We must govern in a way to leave us with the resources needed to ensure national security, support our population and help Ukraine, Prime Minister Kaja Kallas said in a political statement delivered when presenting the Riigikogu with the 2023 state budget.
The government on Thursday presented the Riigikogu with the 2023 draft budget in which national defense and the Estonian people are key. Let me say up front and just in case that there is no cause for panic. Prime ministers appear in front of the Riigikogu from time to time to make political statements, especially when presenting the state budget. It is not my statement that is extraordinary but the times around us.
The world has not been this close to a major war for 60 years. The Cuban Missile Crisis of 1962 was the last time a major power was seriously preparing to use nuclear weapons and publicly threatened to do so. Surprise-surprise, that major power was Russia.
It proved possible to avoid nuclear was in 1962 and seemingly for good. Because countries and leaders understood that such a war would not have winners. Unfortunately, we find today that Russia has dragged Europe and the world into another extremely dangerous security crisis 60 years on.
When Vladimir Putin attacked Ukraine on February 24, he declared war on the recent world order. For Putinists, violence is the answer and solution for everything. Their world is governed by the motto that those who do not listen, must be made to feel. Alas, most people in Russia subscribe to that worldview.
In such a situation, national defense and our people can be the only priorities for the Estonian government. They are indivisible and cannot be set in contrast.
All of Europe in danger should Ukraine fall
Next year's state budget will make sure Estonia is well cared for. It is a budget that ensures national security. It is a budget to increase social cohesion and help us better cope with the extraordinary circumstances our aggressive neighbor has landed us in. It is a budget that lends everyone in Estonia confidence that together we can overcome all difficulties.
The war Russia has unleashed constitutes more than one country's aggression against another, more than killing, shelling, rape, mass graves and sham referendums. To top it all off, Russia is engaged in an energy war with Europe and the world, hoping that the energy crisis will make the voters and leaders of democratic states doubt the necessity of helping Ukraine. We can be sure of one thing: the whole of Europe will be in danger if Ukraine falls.
Russia's energy war quietly kicked off last summer, while many then believed, or rather chose to believe, that dwindling gas deliveries were the result of technical problems. By now, Russia has given up almost all pretense: lift the sanctions and gas will flow again.
Energy is a weapon rather than a natural resource for Russia. The aim of the energy war is to make democratic states doubt, hesitate and stop helping Ukraine. What is more, the Kremlin is also hopeful that if democratic countries are forced to allocate colossal sums to help their residents, there will not be enough left over for national security or helping Ukraine.
We cannot be so naive to be caught in this trap. We know from our painful history what happens when evil wins and big swallows small. That is why we must not do what Putin expects. We must govern in a way to leave us with the resources needed to ensure national security, support our population and help Ukraine. This requires everyone to understand why this winter will be more difficult financially than previous ones.
Estonia has done exceptionally well, while we must consider the possibility of setbacks in our lives and success from time to time. The entire world's development has been delivered a setback and Estonia is in no way distinct. We cannot separate ourselves from the rest of the world and imagine that our problems would be less if we left the European Union, NATO or even the electricity exchange.
On the contrary, we can overcome this setback together, while alone we would be easy prey for our aggressive neighbor.
Those offering so-called simple solution tend to surface in such situations. Estonians have always managed to be rational and see the threads between cause and effect. Let us be rational once more and refrain from being taken in by simple slogans that can sometimes be heard in this hall.
State budget our collective wealth
Let us now talk about money that no one ever has quite enough of. The state budget is our collective money that does not spring out of holes in the ground or ATM machines. The Riigikogu and government have been given a mandate to make responsible use of that money.
State budget revenue comes to €16 billion, up 16 percent from the 2022 state budget and supplementary budget. Expenses amount to €17 billion for an increase of 18 percent. Investments come to €775 million or €30 million more than this year.
As mentioned, the government had two major priorities for the budget this year. To ensure the security of the Estonian state and people and make sure we are cared for.
Our defense spending will exceed €1 billion for 2.82 percent of GDP for the first time in 2023. This is an increase of 41 percent compared to 2022.
Development of medium-range air defense is a crucial decision by the government. Work on creating this capability we have so far lacked has begun, and we stand to receive the first bids in October.
As a small but digitally conscious state, we will invest an additional over €30 million in cyberdefense. Russian cyberattacks against our systems have become more frequent, and the field needs steady funding. Defense spending is an investment in freedom and therefore priceless.
The 2023 state budget embodies preparing for war if you want peace. While we can count on NATO, our own defensive capacity needs to be a big enough deterrent for no one to want to subjugate our small free country. Never again. As prime minister, I assure you that Estonia is in safe hands and well cared for.
The other important priority in this year's budget is our people's coping in the conditions of Russia's energy war. We have earmarked €230 million for pay rises. The entire public sector wage fund will grow by 5 percent for which €60 million has been allocated.
We will be hiking the salaries of teachers, internal security, culture and social workers. The average salary of teachers will grow by around €400 to over €2,000 a month in 2023. The salary of pedagogues teaching in Estonian in Ida-Viru County will be multiplied by a coefficient of 1.5 for a monthly salary of over €3,000 from next fall.
The wages of rescue workers that have lagged behind for a very long time will be hiked by 36 percent next year. The salaries of social and culture workers as well as police officers will also see above-average hikes.
We can also lend the more vulnerable parts of society confidence for the future. I am talking about the elderly, low-paid people and families with children. The average old-age pension will be exempt from income tax starting next year. The average old-age pension will grow to €704 a month if we factor in the extraordinary pension hike.
An amendment set to enter into force from January 1 will render the average old-age pension exempt from income tax. This decision will leave pensions with a total of €123 million that is sure to be a big help for coping with higher energy prices.
The budget includes decisions that improve the subsistence of families and lend certainty for tomorrow. We will hike the large families benefit by 50 percent and the first and second child benefits by 30 percent from 2023. The single parent's benefit will grow fourfold. The total family benefits budget will grow by €163 million in 2023. The basic exemption rising to €654 from January 1 is also bound to be a great help for families.
The 2023 state budget also holds good news for families taking care of elderly relatives. The years-in-the-making reform has reached the home stretch. If until now, families had to find a way to pay for nursing home places out of pocket, the state will offer a helping hand from the new year. The budget holds €40 million for the long-term care reform, with sums set to grow gradually over the coming years. In addition, €100 million in energy support will be made available to households during the heating season.
Russia's war in Ukraine has highlighted more clearly than ever that a uniform school system and general availability of a competitive education for all children is more a question of national security than we ever believed.
The colossal difference in treatments of history caused by different study languages in school is unacceptable in such a small country. The wounds left by years of occupation cannot heal if we allow our eastern neighbor's propaganda to tear them open time and again.
In order to initialize the switch to teaching in Estonian in preschool education and grades first through fourth, we have allocated €41 million for the switch to universal Estonian education in the 2023 state budget. We have an additional €10 million this year and €31.5 million in 2023 for higher education and want to boost funding by 15 percent every year after that.
Innovation has often been the key to small Estonia's success in the world. It is not something we can forget when times are difficult. We agreed to invest at least 1 percent of GDP in research and development moving forward.
Estonians still a very successful nation
What I want to emphasize is that the 2023 draft budget has been put together responsibly. We have taken steps toward restoring the credibility of state finances.
The deficit we inherited from the government before last has been reduced. The budget will sport a structural deficit of 2.6 percent next year, down 0.8 percent from last year's fiscal strategy target. Improving fiscal discipline is financial gunpowder we may yet need should things take an even worse turn.
The coming winter will be difficult, while everything in life is relative. Let us remember, even when cursing price hikes, the government and prime minister, that unlike many Ukrainians we still have homes to return to after work; homes that have heating, water and electricity. Yes, they may be cooler than they have been in previous years. Yes, we may have to consider when and how much electricity to use. But we can take solace in having schools our kids can attend to obtain a competitive education. We are fortunate in that bombs are not flying here.
Let us not forget for a second that we are still a very successful nation capable of helping those in need. We are great and generous when we extend a helping hand to Ukraine right here and over there. We are small and petty when we turn away from those who need our aid and only look for self-gain. We will not break, we will not give up, we will prevail.
Estonian is a wonderful language not only because 99.99 percent of people in the world don't speak it, but because the Estonian phrase "kokku hoidma" (stick together/save) has two meanings both of which are very fitting in recent context. We need to both stick together and live sparingly.
It is the aim of the aggressor to cause us to fall out both domestically and in terms of international relations in the West. The aforementioned purveyors of simple solutions love to ridicule calls to stick together and save.
I believe neither to be a laughing matter. We are stronger together and less vulnerable if we use our resource sparingly. We should not sneer at people sealing their windows or lamenting price hikes in stores.
Once again: we can weather this crisis is we stick together and live sparingly.
We have an excellent budget; a budget for a caring and safe Estonia supporting which will make life in Estonia better for everyone. That is why I urge the Riigikogu to support the 2023 draft budget presented by the government and wish you many fruitful debates.
Editor: Marcus Turovski