Maxim Tovkailo, Olga Pavlikova, Denis Telmanov
The spectre of the economic crisis hovered over the 10th Congress of United Russia
The 10th Congress of United Russia (UR) was held at Gostiny Dvor on Thursday. For the first time, it was conducted by Vladimir Putin, the Prime Minister who doubles as the Party's Chairman. The focal topic of all the speeches was how to protect the Russian economy against the world financial crisis. Mr Putin, President Dmitry Medvedev and United Russia Supreme Council Chairman Boris Gryzlov all spoke about it. They promised tax cuts to enterprises, financial aid to banks, and increased social benefits and tax breaks for citizens. Mr Putin did not formally join United Russia, in spite of rumours ahead of the Congress that a party card had been prepared for him.
PARTY GEOMETRY
The Congress hall had the shape of a trapezoid, with the head table at its top, journalists at the base, and party members and invited guests on the sides. At the centre was a small podium for the speakers. Around it sat the Government members and the party's top functionaries.
The Congress was opened by Mr Putin. Dmitry Medvedev sat to his left and Boris Gryzlov to his right. After the agenda was approved, Mr Putin gave the floor to the head of state, who made a short speech (about 10 minutes). The President admitted that the world financial crisis had developed into a global economic crisis that affected Russia as well. However, he reassured the audience that the state would meet its social obligations to the citizens.
THE TAX PREMIERE
Mr Putin, who was the next speaker, spoke for 45 minutes. He announced tax cuts for business. Until Thursday, the Government had mainly been disappointing the business community by refusing to cut the VAT and raising the social tax from 26% to 34% (effective as of 2010). It also decided to cut the mineral tax and export duties on crude oil. These measures affected mainly the fuel and energy complex and other industries only indirectly, through a cut of petrol prices.
The Cabinet promised to revisit the issue of the VAT cut next year. On Thursday, Mr Putin announced that it would do so in April and urged the tax people to refund the VAT more quickly. "The current arrears on the VAT to be refunded (to enterprises - Gazeta) out of the budget must be minimised before the end of the year," he said.
As of January 1, 2009, the profit tax may be cut by 4%. Its current rate is 24%, 17.5% of which goes to regional budgets and the rest to the federal budget. The 4% cut would affect the federal treasury (though the regions have the right to renounce their 4%).
The reduction of the profit tax, the Government warns, should not be seen as compensation for deferment of the VAT tax cut. On Thursday, Deputy Minister of Economic Development Stanislav Voskresensky explained that the profit tax cut was an anti-crisis measure. However, First Deputy Prime Minister Igor Shuvalov indicated on Thursday that it was, after all, a compensation, not for the VAT, but for the increase of the social tax in 2010.
In addition to the profit tax cut, Mr Putin offered other tax inducements to businesses. The amortisation bonus would be increased from 10% to 30% in 2009, not in 2010 as originally planned. The Government would also cut the fixed tax rate for small enterprises from 15% to 5% .
THE ROUBLE HURRIES TO THE RESCUE
Taxes are only the beginning of the list of new measures to support the real sector. The Prime Minister called on the Central Bank to simplify the procedure for refinancing commercial banks. At present, the Central Bank accepts the bonds of a limited number of companies as loan collateral. Mr Putin proposed lifting such restrictions, thus increasing liquidity in the financial and real sectors of the economy.
The Prime Minister dwelled on the problems of the defence industry. "I propose increased subsidising of the interest rate, building up investments in the capital of enterprises, and allocating additional resources in 2008 and 2009 to prevent the bankruptcy of defence enterprises. The total amount of resources earmarked for these purposes exceeds 50 billion roubles," the Prime Minister said.
The assistance comes in very handy for the defence industry. Most defence enterprises have run up large debts, according to Konstantin Makienko, an expert at the Centre for Strategies and Technologies Analysis: RSK MiG is 43 billion roubles in the red, the Chernyshov plant, 22 billion roubles, the Salyut association, more than 1 billion roubles. "Cheap, long-term loans stopped being issued in the summer, and now even short and expensive ones are unavailable. In addition, all funds earmarked for federal target programmes, including for basic R/D, have been put on hold," the expert explained.
HOUSING PRICES CUT RETROACTIVELY
Against the backdrop of new measures to support the real sector, the promises of additional help to banks were somewhat less impressive. The Government will continue direct assistance to the financial sector: the authorised capital of banks with government participation and of development institutions will be increased out of the federal budget. The capitalisation of the state corporation Vnesheconombank (VEB) is to be increased. VEB has effectively become the vehicle of the Government's anti-crisis measures. On Thursday, Mr Putin signed an executive order allocating 75 billion roubles to VEB that it will use to bolster the stock market.
On the social front, the Government will wage a war on poverty. Unemployment benefits will be raised to 4,900 roubles. Purchasers of new flats will also enjoy benefits: the sum of tax deductions for buyers of new flats will be doubled. "They will save not 100,000 roubles, as now, but 260,000 roubles on taxes", the Prime Minister explained. The new rules will be introduced retroactively, as of January 1, 2008. For those who bought their flats after that date, their income tax will be recalculated and they will get a refund.
SPREADING RUMOURS
After he finished his speech, Mr Putin heard Mr Gryzlov's report before leaving Gostiny Dvor together with the President. He was still the non-party leader of the country's biggest party.
"Who told you that Mr Putin was going to join the party today? I didn't have such information," St Petersburg Governor Valentina Matviyenko told our correspondent. Murat Zyazikov, the former President of Ingushetia, said the time was not right for discussing political issues. "Anti-crisis measures, and not personnel reshuffles, are what matter just now," he said.
The congress presidium continued with the internal party agenda. In addition to promises of early implementation of government-proposed measures, Mr Gryzlov announced the creation of a commission to draft a new United Russia programme. "The Programme will of course reflect the party's ideology. Look at Georgia. Look at Ukraine. We know very well who works with the youth there and how. We will not allow the ideology of our country's development to be imported from across the ocean," Mr Gryzlov stressed.
Predictably, all the congress decisions were voted in unanimously. The merger with the Agrarian Party was approved, and the bureau of the Supreme Council and the Presidium of the General Council were reelected.
Boris Titov, who defected to the Right Cause, was expelled from the Supreme Council, and Duma Deputies Oleg Morozov, Vladimir Pekhtin, and Valery Ryazansky were dropped from the General Council Presidium.
New members of the bureau are the former leader of the Agrarian Party, Vladimir Plotnikov, and President of Mordovia, Nikolai Merkushkin. The Presidium also gained some members: Svetlana Zhurova, Deputy Duma Speaker and Olympic champion, Alexander Shokhin, the head of the RUIE, and Irina Yarovaya, State Duma Deputy and coordinator of the party's State-Patriotic Club.
The General Council also has some new faces. It now includes the secretaries of only those regional branches where at least 64% of local citizens voted for Mr Medvedev for President in March and where at least 60% voted for United Russia in the Duma elections. Under the wire, several amendments to the Party Charter were unanimously adopted. There will be no mandatory party dues, a regular rotation of the party's top functionaries, and a six-month probation period for candidates to join United Russia.