19 october 2010

Prime Minister Vladimir Putin meets with Deputy Chairman of the State Duma and LDPR leader Vladimir Zhirinovsky

Mr Putin and Mr Zhirinovsky discussed budget planning issues. In connection with this, Mr Putin described the current economic situation as being a stage of recovery from the crisis, noting that many factors generated by the crisis remain, and this must be kept in mind while putting together the budget.

Transcript of the beginning of the meeting:

Vladimir Putin: Mr Zhirinovsky, I wanted to talk to you about budget planning. You know that there have already been such meetings with United Russia and I just met with Gennady Zyuganov. I would also like to talk to you about basic macroeconomic parameters and certain areas of public spending.

You know that we have been able to resolve key issues related to overcoming the crisis. We are now at a stage of recovery, but nevertheless, there are still many factors that were generated by the crisis that are left for us to deal with, and we must keep this in mind while putting together the budget.

Of course, as before, social issues will be a priority. I know that your party pays a lot of attention to these issues, as well as the development of science, education and healthcare. Incidentally, with regard to healthcare - we have provided for healthcare expenditures of more than two trillion roubles. This is a sizable increase for next year.

As for education, here I would like to emphasise that we will allocate for the first time (as we did not do in many previous years) significant funding to the Russian Academy of Science for attracting young scientists. We will allocate wage-rates and some money especially for this purpose. We allocated another two billion roubles for the purchase of new laboratory equipment. And we'll discuss other costs in more detail now.

As for the real economy, our actions here are dictated precisely by the situation of individual industries emerging from the crisis. But at the same time, we are initiating a number of new programmes, including, for example, an energy-saving programme - some money is also set aside for this. I would like to talk to you today about all these issues in more in detail.

Vladimir Zhirinovsky: Just today, we approved amendments to this year's budget. Of course, it's good that there was some extra money. This promises good opportunities. It can be positively assessed and funding will be distributed on almost all fronts. The only thing may be... Some people are unhappy - people in the arts and culture. There was recently a meeting ... They have this one aspect - somehow they're remembered at the very last moment. But I told them, you need to somehow enliven the repertoire. This is an important matter because there are theatres almost all over the country. Why do I mention this? Because it has been said everywhere many times - agriculture, education, the real economy, the social sphere ... But they seem to have remained at the very end. But they have to contribute somehow. They don't need to only perform the repertoire from the 19th century and foreign classics... They stage almost nothing modern! They could pitch in and help! Take the very same Chichikov from "Dead Souls." Do you want to tell me that today there are no Chichikovs who buy shares, say, in bankrupt companies? The shares are there, but the companies are not! Or they sell them... Let the auditors come so the whole region is topsy-turvy!

In other words, the budget on the whole, of course, is a cause for optimism, because after all the revenues are decent. As for expenditures - this is understandable, everybody's asking, everybody needs something and money is distributed to everything: utilities, roads and everything else. But I would like to focus a little attention on the revenue side. Let us say that not so long ago, we approved the law on trade. We did not establish limits on trade markups so that there would be freedom for them - this is all well and good. But let's set the rate of profit at 20% - this is a worldwide practice. Then there would be no sense to hike prices so much because large sums of money received from inflated prices will have to be paid to the budget, as according to the law on the rate of profit, businesses must pay 80% in tax and will be left with 20%. Everything in this regard can be regulated by market-based measures. We agree that in most cases, we need to apply market mechanisms to generate additional revenue. This is just the case where we are on untrodden land, I think. Everything is clear with taxes: VAT is the most collectable there, so we can leave it at that level. A sales tax might be introduced in some places.

As for the transport tax, the Ministry of Finance does not want to include it in petrol prices. A flat petrol tax is a concern for people who drive rarely. If they drive once a year they would still pay a flat tax equal to their neighbour who drives every day. They feel abused when taxes are not paid directly through petrol prices. These people balk at the persisting transport tax. As for the Ministry of Finance, it says it can add a rouble to petrol prices but that that would not make up for a repealed transport tax. Now, if we increase petrol prices by two or three roubles, it is something of a risk - people will not buy petrol at such bloated prices, and I see their point.

Again, people who drive only on rare occasions will have objections. It's just as I said about cultural personalities: they also think they are underfunded, in a way.

There is another matter that is, I think, a bit beside the point... Should we think about eventually establishing a committee or another agency for food supplies? It might deal with public catering at schools, universities, hospitals, possibly prisons, major industrial companies, and at home. We fund healthcare, and this is good, but many chronic diseases are practically beyond cure: a patient is supported by pills, but disease prevention should be the main goal.

We allocate family capital - it would be better not to call it maternity but family capital. But then, a child might get ill and the entire capital will be spent on treatment. So we should pay more attention to food. It is very important. Wholesome diet brings health. We should prevent disease and create an atmosphere that alleviates stress. Troops and students also need good food, and we should assist with this, and provide hot meals at schools... The matter concerns a great number of people. The necessary sums have been earmarked, but I think we need a regulating agency in this sphere because it concerns a global problem: a billion people in the world are undernourished, while Russia has vast resources and can export food though we are importing it now. Many were glad when frozen chicken leg imports from America were cut, but these imports increased again later, and [Russian] poultry farmers are wary of competition. We should promote their business. Russian people want to buy Russian food because they are suspicious of foreign foodstuffs. They are packed beautifully, and all Europeans buy them, but they contain too many GMOs and chemicals. We should offer fresh meat. Customers must be sure that this chicken or sheep or any other animal was slaughtered this very morning. Now, take markets. What's become of them? It is good that retail chains are building shops - but they are out to close down the markets! The public is dissatisfied: they want to bargain.

I went to market one day. I knew there was a market somewhere outside Zvenigorod - but I saw a supermarket on its spot, with pre-packed food and fixed prices. When I buy pork, I want to smell it and be sure that this pig was slaughtered this morning. I want to see a slice of this or that. This concerns not so much myself but others. So I think we are overdoing things. Let markets stay, they promote competition. The owners of new stores demand that district authorities close markets down so they can get all the customers. But the public at large is dissatisfied. Municipal officials can cope with the matter quite well.

What else should we talk about, for instance, about the budget? We have allocated money today, but I'm afraid not all the money will be used up again. First, there is procrastination with money transfers to the regions. We should require the Ministry of Finance transfer it in January, February and March. Now it starts transferring funds as late as April! The regions receive allocations only from April through September, and occasionally have no time to spend them.

Take road construction. Some regions prefer not to begin a project now because of sleet and snow. They could start it earlier but the Ministry of Finance does not give them money: it benefits from idle money while the regions and consumers benefit from spent money. It's a pity to have carry-overs. I am sure that hundreds of millions or even more will remain unspent this year. I mean every region will have a fifty, sixty or a hundred million rouble carry-forward for 2011. In principle, it obstructs the development of small business.

Take governors' reports. Possibly, they should mention the number of new jobs in their region. Small businesses are the best way to provide jobs. Let governors report this every year. Their reports are easy to check, and we will see how small businesses are developing. Small businesses are the best remedy against unemployment because the self-employed will never deprive themselves of a job. The majority of unemployed come from hired personnel. It's always better to be the boss.

The smallest businesses can work in any place. Small business strengthens family ties. All these things taken together are important. But there are problems with registration and paperwork even in Moscow. Things are better in some parts of the country and worse in others.

You come to a city and see seething life. It's a real modern city. There are dark cities, too, with remnants of the old economic system and officials who are loath to do anything. So the budget is certainly the main document, and we want to contribute to it, make amendments and influence something. We are sure we'll be successful because we have enough money - perhaps no less than we had before. There is a budget deficit, right, but many countries have it, and then - we can cover it by increasing revenues.

Representatives of other parties reproached the Ministry of Finance for incorrect oil pricing - but then, oil prices do not depend on the Russian Ministry of Finance! They are determined by geopolitical influences on the country. If America had pulled out from Iraq before, it would export more oil this year and the Ministry of Finance would be accused of even greater problems. How can one know another country's plans in oil-producing regions? I think such criticisms are undeserved in this sense. The critics think the ministry sets prices - but the Ministry of Finance cannot plan further developments. Or take Iran! The situation may aggravate next year and oil prices could leap over the $150 mark. Will we find fault with the Ministry of Finance again then?

Vladimir Putin: You are right.

Vladimir Zhirinovsky: Or maybe nothing of the kind will occur, and someone will still find fault... We should not consider external influences... The Ministry of Finance cannot be held responsible for foreign policies, let alone energy resources: they concern the whole world.

Vladimir Putin: Mr Zhirinovsky, let us talk first of all about everything that concerns this day and the budget expenditure amendments for this year. It would certainly be better if our economic agencies could calculate everything down to the last kopeck: all our revenues and expenditures for a year ahead. However, this is very hard - practically impossible, I daresay - to make precise calculations with uncertainty reigning in world markets and the overall world economy. I think that our economic agencies - the Ministry of Economic Development and the Ministry of Finance - are right to proceed from the most conservative forecasts for Russian and world economic development to calculate the revenue and expenditure budget.

I think it isn't bad that we are doing better than we planned in the beginning and even the middle of the year. We should distribute extra revenue in due time when it appears. We have some now, but it is less than what we need to address all our problems - after all, we have a sizeable budget deficit. If we could get sufficient revenue to solve the current problems in full and cover the deficit, then we could say that all our problems are over and done with - at least urgent problems. What we have now is surely a positive trend but nothing more than a trend. We cannot say that what we have done fully satisfies us.

Second, you are certainly right that we should be thrifty. Evidently, one should not repair pitted asphalt in frosty weather. I count on State Duma members to pay attention to this issue, and we will certainly give relevant directives at the government level, that is, the level of executive authority.

I think you pinpointed several other essential things: first, the development of agricultural production and markets, and our attitude to food imports.

As things really are, Europe does not consume many genetically modified products or commodities that violate sanitary standards. That was why imports from certain countries were suspended - particularly chicken from the United States. I would like to remind you that we imported close on 1.5 million tonnes of chicken from the United States recently, against roughly 300,000 tonnes this year. I think we will do without these imports next year and later, especially because our sanitary inspectors often disapprove of the production techniques, transportation and storage of these foodstuffs.

I also want to remind you that the production of chicken in Russia has increased by more than 70% these last years, by 79% if I am not mistaken, and the production of pork by 39%. This is sizeable progress for any economy and any agriculture. This is why the budgets for next year, 2011, and for the years to follow give prominence to the development of agriculture.

You mentioned culture. Regrettably, I admit that our cultural figures are right. We have earmarked 82 billion roubles for next year's expenditures on the arts and cinematography - roughly 10% more than this year. I don't think it will suffice, considering the underfunding in previous years.

As for other sectors (industry, education, science and healthcare), I think we should talk about them in greater detail now.