Kulbergs proposes review of benefits and more than 200 tax reliefs to save €3 billion over four years

Andris Kulbergs of the United List, nominated to be Latvia's next prime minister, proposed on Tuesday, 10 November, reviewing benefits and tax reliefs to cut budget spending, LSM, the Latvian public broadcaster, reported. He told a press conference that €3 billion must be saved over four years and €600 million in spending reviewed straight away.

The largest share, about €900 million over four years, would come from public administration through fewer posts, joint procurement and shared administrative work, Kulbergs said. Sector reforms would provide about €650 million more.

What is under review

The state spends €2.5 billion a year on more than 200 tax reliefs, which Kulbergs wants reviewed. Severance payments for those leaving service and support for people with disabilities together cost about €1 billion a year. As an example, he cited the €25-a-month family benefit per child, which he said should go to lower-income families. Sick leave, the administration of benefits and service pensions are also to be reviewed.

At the same time, Kulbergs proposed measures to boost employment: lower income tax for young people, allowing parents on parental benefit to work part-time without losing it, and lower employer social contributions for older workers. He estimated these would bring in about €290 million a year in extra tax revenue.

No balanced budget by 2030

Kulbergs acknowledged that the earlier promise of a deficit-free budget by 2030 could no longer be met. He wants the Bank of Latvia, the State Audit Office and the Fiscal Discipline Council to play a bigger role in drafting the budget. Bank of Latvia Governor Mārtiņš Kazāks said he did not see “a very deep economic crisis”, but spending had grown faster than revenue since the pandemic.

The make-up of the next government would depend on which partners were ready to carry out these changes, Kulbergs said. He did not rule out a minority government and promised to announce his next step this week.