Transcript of the beginning of the meeting:

Vladimir Putin: Good afternoon, Mr Kudrin.

We have long been working to direct the main budgetary process through the state development programmes in order to make the budget more transparent and involve all agencies – both financial and administrative – in developing individual sectors using budget resources to maximum effect, on the model of national projects, and to direct the entire budget process through these state programmes. Your ministry has done a lot in this area. Where are we now on it?

Alexei Kudrin: Mr Putin, on your instructions, the Ministry of Economic Development worked with the Ministry of Finance to coordinate work across all ministries. As agreed with the Ministry of Finance, the Ministry of Economic Development presented the government with the list of the state programmes that will define the main pillars of the government’s economic and social policy. This list has already been discussed and improved by the budget commission.

We developed 40 programmes dealing with all aspects of the country’s social and economic policy. We then divided all programmes into five key groups. They are: a new quality of life (12 programmes), innovative development and modernisation of the economy (17 programmes), national security and public safety (2 programmes), balanced regional development (4 programmes) and creating an efficient state (5 programmes). There will be a total of 40 programmes. In particular, we distributed the resources allocated to these key areas beforehand, under the federal budget project for three years. So now we can see how much money is concentrated on each area.

The first area, relating to the new quality of life, comprises 12 programmes and consumes 46% of all federal budget expenditure. This is about 4.761 trillion roubles. The second area, dealing with innovative development and modernisation (17 programmes), has 1.785 trillion roubles. Today we can say with confidence that the federal government has targeted this money on innovative development and modernisation, on education and on other sectors. The provision of national security and public safety has 1.953 trillion roubles, about 19% of federal budget spending.

Now, after analyzing the funds at the disposal of all these ministries, I can say that the Ministry of Healthcare and Social Development is not alone in working on healthcare, but also the Ministry of Civil Defence, Emergencies and Disaster Relief, the Ministry of Defence and other agencies that have developed medical provision, like the Nuclear Energy State Corporation (Rosatom)…

Vladimir Putin: I see. Now we have a general picture of each sector.

Alexei Kudrin: And the healthcare development programme will now bring together all these resources, these opportunities and tools needed to attain this goal. And this will amount to 382 billion roubles. The Ministry of Healthcare will coordinate the use of these funds, while particular ministries will execute particular sub-programmes. They will join forces and consider the optimisation of as many processes as possible in order to ensure these goals are attained across the entire territory of the Russian Federation.

The same principle will be applied to developing education, for example. The Ministry of Education will coordinate all education development programmes across the country, including departmental programmes. Some 340.5 billion roubles have been currently allocated to this area.

The development of the transport system will take place under the auspices of the Transport Ministry, though all related ministries will also participate, and the programme will cost 501 billion roubles. The development of science and technology will be take place under the auspices of the Ministry of Education and Science and will also deal with the funds available to different ministries; it will also have the corresponding sub-programmes worth a total of 177.4 billion roubles. Russian cultural development will get 82.9 billion roubles and so forth.

All these programmes have now been thoroughly worked out, all the documents have been agreed with all the ministries and submitted for your consideration and signature. Afterwards, we propose that we draw up the first drafts of all these programmes, including goals and indicators by which progress can be monitored. We then submit these programmes for consideration at a government meeting by the time the budget is submitted for consideration, let’s say by October 1 (we will approve the final deadline later).

In fact, it remains for us to discuss, once again, all these areas of economic policy for many years ahead. On average, we expect the programmes to have six-year terms, though some of them will have 15-year terms. This depends on how long it takes to reach the key levels, as defined in any particular programme. And, of course, this is not simply a matter of drawing up the budget or of detailing how the budget is to be drawn up, it involves the reform of the state administration, which, from now on, will not only be based on budgetary funds. National programmes must also have clearly defined regulatory control tools to ensure the goals set are achieved. The tax benefits, which are aimed at ensuring these goals are achieved, will also be assessed, because they represent concealed budget financing. All these measures will combine to attain the various stated aims. We are finally achieving the consolidation of these resources, and indeed of the funds themselves. The budget will become programme-oriented and will finally have a structure of programmes from 2012.

Vladimir Putin: And how can we assess the results delivered, the efficiency of this work?

Alexei Kudrin: Mr Putin, the focus is on preventing the programme from being altered year after year once it has been approved, because that’s what, in fact, hinders our achievement of these goals. Our objective is to monitor and assess the progress made towards achieving the goals year on year, having defined the goals, the progress-monitoring indicators, the stages of development, and everything else item-by-item and measure-by-measure. We must not blindly follow our ministries when they say that they need to amend these plans, reducing the number of goals and making them more modest by comparison with the initial proposals. Then, I hope, we will see improved quality control, the system of progress-monitoring indicators will swing into action, and the ministries will bear greater responsibility for accomplishing the measures and attaining the goals, which have been announced and supported at a government meeting. 

Vladimir Putin: What impact will this have on the budget process in terms of interaction with Parliament?

Alexei Kudrin:  It makes the full scope of the government’s activities more open. Unlike the defence of certain budget items in terms of the volume of expenditure, now, the discussion of this volume will primarily entail a discussion of the purpose and meaning of the indicators that we are to reach. The process by which they are adopted, expert analysis of the programmes and defending them before scholars and deputies is a significant factor when it comes to efficiency.

We often take decisions quickly, but we do not always choose the most efficient path. That takes time, time for experts, scholars, professionals, including deputies, regional leaders as well as experts, to speak up on how best to achieve each stated goal. Following this procedure is important in ensuring both the quality of the programme and the attainability of the goals it sets. It is advisable for us not to rush out these programmes over a few days or weeks, but have them pass through this one-year preparation procedure, defending and implementing them with minimum amendments over the next few years.

Vladimir Putin: It is important that this procedure is not excessively bureaucratic.

Alexei Kudrin: When it comes to interrogating and defending these proposals, we cannot be too careful, but once the programme has been successfully defended, people should be held responsible for any deviation from the selected course.

Vladimir Putin: Understood. In any case, I want to emphasise this once again. There are many issues that we consider for so long that, upon occasion they lose all relevance, which is why prompt decision-making is taken very seriously. Of course, issues arising should be carefully discussed with experts and in parliament, but excessive bureaucracy is sometimes just a hindrance, impairing the efficiency of the entire performance of the government.

Alexei Kudrin: I think that this refers more to the period during which the programme and all its objectives are defended. The ministry has the necessary resources at its disposal. We are raising the role of the ministries and increasing their flexibility as they work to attain their results. So from now on we won’t have to consider each construction project or event, but will see to it that the indicators by which performance is monitored are achieved. This means that the ministry will be able to alter some programme components. Thus they will achieve the flexibility and promptness of response needed when reacting to specific situations, yet within the parameters set by the government. I see this as bringing the indicators’ fundamental purposes and objectives into harmony with the ministries’ flexibility and responsibility. In this respect the resulting programme-centred approach will raise ministerial fund management capacity.

Vladimir Putin: This work must be undertaken ensuring that issues are passed from one level to another in a meaningful way, rather than circulating endlessly through this system.

Alexei Kudrin: Mr Putin, I think that you should approve all the stages and we will observe them. I hope all the ministries will deliver their programmes on April 15, and that approval will be received by October 1. That timeframe is reasonable enough for all the programmes to be defended.

Vladimir Putin: Good.