PSD and PNL announce RON 6 bln expenses cut

The two leaders of the governing coalition, Marcel Ciolacu and Nicolae Ciucă, announced on Facebook that they had reached an agreement on an “extended” plan to “reduce the state’s expenses as much as possible”. They claim that the plan will bring in 2023 “an economy to the budget of approximately 12 billion lei”. It would be about 6 billion lei from the reduction of expenses and another 6 billion lei from “ensuring new revenues”, including the elimination of some tax exceptions, the increase of some excises and royalties and better collection.

“Today, together with the government partners, we managed to agree on an extensive plan for the #reduction of state expenses as much as possible. The principle underlying this plan is that, in the effort to reduce the budget deficit, the burden must first be borne by the #state, not the citizen and the private sector! We have thus identified dozens of measures that, beyond the elimination of the 200,000 unoccupied budget positions, will lead to the cutting of unjustified increases, to mergers and dissolution of institutions. We are reducing the number of management positions in the public system and capping management allowances at state-owned companies. In addition, we are introducing a clearer system for monitoring performance indicators for state authorities in order to promote projects and investments that really make a difference. We will force the process of decentralizing some decisions, especially to build a legal framework for centralized procurement consortia or partnerships. Only in this way will there be significant and constant long-term savings for the state budget.

At the same time, natural resources, owned by the state, will no longer be concessioned at ridiculous prices: therefore, the first step is to update all royalties with the inflation rate! The impact of measures to reduce state expenses will be around 5.8-6 billion lei by the end of the year. The amount will be approximately equal to what we propose to bring as additional revenues to the budget by eliminating some tax exemptions. Because that’s what we think is right: there should be a common effort, distributed balanced in society, for a more flexible and efficient state, in which there is more equity and transparency!“, Prime Minister Marcel Ciolacu wrote on Facebook.

PNL leader Nicolae Ciucă also wrote a message detailing some of the agreed measures. “Today, in the Coalition, we agreed on a balanced consolidation of the state budget, related to expenses and revenues. Thus, we want to ensure a robust development of Romania in the coming years, but also to fall within a budget deficit quota agreed with international bodies this year. We agreed that, for the year 2023, we will have a budget saving of approximately 12 billion lei. This will be composed, symmetrically, of approximately 6 billion lei from the reduction of expenses and approximately 6 billion lei from the provision of new revenues. As I have said on other occasions, I considered it mandatory that, before any discussion about budget revenues and efforts required of the business environment or the population, we should have a decision on the reduction of state expenses and on the vision of Romania’s economic growth in the medium term and long. In moments like these, the state must be the first to show that it is ready to become more efficient in order to ensure Romania’s development.”

• Reducing by at least 20% the number of state secretaries and halving the number of cabinet members of local authorities (presidents and vice-presidents of county councils, mayors, vice-mayors) and representatives of the central authority in the territory (prefects and sub-prefects);
• Reducing the number of management positions from 12 to 8 percent of the total number of employees, abolishing the public position of head of office and increasing the number of people subordinate to those holding management positions.
• Merger between institutions subordinate to the Parliament, the Government or the ministries. The decentralization of some services, as well as the prioritization of national investment programs.
• In state companies, the number of advisers to management will be reduced by 50%. The number of members of the administrative boards will be reduced to no more than 7 people, and those of the specialized committees will be reduced to 5.
• At the same time, the allowances due to them will be reduced to the equivalent of three gross average salaries per branch of activity, but no more more than the monthly allowance of a Secretary of State. In addition, the base salaries of senior staff in state-owned companies will be limited.
• The legal framework for centralized procurement consortia/partnerships will be created, at the level of ministries with OPCs, as well as between county UATs and subordinate public institutions under the responsibility of other UATs.
• Granting of holiday vouchers only for civil servants whose monthly salaries are lower than 10,000 gross lei.
• For the autonomous public institutions under the coordination of the Parliament, a specific tax of 80% of the net result will be established, but not less than 50% of the value of the specific taxes/tariffs. The salaries of the heads of these institutions will be limited to no more than six times the gross allowance of a minister, and of the other employees to a maximum of 80% of the salary of the head of the institution.
• Merger of at least 20% of the existing research/development institutes, so as to reduce personnel expenses by 15% and abolish those that are no longer relevant in the current socio-economic context.

Initial disagreement

Initially, the ruling coalition parties, PNL and PSD had set up their own lists of measures to find money in the budget.

PSD and PNL had initially not been able to reach an agreement regarding the changes that the Government should adopt this week. The social democrats and liberals want to reduce the number of secretaries of state, some by 30%, others by 20%, as well as the merger of some institutions.

According to Digi24 sources, the liberals wanted to reduce the number of secretaries of state and eliminate vacation vouchers for some budget workers. They also do not agree with the 1% tax on houses more expensive than 500,000 euros and with the elimination of tax facilities for IT. Rareș Bogdan said on Monday that it is not possible to come up with taxes that burden the owners or the private system.

On the other hand, among several proposed measures, Prime Minister Marcel Ciolacu wants to reduce by 30% the number of secretaries and undersecretaries of state, reduce management positions to 8% of the total number of public positions and reduce by 50% the number of advisors to general directors and deputy general managers of state/local companies.

Measures proposed by SocDem PM:

The creation of the legal framework for consortia/partnerships of centralized purchases, at the level of ministries with OPCs, as well as between county UATs and subordinate public institutions under the responsibility of other UATs (for example, the purchase of medicines necessary for the operation of hospitals by County Councils in partnership with hospitals from the county and testing some pilot projects);

Reduction by 30% of the number of secretaries of state/undersecretaries of state;

Reducing the number of management positions from 12%, currently, to 8% of the total number of public positions;

For situations in which personnel regulations do not allow their application for the establishment of services, departments and general directions, for example health, education, national defense, etc. The obligation applies to management positions, respectively a percentage of management positions of a maximum of 8%;

The granting of holiday vouchers only for civil servants with an income below the gross salary level of 10,000 lei;

Merger/abolition of institutions subordinate to the Ministries/Government/Parliament according to the general rule: “Each ministry has a certain national/devolved authority in the territory at the national/county level” and reduces personnel and operating expenses by at least 15%. Impact on digitization and simplification of procedures;

Decentralization of public services from the central level to local public authorities where possible: sports, culture, public health departments, county sanitary-veterinary departments, school inspectorates and their transition into the subordination/coordination/authority of local public authorities;

The suspension for a period of one year of investment programs financed exclusively from state budget funds such as: sports halls, culture dormitories, swimming pools, sports complex, multipurpose halls, etc. for projects in the stage of organizing public procurement procedures;

Establishing limits for the opening of monthly budget credits for personnel expenses, materials and services and investments only within the limit of the monthly evolution of the balance of the budget deficit;

Public institutions of central/local subordination under the authority/coordination/subordination of central/local authorities must have a number of over 50 occupied positions, with duties that do not overlap with those of other public institutions/authorities. The possible merger of existing public institutions must lead to a reduction of personnel and operating expenses by 15% and the number of positions actually occupied by 50%;

50% reduction of advisors to general managers and deputy general managers of state/local companies;

The measures proposed by the liberals    

The Ministry of Finance will create a mechanism that will evaluate the quality of the spending of credit orderers, in such a way that those who are more efficient will receive larger amounts, and those who are not efficient will be reduced from the allocated amounts. Fewer heads in public administration, with more efficient structures. Thus, the number of employees related to each hierarchical structure (office, service, direction, etc.) will increase, and this will reduce the number of current management positions.

At the same time, there will be a reform of the de-concentrated bodies . In this sense, the institutions that have a similar role will be merged. For example, at the level of the Ministry of Labor, there are currently 4 institutions, and one of them will be created. In parallel, institutions and UATs will be incentivized to jointly purchase services or products to obtain a lower price.

The number of secretaries of state will decrease by 20%.

The number of members in the Boards of Directors and the number of related allowances will be limited.The limitation of mobile phone subscriptions in public institutions, as well as other consumables, is also taken into account.

PNL will demand that the business environment and investments be protected as much as possible in the context of deficit reduction measures.

The PNL will ask in the Coalition that, exceptionally, the sale of books and school textbooks remain at the current VAT rate.

PNL will demand that budget workers who earn more than 10,000 lei a month are not granted holiday vouchers.