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Finance minister: Coalition agreement to have €270 million budgetary impact

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

The total price tag of the new coalition agreement's budgetary impacts is €270 million, Minister of Finance Keit Pentus-Rosimannus (Reform) wrote on social media on Monday. The minister nonetheless did not indicate the real cost of the new agreement.

Pentus-Rosimannus noted that the reference base for the cost of the new Reform-Isamaa-SDE government and coalition agreement is not the plans drawn up last year, but rather how much government coalition led by the Conservative People's Party of Estonia (EKRE) and the Center Party would have cost taxpayers.

"The new government program has a significantly lower budget impact than that which an EKRE- and Center-led government would have had," she wrote. "They themselves have previously spoken of a minimum of a billion euros, but knowing the style and behavior of that combination's bigger two parties, one has to agree with those that say that that combo would have lacked any sense of financial limits."

The finance minister wrote that she was talking precisely about the implications of decisions on the state budget, as when drawing up the state budget, the Ministry of Finance must also consider budgetary impacts as well. "That takes taxes on expenditures that return to the state budget, i.e. overall impact, into account as well," she explained.

Pentus-Rosimannus cited that increasing the basic exemption on income tax from €500 to €654 per month will have a budgetary impact of approximately €85 million, monthly child benefits from €60 to €80 a budgetary impact of €47.5 million, single parent support to €80 an impact of €7 million, and family benefits to €600 an impact of €70.5 million.

According to current estimates, the indexation of these benefits, slated to begin in 2024, will mean an additional impact of €3-5 million annually.

The finance minister said that additional funding of higher education in 2022 will cost €10 million, which combined with estimated tax receipts will mean a budgetary impact of €7.1 million. She added that with a 15 percent annual increase in higher education funding, this will mean approximately €25 million in 2023, with a total budgetary impact of €17.6 million.

According to Pentus-Rosimannus, long term care reform will cost €40 million, with a total budgetary impact of €31.5 million.

The transition to Estonian-language education will cost an additional €15 million in 2023, with a budgetary impact of €10.7 million.

"All of that combined makes approximately €270 million in 2023," she underlined. "Not a billion. Or two."

She added that one-off funding to cover higher education's emergency needs will be allocated from the government's reserves this year.

According to Pentus-Rosimannus, the current state budget strategy, which had not yet foreseen such ridiculous inflation or the accompanying increase in tax receipts, already had €169 million reserved to cover new decisions in the 2023 state budget.

"Using this will not lead to a deterioration of the budget trajectory," she explained. "In addition to inflation, however, budget receipts are also increased by growing carbon emission quota revenue. We can expect that receipts from carbon quotas will increase by over €100 million more than planned. Before anyone starts saying, 'But this doesn't include the entire energy support package!' — no, we have not forgotten to include it; there was money in the government reserves and in carbon quota revenues already planned for that. Which means that these aren't new, additional expenses."

According to Pentus-Rosimannus, household electricity consumption will be subsidized at a rate of €50 per megawatt-hour and household natural gas and district heating at a rate of 80 percent of costs exceeding €80 per megawatt-hour.

"The entire package is meant for a fall-winter scenario in which Russia continues to wage full-scale war in Russia and energy prices remain high enough as a result that it would become difficult for people to cope with them," she explained.

The support package is planned to cover a six-month period from October through the beginning of April, she added.

Within the framework of the support package, the state could spend an estimated up to €73 million on electricity and €25 million on natural gas and district heating subsidies this year, the finance minister said.

"The ultimate impact will of course be impacted by both winter energy prices as well as consumption volumes, she added.


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Editor: Aili Vahtla

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