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President of Russia Vladimir Putin: Colleagues,

We have already discussed work on the budget many times this year. This is always a difficult stage in the Government’s work, a complicated process of coordinating the various agencies’ interests. It is a painful process, but extremely important. It is not for nothing that the budget is our basic economic law for the year ahead and the subsequent future planning period.

I know how the discussions have gone within the Government, which has practically completed its part of the work on the budget. The next stage is set to begin now – between the Government and the State Duma – this time within the parliament.

I would like to hear about your final agreements and decisions on the main sectors – defence and security and the social sector.

Mr Siluanov, could you please begin.

Finance Minister Anton Siluanov: Mr President,

Indeed, the current and forecast macroeconomic situation make the 2014–2016 budget not easy to prepare, but nonetheless, it keeps to the budget rules that we adopted and respects the spending limitations set by our budget policy, that is to say, it keeps to the policy principles of not raising spending and steady reduction of the non-oil and gas deficit. This is very important.

In order to resolve the main problems and achieve the objectives set by your presidential executive orders of May 7, 2012 and the various new programmes in place, we have carried out what we call a budget manoeuvre within the budget, setting out decisions on raising revenue and proposing measures for redistributing budget spending. In particular, we have cut public procurement spending, not in actual volume terms, but in cost terms, by bringing down the costs involved in carrying out public procurement.

Our three-year draft budget takes into account the key reform issues – pension, healthcare and education reform – and this will enable us to make more effective use of the planned budget funds. 

Mr President, one of this budget’s innovations is that it was drafted on a programme basis. We can thus follow programme by programme the effectiveness of budget spending and assess the actual results achieved using earmarked budget funds. This is important for parliamentary monitoring of the process too. We work together with the State Duma deputies after all, and they are directly involved in drafting and carrying out the state programmes.

Mr President, all of the funds allocated for carrying out the executive orders of May 2012 have been fully taken into account and come to more than 2.1 trillion rubles for the three-year period.

Of course, we do have some concerns about some of the regions’ draft budgets. With profit taxes currently declining, many regions are having trouble balancing their budgets. We have therefore drafted proposals to increase financial assistance for the regions and for increasing their revenue base. We are working on these proposals with the State Duma deputies at the moment.

Vladimir Putin: Are you collecting information now on the profit tax breaks the regions offer?

Anton Siluanov: Transport tax and land tax breaks are also needed sometimes. We need to analyse their effectiveness. This is all just what we are looking at in the regions right now.

One final thing, we have made provisions too for funds needed for the flood clean-up efforts in the Far East. We foresee that a large part of this money will be allocated this year. In total, we have planned for around 40 billion rubles [more than $1.2 billion] for this work this year and next year. This is a lot of money, but as I said, we propose to have most of it organised through amendments to the 2013 budget.

Vladimir Putin: Good.

Ms Skvortsova, go ahead please.

Healthcare Minister Veronika Skvortsova: Mr President, colleagues,

The health sector budget has been approved overall and is balanced. We plan for increased funding for all main healthcare areas in 2014–2016. The main trend is an increase in funding for insurance-based healthcare.

The budget will enable us to carry out all of presidential executive orders of May 7, 2012 regarding pay rises for medical sector personnel and reaching our main public healthcare improvement targets.

Furthermore, in 2014, we plan to shift some high-tech medical services to the system of insurance-based special medical assistance. Of the 500,000 patients receiving this kind of medical treatment every year, next year, 200,000 will be able to receive it through the compulsory medical insurance system. This essentially does away with the quota system and means that treatment will be available on the basis of real needs.

The details have already been sorted out during our discussions with the Finance Ministry.

Vladimir Putin: Am I right in understanding that part of the money that used to be allocated as direct funding for the healthcare system will now be channelled through the compulsory medical insurance system?

Veronika Skvortsova: Yes, Mr President. These funds are gradually moving into the compulsory medical insurance system from year to year and by 2016, we will essentially have 53–54 percent of healthcare funding going through the compulsory medical insurance system.

Vladimir Putin: Thank you.

Mr Topilin, go ahead.

Labour Minister Maxim Topilin: Mr President, colleagues,

The budget sets out all of the indicators that we decided on earlier. It contains all of the key parameters for indexing social sector payments (the various benefits paid to citizens). The parameters have been set at 5 percent as from January 2014, and 5 percent for monthly payments to entitled groups as from April 1. This rule will be maintained and indexing will be carried out in accordance with the figures set by the law.

Mr President, regarding the maternity capital payments, starting from January 1, 2014, they will increase from 409,000 to 429,000 roubles, in other words, an increase of 20,000 roubles. Full provision of funds has already been made.

This budget includes for the first time new payments resulting from your order establishing the Hero of Labour award. Starting on January 1, 2014, the budget provides for these payments, as well as payments to other groups. These payments come to almost 50,000 roubles a month. 

As for pensions, they will be indexed according to the same timetable as before, that is to say, on February 1 for inflation, and on April 1 in accordance with Pension Fund revenues. We plan total indexation of slightly more than 8 percent and the budget makes the provisions for the needed funds. This will mean an increase in real pensions.

Over the three-year period we will continue annual increases of old-age pensions and raise the correlation with the survival minimum for pensioners. By our calculations, this will enable us to reach the target we set earlier of having the average pension be equivalent to twice the minimum subsistence level for pensioners by 2018.

As Mr Siluanov said, the budget makes provisions for all of the funding needed to carry out the executive orders. Among our obligations in this respect is to ensure full benefit payments for a third child in line with the programme that we began implementing this year and it seems to be going quite well so far. The overall birth rate coefficient was up from 1.58 to 1.69 for the last year. This is the best growth we have achieved so far. We are already close now to the target results. This birth rate growth makes us optimistic that we will reach our objectives.

The budget makes provisions for creating jobs for people with disabilities. This was also one of the instructions in the executive orders. We have taken measures to carry out your other instructions too, including as regards maintaining breaks for small businesses and breaks on insurance payments. They will remain at 20 percent until 2018 inclusive. This was done in order to stimulate small business development. 

Along with the budget, we have also prepared a draft law on raising the minimum wage by 6.7 percent as from January 1, 2014. This will enable us to maintain the correlation to the minimum subsistence level, keep the minimum wage at a particular level and not let it fall. This was what the trade unions called for, and we worked with them to coordinate all of these matters. We will try to respect the agreements reached.

Vladimir Putin: What is the situation on financing for defence projects?

Defence Minister Sergei Shoigu: Mr President, in accordance with your instructions, we have made a thorough analysis of all items in the state arms procurement programme through to 2020. The quantity and deadline parameters have all been kept in place.

Over this time, working together with the Finance Ministry and the Industry Ministry, we have fully synchronised the entire arms procurement programme with the Armed Forces’ actual life. In other words, we now know just what we need to do in terms of coordinating infrastructure needs with deliveries of new arms and equipment, what we need to build in order to operate and service this equipment, how many people we need to train, and what quantity of medical facilities and service housing we need to build.

This synchronisation work enabled us to produce a balanced budget for the three-year period, including 2014 of course. We also made provisions for all of the instructions on implementing your executive orders of May 7, 2012, and we examined these plans first at our board and then in detail with the Finance Ministry.

We have made the necessary decisions in all areas that will enable us to make dynamic progress towards the set targets of new arms accounting for more than 30 percent of total arms by 2017 and 80 percent of total arms by 2020. We are confident that we can reach these objectives if work goes ahead as organised today.

Vladimir Putin: Good. We all know that the global economic situation affects us too. We need to base ourselves on the real circumstances and our economic development forecasts must be realistic. We need to calculate our revenues based on these forecasts. At the same time, we must fulfil all of our social commitments to our people, and this concerns the instructions we are all taking about – the presidential executive orders of May last year. 

Those orders were in large part devoted to social provisions for various groups of people in different areas. They also address issues related to specific sectors. We will not go into all the details right now. It is good that the Government has provided for the funding needed to carry out these general plans.

As for the clean-up effort in the Far East, I hope that this money will be enough. The only point I want to make in this respect is that the money has to be allocated in timely fashion. Obviously, it is not possible to build all the homes that need to be built overnight, but the funding must be arranged in such a way that there are no delays and holdups.

As for compensation payments for moveable assets, they must be made immediately following the decisions from the commission tasked with evaluating the damage. The same goes for full-scale repairs. You already know all of this and I will not repeat it all again now. 

As I said at the start, work on the budget is an essential, vital, but difficult process of coordinating positions and setting priorities. The Finance Minister noted that the budget itself was drafted according to new principles this year. The new programme-based principle being used should make our budget policy more effective. You mentioned the budget rules too, which, as said, aim to bring about a reduction in spending.

What I want to stress in this respect is that cutting spending is not an aim in itself for the budget rules. Their much deeper-reaching aim is to create the conditions for development by helping us to improve our macroeconomic indicators.

As we know, this is an essential condition for developing the economy overall. Indeed, our entire budget policy needs to focus on creating the conditions for growth. I take this to be the case and hope that now that the Government has completed its approvals process, it will take a unanimous position in the discussions in our parliament. 

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