What is the Government’s Platform?

What is the Government’s Platform?

Despite the unwritten law the third Orbán-government failed to have the Parliament accept its platform. Whereas the governing parties did not publish the election programme either, it is not easy to assess what we can expect in the following four years.Beyond the annual budget, the only document the government is obliged to make and that can serve as a compass is the convergence programme. Policy Agenda surveyed what this material suggests the government’s platform will be.

Up to 2010 it was some conventional electoral requirement that the parties endeavouring to form government should have an electoral programme prepared in certain professional depth. Accordingly, the elected prime minister submitted the government platform to the Parliament, which was apparently not binding, but in any case, it included leading buoys. That is it indicates the areas the governments specialised policies will focus on during the entire parliamentary period.

The latest election brought forward significant changes in this respect. The Fidesz-KDNP failed to submit any documents like an electoral programme, and although he had not presented any programmes to his government the prime minister was elected.

However, our obligations towards the European Union a document must be drafted in each year, which presents what the government intends to do and achieve in the next period of three years. This is the convergence programme which includes exact figures relevant to the budgeting directions, and the plans presenting economic and social development. This material is binding to the extent that the government is expected to fulfil the ultimate objective that is the targeted low budgetary deficit, decreasing national debt and low inflation rate. But it is the nation’s sovereign right to choose the means utilised to achieve these goals.

At the end of April the government accepted the convergence programme, which can be interpreted, in our opinion, in the following 4 points, in respect of the government platform:

1.      No Overhead Cost Reduction

The convergence programme includes the target that the “families will be relieved in 2014 from 300 billion HUF and as of 2015 from 340 billion HUF expenses annually, to encourage their consumption.” The increase targeted for next year derives from the cut back of the electricity, gas and distant-heating tariffs on three different dates this year.

Accordingly, the government does not count with any further decrease of the overhead costs next year. Consequently, the process initiated in 2013 will come to an end, and it is also not planned to make the national public utility service tariffs cheaper than those of the current system. Otherwise the effects of this in the retail savings would have been indicated in the paper for this would foreshadow the strengthening of consumption and the development of economy.

2.      No More Money for Public-Work

Following the parliamentary elections the government decided on the employment of 200 thousand public workers on a monthly average in full-time in the public-work programme this year. If the target is implemented this would entail approx. 100 billion HUF extra costs compared to the budgeted sum.

However the convergence programme does not include any hints suggesting that the government intends to rearrange any further funds to this purpose. But this would basically affect the sustainability of the budget for this year, as well as the plans for the next year.

3.      Cut back of the Personal Income Tax Rate to 9% is Put Off

A promise of the governing party prior to the elections was to introduce the 9% personal income tax rate. MihályVarga, Minister, deems this to be possible to be implemented in 2015. However the convergence programme does not say anything about the sources for that, whereas in the forecast made until 2017 the income and property tax rates as per the GDP are predicted to be 6.7%. This is at present 6.9%.

If the personal income tax rate was 9%, it would entail annually 500 billion HUF less revenues from taxes. According to the current figures this can be realised only if the state collects this amount from property taxes.Most likely the government will not undertake this.

4.      2016 will be the Nadir for the Government

The government acknowledges that the subsidies received from the EU funds represented the drive of investments. At the same time, the convergence programme draws the attention to the fact that the effect of the programmes currently in progress will run out in 2016 but the benevolent effects of the new tendering period will still not be perceptible. Although not put into words this will cause certain decline in state investments, which will affect the construction industry principally.

If the economic growth does not gain momentum by that time and the investments of the competitive sector from own sources fail to take the place of state financed developments, the economy will surely face further difficulties and the predicted growth will not happen. At the middle of the government term this will cause serious political challenges to the government.

What the Character of the Next Government be like?

It should be remembered, that if this is the only platform of the government for the next four years, effectively, only the consolidation and correction of the formerly implemented changes are expectable. This would be astonishingly little to expect compared to the governments’ far reaching activities during the previous term affecting every field of administration,and this would not represent a leading principle like the overhead cost reduction did.

Summarising the foregoing, it may be stated that on condition the economy will be unable to serve the not yet revealed (pipe) dreams of the government, then only the symbolic cases andthe quarrelling rhetoric will remain that are intended to cover the governmental work switched over to manager mode.