Oksana DMITRIEVA: THE STABILITY FUND IS AN ARTIFICIAL ECONOMIC BRAKE

FINANCE

Tomorrow, at the plenary session, the State Duma will adopt the budget in the first reading. Rather, it will accept: in the current political system, such phenomena are predictable and inevitable, like ebb and flow. However, not all deputies are satisfied...

Tomorrow, at the plenary session, the State Duma will adopt the budget in the first reading. Rather, it will accept: in the current political system, such phenomena are predictable and inevitable, like ebb and flow. However, not all deputies are satisfied with the government version. Oksana DMITRIEVA, an independent State Duma deputy, a member of the Committee on Budget and Taxes, tells Novaya Gazeta about her attitude to the Stabilization Fund, shortcomings in tax policy, and what ideally the salary growth of doctors and teachers should be.

— You are already working on the draft federal budget for 2007. To what extent has it solved the problem of reducing dependence on oil revenues?

Not only is dependence not reduced, it is increasing. After all, if part of the "oil" money is withdrawn from the economy in the form of the Stabilization Fund, this means that other industries are not developing. Consequently, revenues from the sale of oil on the world market play an increasingly important role. Here, the inverse proportion - the less "oil" funds are invested in the development of other sectors of the economy, the greater the dependence of the treasury on these funds.

— In 2007, the volume of the Stabilization Fund is planned to be increased from 2.5 to 4.2 trillion rubles. How do these savings affect the economic situation?

— In my opinion, the Stabilization Fund is an artificial economic brake. The withdrawal from the economy of the funds that it has produced is equivalent to the outflow of capital. The outflow of capital does not bring anything good. There are scissors between the produced GDP and its use. For example, in 2005 the surplus (taking into account the federal, regional budgets and off-budget funds) was about 11%. And the GDP growth rate was 6.4%. It turns out that the economy worked as if the country did not have GDP growth, but its decline at the level of 4.6% (11 - 6.4 = 4.6). And that's just one aspect. There is an opinion that the presence of the Stabilization Fund slows down inflation, but it is generally known that inflation is the lower, the higher the economic growth. If in fact we have not growth, but a decline in the development of the economy, since part of the GDP was simply “put into a nightstand”, then inflation is growing. So I don't see any economic logic in increasing the volume of the Stabilization Fund.

— How do you assess the growth dynamics of non-interest expenses in the 2007 draft budget?

- If we consider only the federal budget, then there is a slight increase in non-interest expenses in relation to GDP. But if we talk about the consolidated budget and off-budget funds, the situation is different. The increase in federal budget spending is largely due to the fact that it centralizes more and more funds, which are then redirected to the regions and extrabudgetary funds. Thus, the transfer to the Pension Fund is planned at the level of 53%, to the Compulsory Medical Insurance Fund - more than 50%. Transfers to subjects account for about 20%. The federal budget is like a storage tank where funds flow.

An analysis was made of the expenditures of the extended government (the same federal and regional budgets plus off-budget funds. - V.Ch.) in relation to GDP. There is no growth - on the contrary, there is a decline. In 2003 it was 32.8%, in 2004 - 30.4%, in 2005 - 29.7%, and by the end of 2006 the figure may drop to 29.4%.

- How long will the situation last when income growth exceeds expenditure growth by more than twice?

— In recent years, our income has grown at a faster pace. In 2003, the budget surplus in relation to GDP was 1.6%, in 2004 - 4.5%, in 2005 - 11%. But in 2006, the surplus is expected at the level of 6.7%. This means that the peak of favorable market conditions has already passed, it fell on 2005. The rate of growth in oil prices on the world market has slowed down, and it will be more and more difficult to camouflage the flaws in tax and budgetary policy with oil revenues. The general government's revenue share has already fallen from 41% to 36% of GDP. There has already been a failure in VAT collection - with the planned amount of 1 trillion 123 billion rubles, the actual expected amount by the end of 2006 will be at the level of 958 billion rubles. This is a failure of tax policy, which was not previously obvious only because such holes were patched with oil revenues. When the world situation changes, in order to increase incomes and develop the economy, it is necessary to give preferences to those sectors in which we want to ensure a structural shift. We want to move away from the commodity sector, so let's give tax breaks to innovative, high-tech industries. Until this is done.

- How can you comment on the growth of expenses for the maintenance of the state apparatus - 821 billion rubles, isn't it too expensive?

- Let's figure it out. Many believe that the functional section - general government spending - is equal to the cost of maintaining the state apparatus. This is wrong. The investment fund is included in the general government spending, and it is growing significantly - from 70 to 110 billion. How reasonable this is, given that not a single ruble of the investment fund has been disbursed by September 2006, is a separate question. Financing of customs, tax, financial and supervisory authorities is also growing very noticeably - by 150%. It is these articles that give such a serious increase in national spending in general. Expenses for the maintenance of the legislative and judicial authorities are growing by only 30%, while those for the maintenance of the government are even reduced.

- The military budget in 2007 will exceed 800 billion. Is it possible, given the secrecy surrounding defense and security issues, to evaluate the effectiveness of spending these funds?

- I do not see any additional difficulties with the analysis of the effectiveness of spending funds on defense and security. The military budget is sufficiently deciphered, there are open articles that are discussed in an open mode. Closed ones are also discussed - behind closed doors. The deputies have quite enough information for analysis. I will say that there are much less clear items of expenditure. For example, in the same section “general government expenditures” there is an item “other general government expenditures”. What is hidden behind the word "other" in addition to the investment fund, I do not know. But these “other” expenses are also increasing, and significantly!

“At the same time, spending on social policy will decrease next year by 6.4 billion rubles. What is it connected with?

- The budget classification has changed, and now the expenditures on the employment fund, in particular, on the payment of benefits to the unemployed, have been moved to the “interbudgetary relations” section. In general, the share of social spending is not decreasing. And even a weak, but still positive trend has been outlined - 2006 will be the first year when the implementation of the budget on social items will be no less than planned.

- The draft budget-2007 provides for a 15% increase in salaries for state employees. But the Ministry of Health and Social Development has already started talking about 19%. How is the real rate of inflation estimated?

- No. The growth of salaries of state employees should go ahead of schedule, in this Zurabov and his department are right. Another thing is that neither 15% nor 19% indexation will help solve the problem of bringing the salaries of state employees to the level of the average salary in the country. Today we have all budget grades, including the highest grade 18, below the subsistence level for the able-bodied population. In order to solve this problem, indexation would have to be about 70%. And here the money that is accumulated in the Stabilization Fund could come in handy. But I don't think the government will take such a step.

- According to your estimates, what will be the inflation rate in 2007?

— The inflation rate in 2005 was 10.9%. In the 2006 budget, inflation is set at 8.5%, but in reality it will be about 10%. I think that the same inflationary growth will continue in 2007 as well. To significantly reduce inflation, changes in economic policy are needed. And since everything is going according to the inertial scenario, I think we should not expect major changes. Inflation is very dependent on rising prices for energy resources and housing and communal services. And if the regional monopolists in the housing and communal services market set a 25% increase in tariffs in 2007, there will be no reduction in inflation.

I can make one more prediction. A year ago, I said that in the draft budget for 2006 revenues are underestimated by about 1 trillion rubles. Today it is already known that instead of the planned 5.046 billion by the end of 2006, revenues will amount to 6.159 billion. For 2007, revenues are also underestimated - by about 700 billion. Accordingly, the surplus next year will not be 1.5, but 2 trillion rubles, which will settle in the Stabilization Fund.