Government to cut ministry expenditure by €286 million to 2023

Coalition ministers' cars, outside the Stenbock House during the recent state budget discussions.
Coalition ministers' cars, outside the Stenbock House during the recent state budget discussions. Source: Siim Lõvi /ERR

The coalition government is to cut ministry expenditure by €286 million, in comparison with the budget strategy agreed on last spring, Baltic News Service reports. This follows the government's setting of both the budget for 2020, and the overall strategy down to 2023.

The coalition had been meeting to discuss budget strategy last week, going into the early part of this week, and the proposed cuts, related to expenses and support payouts, cover the period 2020-2023.

At the same time, the total state budget expenditure for 2020 will be around €300 million more than 2019's budget, finance ministry spokesperson Ott Heinpalu told BNS Tuesday.

The breakdown of the €286 million in cuts is set to be:

  • 2020 - €84 million.
  • 2021 - €112 million.
  • 2022 - €45 million.
  • 2023 - €45 million.

How the cuts are going to be apportioned to individual ministries is to be determined in the course of budgetary discussions in the fall.

"This fall, the government will review both the budget for next year, as well as the national fiscal strategy, and will try and find resources for financing of priorities," Heinapuu said.

He added that no conclusive decisions will be made before the publication of the finance ministry's summer economic forecast, and the budget discussion in the autumn. All ministries are to scrutinize their options themselves, to find where cost savings can be made, it is reported, and in the next few years, the government itself will carry out its own research on where cuts might be made.

Budget strategy overview

At Monday's Cabinet meeting, the government reached an agreement in principle on the state budget strategy for 2020-2023, as well as the draft state budget for 2020. The budget strategy and the draft budget for next year are also on the agenda for this Thursday's session of the government.

The government's overall thrust will continue to be a conservative budgetary policy, with structural budget balance at the core. This is aimed at balanced economic growth and limiting the growth of the state's debt burden, so no notable wage growth arising from the state budget is anticipated in 2020. The government also opted for slower growth in operating expenses and support, compared with earlier plans.

The coalition aims to reduce the structural budget deficit to 0.4 percent of GDP in 2020, from 0.9 percent in 2019, with a balance being achieved in 2021, for the rest of the planned period.

However, a surplus is planned for the government sector's nominal budget position over the same time-frame. The government also aims to stop compensating for current deficits with future surpluses, by waiving the so-called restrictive regulation, which means the practice of calculating budget balance as the average of several years will also end, returning to the requirement that the structural budget position of the general government sector remains in balance.

As reported on ERR News, other planned specific changes arising from the latest budget strategy are both retaining research and development (R&D) spending at 0.71 percent of GDP, rather than the 1 percent agreed by the previous administration at the end of 2018, and slashing alcohol excise duty by 25 percent, should the bill enacting this, currently at the Riigikogu, pass.

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Editor: Andrew Whyte

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