Medvedev outlines budget plans

Russia’s budget for the coming three years has been officially outlined as President Medvedev delivered his annual budget address to the government.

Privatization of state assets and decentralization of the “power vertical” should be among the main priorities for the coming period, according to the president.

But it will be up to the government to decide who is going to pay for the “fundamentally new model of economical growth”.

That means that finance minister Alexei Kudrin has ample scope to push through his plans for a banded rate of national insurance payments, ensuring higher earners pay more.

“In the presidential address it was said that we need to use the funds gained from privatization, and money from oil and gas income, and other sources as well [to meet the shortfall in income,” Alexei Kudrin, the Finance Minister, told journalists.

“For example, the economists in the government see that it will be necessary to introduce a descending tax scale for insurance payments for salaries, for example over 512,000 rubles ($18,125) per year,” he said.

This could help collect the missing 160 billion rubles ($5.7 billion), Kudrin added. The rest should come from the more intensive use of oil and gas revenues, according to the minister.

Currently employers have to make insurance payments at a common rate for any salary below 463,000 rubles ($16,575) per year. Above that level no compulsory payments are required.

A proposal currently under discussion would push that limit to 512,000 rubles, with a starting rate of 10 per cent

The general line of the presidential annual budget address is to modernize economy and reduce the role of the sate.

“It [the economic model] is to be based on the growth of private initiative, innovations … on efficient system of public services, on high-quality financial and production infrastructure,” Medvedev said in his speech, published on the Kremlin’s official web-site.

And easing the tax burden for small and medium-sized businesses and social service providers, as well as various NGO is on the presidential to-do list.

At the same time pensions and other social payments are to grow by over 11 and 6 per cent respectively, he said.

But that has prompted a shortfall of 400 billion rubles ($14.3 billion) in the budget, which will has been pushed off the president’s desk.

Privatisation, the oil and gas industry, currency reserves and ‘other sources’ are to help meet the cost of the initiative, the president said.

“The government is to define the ratio to use these sources in the budgeting process. This is your assignment,” Medvedev said.