Vladimir Putin calls on ministries to set an example in introducing austerity measures. As it happened, the measures started with Dmitry Medvedev.
The government will submit the draft 2010 budget to the State Duma tomorrow. For the first time in years it will be a deficit budget (the current financial plan, which has been repeatedly amended as its implementation proceeded, does not count). The official rhetoric matches the current situation. At a government meeting Prime Minister Vladimir Putin called on all the government ministries and agencies to adopt austerity measures, starting with themselves.
However, as it turned out, they started with Dmitry Medvedev. The budget item called Functioning of the President of the Russian Federation was cut more drastically than any other budget item (by 3.8 billion roubles, or 36.3%). It is unclear from the draft budget how much the functioning of the prime minister's office costs the country, but the cost of government activities as a whole is to be slashed by 28.3%. Among other groups that will have their budgets cut compared with 2009 are customs officials, election commissions, border guards, prosecutors, justice bodies and the drug control administration. However, financing will be increased for all the internal affairs agencies, diplomats, the penal system, the FSB, the Federal Security Guard Service and some other agencies, this in spite of the crisis.
However, it is not our business to divvy up the budget. What matters is the overall figure, which was announced by Finance Minister Alexei Kudrin: government administration costs will be cut by an "unprecedented" 20%. If Kudrin had bothered to specify the sum in roubles we would know exactly how much we are paying for government services. In the meantime that sum is spread over a great many different budget items. For example, the cost of the presidency is included in the item "general state issues," the Internal Affairs Ministry, in the "national security" item and the Defence Ministry in the "defence" item. Each of the major items contains a line called "other matters in this field..." For example, the funding of "other general state matters" next year, in spite of the crisis, will grow by 75.5% to 261 billion roubles. That formula could cover anything.
Here is an example. Next year the government is planning to spend 30 billion roubles to stimulate the automobile industry. Two-thirds of that sum will finance the procurement of vehicles for government needs. One wonders whether these costs should be included in "other matters in the field of national economy," "other general state matters" or perhaps in departmental items, if the brand-new cars are destined, for example, for the Internal Affairs Ministry (a 2-billion rouble tender for cars was recently announced, although it cannot be said for certain that the cars in question will be Russian-made).
For example, more than 2 million roubles was earmarked this year to replace the "crystal pendants for the chandeliers with metal braces" at the State Duma building, but the press-secretary of the President's Business Administration Department, Victor Khrekov, has assured the public that the final figure would be less, because not all the pendants would be replaced and cheaper metal would be found. In other words, the plan to refurbish the interior, even after the crisis, has been dropped.
In other words, what needs to be controlled is not so much the total amount of budget money spent by this or that agency, as its effectiveness. An external audit, preferably public audit, is necessary. After all, the www.zakupki.gov.ru, the Federal Antimonopoly Service site organised by its head, Igor Artemyev, is designed for all (or nearly all) government bodies to publish information on tenders they call to meet their current needs. But for this resource, the nation would never know that some officials order custom-made cars or gold-plated beds with silk canopies for themselves. The resulting uproar led to the annulment of some of these lots.
To cut a long story short, I have a specific proposal. In addition to "improper use of budget resources" lawyers should introduce the concept of "inefficient use." Executive bodies, political parties and public movements should have the right to expose facts of ineffective spending (a similar mechanism is already being created as part of the anti-corruption drive). Finally, ineffective use of budget resources should be subject to disciplinary action (starting from reprimand to dismissal and disqualification). Perhaps it is not an ideal control mechanism, but today even such a mechanism is absent. (The Audit Chamber can carry out some inspections, but its findings, unless they reveal breaches of the law, are not binding). If any transactions of officials with budgetary money are put under interagency and public control, their spending will naturally decrease by more than 20%, I think.
In the meantime we are reduced to counting the number of pendants at the State Duma and guessing which government agency will be ordered to buy Russian-made cars as punishment for some unspecified sins. The budget parameters meanwhile remain a "general state matter", which has been a mystery even for the majority of MPs who, under the Constitution, vote for or against the budget.
Alexander Polukhin
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Expert opinions
Sergey Aleksashenko, Director of Macroeconomic Studies, Higher School of Economics: "I for one think that spending money on internal affairs agencies which are mired in corruption makes no sense. It will be money down the drain.
"It is impossible to cut the spending on the government administration if there is no parliamentary or public control of the budget. With today's docile parliament, society has no control over the budget. Therefore the bureaucracy will always spend the money in its interests and not in the interests of society. I believe that all the current budget spending is ineffective and needs to be revised. Only public hearings could rectify the situation."
Vladislav Korochkin, Vice President of OPORA Rossii:
"The vague nature of the budget spending items tells us very little about how the bureaucrats want to spend the money in reality. Perhaps when they speak about security, etc., they imply something connected with infrastructure. And yet they may turn out to be the priorities in times of crisis. When there are a lot of redundancies (and to increase economic efficiency jobs have to be shed, as we have pointed out all along) that labour has to be quickly employed somewhere else.
"Providing employment for everyone in some hi-tech innovative fields within a short space of time is a pipedream. It takes several years at least. The short cut is to create infrastructure as a foundation for economic growth once the crisis is over.
"Of course the cost of state administration must be reduced, the number of bureaucrats should be cut and their productivity can be increased many times over simply by streamlining the decision-making mechanism.
"What is needed is not upfront budget cuts but a reduction of duplicating functions and innumerable inspections. State procurement should also be more effective. I think a lot of money can be saved in this area by cutting prices without reducing the amount of products procured."
Oksana Dmitrieva, Member of the State Duma Budget and Taxes Committee:
"What is wrong about this budget is the approach. Its main purpose is, arguably, economic growth. We should not allow government investment demand to drop, on the one hand, and on the other hand, we should not allow solvent demand among the population to drop. The demand for Russian industrial products is entirely internal. We export only commodities and energy. How can the manufacturing industry develop if there is no internal investment demand and no demand on the part of the population?
"The rationale of certain investments is open to question. Investment in the Olympics is comparable with investment in innovative activities. In addition, 100 billion roubles more will be required to service the debt in 2010 than in 2009. And that is the cost of two space programmes.
Yegor Lysenko, Lola Tagayeva