The state budget for next year passed the first of three readings in the Chamber of Deputies. As in previous years, deputies YES, CSSD and KSCM voted in favor. The remaining parties were against – the government should get the budget back for revision. Whether this distribution of forces will last in further negotiations, but remains open.
President Miloš Zeman came to the House to speak on a budget. The government was defended on behalf of the government by the Minister of Finance Alena Schillerová, Prime Minister Andrej Babiš did not speak in the debate. Agreeing at first reading means that it will no longer move with the main parameters of the budget. So revenues, expenditures and deficits are paid as proposed by the government. The deficit is to amount to 320 billion crowns, which is the second highest amount in history after 500 billion planned for this year.
The deficit will have to be paid against the national debt. At the end of next year, it is expected to just exceed 2.5 trillion crowns, before coronavirus it was only 1.75 trillion. According to the government, the impact of coronavirus will continue next year. Compared to last year’s (last) normal budget, the government wants to spend 250 billion more this year, mainly on higher salaries, pensions and various programs to support the economy. Due to a weaker economy and worse tax collection, the government will collect 50 billion less. The gap between income and expenditure thus widens and the debt rises.
The problem is that it is not at all certain whether the proposed numbers are valid. This is the main subject of opposition criticism – along with a lack of will to save. There are two reasons for the doubtful reliability of the figures presented. First, it is not clear how big the impact of the coronavirus will be. As a result, the Ministry of Finance itself has resigned from calculating regular economic forecasts, which it normally issues every quarter. The second, main objection is that the budget does not include major tax changes that the government is proposing in parallel in another parliamentary press. The budget looks like it doesn’t exist.
Read also: Tax cuts are one step closer, Okamura helped Babiš
Schiller justifies this by saying that she can’t build a budget on unfinished laws, but she denies herself: she did exactly that last year, except that the laws worked in her favor and improved the budget, so she counted them already in the preparation stage. It is not customary for such large tax changes as the government wants to make now to be discussed so late before the end of the year. The opposition argues that without tax changes, the budget is just a piece of paper and does not fulfill a basic role – to show lawmakers a plan for how the government wants to manage state money.
Another common objection is that the government has done work on a strategy to back out of the current large debts. Schiller explains this by saying that after the election, the new government will set its own strategy anyway.
15 or 19? Or nothing?
The main tax change is the abolition of the so-called super-gross wage. After its abolition, personal income tax is to be calculated only on the gross wage, which involves setting a new percentage rate. The government itself is arguing about its amount – the YES movement wants 15 percent, the CSSD proposes 19 percent. Both changes are a relief for taxpayers, but each different. They are presented in the Chamber in an unusual way: Andrej Babiš and Jan Hamáček proposed them for themselves as two competing parliamentary amendments.
In the preparatory meeting at the Committee on Budgets last week, Babiš’s 15 percent version passed, but only thanks to the support of the SPD and the small number of deputies present. According to the National Budget Council, this version would lead to a shortfall of another 88 billion crowns in the budget, and the debt would jump next year not by 320, but by 408 billion. Which the CSSD thinks too much and does not want this version. Babiš and Schillerová insist on a 15 percent rate, they consider large debt a necessary step to stimulate the economy. In the Chamber of Deputies, President Zeman reiterated the objection of many economists that people may not even spend the extra money, but would rather save it, but eventually supported the thesis of necessary debt – and recommended Babiš’s version of lower taxes, albeit as a transitional measure for two years.
Even after Wednesday’s meeting, however, it is not clear which party will eventually support Babiš’s tax cuts – and whether it will pass at all. A similar proposal as Babiš was repeatedly submitted by the ODS. Her votes, along with the SPD, would be enough to support her, but this would create an unusual coalition at a crucial point, which de facto means that the government’s tandem is moving to the other side at the moment. At the same time, the tax changes – unlike the budget itself – must go from the Chamber to the Senate, where further objections can be expected. So the question is whether the tax cut will not be just an unfulfilled promise, the failure of which Babis will lead to rebellious opposition.
The support for the budget is also unclear – and thus the further fate of government management, and therefore government functioning. The Communists backed the budget on Wednesday in the first round, demanding that they want to take 10 billion from the army’s budget and hide it for rescue covid programs. Babiš has ruled that out before. No other party wants to support the budget.
The final vote in the Chamber is scheduled for 16 December. Until then, MEPs have to make proposals for transfers between chapters – these are possible if they are agreed by a majority in the House and if they do not affect the already agreed expenditure ceiling, usually in the context of total trillions. And then about the budget as a whole.
If nothing changed and there were few votes, the government would have to run a so-called provisional budget next year. This presents a number of limitations, but not a completely intractable situation. The basis for the provisional spending is the previous year’s budget – and the government is playing cards, because after a continuous summer increase due to coronavirus, the expenditure ceilings are even higher this year than those planned by the government in next year’s budget.
Not having a budget would be an unusual political problem and a bad signal abroad. However, since the government is ending next year due to the elections, it is not possible to predict what will happen in the end – whether Babiš’s improvisation will run this time and the dispute will escalate, or, as every year, there will be an agreement on money.
–
