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PM Kallas refrains from ruling out potential cut to parental benefits

Kaja Kallas
Kaja Kallas Source: Siim Lõvi /ERR

Estonian Prime Minister Kaja Kallas (Reform) did not reject claims that shortening the period of parental benefit payments is being discussed in political circles due to the difficulties related to the state budget. Speaking on Vikerraadio on Tuesday, Kallas said the government was reviewing the entire family benefits system.

Host Mirko Ojakivi asked Kallas to comment on a claim made on Friday in an article in the daily newspaper Õhtuleht, according to which politicians are discussing reducing the length of time people are eligible to receive parental benefits from 18 months to 12 in order to save money.

"We have a budget review next year, which we will start in three ministries: the Ministry of Economic Affairs and Communications, the Ministry of Social Affairs and the Ministry of Finance, so these are the places where there are the most subsidies," Kallas replied when asked about her views regarding whether parental benefits could be cut in the budget or if they are too important.

"In the Ministry of Social Affairs, all the issues related to family benefits have been discussed, and it has been agreed that the Ministry of Social Affairs will come at the start of 2024 with a holistic view of all these benefits, [including] parental benefits, and everything that we have, as well as how they could be better targeted. This is part of the budget review, to try to ensure the support is targeted at those who need it most. So, we are still discussing that," the prime minister said.

In an earlier part of the interview, the prime minister said that if the Estonian government is required to do more and more to increase public spending, then that is not possible given the current tax burden.

"We cannot provide services equivalent to the Nordic countries with a tax burden that is 10 percentage points lower or even more - we cannot provide these services," said Kallas.

Kallas: Real purchasing power already at pre-crisis levels

Kallas also disagreed with the Bank of Estonia's (Eesti Pank) estimate that real wages will only reach pre-crisis levels in 2025-2026.

"Real purchasing power has already reached pre-crisis level and people's real purchasing power is higher than inflation. There will probably be adjustments after the fact, given that inflation, if we look at how that has been calculated and what's been factored in. When it comes to energy for example, it's assumed that everyone is on the universal service, but we know that's not the case anymore and all those sorts of things," the prime minister said.

Kallas also said that Estonia's absolute poverty rate, which last year rose from 1.4 percent to 3.5 percent, was largely down to a number of factors related to the calculations, such as the steep rise in the living minimum, or absolute poverty threshold, and the withdrawal of money from the second pension pillar in 2021.

"However, given the current really rapid growth in real wages, especially pensions and social benefits, there is reason to expect this year's numbers to come in well below that. So this is old information, given that we are in November 2023," Kallas said.

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Editor: Michael Cole

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