Budget approved for 2015 boosts social spending but cuts investments

11-12-2014

The Czech lower house has passed a budget for 2015 that envisages a deficit of CZK 100 billion, less than 3 percent of gross domestic product. The country’s social services will receive a boost next year but a number of ministries will have to tighten their belts.

Photo: European CommissionPhoto: European Commission The budget rubberstamped by MPs in the third reading on Wednesday is based on projections of revenues of CZK 1,099 billion and expenditures of CZK 1,119 billion in 2015. State bonds are expected to make up much of the difference. The projected deficit is CZK 12 billion lower than that approved for this year.

The budget, which President Miloš Zeman has pledged to sign, plans for an increase in spending on social services of CZK 450 million. Seniors will see their pensions grow by a monthly average of CZK 200, which may not seem like much but is five times more than the increase they got last time out.

State employees including police and fire officers are set for pay rises of 3.5 or 5 percent and families with children will benefit from more generous tax breaks. Value added tax on medicines and books will be cut.

The Ministry of Labour and Social Affairs will receive over CZK 530,000, the largest single portion of the entire budget. However, others ministries – such as transport, education and the environment – will have to tighten their belts after being allocated less than in 2014.

Prime Minister Bohuslav Sobotka said the fact the projected deficit was considerably less than 3 percent of GDP placed the Czech Republic in the “better half” of the European Union. It will be good for the country’s international rating, he said.

Mr. Sobotka said his government, who were pushing through their first budget, had brought to an end a series of budgets passed by centre-right governments that were based on broad cuts.

However, opposition leaders and some analysts have criticised the fact that the budget has cut the amount earmarked for investment – including in science and research – to CZK 75 billion, CZK 25 billion less than the figure for this year.

Miroslav Kalousek of TOP 09 said investment would be even lower than during the economic crisis, when he had been finance minister. He also criticised the high amount set aside for the running of the state.

For his part, the minister of finance, Andrej Babiš, said he had had to do battle with his colleagues in the coalition government to keep the deficit to a “mere” CZK 100 billion.

Mr. Babiš told Czech Television that ministers had been pushing for a figure of up to CZK 115 billion in the summer. What’s more, he said, he would aim to reduce the deficit more during the course of 2015.

11-12-2014