Savings on the expenditure side of the budget should reach €1.3 billion, according to the Finance Ministry, but this figure is not yet supported by specific measures, the Budgetary Responsibility Council (RRZ) pointed out on Thursday, adding that it is not yet in a position to assess if the entire consolidation package is realistic.
The adjustments presented so far should lead to a reduction of the deficit by €282 million, of which €130 million is savings of local authorities, meaning that information on measures worth €1 billion is still lacking.
"Part of the package on the 'expenditure savings' side should also include the yet unconfirmed reimbursement of almost across-the-board energy subsidies or other budget expenditures from EU sources in the amount of €435 million. Energy subsidies as such, however, can be considered a deconsolidation measure, thus the compensation via a possible reimbursement only represents the neutralisation of their negative budgetary impact, thus it is not an austerity measure and shouldn't be counted in the consolidation package," stated RRZ.
After adding the energy subsidies, even if they were reimbursed from EU funds, the total size of the package would be €2.3 billion or 1.6 percent of gross domestic product (GDP), not the declared €2.7 billion, according to the council. "If that reimbursement doesn't take place, the impact of the package on public finances would be only €1.9 billion (1.3 percent of GDP). Finally, if the as yet unspecified savings of the projected amount aren't delivered, the benefit of the package would amount to only €1.3 billion (0.9 percent of GDP)," said the council.
The budgetary council reproached the government that despite the call for the measures to be dominated by savings on the expenditure side, most of them are still on the revenue side of the budget, as in previous years. Moreover, more than half of the revenue measures, according to the council, directly burdens economic activity. In fact, they are mainly aimed at increasing the tax-levy burden on labour, through an increase in the rate of health-care levies, an increase in social levies paid by sole traders or an increase in the progressivity of the personal income tax.
The fiscal council also pointed out that some of the measures presented are of a one-off or temporary nature and there is a risk that some of the as yet unspecified expenditure savings will also be one-offs. Thus, there is a significant risk that the impact on sustained improvements in public finances will be much lower than the declared amounts of consolidation.
According to opposition party PS, the third wave of consolidation will affect everyone in Slovakia, and even those who aren't sole traders or don't have high incomes will feel it through the problems that it will cause for local authorities, as their services will become more expensive and they won't have money to invest in their own development.
The year 2026 will be even more difficult than the previous ones because all three waves of consolidation will meet in it, emphasised MP Marek Lackovič. "This also applies to the budgets of our municipalities, towns and regions. By 2026, they will have reduced revenues from income tax reaching more than €60 million, another more than €180 million, according to estimates, via increased VAT, and another €100 million in the form of the so-called parental pensions, which will start next year," he said.
According to him, they will lose another €137 million by a reduction in their share of income tax revenues. "The state will cut almost half a billion from the budgets of local authorities next year, and this without any discussion with the Slovak Towns and Villages Association, the Slovak Towns Union or the Self-governing regions Association (SK8)," said Lackovič.
Slovak Towns and Cities Union (UMS) chair Richard Rybníček after a meeting with Parliamentary Chair Richard Raši (Hlas-SD) stated that towns and cities will not have the financial resources for development and improving services for local people due to consolidation.
"We'll no longer have funding for developing and improving services for local people, and it isn't possible to operate in this way. It isn't possible to keep cutting funds that belong by law to towns and municipalities just because the state can't save on itself and can't carry out proper consolidation at its ministries, state offices and according to its own efforts," said Rybníček.
The consolidation for next year will involve a shortfall of €110 million for local governments. He said that it's not yet possible to quantify how the consolidation measures will affect individual cities, but Slovaks won't receive higher-level services, only the same as before. Rybníček stressed that municipalities currently aren't considering increasing the tax burden on local residents or entrepreneurs or raising property taxes.
"If we were to start raising property taxes now and filling our budgets, I don't think that's the way to go at all, so we aren't going to do that. As part of this consolidation, we'd much rather see the state save on itself and keep the money that belongs to towns and cities from income tax in those towns and cities. We know best how to deal with the problems that we are dealing with there, and the state is clearly not managing it," added Rybníček.
Source: TASR
