, which is about €10 million less than planned in the spring. The task of saving was reduced in the area of internal security and social affairs. The savings will help continue moving towards a balanced budget, while raising the salaries of healthcare, culture and internal security workers.

The revenue base of local governments will grow by over €100 million next year. Approximately €58 million are planned for housing in 2022, with which the government will support, among other things, the reconstruction of residential buildings owned by both private owners and local governments, and the demolition of decommissioned buildings.

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Editor: Helen Wright

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