The Parliament has passed the major items of the Budget 2014. The deficit has increased significantly and interesting rearrangements have been made to the budget. Policy Agenda has examined how much the government managed to stand its ground against the party political lobbies in the parliamentary debates and in what items was it constrained to let even in an unprincipled manner.
Plans and Facts
In this government term we have had the opportunity to get used to the fact that a budget accepted has hardly anything to do with the one implemented. Looking at the budgets of the past three years including the current one, it becomes obvious that the alterations made by the government to the target deficit came to approx. 1,300 billion forints compared to the original target in the course of implementation. In this respect the most dramatic changes were made in 2011, when the deficit was reduced by 1,055 billion forints due to the interim steps made in the convergence programme and for the winding up of the private pension fund system.
This year the uncompromising rigour turned into lenience as regards the budgetary discipline. The deficit crawled up by 200 billion forints due to interim alterations, which might also grow by the end of the year if the figures of October are considered.
The Parliamentary Bloc Tries the Limit
Policy Agenda examined how permissive the government becomes in the course of parliamentary debates over the budget. The figures reflect that the government remained stern during the whole length of the budget discussions in respect of the deficit in 2011 and 2012, and afterwards the rate of deficit was not let to increase compared to the originally budgeted one. However this was not the case as regards budget 2013, because during the debates 164 billion forints were put on the deficit by the governing party’s bloc, while this year the budget deficit was increased by 60 billion forints.
Needless to say, that in itself not increasing the deficit with extra demands does not suggest a responsible attitude towards the budget on the governing party’s side. Principle based approach is ensured if it is capable of providing real sources for the extra burdens. In this field serious problems appear. The governing party’s representatives show propensity for resorting to VAT revenues. When they seek possibilities to formally offset any expenditure, they just increase the expectable VAT revenues. This means, they overrule the forecasts made by the government’s experts, and in each case without reasoning they simply correct the targeted revenues.
In this government term such changes were made in 225 billion forints worth. They were unable to resist this temptation this year either, and they budgeted with additional 14 billion forints over the anyway unrealistic targeted revenues. By exactly the same amount as they increased the amount of subsidy due to the BKV with. Obviously, this 14 billion forints cover, at least partly, the reduction of the BKV season ticket prices. A peculiarity of this situation is that by cutting the season ticket prices even the VAT revenues will decrease on budget side, while, in our opinion, the funds for that come from fictive VAT revenues.
Will there be corrections?
Budget 2014 has not yet been accepted. For the time being only the key figures are available, which, in principle, will remain unchanged when the final act is passed. At the same time, the statutes facilitate even the significant correction of the budgeted revenues and expenditures in the very last moment.
In accordance with the figures on hand, although the GDP figures this year seem to be better than anticipated, in the Policy Agenda’s opinion we will be unable to fulfil the targeted less-than 3% deficit. Despite that the deficit increase by 60 billion forints will have positive effects on the local governments’ management, whereas this amount will be devoted to cover their debts, but not such a great extent to have a neutral impact on the budget as a whole.
Politically, the government will not be constrained to make any rearrangements in the budget prior to the elections, since, before 6 April, being the appointed date of elections, only the first two months’ figures will be public. It will be easy to say by the government that the budget does not show any problems in execution.