Andrei Vladimirov, Dmitry Plenkin (photo)
Prime Minister Vladimir Putin stressed that the governing party is responsible for the economic situation in the country.
"Parties are created not to satisfy the ambitions of their leaders, but to develop the state and help people in their daily life." This is certainly true of the party that gathered at Gostiny Dvor for its regular congress on November 20. The words were spoken by Dmitry Medvedev, an honoured guest at the 10th Congress of United Russia.
First, the ambitions of the UR's leader, Mr Putin, had been met long before he became the head of the party. Second, the governing party today is indeed more in touch with the "daily life" of the voters than ever before.
The gist of Mr Putin's keynote speech to the congress was that it was perhaps the first time in his career as President and now Prime Minister that he has met a real challenge. Its name is economic crisis. Even international terrorism could hardly be likened to the magnitude of this challenge. It will be recalled that as the fight against extremism was stepped up, Mr Putin's rating kept growing. This is not so today. The governing party and its leader for the first time face a challenge on which their political future may depend. Obviously, in the next election, the voters will vote not with their hearts, but with their purses. This explains the fact that was unprecedented in recent political history: specific economic decisions have been announced at a party congress, and, once endorsed by the congress, were put before Parliament and then passed on to the Government, which is to put them into practice.
Under the Constitution, Russia will of course remain a presidential republic. Under the above scheme, however, the Government, the Prime Minister, and now the party that is their support base are responsible "for everything" in the country. The keynote speaker recognised this obvious fact. "As the parliamentary majority party, United Russia is fully responsible for what happens in the country," Mr Putin said. Its political future... will depend directly on how we cope with the problems the country and its citizens are facing today."
This is a very candid admission in a country where the tradition of "passing the buck" is so powerful. The measures to support the economy and business announced at the party congress are likely to be only the beginning of major changes. The UR, for example, has postponed the adoption of a new party programme based on the Government's Strategy through 2020. It looks as if the programme and the strategy with the strategic economic tasks they contain are not relevant any more. This is the conclusion that anyone who listened to Mr Putin's report to the congress made. The Prime Minister admitted for the first time that the country was in an economic crisis. The measures to combat the crisis that he announced have little to do with the course for state capitalism pursued over the past years. The party and Government's programme envisages a massive reduction of taxes to support business and prevent a recession that threatens to become a home-grown, and not an imported, phenomenon.
The tax and budget benefits for business and the populace announced by Mr Putin were not conceived on the eve of the congress, but were part of an overall anti-crisis plan. This was the most pleasant part of it, which is why it was left to be enjoyed as a dessert called "congress debate". The debate, predictably, did not last long: not a single delegate gave as much as a hint that he was against, and not a single delegate showed any interest in the items on the Government menu that had not been presented for the party's scrutiny.
These items nonetheless merit attention. Suspension of payment of compensations for deposits lost before the reform, for example. Or the principles of allocation of state resources. Not all of the 5 trillion roubles earmarked to support the economy proved useful. Some of that money went to the individuals that are close to the authorities, which should be the responsibility of the Government and the party that supports it.
"They will have to answer to voters who can forgive a lot, but not a decline in their living standard after eight years of sustained growth. The latest opinion polls show that more and more citizens are asking uncomfortable questions. The Levada Centre has found that the share of respondents who believe that the Government is not coping with the key economic tasks has grown from 27% to 33%. The share of those who would give the Government good marks has dropped from 13% to 7%.
Significantly, while the Government's rating is low, the head of the Government still remains the most popular Russian politician. However, unless Mr Putin's Government and his party manage to steer the country through the crisis, a political turnaround may not be ruled out.
Some analysts have noted that shortly before the UR congress, the "For Putin" movement was suddenly revived and held its forum in Moscow. That group, created to convey "the working people's wish" that Mr Putin remains the "national leader," last made itself heard on the eve of the presidential election. It may be a mere coincidence. Support for the leader is welcome at all times, especially in times of crisis, and the party he leads is optimistic. For example, the photo album titled "Seven Years out of a Hundred" distributed at the congress illustrated the UR's achievements in its first seven years. Apparently, the party expects to have at least 93 more equally successful years. However, the 2009 crisis must be left behind first.
* * *
COMPETENT OPINION
We would be lucky if we hold out another year
Deputy Prime Minister and Finance Minister Alexei Kudrin answered questions from Itogi after attending the "anti-crisis congress" of the UR.
Question: Will the new tax initiatives announced by the Prime Minister require adjustments to the budget?
Answer: In his speech, Mr Putin proposed new measures to support the national industry. Now that we assess the consequences of the world financial crisis and its impact on the Russian economy more strictly, the state must introduce the so-called anti-cycle policy measures. That is, when the situation in the world worsens, you must support the national industry. Thus I believe the tax cuts are timely. We are even being proactive. We are prepared to cut the profit tax by 4% as of January 1, 2009, at a cost of about 400 billion roubles. I think the enterprises will use this opportunity to meet their commitments, make further investments and support their current activities.
Q.: Among other measures mentioned was the increase of the amortisation bonus...
A.: ... From 10% to 30%. What does that mean? When new equipment or a building is put on the enterprise's balance books, 30% is at once deduced from the taxable profit. This will be added to the current investments, construction projects, and modernisation. The crisis forces many enterprises to switch to more effective mechanisms and technologies in order to withstand competition and pressure. They need help. The 30% bonus will yield over a hundred billion roubles.
Q.: But that money would be deducted from the budget.
A.: We are not going to cut budgetary spending next year. We will use the Reserve Fund to help us through the difficult period. In the future, we expect growth rate and profits to increase. The total mass of tax revenues will grow, but for the moment it is important to preserve the structure of the economy and even improve it.
Q.: How long will the crisis last?
A.: The peak of the world crisis will occur in 2009. Now, it is economic as well as financial. That year will see a drop in demand for Russian products as well. In 2010, growth will resume across the board, so we have to survive the next year by skilfully and competently distributing our resources. We will have to spend the resources because it will be the worst year that we have experienced in the last ten.
Q.: What about inflation and the rate of the rouble?
A.: Inflation will go down. Next year's target is up to 8% a year. As for the currency exchange rate, that is the responsibility of the Bank of Russia. I am sure we will have a stable exchange rate policy.
Q.: How much will the increase in unemployment benefits cost the budget?
A.: About 30 billion roubles in 2009. As for the budget as a whole, the growth rate and revenue forecasts are being reassessed. Of course, there will be no budget surplus; we might even go slightly into the red.
