‘Oligarch’? Putin decrees a massive budget-doubling of socialized healthcare

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MOSCOW, Russian Federation – In a message to the Federal Assembly, Putin instructed the government to  double spending on healthcare, as well as spending on infrastructure.

Presidential decrees on increasing spending on the social sphere and infrastructure have been fully formulated, in fact expert consultation was already completed, the press secretary of the president Dmitry Peskov said. The document will be presented to President Vladimir Putin.

Earlier, Bloomberg reported that the new presidential decrees could cost the budget of 10 trillion rubles. For six years, such expenses were confirmed to Vedomosti by a federal official. But Peskov denied the figure: “We will not run that high, at least, the expert study was conducted on the basis of other figures.”

In a message to the Federal Assembly, Putin instructed to double the state’s expenditure on health care, as well as spending on infrastructure: in the next six years, more than 11 trillion rubles will go to the construction and improvement of roads. Putin called for the development of education, without mentioning the amount of expenditure. How to finance such expenses, officials have not yet decided. Most likely, there will be no sources of funds in the decrees, the official said. Where the money will come from, the new government will decide at that time.

Part of the costs will be implemented by reducing spending on other budget items, such as defense, Bloomberg writes. Health financing is possible due to the redistribution of budget expenditures, said the Minister of Finance Anton Siluanov back in March.

The remaining expenses can be paid by the citizens and business: at recent meetings, Prime Minister Dmitry Medvedev discussed raising the personal income tax by 2 percentage points – up to 15% – with the introduction of a non-taxable minimum, the abolition of the 10% preferential VAT rate, tax maneuver up to 22% with a VAT increase of up to 22%), as well as the completion of the oil and gas tax maneuver (zeroing in the export duty and increasing the MET) and the introduction of a trade levy on turnover (something similar to a sales tax).

The increase in expenditures by 10 trillion rubles by 2024 suggests that, on average, spending on human capital and infrastructure will grow by 1.5 pp per year, says the head of the Economic Expert Group, Evsei Gurvich. But investments can be increased without increasing taxes, he believes, partly due to the acceleration of economic growth, the redistribution of budget expenditures, for example, expenditures on the national economy. Also, the budget rule in the future will allow increasing the financing of infrastructure projects from the FNL funds when it exceeds 7% of GDP (as of April 1 it was 3.9% of GDP), he said.

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