First post-crisis budget is adopted

The Latvian government submitted its draft budget for 2013 to parliament for approval on 28 September 2012. For the first time since 2009, more money was allocated to the public administration sector, education and healthcare. This year budget discussions were unusually low-key. Social partners acknowledged that the budget was not ideal, but did not raise objections. However, in fields that will not receive extra funding, there were protests from unions and employers.

Government increases public sector financing

On 28 September 2012, Latvia’s Cabinet of Ministers submitted its draft state budget for 2013 to the parliament (Saeima) for approval. In contrast to the austerity budgets of previous years, the budget for 2013 called for increased financing in sectors most affected by the crisis – public administration, education, healthcare and for the police, firefighters and other security services. In the second half of 2011, the government began to restore bonus payments for state administration and healthcare (LV1210019I).

The review of the budget by Latvia’s Saeima proceeded without complications, and it was approved in principle at the first reading.

The most vocal objections were expressed by the nationalist party VL-TB/LNNK, which wanted more money for resolving the demographic situation through family support measures.

The parties and government reached agreement before submitting the budget to the Saeima, with additional funding being allocated from the state budget to address the issue. The minimum childcare allowance for children up to the age of 12 months was increased to LVL 100 (€143 as of 20 December 2012) per month.

No objections from social partners

In contrast to the usual situation in which discussion of the budget has been accompanied in recent years by a high degree of social activity, including national and sector-level strikes and protests, this year the social partners were more restrained. Employers acknowledged that the draft budget was not ideal, but they did not raise serious objections. The budget lowered income tax from 25% to 24% and preserved existing measures designed to stimulate investment.

Trade unions wanted the tax burden on low-income workers eased. They called for an increase in the tax-free allowance and tax relief for those who cared for dependants. Although their requests were ignored, national protest campaigns were not planned.

The budget was adopted on 15 November 2012.

Protests by sports workers

Protests did go ahead in some sectors which did not receive increased funding. On 22 October 2012, around 100 sports trainers gathered at the Saeima building and later moved to the Ministry for Education and Science.

The protest was organised by the Latvian Council of Educational Sports Institution Directors (LSIIDP). The demonstrators were protesting against current government policy and demanding support for youth sports. They wanted higher salaries for sports trainers to bring them up to the approximate levels of salaries in the culture sector. The demands of protesters were not met.

Probation officers’ demands met

Employees at the State Probation Service (VPD), who are represented by the Latvian Probation Service Workers’ trade union (LPDA), did not back down from their demands. The union demanded that employees’ salaries be raised from 2013 to LVL 400 (€573) per month after tax. Salaries are currently less than LVL 300 (€430) per month. The union also called for a 10% additional payment for hazardous work conditions – currently it is 1% of the base salary – and the restoration of a full 40-hour week for employees (LV1208029I).

The trade union has repeatedly attempted to persuade the Ministry of Justice, the government, the deputies of the Saeima, the ombudsman and the general public to support its demands. At the beginning of September 2012, when the government was considering the state budget, employees of VPD protested at the Cabinet of Ministers’ offices.

The trade union told the government that if agreement was not reached in the conciliation commission within seven days, a strike would begin.

An agreement was reached and the strike called off after additional funding was allocated from the state budget, and the full working week was restored.

Unease in healthcare sector

While the budget was received with optimism by the majority of state institutions, there was still unease in the healthcare sector.

On 20 November 2012, seven health care associations under the leadership of the Trade Union of Health and Social Care Employees of Latvia (LVSADA) signed a statement addressed to the European Council and European Parliament. They called on international organisations to support trade unions’ efforts to improve healthcare policy in Latvia.

Commentary

Favourable economic indicators and increased funding from the state budget for sectors under its control have engendered optimism in Latvian society.

Prime Minister Valdis Dombrovskis expressed the hope that private entrepreneurs would follow the government’s example and raise salaries in the private sector. According to data from the Central Statistical Bureau of Latvia (CSP), salaries have already started to increase. In the second quarter of 2012, the average net salary in the national economy increased by 3% over the first quarter; in the public sector it increased by 6.4%.

As economic activity is renewed, there will inevitably be discussions about the issue of skill shortages in the Latvian workforce, a situation that may lead to another salary explosion.

Raita Karnite, EPC Ltd.

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