Stenbock House, 19 April 2017 – At today’s cabinet meeting, the Government reached an agreement on the principles of the state budget strategy for 2018–2021, which will form the basis for the financial plans of the government for the next four years. Meaning: the budget position’s target and the most important investments for these four years have been agreed upon.
The Government agreed upon the government sector budget position with the aim of using the surplus from earlier periods for strategic investments to the extent of 0.5 percent of the gross domestic product (GDP) in 2018 and 2019; and to the extent of 0.3 percent of GDP in 2020. By 2021, the government sector budget will achieve structural balance.
“Our financial plan for the next four years reflects the four great objectives of the Government: to increase the population of Estonia, to increase the welfare and cohesion of the society, to bring Estonia out of economic stagnation, and to strengthen the security of Estonia,” said Prime Minister Jüri Ratas. “This is expressly clear in the Government’s decision to carry out a reform in the financing of health care, which will help ensure universally available and high-quality medical health care. The investment decisions to boost the Estonian economy in order to improve welfare of all of society are also important. These include, for example, the renovation of Linnahall in Tallinn, the repairs of roads, and high-speed internet connection,” added Prime Minister Ratas. He also expressed that in addition to the salary increase that had been promised in the Coalition Agreement, to teachers and cultural workers, an agreement was reached to increase the salaries of police officers and rescue workers, as well as an agreement on a 3.5 per cent increase to the social care workers’ salary fund was also reached today.
According to the Minister of Finance Sven Sester, the economic policy of the Government forms a whole and is focused on helping the economy grow. “Changes in tax policy make the tax structure friendlier toward economic growth: income tax will be lowered and taxes on consumption will increase,” Sester said.
During the state budget strategy discussions, the government coalition agreed that the car registration fee, which had been planned earlier, would not be imposed. “I am happy the cabinet supported my proposal to give up the car registration tax, which would have increased the tax burden of those who travel by car. As it is possible to draft the budget without establishing this new tax, it is reasonable not to impose it,” said Minister of Finance Sven Sester. Implementing a one-time car registration fee was one of the tax changes agreed upon during the formation of the government coalition in November 2016.
The Minister of Health and Labour, Jevgeni Ossinovski, said that health care would receive an additional 215 million euros during the next four years. “The Government decided to start making additional contributions to health care for non-working pensioners. It is without a doubt one of the most important decisions of this government because it will solve the problem of under-financing that has been bothering the health care system for a long time,” he emphasised. “By 2022, the additional financing of the Health Insurance Fund will experience a step-by-step increase to 13 per cent of the pension of old age pensioners, which will bring about 100 million additional euros to the Health Insurance Fund. By next year already, 37 million euros of additional financing will be allocated to health care. These additional resources will be used for shortening the waiting lists for medical care, which will ensure faster availability of services to the people of Estonia,” Ossinovski explained.
During the same period, the Health Insurance Fund will also gradually take over the organising of the health care services which, until now, have been financed thorugh the state budget, like ambulance services, and the treatment and prevention of HIV and drug addiction.
In order to promote economic growth, the Government decided to allocate an additional 6.5 million euros per year to the research, development and innovation programme. As a whole, the financing of the sector in relation to GDP will not decrease.
The large investor’s support measure will also continue in 2018, and 3 million euros have been allocated for that. Financing for activities related to the opening up of new export markets has also been provided for agricultural producers.
In the sphere of information and communications technology, the Government decided to increase the financing of the e-residency programme with a total amount of 1.36 million euros over four years, so that it would be possible to accept more applications than is currently possible, and to speed up their processing.
The state budget strategy document prepared on the basis of the achieved Government agreement will be approved by the Government at its sitting on 27 April. The strategy will connect the objectives of sectoral development plans and their financing options on the basis of the macro-economy and state finances forecasts of the Ministry of Finance.
The budget strategy will form a basis for the next year’s budget, which will be drafted this autumn.