The session ‘The Regional Budget. Spending Can’t Be Saved’ was held as part of the business programme at the Russian Investment Forum on 15 February 2018. It was moderated by Andrey Makarov, Chairman of the Committee on Budget and Taxes of the State Duma of the Federal Assembly of the Russian Federation. He reminded the participants that at last year’s Forum in Sochi they had agreed to discuss what changes would take place in inter-budgetary relations within a year: “The people who have gathered here are more interested than anyone else in solving these problems: regional leaders, ministers, Dmitry Kozak, and Accounts Chamber Chairwoman Tatyana Golikova.”

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Russian Minister of Finance Anton Siluanov was the first to present a report on what has changed over this time. He said the “debt canopy” had been removed: “We essentially were standing on the threshold of a debt crisis among the regions of the Russian Federation two years ago, when many regions were in a debt hole. This issue has been resolved. Regional loans have been restructured, and the internal revenues and expenditures of the regions have become comparable.” Mr. Siluanov noted that significant changes have taken place in inter-budgetary relations: a model budget has been introduced in the levelling system, the expenditure powers of the regions have been assessed, the volume of inter-budgetary transfers has been increased and their predictability has been improved, and an inventory of the regions’ powers has been conducted. In addition, he said a “superstructure” has been created to motivate the regions to earn additional revenue: “This includes grants and an income tax refund.”

Accounts Chamber Chairwoman Tatyana Golikova agrees with the position of the Ministry of Finance: “Some very complex and serious work has been carried out, which we expect will produce results in 2018–2019,” she said. At the same time, she noted that “the regions are still planning their budgets improperly”, i.e. there is a difference between what is prescribed in the budget and what is obtained as a result.

Russian Deputy Prime Minister Dmitry Kozak warned representatives of the regional authorities that the amount of resources would not be increasing and this should be understood: “The goal is to distribute these resources as fairly and efficiently as possible among the regional budgets.” In particular, a discussion of the methodology for distributing profit tax is on the agenda.

Russian Minister of North Caucasus Affairs Lev Kuznetsov believes the key priority for the regions is to search for additional revenue, i.e. basically search for investments. He said that two regions of the Caucasus – North Ossetia and the Chechen Republic – had declared 2018 the “year of investment”. Federal budget expenses should also aim to support the investment activity of the regions, he said.

Governors also shared their vision of the situation during the discussion. Irkutsk Region Governor Sergei Levchenko said despite the fact that all these measures have been by the Government, “things have not become easier, not in the least.” Aleksandr Uss, who was recently appointed Acting Governor of the Krasnoyarsk Territory, described the situation in the region with a “fresh outlook”. He supports the federal government’s decisions, but believes that the peculiarities of each region must be taken into account. In particular, the Krasnoyarsk Territory has historically had an economic structure with high payroll costs, which is not seen in neighbouring regions: “We would very much like the specific nature of the region to be taken into account.” Anatoly Artamonov, Governor of the Kaluga Region (which the moderator described as a region where “everything is fantastically good”), noted that the inter-budgetary policy has changed significantly in a short time and this has enabled the regions to look at their own capabilities: “The regions have become more interested in developing their own income base.” At the same time, he said he does not consider the introduction of a “modular budget” to be best option for the development of the regions.