Fiscal Council: Inhabitants' interest in state budgeting is decreasing  27 May 2019

Only a fifth or 18% of the respondents in Latvia follow the state budget, but 82% do not do so, according to a survey conducted in April 2019 on the state budget discipline. Comparatively, in 2016, this interest was 25%, 21% in 2017 and 19% in 2018.

Respondents aged 35-54, a group with higher education, public sector employees and high-income respondents have more often expressed interest in following the creation of the state budget.

"As the public interest in the state budget decreases, there is a growing risk that Latvia's negative practice of making decisions in previous years will continue, which may worsen the fiscal stability of the country in the long run, i.e. spending is higher than we can afford," says Jānis Platais, Chairman of the Fiscal Discipline Council.

Asked to express their views on public savings and debts, 52% of respondents in the SKDS survey agreed that "during a period of rapid economic growth and development, savings should be made for more difficult times" (including 30% agreeing "completely"). It should be noted that support for this statement is gradually shrinking. On the other hand, "at a stage of economic growth, public debt can only be increased on the condition that money is invested in projects or areas that will benefit from future generations," agreed 40% and was a little more than a year ago.

Of the areas that should not be affected by reducing the state budget, respondents most often recognized health care (87%) and social security (71%). The third most often mentioned - education and science - is marked less frequently (47%). It should be noted that these three positions have been mentioned more frequently in previous years, but the popularity of the fourth most frequently mentioned items - tax breaks - in 2019 has surpassed that of "roads and infrastructure".

In turn, they are asked to indicate which of the four positions for the need to reduce public spending should be evaluated first, most often respondents mentioned the reduction  of the salaries in public administration (67%). The second and third most frequently mentioned were "national defense and internal security" (40%) and "art and culture support" (39%). It should be noted that the areas of "public administration remuneration" and "state protection and internal security" have been noted more frequently than in previous years.

According to J. Platais, Latvia has been accustomed to relatively high growth rates in recent years, but it should be expected that economic growth will slow down already at the end of this year and in 2020.

"The fiscal policy so far in our country has been greatly eased - we worked with a larger deficit than we can afford. As the economy grows, it is expected that a number of budget priorities will not be implemented and the old headline or planned spending will need to be revised," said J. Platais.

According to J. Platais, the survey shows a positive tendency for public money saving - the majority of the population (89%) thinks that it would be better to reduce spending in order to reduce the government deficit, while 4% think it would be better to raise taxes. Compared to the results of surveys carried out in previous years, the proportion of supporters of expenditure reduction has slightly increased (in 2016 and in 2018 it was mentioned by 87%).

The majority of respondents (85%) believe that measures should be taken in Latvia to reduce income inequality (including 50% saying that they should be done).

Most often, people have supported measures to reduce income inequality, such as "material support for students from poor families" (87%, of which - 48% fully supported), "higher social support for the poor" (81%, of which "full support" 42). %) and "support for new businesses in new technology sectors" (81% of which - "totally support" - 36%).

It should be noted that respondents most often consider the most effective measures to be the progressive income tax system (51%) and the progressive real estate tax system (36%), the implementation of which would be supported by 73% ("fully supported" - 33%) and 71% ("fully supported" - 35%), but less often - higher investment in science and higher education (12%) and support for retraining for the unemployed (12%).

Inhabitants consider incompetent public administration (61%) and lack of political will (44%) as the main obstacles to reducing income inequality.

Fiscal council secretary D.Kalsone report on the budget discipline survey is available here (in Latvian). The report presents trends of opinion of the population in four survey years, as well as an overview of additional questions asked this year on support for inequality reduction in Latvia.