The new Prime Minister to implement the former President's programme
On May 8, 2008, Vladimir Putin, appointed Prime Minister by the State Duma, was to submit his programme to the Government, instead of instructing the Government on what to do, which used to be more common for him. The most attractive issue for investors was a promise to reduce taxes for oil companies, although that had been Mr Putin's order to the former Government. The new Cabinet is more interested in stock market regulations and the efficiency of public spending. Though the work on the health care and education reforms will start only in 2009.
The speech of Vladimir Putin, as a candidate for the post of Prime Minister, at the State Duma had been planned to take only 15 minutes but it turned out to be very informative. As scheduled, Mr Putin presented the programme of the future Government, focusing on economic and social issues. The address to the deputies contained less news than the State of the Nation Address, but still it gave the outlines of the White House's future priorities.
First of all the programme seemed to focus on the short term. Vladimir Putin outlined three main points the Government will be working on until early 2009, and generalised other issues. One of Mr Putin's tasks was to slow down the inflation rate, but he did not mention the exact time frame, saying "within the next year, or years". Vladimir Putin started his speech by discussing long-term plans, saying that within 10 to 15 years Russia will become one of the leading countries in terms of the quality of life (which implies the level of income, social security, quality of education and health care, life span, the environment and housing). As the talk continued, Mr Putin turned to the next few months.
The main news about the Government policy involved health care and education, which Mr Putin declared indirectly. He reiterated the basic principles of the reforms and the figures for the spending on these areas within the current three-year budget. He also explained that "preparation work" for the future reform "must start as early as 2009". Thus the reforms of social security institutions will be postponed. The only novelty in the social sphere reported by the Prime Minister was the introduction of legislative indexation of the minimum wage (Mr Putin said that starting from January 1, 2009, it will amount to 4,330 roubles (about $173), which is equal to the living wage for the late 2007. This will happen "within the next few years".
Judging from Mr Putin's speech, stock and financial markets will become the main issues for his Government. Under his guidance, the Government will optimise the infrastructure and the state control of the finances, industrial legislation, provide a "comfortable tax regime" on the equity market and "incite big public companies and their IPO's on the domestic market" by promoting corporate management.
Vladimir Putin backed the thesis proposed by the head of Russia's Sberbank, German Gref, in January, saying that it is necessary to maintain the expansion of Russian funds onto the foreign markets. Judging from the Prime Minister's detailed description of the programme, the Government will begin to turn the Russian capital into the world's largest financial centre as early as in May 2008.
Control over public spending and its efficiency is the second key challenge of Vladimir Putin's Government. The Prime Minister stressed that the situation in this sphere is crucial. He promised to change the present trend and the principles of budgeting state investments, to control the number of state officials (though he did not say anything about cutting down the number of state officials) and change the state standards in construction.
The third part of Vladimir Putin's speech concerned taxation, and covered the issue in detail. Though it was welcomed with the applause of the deputies, there were a lot of familiar points from the February 8 meeting of the State Council on Russia's development strategy until 2020, as well as from Dmitry Medvedev's election speech at the Krasnoyarsk forum a week later. The financial initiatives have been already included into the general taxation policy for 2009-2011. In order to demonstrate the continuation of his policy, Mr Putin stated in the State Duma that to stimulate oil production it is "high time to take the decision to relieve taxes in this sector of the economy".
He was referring to the mineral extraction tax, which will be accomplished by raising the non-taxable threshold from the current $9 to $15 from 2009. The Finance Ministry reports that the companies will save 104.1 billion roubles ($4.2 billion) in 2009 and 112 billion roubles ($4.5 billion) in 2010.
Yet the Prime Minister's passionate words concerning tax relief for oil companies caused the stock market to grow on May 8. As for another important tax policy -VAT - Vladimir Putin did not provide any new information, confirming that the dispute over the VAT is to be resolved by August. He was very evasive about the reduction of the VAT. He said that the Government is to decide "when to reduce taxes and to what extent". In August Mr Putin's Government may come to a decision, but the Finance Ministry advises against cutting the VAT rate, and suggests reducing the income tax.
Dmitry Medvedev was more definite about the VAT in his speech on the economy at the Krasnoyarsk forum. As a presidential candidate he urged "to pass a law as soon as possible that sets out a timetable for introducing a single reduced VAT rate", and "to consider replacing the VAT with a sales tax". On the whole, Mr Medvedev was very specific in his speech and covered a wide range of problems, backing his words with figures. As for Mr Putin, he tried to avoid being specific in his speech, and provided the figures approved by the governments of Mikhail Fradkov and Viktor Zubkov.
During his speech Mr Putin didn't use the word "corruption". He used this word only to answer the deputies' questions. Admitting in his speech the fact that people "steal" in Russia, the Prime Minister offered no solution to this problem, apart from "the office of public prosecutor and law enforcement agencies". As for Mr Medvedev, he devoted the last part of his Krasnoyarsk speech to the need to reform the executive authorities and urged to "draw up and carry out a special national anti-corruption plan".
Finally, neither Mr Putin nor his successor two months earlier, said anything about the structure of the future Government. It should be kept in mind that, according to Article 112 of the Constitution, Vladimir Putin is to impart his conception of the new structure of the executive body to Dmitry Medvedev by May 15.