Prime Minister Jüri Ratas' speech at the submission of the draft state budget of 2019 at the Riigikogu, 26.09.2018

Dear President of the Riigikogu,
dear members of the Riigikogu,
dear people of Estonia,

It is great honour for me to hand over to the Riigikogu the second draft state budget drawn up by this government. This document – like the state budget for 2018 – is a financial document which supports a responsible and sustainable budget policy. Furthermore, the state budget for 2019 will boost the entire development of Estonia. We owe the state budget of over 11 billion euros to all the hard-working entrepreneurs and people who have contributed to building our country this year as well as over previous decades.

The work of the government of the Estonian Centre Party, the Social Democratic Party, and Pro Patria is based on four goals which were set when the government was formed: restoring the upward trend of Estonian population; increasing social welfare and coherence; promoting Estonian economic growth; and ensuring and strengthening the security of our country. The state budget for next year contributes to all of the above-mentioned directions.

Dear members of the parliament,

The economy of the Republic of Estonia, which is celebrating its one hundredth birthday this year, is doing well. The gross domestic product is increasing for the ninth year in a row and we have witnessed faster economic growth in the last few years. For example, last year, the economic growth reached 4.9%, which is more than we had managed in the five previous years. We are also expecting a decent, an over 3.5% economic growth for this year and will continue to enjoy achievable growth rates in the next few years.

We must certainly acknowledge Estonian entrepreneurs who have created many new jobs in the last few years and contributed to the growth in the people's incomes. Currently, there are more earners than ever before in Estonia. Last quarter, approximately 75 percent of the population aged 15–64 were employed, which exceeds the same figure in most other European countries. Such a high level also constitutes a new record for Estonia after regaining independence.

Our economic position is improving in Europe and in the world as a whole. As we know, the Estonian gross domestic product per capita based on purchasing power grew to 77% of the average of the European Union in 2017.

Step-by-step, making efforts together, we are getting closer to the richer Wester European countries and Nordic countries every year. Naturally, Estonia still has a long way to go, but one should always set ambitious goals. Therefore, we must also skilfully make use of the gradually shrinking structural funds of the European Union.

The state budget for 2019, which is nominally in surplus and structurally balanced, is also based on the positive economic cycle. The tax burden will remain stable between 33–34% in the coming years and, according to estimations, the debt burden will fall from the 8.2% in 2018 to 7.4% next year. Hence, we will reach the level of only 5.4% by 2022.

As of 2019, we will be annually repaying loans in the amount of 70 million euros, as it would not be reasonable to increase the reserves at this point from the financial perspective. On the background of high inflation, the productivity of reserves is very low or even negative, thus, their real value in time would decrease. In addition, as the common saying goes – borrowed money is not your own.

Dear audience,

Naturally, the decent economic growth and very good state of the finances of the country do not mean that we can rest on our laurels.
On the contrary – we must continue to develop our country, including e-Estonia, every day. Therefore, the government will invest 118 million euros into the maintenance, updating, and development of the information systems and equipment of e-Estonia over the next four years.

As a result of the required investments, both the convenience for users and the security of our e-services will improve. Records management with the state must be as efficient as possible. Based on the ICT development plan, however, we will be supporting the digitalisation of industrial undertakings, providing assistance in product development, and opening new embassies in foreign countries.

I am happy that the Tax and Customs Board, Statistics Estonia, and the Bank of Estonia are actively cooperating to reduce the burden of submission of information on the companies. Cutting down excessive paperwork and procedures must be one of the goals for all state authorities. The zero-bureaucracy project may not merely remain a slogan, it must clearly help to reduce the bureaucratic requirements in the communication with the state.

2019 will be calm for commercial undertakings and for the people from the perspective of taxes which will increase the feeling of security. The government coalition has cancelled the previously regularised increases in the excise duty rates for alcohol and, as we know, we have also cut in half the increase in the excise duty rates for spirits and beer which is planned to be executed in the beginning of the year. We must certainly continue to work to minimise the border trade which has been increasing too rapidly in the last years.

The excise duty rates for petrol and diesel fuel will also remain the same next year. I fully support the decision of the current government coalition to cancel, in the interests of the development of the economy, the 10% increase in the excise duty rate for diesel fuel which was adopted by the previous government. Based on what I have read in the media, it is clear that several of the parliament members who are now in the opposition have also admitted that the plans to increase the excise duty rate were wrong. Diesel fuel is an important cost item for companies and thus has an impact on the prices of many goods and services. We have to keep the price of fuel at a competitive level.

Dear listeners,

Next year's state budget will, above all, contribute to people, public services, and rural development. By contributing to high-quality services – in the form of education, health care, or security – we invest in a stronger, more cohesive, and wealthier society. Hence, the current government has from the very beginning valued and stressed the role of local governments and the importance of rural life.

It is the duty of the state to ensure humane living conditions for the entire population, not only to develop the so-called attractive centres.

Estonia has always been successful ever since the restoration of our independence, but the development of our economy has been uneven. Unfortunately, there are areas of Estonia where the economic growth has been especially slow to recover after the last recession. We also know today that there are counties where there is a deficiency of jobs instead a shortage of labour. Such a situation deepens the regional inequality of incomes and accelerates both domestic migration and emigration.

In order to achieve the coherence and greater welfare of the society, it is important to prevent the gap between different counties of Estonia from expanding too much. Therefore, we will be paying a lot of attention to regional development next year. We will continue to increase the income base of the local governments, to pay the transition facility to farmers, and to execute various regional programmes.

Specifically, the state will allocate additional resources through regional support programmes for the invigoration of the economies of Ida-Viru County and Southeast Estonia and for the creation of jobs of a higher added value. Next year, we intend to allocate almost five million euros for the Ida-Viru County programme and 800,000 euros for the Southeast Estonia programme. Based on the state budget strategy decisions, funding of these programmes will continue until 2022.

Entrepreneurship may not only be focussed around the larger centres, jobs must also be created in areas with more jobseekers. This will simultaneously reduce the shortage of labour as well as unemployment. I do not support the situation, which has lasted for years, of people being forced to travel tens and tens of kilometres every day to get suitable jobs or even move away from their homes to larger centres. The entire Estonia must be full of life!

We will also be contributing to the development of local life by increasing the public transport subsidies in the next year's budget by almost 10 million to 101 million euros. Furthermore, we will be implementing several smaller regional investments.

The local government funding reform has increased their income and allows them to provider better and higher-quality services to the people. The ability of the parishes and cities to make the investments required for their residents will also increase. The income of the local governments will increase by approximately five percent next year, amounting to almost 2.2 billion euros.

Furthermore, as I have already highlighted, we will continue to pay the transition facility to the farmers in the maximum permissible extent. All these steps are extremely important, as a strong local level and sustainable rural life are the bases for a viable country.

Dear all,

Our economic growth must be sustainable and inclusive, that is, reach all people of Estonia. Thus, we have decided to contribute to increase the income of working people and will increase the salary fund of the employees whose remuneration is paid from the state budget by 2.5%. The most significant wage increases can be expected in the sectors of education, culture, social care, and internal security.

The amount allocated for increasing the salary fund of teachers will be 9.7 million euros higher than this year, as a result of which the average wage of teachers will reach the level of 1,500 euros. There is 3.4 million euros in the budget for increasing the salaries of cultural professionals. The average wages in this sector will thereby increase to at least 1,250 euros. Likewise, the salaries of preschool teachers, social care specialists, veterinarians, and many other important professionals will also increase.

The government has already agreed in the course of the state budget strategy discussions that there will be 12.9 million euros allocated for increasing the salaries of the employees of the Police and Border Guard Board and 7.9 million euros for increasing the salary fund of the Estonian Rescue Board. As of next year, the basic wages of the patrol police officers and border guards will be at least 1,280 euros plus regional bonuses. For example, in Ida-Viru County, the income of a patrol police officer will reach 1,700 euros.

The average basic wages of the rescuers will increase by 23.6% from next year, that is, it will reach one thousand euros. On average, 11% of additional pay is added to the basic wages of the rescuers for night work and working during holidays.

The salary fund of the employees of the Estonian Interior Ministry's Centre for Information Technology and Development (SMIT) will also increase with almost 1.9 million euros of additional funds allocated for this purpose. On average, the wages of the employees of the SMIT will increase by 20%, which will allow the authority to maintain a competitive wage level. The salary fund of the alarm centre will increase by eight percent.

All people deserve fair pay for their work. The planned increases of wages will allow us to believe that the people who are employed in the positions which are significant for the security and the future of all of us are remunerated respectfully. The increases in wages must undoubtedly continue in the coming years.

We will also allocate significant additional funds to the national defence. The total planned defence budget for 2019 amounts to 585 million euros, which forms 2.16% of the estimated GDP. We will hold our defence forces in high regard by taking the average wage level of the active servicemen 30% above the Estonian average in 2019 and intend to maintain this level in the future. The equipment and arms of the defence forces and the Estonian Defence League will also see an increase.

Currently, almost 40% of the total defence budget is planned for various defence related procurements which will be used to strengthen our military capability. We will pay the final contractual instalment of the CV90 combat vehicles for the infantry and will complete the modernisation of the navy minesweepers. We will continue to organise large-scale procurement procedures for ordnance.

Investments into the national defence infrastructure will be used to develop campuses and training grounds for the defence forces. This will ensure the required training environment and modern living conditions for our soldiers and for the allies. All these steps will help to reinforce the peace and security in our country, as well as in the wider world.

Dear members of the Riigikogu,

The economic success of a country must always also reach the elderly. The average amount of the old-age pension will increase by 7.6% next year, from 447 euros to 481 euros. The increase in pension could always be faster, but this is an necessary step to support the monthly coping of the elderly. It is very important to me that the persons whose only income is their pension will not be required to pay income tax from the average old-age pension next year. We will also continue to support the improvement of the coping of the pensioners who live alone – there is 10 million euros in the state budget for this purpose.

We will also contribute in the sector of social care. The funding allocated for special care services will increase to 36.9 million euros, as a result of which it will be possible to fund the existing places for providing services as well as to create new ones. The funding for social rehabilitation will increase to 12.7 million euros to ensure quicker access to assistance as well as a higher volume of the services.

The government will continue to implement the healthcare reform, and the budget of the Health Insurance Fund will increase by as much as 180 million euros in total. Directing additional resources to healthcare will also help to cut the queues for healthcare services and improve the accessibility of medical care.

We will also continue to pay an additional benefit for medicinal products for the tens of thousands of people who need large amounts of those products to decrease their expenses on prescription medicinal products. There is 9 million euros planned for the additional benefits for the discounted medicinal products of a high own contribution rate.

As a state and a society, we must contribute actively to improve the health of the people, increase the number of healthy life years, and ensure a dignified old age for all elderly people.

Dear parliament

We will direct 370 million euros into investments through the state budget. We will be investing into important transport and infrastructure projects, the promotion of rural life, and culture and sports projects. Just a few examples: 6.1 million for the Tehvandi Sports Centre; 2 million for the television complex of the Estonian Public Broadcasting; 1.3 million for getting started with the reconstruction works of the building of the Estonian National Library; 11 million for the fishery sector; 59.1 million for the promotion of agriculture and rural life; 31 million for Rail Baltic; 31.5 million for the construction of the Kose-Mäo road into a four-lane highway. There will also be numerous small, local investments made in addition to the large-scale budget allocations.

The finances of the state have been kept in a good order and we will continue to implement a responsible and sustainable budget policy which will support the economic growth in the future. Each state budget must contribute to increasing the welfare of the people of Estonia and thereby contribute to growing our population. Estonia must be a country where people want to live and where they want to come to – to work, live, start families.

For years, we have been a country of a high emigration; in the last three years, however, the number of those arriving in Estonia has exceeded the number of those leaving. Therefore, I am especially happy that thousands of Estonian people have decided to return to their home country. I deem it appropriate and important to send a clear signal from the lectern here at the Riigikogu that everyone who has left Estonia in the previous years are welcome to return to their homeland, even just temporarily, but in many cases hopefully permanently.

Dear kindred spirits,

The anniversary year of the Republic of Estonia has been a good year for us as a country and as a nation. The economy is growing, the wages are on the way up, and our people have the work that they need, diverse opportunities for learning, and for occupying themselves otherwise. If we remain on the same course, 2019 will be at least as positive and we will be able to celebrate the 101st birthday of our country in an even more successful, wealthy, and fair country.

I would like to heartily thank the Ministry of Finance, all other ministries, the State Chancellery, and every single official for all the work and for their contributions to drawing up the draft state budget.

I would also like to sincerely acknowledge the parties of the coalition – the Social Democratic Party, Pro Partia, and my own party.

In addition, I would like to extend my gratitude to all other parties, members of the parliament, the private sector, and civic associations for their ideas and inputs. The state budget for 2019 is the fruit of our collaboration and I would like to call all members of the parliament to support it.

Thank you for your attention! I wish for the honourable Riigikogu professionalism and positivity for discussing the state budget!