Regional subsidies should be consolidated

In general, proposals to reduce the number of types of subsidies and their consolidation are logical and correct. The existing system of numerous miscellaneous subsidies which exceed (or almost exceed) Rb 1bn in some cases, impairs effectiveness and transparency of the Russia’s system of intergovernmental fiscal relations, above all, in terms of excessively constrained decision-making of regional government authorities against mismatched federal and regional priorities in some cases (i.e., federal authorities are unable to correctly identify the needs of citizens in certain regions). In addition, it is extremely important to transit to allocation of subsidies predominantly within the framework of the Federal Law “On the Federal Budget” to enhance predictability of volumes of intergovernmental fiscal transfers for the regions and effectiveness of utilization of budget funds. “Rb 242bn of subsidies and subventions were not utilized at 2012 year end, of which Rb 165bn were investment subsidies”, said the Russia’s Minister of Finance Anton Siluanov.

To date, however, reforming of the mechanism of allocation of subsidies from the federal budget has slowed down notably, thereby impairing substantially transparency and effectiveness of intergovernmental fiscal relations between the federal authorities and the regions.

The existing budget projections provide for a smaller number of subsidies, from 104 types in 2012 to 93, 81 and 70 types in 2013–2015, respectively. However, the expected reduction in the number of subsidies is not enough at all. The Russian Government Order dd. November 11, 2010, No. 1950-r approved a list of 41 national programs (as amended and restated). Comparing the number of national programs with the expected number of subsidies leads to a single conclusion of that more than one subsidies would be allocated as part of at least a few of national programs, which seems to be unreasonable and very complicating for the system of intergovernmental fiscal transfers. 

It should be taken into account that by no means every program provides for co-financing of regional expenditures with the federal budget, simply because relevant powers are exclusively vested with the federal government authorities. Therefore, one may say that the number of subsidies planned by 2015 more than doubles the number of national programs. It should be noted here that the Federal Law “On the Federal Budget for 2012–2014” provides for the reduction in the number of subsidies to 70 in 2013 and 62 in 2014, i.e. the plans were adjusted substantially towards increasing the number of types of subsidies.

В плане распределения subsidies as part of the Federal Law “On the Federal Budget”  ситуация следующая. The national program “Creation of conditions for enhancing efficiency and trust management of regional and municipal finances, sustainability of budgets of the constituent territories of the Russian Federation” provides for increasing a share of subsidies, whose allocation among the constituent territories of the Russian Federation is approved by a supplement to the Federal Law “On the Federal Budget”, in total subsidies from 16.1% in 2013 to 55% in 2020 (minimum values of the respective target indicator). Target values of this indicator seem to be considerably underestimated, and a corresponding share should reach up to 80–90% by 2015-2016.

It is important to understand that reforming the mechanism of allocation of subsidies from the federal budget has been slowed down largely through the position of other federal ministries which administrate such subsidies, rather than poor performance of the Ministry of Finance of Russia. It is important that the Russian Government should provide a real and active support to the proposals made by the Ministry of Finance on consolidation and allocation of subsidies as part of the Federal Law “On the Federal Budget”, which long ago were stated in official conceptual documents.

Mamedov A.A. – researcher, Budget Federalism Department