Prague - Next year, Czech Republic's public finance debt will grow by CZK 95 billion, says the 2008 draft state budget that was seen by Aktuálně.cz.
The Finance Ministry would not publish the draft of its budget before September 11 when it is to be debated by the government. In its brief press release it only admits to a planned budget deficit of CZK 71 billion.
Nevertheless, the documents submitted to the Government admits another budget shortfall of CZK 20 billion more, as the financial backup resources of individual ministries will dissolve in the planned spending.
Another billion will be added to the public debt by the worsening balance of spending outside budget, especially the Housing Development State Fund. The district and borough budgets will be worse off by three billions. Thus, the public finance deficit will reach the 2.95 percent of the Czech Republic's GDP as announced.
Six winners
According to the budget, the state is going to give the most to the transport related building works. At the last moment, Miroslav Kalousek, the finance minister, added CZK 10.6 billion to the expenditure to co-finance EU investments. At the same time, another 45 billion will be allocated directly from the Transport Ministry budget to motorways and railways works.
"This extraordinary capital expenditure growth in the budget is caused mainly by the steep increase in subsidies to the State Fund for Transport Infrastructure", the draft budget says explicitly. This year, 1041 billion were budgeted, with 89 billion investments. Next year, the state is going to spend 1107 billion, out of which it wants to invest 126 billion.
Besides the Transport Minister Aleš Řebíček, the Interior Minister Ivan Langer and Justice Minister Jiří Pospíšil can be satisfied with the new draft budget. Langer will get 25 per cent more money to pay the policemen than he had this year, and Pospíšil one seventh more.
At the last moment there was more money also for the Culture Minister Václav Jehlička whose budget will now not be cut. The planned cuts announced last June led to the Minister threatening to resign.
Both the Local Development Minister Jiří Čunek and his colleague from Foreign Affairs Ministry Karel Schwarzenberg will have to prepare for Czech EU presidency from the start of 2009.
There will also be one and half billion Crowns more for the state subsidies of the controversial support to the building saving scheme; the same subsidy the former Finance Minister Bohuslav Sobotka was trying to restrict.
One loser
On the other hand, the Education Minister Dana Kuchtová has lost: her budget will be 4 billion lower than this year. She won two partial victories, though: she will not have to cut the number of teachers, and, in a last minute turnaround, she's getting higher subsidies for elementary and secondary schools one billion more than the last year.
But the universities' and colleges will lose about ten per cents of their budgets. At the same time, the state will cut almost two billion from the current 25 billion state subsidies for sciences. Kalousek's proposals try to pre-empt the charge that the new Government does not wish well on scientists.
This year´s subsidies set aside over 3.5 billion for pre-financing of European research projects with Czech scientists' participation. As the researchers did not use the possibilities offered, three and half billion Crowns went to the budget reserve for future use.
Look for help in Brussels
Nevertheless, the figures clearly indicate that, from all the areas involved, only the Education Ministry and the Academy of Sciences are threatened with real loss.
In the case of the Agriculture and Environment Ministries, the shortfall is only of bookkeeping character. Both ministers responsible moved the financial resources into the extrabudgetary funds under their control.
The Industry Minister Martin Říman had to restrict the support to businesses and subsidies to liquidation of damages to the mining industry. In case of his department, though, it is clear that he will be able to make up for the shortfall in the next year while getting money from the European action programme, Business and Innovation.
There could be European money for Mrs. Kuchtová, too. She wants to invest mainly into the equipment for schools and research institutes, but she'll have to get round some problems as the Czech Republic has little experience using European educational programmes. Moreover, she won't be able to use money from Brussels to pay teachers.
As per usual, the budget does not mention health spending. The Health Ministry expenditure will rise somehow, and the Minister, Tomáš Julínek, will get a chance to subsidise state-run hospitals a little bit more than until now.
The main body of money will pass through the health insurance companies. These can now rely on the fact that the expected 7 per cent rise in income pay will lead to almost the same rise in their incomes.
The budget to be saved by higher taxes
Kalousek's proposal has to be approved by the Government next week. Come the end of September, it will have its first reading in the Parliament, and, two month later, there will be a final decision.
Theoretically, the ministers or MPs could refuse the budget as a whole. Failing that, they would be pushed to change its basic parameters, including the main one: that the state income and expenditure will rise faster than the economy.
Kalousek is counting on five per cent growth of economy, whereas the budget income will rise by 9.2 per cent to CZK 1036 billion. The expenditure, CZK 1107 billion, will rise by 6.4 per cent as compared to the current year.
The state will get the most from the rise in Value Added Tax rate, which will bring in 24 billion extra (of which the state will be getting just two thirds of the total VAT revenue, the rest will go to the districts and boroughs).
It will get extra 13 billions from the consumer taxes, and 8 billion from taxing businesses. On the other hand, the state is going to lose CZK 11 billion on the personal income tax and 1 billion on property taxes.
Most savings: Ministry of Work and Social Affairs
The deficit for this year is expected to reach CZK 120 billion, cutting it by 25 billion in the next year will be achieved by higher taxation.
The most savings on expenditure come from the Work and Social Affairs Ministry that is going to pay out CZK 10 billion less on income support benefit and sick pay. But the efforts of the minister responsible Nečas are thwarted by the necessity to increase pensions.
Even should he, as he said a week ago, use the minimal index-linked increase of 3.95 per cent, the state spending would increase by CZK 18 billion.
The ministerial documents say main risks come from the European subsidies. The budget revenues count on getting CZK 76.1 billion next year more than double the sum Czech Republic received from Brussels so far.
So far, the Czech ministers were unable to conclude successfully the negotiations with the European Commission the action programmes facilitating the influx of Brussels money.
