Activity-based stage budget vagueness hinders process of making cuts

The explanatory memorandum to this year's state budget.
The explanatory memorandum to this year's state budget. Source: ERR

The general nature of the state budget makes it hard to hold substantive discussions on where to make an austerity cuts, critics say. Finance Minister Mart Võrklaev (Reform) meanwhile says he is open to all suggestions as to where these cuts could be made, ahead of the start of the 2024 state budget process.

Some experts say the activity-based nature of the state budget is too vague.

Kaspar Oja, economist at the Bank of Estonia (Eesti Pank) told ETV news show "Aktuaalne kaamera" (AK) Friday that: "The budget answers rather more the question of what money will be spent on, rather than what gets done. It is focused on long-term strategy and goals, but it does not talk precisely about the activities that will be carried out."

Olavi Lepp, head of Swedbank, said that the state budget is opaque.

"How can we hold any kind of debate when we have budget lines from which it is not possible to understand where the money will be spent," Lepp said, speaking to Vikerraadio.

"Then the question arises, where will we make cuts," he went on, adding that clearer information which could be contained within budget lines, is lacking.

Minister Võrklaev meanwhile said that: "If people or entrepreneurs and municipalities feel that something could be done more efficiently somewhere, with less costs, then every proposal is very welcome."

"Ministers in the field will review them to see if it is viable to save money, if there is a justification there," Võrklaev went on.

Ministers have made 120 proposals so far for next year's state budget, while the finance minister says that he has also received ideas on how the state could save money from the wider public.

Võrklaev has called on local governments and also business, for ways to to look for savings opportunities ahead of preparing the 2024 state budget. 

The state budget process begins in September, gathering pace through the fall, and must pass three readings before it can be enshrined into law. Substantive amendments can be made between the first and second reading of the state budget bill.

In practice the bill's passing is usually the last significant action made by the Riigikogu before it breaks up for the Christmas and New Year recess.

At the same time, major changes and more detailed budgetary entries are not expected in the 2024 state budget, ERR reports.

The finance minister added that activity-based budgeting provides measurable goals, while the state budgets drawn up before this system was put in place were thought to be too detailed.

"This is a place to find a balance. If you go into too much detail, you could again say that there is too much information, and no one can process it. /.../ In fact, it is possible to read in the background of the activities a little more detail, within the explanation memorandum, and of course the information can always be requested - either from that area or from the finance ministry - for more detailed explanations," Võrklaev said.

Reform MP Aivar Sõerd, who sits on the Riigikogu finance committee, said that savings could potentially be made in the prisons sector.


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Editor: Andrew Whyte, Merili Nael

Source: 'Aktuaalne kaamera', reporter Anne Raiste.

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