Unlimited desire. Who of the MPs solicited most of the funding from the 2020 budget

During the 29 years of independence, Ukraine has seen 25 prime ministers, 9 parliamentary MPs, and 7 presidents. However, the government’s endeavors toward increasing annual budget expenditure has remained unchanged.

Most often, these efforts are manifested at parliamentary level during the budget estimates hearings. MPs’ “wishes” usually require additional trillions of hryvnias for implementation.

Most of these amendments are initiated by the MPs themselves, although the president, government, oligarchs’ lobbyists or individual businesses also sometimes happen to submit their amendments via MPs.

VoxUkraine analyzed the entire array of MPs’ amendments to the 2020 draft budget and found out which MPs tried to maximize spending and why. Last year’s analysis can be found here.

How did we filter the amendments?

We did not analyze the amendments concerning the reallocation of spending, since reallocation does not affect the budget balance.

Nor did we consider the so-called “abstract” amendments containing MPs’ proposals for increased spending for certain purposes without specifying how much funding is needed.

Four groups of amendments came into focus of our analysis:

• Amendments regarding direct increase in the expenditure already budgeted. This is the largest group of amendments aimed at increasing budget expenditure on various programs / projects in specified volumes. 

The formula for calculating their value is as follows: 

“cost of the MP’s amendment = the amount desired by the MP  – the amount budgeted”

• Amendments regarding expenditure with a clear reference to a specific macro indicator (in the case of the 2019 budget, to GDP or the wage fund). Some MPs suggested increasing the funding of specific sectors or programs by a specific percentage of GDP or setting it at “at least x% of GDP” or the wage fund. The “cost” of an amendment was determined by the following formula:

“cost of the MP’s amendment = x% of GDP in nominal terms (the size desired by the MP) –  expenditure already included in the budget estimate before the first reading”

Due to the amendments being submitted to the Law on the State Budget, we calculated the cost of such amendments specifically for the state budget, leaving out the possible impact on the expenditure of local budgets or the private sector.

MPs’ proposals to increase the amount of spending on education to at least 7% of GDP under Article 78 of the Law on Education were also left out. The Law on Education stipulates that the state should provide for education expenditure of no less than 7% of GDP from the state and local budgets combined. These three amendments were not included in the rating since the MPs refer to the consolidated budget without indicating by how much the state budget’s expenditure should be increased.

• Amendments aimed at changing social standards with an impact on expenditure already estimated
• Amendments providing for new transfers from the state to local budgets, revival of once existing or emergence of new budget programs

In total, 1,124 amendments were the subject of analysis, with 616 individual and 508 group amendments. Let us take a look at them below.

RESULTS

Group Amendments. The opposition is at the forefront

 265 MPs submitted 508 group amendments.

The record-breaking amendment in this group is the proposal by the Opposition Platform – For Life to revise the macro forecast and increase budget expenditure by over UAH 172 billion. Second and third places went to the amendments to increase funding for science by UAH 68.3 billion and the medical guarantee program by UAH 48.4 billion. (Table 1)

Six of the ten amendments providing for the largest increase in budget expenditure were submitted or duplicated by the members of the Opposition Platform – For Life. The rest of the  amendments were submitted by non-factional MPs, the committee on education and a number of other Verkhovna Rada committees. These amendments provide for spending increases with regard to the medical guarantee system, social benefits, education and pensions. Their implementation requires more than UAH 502 billion.

Nearly all the top 10 amendments were rejected. Only the amendments to increase payments to needy families (number 4 in the top 10) were considered in part. This means that the committee instructed the government to analyze the budget situation and possibly find the resources for such an increase.

Individual amendments. The “Servants of the People” tried to serve the people

In total, 616 amendments from 120 MPs

The top 10 individual amendments (Table 2). Volodymyr Zakharchenko (SN) became the record holder for the number of individual amendments. He alone submitted 35 amendments amounting nearly to UAH 214 billion.

Half of the individual amendments soliciting most of the funding from the budget were made by representatives of the presidential faction, followed by the Opposition Platform – For Life. In essence, these amendments are similar to those by the top groups, i.e. the MPs’ individual proposals also target increased expenditure for the medical guarantee program, pensions, and education. In order to make the MPs’ proposals a reality, an additional UAH 546 billion would be needed.

For what the MPs solicit funding

Most of the MPs’ amendments relate to increasing current or new subsidies or subventions. The MPs submitted 387 individual and 176 group amendments concerning inter-budget relations. This is also accounted for by a desire not to lose political authority in their constituencies. The most popular amendments relate to the allocation of subventions (in different combinations) for social economic development, and the regional development fund resources.

Coming second and third, by a significant margin, are the amendments relating to economic activity and social protection. The former include those relating to road repairs, as well as various support provided to state-owned enterprises or the development of industries.

Social amendments (in whole or in part) are adopted most reluctantly. Only 16% of them (12 out of 74) were adopted in whole or in part; their size in UAH amounted to 25% of the total requests for increased social spending. This can be explained by the fact that social amendments require considerable budgetary funds.

The amendments relating to defense are the smallest in number. However, all of them were fully or partly adopted by Parliament.

Peculiarities of the MPs’ amendments

First of all, the amendments’ cost went up. The average cost of an individual amendment increased from UAH 2.4 billion to UAH 4 billion compared to the previous year, with a group amendment rising from UAH 2.3 billion to UAH 2.8 billion. The most expensive amendments are generated by the opposition (Table 3-4). The average cost of individual and group amendments by the Opposition Platform – For Life is UAH 9.8 billion and UAH 4.9 billion, respectively.

Secondly, social spending remains the focus of MPs. The main budgetary items with impact on the size of social standards are 7, 8, 9. They establish the minimum wage, subsistence minimum and social assistance to the needy. The idea of increasing them continues to be popular with MPs (Table 5-6). The biggest increase in the subsistence level was proposed by MP of the presidential faction Yuriy Zdebskyi, with the least increase proposed by the European Solidarity faction.

Each of the political forces had different ideas of what the minimum wage should be. The most moderate increase was proposed by the Batkivshchyna, and the largest by the Opposition Platform – For Life, and Yuriy Zdebskyi, mentioned above.

Besides the minimum wage and the subsistence minimum, a number of the proposals by MPs related to a significant increase in student scholarships, and a social assistance of minimum UAH 100 thousand for the birth of the first child and up to UAH 200 thousand for the second.

Thirdly, when preparing the budget for 2020, the principle of “largest party, most changes” worked. The Servant of the People submitted the largest number of proposals to the draft budget. However, most of the proposals submitted by the MPs were rejected (Fig. 2).

Overall, 68% of the individual and 60% of the group amendments were rejected. Only 2% of the individual amendments were adopted in full. The statistics are better in the group amendments with 7% of them being adopted.

According to the results of the analysis, it can be asserted that MPs continue to maximize budget expenditure, often without bothering to look for proper compensators in the budget revenues. Among the entire array of amendments, the most proposals are aimed at increased spending for regional development and social benefits / raising social standards. The fact that such amendments are generated against the backdrop of limited budget opportunities often contradicting economic reality is indicative of a significant populist component in the MPs’ proposals.