On the adoption of the three-year budget for 2008–2010
President Vladimir Putin: On Thursday I signed the Law on the Budget. For the first time in modern Russian history we have adopted a three-year budget. I am sure that it will help us to create the conditions needed for maintaining macroeconomic stability in the country and should have a positive impact overall on economic development and on the social sphere, given that it sets out the main spending parameters and defines our priorities.
This is the perhaps the first time that the budget sets such a large number of specific tasks and objectives for developing the real sector of the economy. This includes shipbuilding and aircraft manufacturing. The budget also addresses particularly sensitive social issues such as healthcare, education and pensions.
Finance Minister Alexei Kudrin: The 2008–2010 Federal Budget is innovative for the fact that it covers a three-year period and also for the demands it places on federal targeted programmes and the possibility of concluding contracts for the whole three-year period. What is particularly important in this respect is that a large number of those placing orders and carrying out contracts will not have to draw up a new contract every year, and this will reduce the time and expense that the state puts into constantly reviewing all sorts of facilities and contracts.
As far as the budget’s main parameters go, federal budget spending in 2008 will come to 6.570 trillion roubles, which is 1.107 trillion more than in 2007 and represents an increase of 20.3 percent. This is one of the biggest increases in budget spending over recent years. There have been bigger increases, but this is quite a rapid pace of growth.
The budget will increase to 8.89 trillion roubles in 2010 and will make use of new principles for planning revenue and expenditure, including a very carefully planned and cautious policy with regard to oil and gas revenue.
Looking at spending on the main items of expenditure, support for the pension system and allocations to the Pension Fund are in first place with 1.350 trillion roubles allocated for these purposes in the budget next year. In accordance with your Budget Address, the objectives set out in the budget law will enable us to raise pensions by 65 percent over the three-year period.
The second biggest item of expenditure is national defence. Here we have allocated 959 billion roubles. This spending will enable us to raise wages and provide all servicemen with housing by 2010. By 2012, we will also have built service housing.
Furthermore, this three-year period will also see the implementation of the federal targeted programmes for the transition to the new system of recruiting servicemen given the reduction of military service to one year. Defence procurement spending related to completing work on new technological developments and the beginning of series production of new generation weapons is being increased.
The third biggest item of expenditure, with 919 billion roubles allocated next year, is support for the country’s regions. This is linked to the big disparities in revenue and expenditure from one region to another.
The fourth biggest item of expenditure is spending on national security and law enforcement.
Looking at expenditure growth, given that we have begun paying greater attention to developing the real sector of the economy, support for the national economy is the item of expenditure which shows the biggest increase in spending. This covers innovation programmes, infrastructure, the aircraft manufacturing and shipbuilding industries, and the energy sector, including nuclear energy. This item has increased by 44.4 percent and now comes to a total of 718 billion roubles that will be spent on supporting the economy. The biggest increase in spending is in nuclear energy, which will see an increase from 14 billion roubles this year to 60 billion roubles. Spending on road construction will also increase. The federal budget will allocate a total of 250 billion roubles to road construction next year and this figure will increase annually.
With an increase of 27.6 percent support for the pension system is in second place in terms of increased spending. In third place is social policy with an increase of 26.6 percent. This covers payments for disabled people, for people who were involved in the Chernobyl cleanup operations, the unemployed and other groups who require social benefits and support.
Spending on culture (we made amendments to increase spending in this area as a result of discussions in the State Duma) is in fourth place. Spending on culture will increase by 22 percent next year, more than the average increase in budget spending overall, and we will spend 82 billion roubles in this area next year, including financing for the Presidential Library project and other projects.
Of course the national projects are also among the most important spending priorities and will get increased support. This includes mother and child support as part of the demographic policy programme, innovation development and support for leading areas of fundamental science, above all in the area of nanotechnology. This also includes additional support for work to reform the housing and utilities sector and for road construction and the Development Bank. But most of this spending is taking place this year and next year we will simply be continuing to finance work in these areas.
On a meeting of the Military-Industrial Commission
First Deputy Prime Minister Sergei Ivanov: Tomorrow the Military-Industrial Commission will meet to discuss the issue of expanding the production of special materials – what is known as low-tonnage chemical materials – used in the production of military and dual-use goods. These are completely new materials widely used in shipbuilding and rocket construction and also increasingly used in the civilian sector in high-technology production.
We want to continue using the targeted programme method of planning in this area. The Government has already allocated considerable funds of late for developing this sector of fundamental importance for the production of high-technology military and dual-use goods.
We have programmes operating through the Defence Ministry, the Industry and Energy Ministry and the Education Ministry. We want to see how effectively they are being implemented and use precisely the targeted programme method and perhaps in the future draw up a specific federal targeted programme especially for this particular sector, since it is one of the fundamental sectors upon which the production of many types of modern goods, including for the defence sector, depends.
On a meeting on missile defence in Washington
Foreign Minister Sergei Lavrov: An inter-ministerial delegation with representatives of the Foreign and Defence Ministries has left for Washington.
As was your agreement with President Bush, a first round of consultations will take place, and this will be followed by two or three more such meetings with the results of the consultations then being presented to a meeting of both countries’ defence and foreign ministers scheduled for the beginning of October. A report will then be drawn up for the Russian and U.S. presidents.
Our delegation’s position is based on the directives you approved on the basis of the initiatives you proposed at Kennebunkport. These directives formulate in concrete terms and set out the substance of your proposals and make provisions for the U.S. side to receive the according drafts of the documents.
We think that we have prepared well and we hope for a positive result, at least as far as continuing our contacts and explaining our positions is concerned. Of course, we cannot but notice that this subject continues to be debated in the U.S. Congress, where there is the desire to make the U.S. national missile defence system part of state policy, while at the same time doubts are being expressed as to how justified the spending is on the projects Washington has so far put forward. We hope therefore that these consultations and the discussions on this issue last week in the Russia-NATO Council (which showed considerable interest in our proposals and readiness to discuss them further) will enable us to reach agreements that would be in line with our policy approach.
Vladimir Putin: We spoke about the need to involve our European partners in this process. What is being done in this respect?
Sergei Lavrov: At the meeting of the Russia-NATO Council last week the Russian delegation (also an inter-ministerial delegation) presented our views and gave detailed answers to a large number of questions.
Vladimir Putin: We need to unite these two processes. It does not make sense to work in two different directions on one and the same subject.
Sergei Lavrov: In accordance with the agreements reached, this is precisely what will happen given that consultations between inter-ministerial delegations were approved at Kennebunkport and these consultations will take place over the coming two months. In parallel with this, we will keep our European partners informed and the ultimate objective will be indeed for the final agreement to bring this whole process together in a single whole.