Coalition partners urged Finance Minister Mart Võrklaev (Reform) to give a vision for the state's revenue and expenditure in 2025 as soon as possible, following his announcement that no new taxes will be implemented.

Võrklaev outlined a framework for future budgets today, and proposed the first negative supplementary budget in 15 years.

Võrklaev himself does not want to talk publicly about the numbers.

Coalition partners of the Reform Party finance minister, who have seen the tables, give different figures. For example, if a country sets a target of saving €100 million, the impact of every move on the economy and tax revenue needs to be taken into account to know the actual cut. So the figures in this tale are also somewhat indicative.

All in all, Võrklaev's proposal for a supplementary budget seems to rest on several pillars.

First, he believes that almost all ministries should make cuts in operating expenses. "Only expenditures that can actually be reduced within the current year can be subject to a supplemental budget cuts," explained Võrklaev. "That's why the proposal focused primarily on economic and personnel costs."

Eesti 200 would immediately take a slice out of all costs

According to various sources, the finance minister wants to save €20 to €30 million by cutting operating costs in all ministries.

Social Democrat Jaak Aab said that ministries could get by with more than just cuts in operating costs, but for some ministries the task is more difficult.

"Of course, Lauri Läänemets is worried about the Ministry of the Interior, because most of the operating budget is police and rescue salaries," Aab said. "But it's all very well to make savings, no one is arguing against that."

Marek Reinaas, a member of Eesti 200, said that they had no objection to cross-sectoral savings. He explained that for the supplementary budget, Võrklaev has proposed a maximum cut in operating costs, but for the following years there will be talk of a maximum cut in all costs. This means that all possible subsidies would be also included in the cut sums.

"Since this is how the cuts were planned for the next few years, it would make sense to do this year's negative budget in the same way," Reinaas said. "Not in a way that we make a negative budget in one area this year and start cutting in another area next year."

While Reinaas says that the finance minister's cutback plan is more complicated than Eesti 200's, Võrklaev says that his plan is much simpler. In the case of the Ministry of Social Affairs, for example, the blanket cap would apply to subsidies. But to reduce them, the law would have to be changed at will. If the law is not amended quickly, it will put too much pressure on the operating costs of the Ministry of Social Affairs.

Who got more, cuts more

The second pillar of Võrklaeva's supplementary budget concerns those ministries that were more successful in last fall's budget negotiations and whose additional requests were granted.

"We're not taking anything away, we're just reducing the amount that was added in 2024. Maybe that's the most painful part. You're not just getting that much extra money," he said.

The finance minister reportedly suggested to the coalition partners that the ministry should save 10 percent for every additional request approved. For example, if the Ministry of Regional Development received €8 million for public transport reform, it would have to find an additional €800,000 in savings. Exactly where the money would come from would be an internal matter for the ministry.

In total, this could save around €20 million.

Võrklaev made it clear that not all of the fall budget deficits would be affected by this proposal. "Defense spending cannot be included here today," the finance minister stressed. "We have to buy weapons and shells today. We need to look at defense differently."

Aab: Municipalities could go to court

Võrklaev said that local governments should also contribute to the negative supplementary budget. According to various sources, he hopes to save about €27 million at the expense of municipal revenues. The actual cuts may be slightly higher.

The government does not confirm these calculations, but neither does it refute them. It only says that the cut would affect the part of the tax that is transferred to the municipalities. Put simply, this means that the municipalities in Harju County would feel the cut more than those in Võru County.

"Counties that actually have growing populations and rising incomes will benefit more from the income tax allocation. In this sense, the impact is likely to be greater for cities and larger regions," he said.

Jaak Aab said that if the state wants to reduce the share of income tax transferred to municipalities, the law must be changed.

"If you make these changes in the middle of the year, when the municipalities have done their budgets and projections with what they had in front of them as of January 1 in the legislation, I believe you'll have a lawsuit from the municipalities, and I think the state is more likely to lose than to win," he said.

Võrklaev emohasized the importance of making essential cuts, regardless of the current fiscal year. "Of course, this is challenging for both the state and the towns. But if the scenario is such that we have less expenditure, we cannot spend this much," the finance minister said.

Foundations, companies, and investments

Võrklaev argued that the same idea applies to state foundations. Although the foundations have also established budgets, the finance minister's cuts table anticipates them making a significant contribution. The second-largest amount is supposedly in the dividend line. Perhaps state-owned enterprises should likewise look for savings.

Furthermore, deferring investments should result in savings of a few hundred million euros. Võrklaev also wants some investments to be postponed until next year.

At the same time, the investment line faces criticism because the rise in spending for the following year will not help future cuts.

Reinaas said that at Wednesday's meeting, the coalition partners decided that all future decisions would be based on the goal of reducing the budget deficit to less than 1 percent of GDP by 2028. This means that, when preparing the supplementary budget, the country's budgetary plan must be considered.

The need to look at the big picture and make big deals with the supplementary budget is the loudest voice of the social democrats.

"Even if the things we are doing now are completed, next year's budget will still have a hole of -4.7 percent of GDP, of which it will take nearly one and a half billion to get to 3 percent," Aab said. "A little tinkering won't fix the major problem, but there should be some consensus in principle on how to approach the large problem."

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