NCP’s proposed pension and benefit changes will cost state budget several hundred million euros

New Conservative Party’s proposals on changes for pensions and benefits will cost the next Latvian government several hundred million euros, according to estimates from ministries.

NCP detailed commitment to increase non-taxable minimum for pensions to EUR 500 in the next two years and establish the minimal pension in the country at EUR 200.

LETA has received ministries’ estimates on the cost of multiple proposals included in NCP’s offered plan. If the differentiated non-taxable minimum is abolished and a EUR 500 non-taxable minimum is adopted for everyone, PIT revenue will decline EUR 500 million: EUR 100 for the state budget and EUR 400 for municipal budgets. If differentiated minimum is kept for PIT and the first threshold is increased to EUR 500, PIT revenue would decline by EUR 130 million: EUR 26 million for the state budget and EUR 104 million for municipal budgets.

Increasing non-taxable minimum for pensions to EUR 500 would mean PIT revenue to decline by EUR 50 million, Finance Ministry estimates.

Welfare Ministry has submitted a report on plans to increase of minimal pensions. If minimal pension is increased to EUR 2015, it will be necessary to allocate EUR 524 million to finance this initiative. This amount covers the increase of minimal retirement pensions and state social insurance benefits, disability pensions and insurance benefits.

NCP’s plan includes the proposal to increase family state benefit amount to EUR 50 for the first child, EUR 100 for the second and EUR 150 for the third and every next child. This increase would cost the budget and additional amount of EUR 252.7 million.

To prevent medical personnel from leaving the country, NCP promises to increase doctors’ wages to at least EUR 1,700 after taxes and wages of nurses to at least EUR 800 after taxes. Healthcare Ministry reports that increase of wages for doctors alone would cost the budget EUR 222.3 million. Increase of wages of nurses would cost the country EUR 125.3 million.

NCP stresses in its offer that funding for healthcare has been insufficient these past several years, and that healthcare should be a priority for the next several years. Ensuring funding for healthcare reaches 4% of GDP would be a welcome goal to work towards.

Finance Ministry notes that funding has already reached 4% of GDP. If costs were to be calculated from the state base budget only, it would be necessary to allocate an additional amount of EUR 159.4 million in 2019 and EUR 250.5 million in 2020.

NCP also offers allocating 1.5% of GDP as funding for science. According to Finance Ministry, this will cost the state budget EUR 306.5 million.

Relieving housing of real estate tax would reduce revenue from this tax by EUR 33 million.

Parties involved in the process for the formation of a new government in Latvia plan to continue talks with Finance Ministry’s experts on the possible priorities plan this week.

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