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Opposition MPs: Budget covers key areas, but with scant support measures

A Riigikogu sitting.
A Riigikogu sitting. Source: Siim Lõvi /ERR

Opposition MPs have questioned consensus reached by the Reform/Isamaa/SDE coalition during its state budget talks held on Friday, saying that support is not provided in key areas at a time of record inflation. Conversely, a senior Swedbank economist has questioned where extra support may come from in the context of a shrinking tax base.

Center Party MP Jaak Aab said the most important areas had been resolved in the budget, which includes family allowances, a mitigation of electricity price increases and national defense costs.

Salaries also increased, albeit to a lesser extent, while Aab, a former public administration minister, told ETV news show "Aktuaalne kaamera" (AK) that: "However, we haven't heard anything about taxes. Isamaa had also said in the spring that excise taxes should be cut. Fuel prices continue to be high, and these also push up other prices. The same is the case for VAT on food, which could still temporarily lower growth for the year."

Conservative People's Party of Estonia (EKRE) chair Martin Helme expressed dissatisfaction with the general five percent wage increase in the public sector.

Helme told AK that: "Undoubtedly, this will make people in the public sector happy, but if we consider that impoverishment has occurred at a rate of 25 percent, i.e. inflation or price increase has been 25 percent, but public sector wages are boosted by five percent, people have actually become poorer."

Why the state does not pay more subsidies to people and companies when the required funds are available in the budget is not clear, Helme added.

Jaak Aab also pointed to what he called a shortage of support to energy-intensive large producers, specifically in the food sector, adding this may force some bankruptcies to companies in the sector.

Away from the Riigikogu, Swedbank's chief economist Tõnu Mertsina said that since tax receipts have been declining for several months, government spending must be made cautiously.

He said "If we now consider that rapid price growth helps to bolster taxes and tax receipts, at some point we will still face the fact that expenses will also rise, since it can never be quite the case that inflation boosts tax receipts, and not expenses."

A plethora of support measures may also cause inflation to even gain further momentum, he said, regardless of the trend for substantial government support being carried out in the EU as a whole.

A shrinking economy means a shrinking tax base and thus no options for further spending, he added.

Mertsina told AK: "I don't want to be the bearer of bad news, but it seems to me that tax increases are hidden behind all these expenses, if taxes are not collected so effectively anymore, while the coalition could talk about this fact openly."

Meeting at the Vihula manor, a popular R&R spot in Estonia, the coalition ruled that the universal electricity service to already reach households, be extended to small businesses, while teachers, rescuers and policemen will receive at least a 15 percent pay rise.

The government is due to present its 2023 state budget bill to the Riigkogu at the end of this month, which will be followed by dissemination at Riigkogu committee level, discussion, questioning and debate and three rounds of voting, with a view to passing into law by mid-December.

This is the first state budget the current coalition has drawn up, having entered office in July.

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Editor: Andrew Whyte

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