State budget bill to go to second reading, 'protection' funds halved

Toompea Castle facade. The building houses the Riigikogu.
Toompea Castle facade. The building houses the Riigikogu. Source: Ken Mürk/ERR

While the 2022 state budget bill is due for its second Riigikogu reading later this month, the backdrop will be a controversial annual regional funding distribution being halved in value, to €3 million, at least on last year's figure.

Amendments to the state budget bill include those on distribution of the protection money – "Katuseraha" in Estonian, literally roof money, or also umbrella money, and either way a term which doesn't translate well into English without sounding somewhat suspect.

In fact the Reform Party's very beef with the policy revolves around concerns of corruption.

The allocations from the four other Riigikogu parties are due by November 19, just after the bill goes for its second reading.

Protection money

Parties submit a list of projects, to the Riigikogu's finance committee, that they wish to distribute funds to. The money is issued in proportion to a party's representation. The recipients are generally regional infrastructure projects, sports and leisure facilities, education, social causes and also religious buildings, as well as some NGOs.

The process could also be viewed as greasing the wheels for getting the state budget bill passed at the Riigikogu by year end.

The actual distribution of the funds is done by a government ministry, supposedly the one most relevant to the item.

Reform has traditionally stayed away from protection money scheme

Reform traditionally shuns the practice, referring it to a form of corruption.

Now Reform is in office with Center its position is slightly trickier than when it was in opposition, but the party has still pledged to make the process more transparent, though is now stopping short of banning protection money altogether.

In 2020, the three coalition partners at the time, Center, Isamaa and the Conservative People's Party of Estonia (EKRE), presented a joint list, which somewhat muddied the waters as to which project was being allocated funds by which party.

This tri-partite application also accounted for the lion's share of protection fund spend – Reform being aloof from the process and the Social Democratic Party (SDE), as the smallest party by Riigikogu representation (10 seats), getting the smallest sums to distribute.

One initiative which EKRE supported, Elu Marss, an anti-abortion/pro-life NGO, prompted protest, partly because the NGO had only been set up shortly before protection money time rolled around.

Payment of the €171,000 due to Elu Marss was delayed until October of this year, while the interior ministry inserted a clause requiring the funds not be used to support an abortion ban.

While Elu Marss might seem like a beneficiary more in line with the social affairs ministry's remit, interior minister at the time the money was allocated was Mart Helme (EKRE). Kristian Jaani (Center) became interior minister in January.

State budget 2022 figures

The state budget for next year is set at €13.13 billion (revenue) and €13.64 billion (expenditures), with €716 million due in investments.

Defense spend accounts for 2.3 percent of GDP – in excess of the 2 percent required, though not always obtained in some member states' cases – for NATO membership, while Research and Development spend remains at the 1 percent of GDP-mark.

Protection money has been halved to €3 million, ERR reports, ahead of the 2022 budget, compared with €6 million last year.

2021's figure was, however, higher than 2020's, set in 2019 and before the coronavirus arrived, when the figure stood at €4.2 million.

This year's figure amounts to about €30,000 per Riigikogu member (there are 101 MPs sitting in parliament), while in the interests of boosting transparency, MPs who make specific proposals will see their names appear alongside the recipient organization, ERR reports.

State budget goes to 2nd reading on November 17

Having passed its first reading (of three) on October 21, the state budget bill goes to its second reading on November 17, i.e. two days before the deadline for the submission of protection money applications.

The Rigiikogu's finance committee had to vote on the amendments since the first reading, and how many of them should be entered in the bill as it is sent to its second reading; of 45 amendments submitted, two found support from the committee, while committee chair Erki Savisaar said, the committee set budget entries on the implementation of plans set out in the government's action program.

"For example, at the Ministry of Culture, there will be reorganization linked to wage growth, and investment subsidies to cover the costs of vaccination information activities," Savisaar said, adding competitiveness within the food industry, performance-related wages for teachers, social workers and care workers as other entries.

An extra €2 million has been allocated to wage support for seafaring crews, as another example, he said, noting that further changes are still being discussed at committee-level and may prompt further changes before the third reading.

Finance committee deputy chair: VAT cut on energy bills struck off budget due to coalition opposition

Some of the rejected measures were the result of coalition policy, committee deputy chair Aivar Kokk (Isamaa) says.

Kokk said: "We expected that the increase in the budget resources arising from the second pillar pension scheme being made voluntary would lead to an extraordinary hike in pensions and exemption from income tax for the average pension from next year. However, the coalition did not support these proposals."

"In recent months, we have faced a sharp rise in gas and electricity prices, which has led to a concomitant sharp rise in input prices for many businesses and a steep rise in household spending for households. Unfortunately, the coalition did not support a 20 percent reduction in VAT on electricity, gas and heat," Kokk went on.

The Center Party's leader, Jüri Ratas, who is also Riigikogu speaker, has in fact called for a cut on VAT on energy bills, but the policy is opposed by Center's coalition partner, Reform. Isamaa members have voiced support for the measure.

The state budget bill's third reading is likely to take place in mid-December, with a view to it passing before year end.

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Editor: Andrew Whyte

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