Reform MP: Energy compensation package not focused enough
Many of those benefiting from government support packages aimed at fighting soaring energy prices do not really need the aid, Reform Party MP Jürgen Ligi says. Opposition MP Urmas Reinsalu (Isamaa) says that the government should have reacted more quickly to the rise in prices which began in late summer and early autumn, not least when drawing up the state budget bill at around the same time.
Appearing on ETV politics head-to-head show "Esimene stuudio" Tuesday night, Ligi, a former finance minister, said he would not have established the 50 per cent energy network fee compensation for all customers.
He said: "I would have compensated the worst off people. This was also done over a six-month period, costing €38 million. The real solution is investments – the government cannot fight market prices."
Ligi's party is in office with the Center Party.
The Reform MP said that tweaking on particular area of inflation will not work, not least since there is no budget surplus.
Ligi added that there is no surplus in the state budget, since the budget will be in deficit for a long time to come. "The budget forecast is locked in and is not adjusted to a single price change. Electricity makes up three percent of a household budget, and there are those for whom the component is 13 percent, but they are very few in number. They have to be helped, but that doesn't mean those for whom the proportion is 2 percent have to go to help out. What counts is real appreciation of the consumer basket," Ligi went on referring to inflation as a whole.
"You want to throw money at those who do not really need it," he added, and also said that real wages and pensions are growing faster than inflation.
Balanced budgets have long been a Reform Party dogma.
"We are in the hands of market forces; it is a bad situation, but the solution lies in investment and social policy. This panic is completely in vain," Ligi said.
Isamaa MP and former foreign minister Urmas Reinsalu said that his party's proposal to combat soaring energy prices via a VAT reduction was rejected by the Reform/Center coalition.
At the same time, the government is being indecisive and toothless in its response to the crisis, Reinsalu said, while in the current situation, where economic growth is rapid, support for firms should be a priority.
"Currently, the economy is buzzing and money is only needed in very tight spaces, not outright because we have inflation from a macro perspective," he said.
With higher energy prices, more money is coming to the state (via VAT), and the increase in the prices of energy carriers should have been alleviated for consumers via this money, Reinsalu said.
Isamaa had proposed a reduction in VAT from the current 20 percent, to 9 percent.
The government approved a €88.25 million subsidy to electricity network providers earlier this month, covering 50 percent of consumers' network fee without the suppliers losing out, and to run retroactively from the start of October to the end of next March.
A separate government measure will provide support to low-income households.
While Center's leader Jüri Ratas has called for the VAT cuts on energy costs, this has not gone ahead.
Reform had already apparently climbed down on a Covid vaccine fund proposal.
Electricity prices reached record highs early in October, at a time when natural gas and vehicle fuels have been doing the same.
The state budget has already been sent to the Riigikogu for its third and final reading, with a view to passing before parliament breaks up for Christmas, on December 16.
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Editor: Andrew Whyte