Finance Minister Mihaly Varga submitted Hungary’s 2019 budget bill to parliament on Wednesday.
Before presenting the document to House Speaker Laszlo Kover, the minister said the bill is designed to guarantee Hungary’s security, maintain economic growth, support families and pave the way for full employment.
Next year’s budget targets economic growth of 4.1 percent and a budget deficit of 1.8 percent of GDP based on European Union accounting rules. The public debt is seen dropping to 70.3 percent from 72.9 percent of GDP.
The Fiscal Council said earlier that the deficit target of 1.8 percent and public debt reduction laid out in the 2019 draft budget were achievable. It noted that the draft contains 60 billion forints (EUR 187.5m) in reserves in the Country Protection Fund and an additional 110 billion forints of reserves set aside for extraordinary government measures. The targeted reserves for next year include 78.4 billion forints for pay rises in the public sector and 40 billion forints for the development of public services.
Varga said the budget retains the 15 percent personal income tax rate under a single-rate personal income tax regime. The VAT rates of milk, eggs, pork, poultry, fish and other basic foodstuffs will remain at 5 percent, he added. Tax cuts are also set to continue, he said. The social contribution tax will drop from 19.5 percent to 17.5 percent, Varga said. These 2 percentage points will mean that 100 billion forints will remain with entrepreneurs, he said.
The budget allocates 242 billion forints for the government’s family home purchase subsidy scheme CSOK. Tax benefits for families with two children will rise to 40,000 forints, he said.
The budget bill posted on the website of parliament shows total revenue of 19,580.097 billion forints and total expenditures of 20,578.531 billion forints. Revenue is 4 percent over that in the 2018 budget. Expenditures are 2 percent higher. The deficit is targeted at 998.433 billion forints, 27 percent lower than the gap targeted for 2018. The budget bill targets corporate tax revenue of 399.5 billion forints, 8 percent over the target for 2018. Revenue from the Simplified Business Tax (EVA) is set to fall by 35 percent to 45.4 billion forints, while revenue from the Itemised Tax for Small Businesses (KATA) climbs 20 percent to 135.7 billion forints.
The target for revenue from the bank levy is 52.9 billion forints, up 5 percent from the 2018 target. Revenue from the financial transactions duty is seen climbing 11 percent to 228.1 billion forints. Revenue from VAT is targeted at 4,285.8 billion forints, 12 percent over the 2018 target. Revenue from excise tax is expected to edge up 3 percent to 1,136.3 billion forints.
The bill targets revenue from personal income tax of 2,361 billion forints, 13 percent more than the target in the 2018 budget. Revenue from household fees is seen edging up 2 percent to 192.4 billion forints. The bill puts revenue from the toll on commercial vehicles at 197.8 billion forints, up 11 percent from the 2018 target.
The Prime Minister’s Office and its related institutions will altogether get 790 billion forints. The budget chapter on the office targets over 51.6 billion forints in revenues.
The allocation in the chapter for a capital raise in the project company for the upgrade of the Paks nuclear power plant is 106.1 billion forints and 135 billion forints is earmarked for developments in Hungary’s biggest cities under the Modern Cities programme.
The bill shows a 3.6 billion forint allocation for the preparation and implementation of the Liget Budapest Project, an overhaul of the capital’s City Park.
The bill allocates 287.2 billion forints for the Ministry of Foreign Affairs and Trade, targeting 6.98 billion forints in own revenue. A total of 73.96 billion forints will go towards funding Hungary’s representative offices. The budget targets 6.36 billion forints in operating revenue in this area. As regards the management of the ministry, the bill shows operating revenue of 187.8 million forints and spending of 11.4 billion forints.
In health-care spending, funding for general practitioners’ surgeries will rise by 1 billion forint to 130 billion forints. The government will spend 2,442 billion forints on the health insurance fund compared with 2,319 billion forints in 2018.
Spending on local governments will rise by over 32 billion forints from this year’s 705.4 billion forints to 737.3 billion forints.
The interior ministry will have 35 billion forints less to spend on the handling of mass migration. At the same time, it will get 23.5 billion forints more for counter-terrorism measures.
The police forces will get 234 billion forints compared with this year’s 218 billion forints. The TEK counter-terrorism force will get 13 billion forints for personnel expenses, the same amount as this year. It will be given 2.3 billion forints for material expenditures next year, down from this year’s 2.6 billion forints.
The defence budget will increase by 86 billion forints to 513 billion forints, or more than 1.16 percent of GDP. In 2012, the government adopted a resolution in which it pledged to increase defence spending by 0.1 percent of GDP from 2016.
Pension funding for women who choose to retire early will be 258.6 billion forints. Spending on old-age pensions will rise from this year’s 2,669 billion forints to 2,773 billion forints next year. Orphan support will decrease slightly from 32.5 billion forints to 30.5 billion and funding for widow’s pensions will be 357 billion forints compared with 348 billion forints in 2018.
The final vote on the bill is expected on July 20.
Fidesz hails, opposition criticises draft budget
The ruling Fidesz party said that the budget bill envisages a budget of “steady growth”, based on “responsible and provident” planning and is designed to guarantee security, economic growth, support for families and full employment. Spokesman Imre Puskas said that the pre-2010 leftist governments had had “wasteful” budgets which hit families with austerity measures and tax hikes, plunging the country into debt and to the brink of insolvency. Hungary lost its economic independence, “danced to the tune of Brussels and the IMF”, and faced an excessive deficit procedure for nine years, Puskas said.
The Fidesz-Christian Democrat government, in turn, has “regained the country’s independence and stabilised its finances. It pursues a responsible fiscal policy that reduces state debt and induces a growth rate of over 4 percent,” he said. Since 2010, unemployment has fallen from 12 percent to 3.8 percent, wages have kept growing and taxes have been reduced, the Fidesz spokesman said.
Jobbik deputy leader Daniel Z Karpat described the 2019 draft budget as that of austerity. In recent years, a certain degree of economic growth could be realised thanks to European Union funding, but these resources are now running out and the ruling parties failed to “put the economy on its own feet”, and enable it to grow on the basis of its own resources, he said.
The Socialists said that the 2019 draft budget was “not a Christian Democratic budget but rather that of an irresponsible, populist and communications-focused government.” It is the budget of a country dubbed “Footballistan” where more than 100 billion forints are still being spent on building stadiums, the party said. Whereas Varga talked about a budget of “secure growth”, EU funds still represent the engine of the economy and without them Hungary’s economy would “simply collapse”. What makes “the irresponsible policies of the Orban government” all the more shocking is that they are gradually removing Hungary from the EU, the Socialists said.
Leftist Democratic Coalition said that the draft budget was “a budget marking time, devoid of imagination and concept”. Although Fidesz is planning fast economic growth, the budget fails to address any of the “increasingly pressing” issues that are truly important for Hungarians, Laszlo Varju, the party’s deputy leader, said. Hungary has to strive to create a European quality of life, introduce the euro and “get closer to the ideal of the United States of Europe” but the draft budget fails to serve these goals, he said. Neither does it ease the “chronic lack of funds” in education, health care and the social services sectors, or give any indication as to how the government wishes to solve these problems, Varju said.
Green opposition LMP said that the draft budget failed to solve “the citizens’ everyday problems”, with “young people and the future” standing to lose the most, party lawmaker Antal Csardi said. It is a “budget of unsustainability and rigidity”, he said. The 15 billion forint (EUR 46.7m) increase in education spending “doesn’t even come close to offsetting inflation”, Csardi said, arguing that the budget left less money in real value “for the most important sector for our future”. The budget offers no solution to stop emigration as there is no trace of a substantial raise in wages or a solution for the housing shortage, Csardi said. LMP would stop several investments it deems overpriced, such as the Budapest-Belgrade railway line, and would cut VAT for all basic foods, he said.
Source and photo: MTI