Vyacheslav Volodin to finance minister: ‘Our president turns out to hear us, while the finance minister doesn’t’

Budget not based on incomes but necessary costs

“This bill seriously differs from any bill the State Duma has ever considered perhaps in the country’s contemporary history, while I can judge since 1993. The budget was created not on the basis of incomes but on the basis of necessary costs, necessary costs on health care to help really solve people’s problems and, of course, on costs to develop the economy, while social commitments are secured by the budget construction,” Chairman of the State Duma’s Committee for Budget and Taxes Andrey Makarov gave the presented financial bill such an evaluation.

However, the speaker was emotional enough and showed Siluanov a number of imperfections in the project. But the parameters of the budget in numbers go first.

By the government’s estimates, Russia’s gross domestic product will increase by 3%, to 115 trillion rubles, in 2021, while inflation will total 3,7%, the average dollar rate is forecasted to reach 72,4 rubles, Urals oil that Russia exports is expected to amount to $45 per barrel.

The amount of incomes is considered to be 18,8 trillion rubles next year, with further growth to 20,6 trillion in 2022 and to 22,2 trillion in 2023. The income level will grow too: to 21,5tn rubles in 2021, almost 22tn in 2022, by more than 1,5tn in 2023. As head of the Finance Ministry Anton Siluanov stressed, the government will continue implementing a myriad of national projects as well as five national goals set by Russia’s president. So it is supposed to lower the poverty level, for this purpose, the government is going to raise pensions by 6,3%, the minimum wage by 5,5%, 400 billion rubles will be included to support low-income families with children, maternity capital will also be indexed to 639,000 rubles.

The health care system will get 3,8% of GDP: a primary care modernisation programme will be launched from next January, 90 billion rubles will be spent on it. As for education and science, the Finance Ministry is planning to increase the number of subsidised seats (by 33,000) and create new seats in universities (additionally 11,500), so about 60% of school graduates will be able to study at the state’s expense. Younger schoolchildren will be provided with hot food, while the budget has 75 billion rubles to pay for class supervision.

As for providing Russians with housing, the programme of the preferential mortgage at 6,5% will go on, the mortgage rate is also expected to go down. 700 billion rubles of loans await small- and medium-sized businesses, small- and medium-sized enterprises’ insurance premiums will reduce twice, which will allow them to save 500 billion rubles, while the IT sector’s insurance premiums will decrease from 14% to 7,6%, which, Siluanov thinks, will help get emigrated digital specialists back to the country. At the same time, Russia’s Ministry of Finance is offering to cancel tax benefits on viscous and high viscous oil and benefits on oil exports from some areas, tax on solid mineral production will change too.

But the tax load on SMEs and the IT sector will diminish, while oil production duties will increase thanks to the cancellation of previous benefits, gas and petrochemistry development stimuli will be introduced, the financing of national projects will rise by 15%.

The amount of interbudgetary transfers will go up too: according to the budget’s project, the Russian regions will receive more than 2,8 trillion rubles, while almost 718 billion rubles will be sent to fill the budget gap. An incentive mechanism created by the Finance Ministry for regions to achieve national goals set by the president and implement national projects will become the novelty. Even grants are envisaged for regions with good performance, for this purpose, the Ministry of Finance will allocate 35 billion rubles with a rise to 50 billion in the next years. The regions in general will receive around 700 billion rubles of interbudgetary transfers to implement national projects.

The goal the head of the Finance Ministry sets for 2021 “to go back to development projects from overcoming consequences of the pandemic and focus on achievement of national goals — it is a rise in the population’s disposable income, a decrease of poverty, provision of Russia’s comfortable and healthy life, while the budget policy aims to perform these key tasks”.

Kudrin promised complications because of second coronavirus wave

Evaluating the project of the budget, Chairman of the Accounts Chamber Aleksey Kudrin noted that a second wave of coronavirus might make its amendments to the Finance Ministry’s 3% economic growth, so one shouldn’t expect economic indicators to go above 2,2%. Moreover, consumer demand and growth of investments have already begun to fall since September after summer recovery. Kudrin offered to base on the government’s macro outlook and then add specifications to it during the year.

The head of the Accounts Chamber criticised the reduction in the share of costs on education with 3% GDP in 2021 to 3,6% in 2023, though the reduction is just 0,3%, Kudrin says “I wouldn’t like to see that we will spend on education less, while a fall is expected in education from 3% GDP to 2,9%”. He reminded the audience that the task in 2008 was to reach 5% GDP both in education and health care: “Everybody agreed with it then, everybody put their signature. Meanwhile, for some unknown reason today we don’t keep these numbers as benchmarks in the key spheres for the country’s development”.

As Aleksey Kudrin said, oil and gas incomes in Russia will be below basic oil incomes for the first time. So the government will have to take 91 billion rubles from the money box of the National Wealth Fund to suppose next year’s expenses. The non-oil-and-gas deficit indicating how dependent the federal budget system is on oil and gas stays at about 10% of GDP. But economists forecast that it will reduce to 6,6% in the next three years, which, in Kudrin’s opinion, is a positive trend.

The new tax burden that awaits the industry and businesses in the future will additionally replenish the budget’s income by 550 billion rubles in 2021 and already by 692 billion rubles in 2023.

Considering all crises, the amount of costs from the federal budget on the national policy in the future will be 3,3 trillion rubles exceeding all costs. 2,2 trillion rubles will be invested in national projects, of which 700 billion will go to the regions.

Kudrin named the absence of foundations of some budget costs an important problem of the project: 72,5 billion rubles of asset contributions are planned without any foundation, there is no attached material to receive three subsidies by Rosavtodor (570 billion rubles from 2021 to 2023), two state programmes haven’t been approved — provision of protection of the individual, society and state and provision of chemical and biological safety. However, they have funding that was included — 796 billion rubles. Kudrin forecasts that 2021 will be a tough year and they will have to work hard to improve the budget system.

“Today it is ridiculous to hear that dependence on oil incomes is reducing”

Chairman of the State Duma’s Committee for Budget and Taxes Andrey Makarov was next after Kudrin to point out the Finance Ministry’s imperfections. In his opinion, the budget isn’t able to solve the problem of economic growth, one should stop thinking that it can solve all economic problems, it can prevent a catastrophe, while the indicator of GDP’s growth lost its meaning as a universal economic indicator a long time ago.

“The main indicator today is people’s satisfaction with their life. We don’t have it. As usual, we try to guess oil price and determine our incomes. Today it is ridiculous to hear that dependence on oil incomes is reducing. It is ridiculous to say that it is a good tendency that prices for oil have collapsed.”

Another reason for criticism is the regions’ constant reduction of the possibility of quick response, undertaking something on their own, Makarov thinks. The Ministry of Finance corners them into estimated financing. “Let’s have a look at the amount of money, the result and the compliance with each other so that the regions will be responsible for the result, not for the compliance with all procedures. The solution to people’s problems is the main merit of this law, the rest is what we will still have to do,” Makarov concluded.

Volodin and Co criticised Siluanov

Later, deputies who didn’t like some indicators began to make remarks to the Finance Ministry and Anton Siluanov. So deputy Vladimir Kashin indicated that 52 billion rubles included to the budget’s project for agriculture would be obviously not enough. In reply, Siluanov noted that the countryside would receive another 180 billion in other various programmes, it is road repairs, medicine, education and so on. Then, the State Duma’s speaker Vyacheslav Volodin started dialogue. He reminded the finance minister of his recent hostility to the allocation of public money to provide primary schoolchildren with hot food.

“But the president interfered and made a decision, while in your speech you are talking about it as if it was your accomplishment. We would like the finance minister to be a partner and hear the deputies, hear the citizens’ request. While here the president turns out to hear us, while the finance minister doesn’t. And when we talk about the development of agriculture, you look at all previous decisions, they were made by the president despite the Finance Ministry because it was against. We would like you to hear us. The Finance Ministry can’t be above the government. The Finance Ministry can’t be above Parliament,” Volodin said.

Another 10 deputies delivered speeches and each of them pointed out different sore points in the budget’s project: it is the provision of the Kuril Islands, working pensioners’ pension indexation, resettlement of miners from barracks as well as providing orphaned children with housing. They also asked why teachers from vocational colleges weren’t entitled to receive additional payments for class supervision. They asked him other questions too. Siluanov, in turn, promised Parliament to work on these moments by the next consideration of the budget project.

While communists are against

Reproaches of the finance minister went on. He also was criticised by communist Gennady Zyuganov who demanded to increase the funding of education and health care from the reserve fund and the National Wealth Fund. In his opinion, the people are getting poor en masse, and the situation is only getting worse.

“You’re offering a budget that will make everybody feel only worse, our faction won’t endorse it in the voting. You sow panic on state TV channels with the epidemic. It isn’t fought off, 3,6 billion rubles aren’t included to the budget. They are stashed away in the Finance Ministry,” Zyuganov said.

Another elder statesman of the State Duma Vladimir Zhirinovsky who delivered a speech after Zyuganov stressed, in contrast, that one couldn’t vote against the budget’s project. “It is the law of the whole country, its incomes and costs. So what, will we stop the whole country from 1 January because the communists didn’t vote for the budget?” he asked the question.

He offered communist deputies to refuse their mandates, while the money the party receives in the State Duma should be handed out to farms and children of war. Zhirinovsky agrees with the Finance Ministry’s argument about the sanctity of reserve money.

“So Karabakh is on fire, what will it end with? The Turkish army is coming in. We couldn’t consider this in the budget for 2021. Will Belarus calm down or will this go on? It has already been given 1,5 billion.”

United Russia deputies in the person of Andrey Isayev and Fair Russian party also voiced their decisions to vote “in favour” of the budget’s project. The party’s representative Aleksandr Remezon offered to include costs on benefits for families with schoolchildren, provide miners who still live in barracks with housing to the budget. As both politicians noted in their speeches, the budget should be corrected considering all proposals from both deputies and economists.

Three hours later, the project of the budget was finally adopted by the deputies at the first hearing: 346 parliamentarians voted in favour of the new financial document, 54 were against. Now the Finance Ministry has a task of improving the financial document of the country regarding the imperfections indicated at the first hearing and then presenting an updated version of the budget project for 2021 by the second reading.