Orbán cabinet planning unprecedented austerity for local governments?

K-Monitor, an NGO campaigning for transparency in the use of public funds and the fight against corruption, writes on its blog that the Orbán government is planning to make more severe cuts than ever in the funding of the local government sector.

Unprecedented austerity to come?

The NGO extracted this unpleasant news from the Ministry of Finance’s Macroeconomic and Fiscal Forecast 2023-2027, published on 30 December, Telex writes.

According to K-Monitor, the document reveals that the budget support provided by the government to finance the functions of the local government sector will not only fail to keep pace with inflation until 2027, but would also decrease in numbers. Meanwhile, the “solidarity tax” on municipalities with higher own tax revenues will continue to increase.

Funding to local governments to fall sharply

This would reduce net funding from the central budget to the local government system to an unprecedented low. By 2027, the net expenditure of the budget on the operation of local governments is projected to fall from HUF 850 billion (EUR 2.25 billion) in 2023 to below HUF 700 billion (EUR 1.85 billion). Meanwhile, local government costs have risen sharply due to high inflation, wages and soaring energy prices.

What will follow austerity measures?

According to K-Monitor, this could lead to a disruption in the viability of municipalities. For the government, however, this austerity is politically advantageous. On the one hand, local mayors can be blamed for the problems that follow the decrease in funds. On the other hand, the government can arbitrarily differentiate between municipalities by supporting those in favour and further worsening the situation of those against it.

Lots of money, but not for the right purposes

K-Monitor finds it worth noting that local governments have the right to subsidies under the Fundamental Law (Alaptörvény) to carry out their basic statutory tasks. According to the NGO, instead of subsidising private companies (of those close to the government), propaganda campaigns and prestige investment, the Orbán cabinet should spend those billions of forints on the operation of cemeteries, kindergartens, schools and the state of roads.

For other purposes, however, the government plans to spend a lot more. For example, the expenditure of the Defence Fund is projected by the Finance Ministry to rise from HUF 850.7 billion in 2023 to nearly HUF 1,560 billion in 2027.

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