The tax burden next year will be 33.7 per cent of GDP, which is one percentage point less than this year. Next year, the general government debt will be 6.36 billion euros, or 19.7 per cent of GDP, which is almost 5 percentage points less than estimated in the spring.
The general government structural budget position is –2.6 per cent of gross domestic product, which is 0.8 percentage points better than planned in the spring. This will be achieved both thanks to the strong growth rate of the Estonian economy and the state reform. The nominal position is -2.2 per cent of GDP, which would make Estonia comply with the budgetary rules of the European Union that have been temporarily suspended during the COVID-19 crisis as soon as next year. In the spring, it was estimated that Estonia will achieve the goal by 2024.
According to Prime Minister Kaja Kallas, the state budget of next year will help the Estonian people, as well as support the Estonian economy and development. “Thanks to the strong economic recovery from the crisis and the bold decisions of the government so far, we have been able to draw up a responsible state budget for 2022, focusing on helping our people, growing our economy, and paving the way for our continued development of the country. This is a budget for the whole of Estonia, where the priorities are a safe, educated, and happy population and a strong and protected country,” said Kallas.
Priorities of the 2022 state budget
Overcoming the health crisis and raising the salaries of frontline workers
The salaries of medical staff, teachers, police officers, rescuers, and cultural workers will increase next year. The government guarantees in the state budget an increase in the salaries of health care professionals agreed in the collective agreement for medical staff – the minimum hourly wage of doctors and nurses by over 7 per cent and for care workers by over 9 per cent. The salaries of state-funded welfare service providers will rise to the same level as nursing staff.
The minimum salary of teachers will increase by 7.3 per cent in the new year. The total salary increase will cost 30 million euros. The salaries of cultural workers will increase by almost the same amount. The minimum wage of frontline police officers will increase by almost 5 per cent and the minimum wage of rescuers by almost 12 per cent – a total of 11.7 million euros will be directed to the area of internal security.
The government considers it important to level the educational gaps of schoolchildren caused by distance learning during the crisis and plans 12 million euros for this purpose next year. An additional 10 million euros will be allocated to local governments for better access to hobby education for children. In addition, the Kultuuriranits programme will be implemented, the aim of which is to ensure better access to culture for basic school students across Estonia. Support for the production and distribution of Estonian films will increase by two million euros.
The state budget is used to pay systematic attention to solving mental health problems and helping the invisible victims of society. For example, three million euros will be directed to the development of mental health centres for children, as well as to the funding of the professional year of clinical psychologists and the services of community psychologists in local governments.
In order to promote physical activity, 600,000 euros have been added to the state budget in order to implement measures that promote physical activity as the lack of it is one of the biggest health risks in Estonian society.
In order to achieve control of the coronavirus, the country continues to make every effort to make vaccination widely available and as convenient as possible. A one-off amount of 16.1 million euros will be allocated for vaccination fees and the organisation of temporary vaccination centres, vaccination preparedness fees, the operation of mobile vaccination rooms, vaccination performance fees, and telephone services. The state considers it important that vaccination be free of charge for all Estonians until the end of the epidemic.
Better coping of people
The Estonian economy has emerged well from the crisis, but good economic growth also means a faster rise in prices. In order not to accelerate the price increase further, the government will cancel the excise duty increase next year, temporarily keeping the excise duty at the 2020 level. Excise duties will not be raised to a new level in one go in 2023. Instead, their increase is planned over a period of four years.
Economic growth has also increased the receipt of social tax, which is why the average old-age pension will increase to 590 euros per month next year. The government decided to further increase the benefit for a pensioner living alone from 115 euros to 200 euros.
Research and development costs
The government will increase funding for research and development by a total of 40 million, which is necessary to keep funding for the sector at 1 per cent of GDP. This means that, in addition to the 11.3 million euros allocated under the state budget strategy in the spring, an additional 29.5 million euros was added in the autumn to finance the sector. In total, this means research and development costs of around 300 million euros. This is the highest level of research and development investments in Estonia.
Of the additional funding, 16.3 million euros will be channelled through the Ministry of Education and Research to ensure the functioning of the research system, 16.3 million euros will be channelled through the Ministry of Economic Affairs and Communications to support business R&D and innovation, and 8.2 million euros will be allocated to knowledge-based development of sectoral policies.
Digital state and cyber security
The government will allocate an additional 30 million euros to ensure the maintenance of the digital state and cyber security. The funding will ensure the maintenance of basic digital services and the sustainability of critical information systems. The funding will also reduce information and cyber security risks.
At the same time, the digital state will continue to be developed. For example, the development of event services will continue to make communication and administration with the state much easier and more proactive. The state is working for the wider introduction of kratts to ensure the efficiency of the public sector and provide a more convenient service to the people. Efforts are being made to increase the use of the public sector of cloud technologies. In addition, the development of common digital platforms, including X-tee and eID, will continue.
In addition, the broadband infrastructure support measure for high-speed internet access networks, launched in 2018, will be continued, which should enable nearly 40,000 households in rural areas to connect to the high-speed access network by the end of 2023. An additional 10 million euros from the Recovery and Resilience Facility of the European Union is planned for last-mile high-speed internet investments.
National security and defence expenditure
Defence expenditure will reach the highest level in Estonian history. Compared to the state budget of this year, the government will spend 104 million euros more on national security and defence expenditure will reach a record level – 750 million euros, exceeding 2.3 per cent of GDP. The largest defence budget helps to fill national defence capability gaps faster and strengthen the security of Estonia.
A sustainable, carbon-neutral, and resource-efficient circular economy
The government promotes the introduction of new technologies, including green technologies, in all sectors of the economy – energy, industry, transport, agriculture, waste management, and forestry. The state is moving towards sustainable production and consumption and the development of waste management so that materials can be recycled. Enterprises can apply for support to increase waste recycling and local governments to develop infrastructure for separately collected waste. The total amount of the support is 4.5 million euros.
It is planned to support the introduction of low-emission vehicles for a total of 10 million euros at the expense of the sales revenue of greenhouse gas emission units, of which the amount of support in 2022 is 8 million euros. In addition, the state will invest next year in the introduction of green gas, renovation and construction of district heating boilers, and in street lighting. The pilot project for electric buses will also continue and the first pilot project for the introduction of hydrogen in public transport will begin.
In order to make transport greener and meet the climate goals, the electrification of the existing railways will begin so that by the end of 2024, it will be possible to travel by electric train to all major stations. The design and construction activities of Rail Baltica and other large-scale road construction and maintenance works will also continue.
State reform
Next year, work on making the public sector more efficient will continue, similar activities will be combined, and support services will be streamlined. In order to provide better public services, the state is renewing their organisation, both digitally and in direct communication. State houses will continue to be built to bring services closer to citizens and business operators.
Around 50 million euros in labour and economic costs will be saved for all areas of government, which is about 10 million euros less than planned in the spring. The savings burden was reduced in the area of internal security and social affairs. The savings will allow us to continue moving towards a balanced budget while raising the salaries of health, culture, and internal security staff.
Local governments
The revenue base of local governments will grow to over 100 million euros next year. Approximately 58 million euros are planned for housing in 2022, with which the government will support, among other things, the reconstruction of residential buildings owned by both private owners and local governments, and the demolition of decommissioned buildings.
State budget 2022 and general economic indicators:
