President of Russia Dmitry Medvedev: Colleagues,
Today I signed the budget address outlining budget policy for 2010–2012. I already explained what motivated the decision to make this document public. This is being done partly so as to focus your attention on its key points, and also, of course, because this document is so important in general for the country’s life over the coming period. This is why I have brought together today those directly involved in carrying out the tasks outlined in this budget address.
We all know what a difficult situation the country and the economy face today. The global economic crisis is far from over. Unfortunately, we expect that GDP will shrink by more than was initially forecast this year. The global crisis has caused a sharp drop in government revenue that obliges us to make adjustments to this year’s budget. Expenses will be higher than revenue for the first time in the last ten years. The budget deficit will be at least 7 percent of GDP, and this is the optimistic forecast. The reserves we have built up enable us to fulfil our social spending obligations and also put serious money into anti-crisis policies. These are matters of paramount importance. The result is that in 2009, rather than cutting back expenses, we will actually increase spending compared to what was originally planned. Incidentally, other countries currently facing difficulties, all the developed countries in other words, are doing the same thing.
We all know the facts and figures, and I think we all agree with the obvious conclusions. Let me explain what I mean. Macroeconomic stability is a fundamental condition for economic development. Budget planning must therefore be based on conservative estimates of future price fluctuations on the commodities markets. Of course, prices could turn out higher than estimated, and this would certainly be in our favour, but we cannot risk our ability to fulfill our spending commitments.
We also need to keep public spending within reasonable limits. The budget must not become a source of financial instability nor must it contribute to a slump in business activity in the country. We need to find the golden mean. We also need to realise that the decisions we have made, above all about pension system reform and our economic modernisation and technological development priorities require serious changes to the budget’s structure. We need to make the budget one of the key tools for reaching our long-term goals. Budget policy must be able to adapt to changing circumstances, but even during a crisis we cannot resolve short-term difficulties to the detriment of our long-term objectives.
With these considerations in mind, I think we need to concentrate on the following principal budget tasks, ten in all:
One, we need to fulfil our social spending commitments and make them more targeted in nature. There must be a consistent effort to give the regional authorities greater powers in this area. They are the ones who, using their knowledge of the local situation, should decide which specific social support programmes are needed, taking into account the income levels of benefit and subsidy recipients.
Two, consistent efforts are needed to bring down the budget deficit. The pace at which this can be accomplished is a matter for separate discussion. The budget should provide for a higher level of undistributed reserves so as to enable us to make flexible responses to the fast-changing economic situation. In particular, we will need to decide later on the indexation parameters for payroll funds, military servicemen’s wages and the minimum wage. I propose that we base ourselves on the results of the budget’s implementation for the first half of this year, leaving open the possibility for subsequent adjustments based on the results for the year as a whole.
Three, we need to introduce stringent cost-cutting measures to save budget money. I want to make it clear that saving money and cutting back spending commitments are far from always one and the same thing, although in many areas that are not priorities in the present situation we find ourselves having to cut back spending too. It is important to clearly identify our priorities and the objectives of spending taxpayers’ money. We need to make a consistent effort to spread the use of programme and project approaches in budget planning and ultimately achieve the greatest possible economic and social multiplying effect from every rouble of budget money.
Four, we need to find optimum means for supporting the country’s manufacturing and industrial sectors and its financial system. Enhancing effectiveness, above all energy efficiency and labour productivity, and carrying out technological modernisation should be essential conditions for state support.
Five, we need to achieve a radical improvement in the quality of our public services. The various programmes we carry out, including our work on the priority national projects, which will continue to demand our particular attention, should develop the use of new ways of providing healthcare, education, and other social services. We should not be afraid in a number of cases to move away from public sector production of these services to having the state purchase these services in the public’s interest on the competitive market, but only in cases where this would lower costs and improve the quality of services provided.
Six, we need to radically improve the public procurement system. Public procurement should be a means of encouraging technological modernisation and competitive effective producers. Cases of putting up the prices essentially amount to direct corruption and should be dealt with swiftly and resolutely, otherwise we will just be pumping more money into the economy without producing the desired economic effect, and we will just be lining the pockets of criminals grown fat on budget funds.
Seven, we need to set an economically justified tax burden that would encourage entrepreneurial activity and promote technological research and development. In particular, we need to come up with tax incentives for businesses to become more energy efficient. This is something we have been talking about for a long time now. We also need to take a close look at the possibilities for lowering the tax burden in order to mitigate the negative impact on taxpayers of higher contributions to the pension and medical insurance systems.
Eight, we need to make the authorities at every level of government responsible for spending budget money effectively, ensure a balance in spending powers, and create incentives for the regions to develop their own revenue base. Budget subsidies should not be a universal means of financing spending commitments. They should be used only in cases where there is a need to smooth over excessive discrepancies in the level of provision of particular public services, or when we need to encourage the spread of best practice in providing these services, including through the priority national projects.
Nine, we need to complete the establishment of a reliable and balanced pension system that will make it possible to give senior citizens a decent standard of living. The average old-age pension should come to more than 8,000 roubles a month in 2010. We need to eradicate poverty among pensioners, including by topping up pensions lower than the survival minimum in the regions with additional benefit payouts.
Finally, ten, we need to start work on putting in place a barrier-free environment for people with disabilities. We need to implement the measures that our country committed itself to by ratifying the [International] Convention on the Rights of Persons with Disabilities.
I conclude by coming back to the words with which I began. The budget address’ implementation depends directly on all of you here today. I am sure that you all understand that this difficult time, this crisis period, is a time when we need to make a consolidated effort to carry out the anti-crisis measures that will create opportunities for future growth. We cannot let these opportunities slip through our fingers. We do not have this right.
I propose now that we have a brief discussion of the plans for carrying out the budget address, including the procedures and deadline for preparing the draft federal budget.