Vladimir Putin's opening remarks at a meeting with the leaders of the Federation Council:

Good afternoon,

We had regular meetings in former years as well. They were fruitful and substantive. There is all the more need for such meetings today because the Government and Parliament must work on a permanent basis, very closely together, practically on a day-to-day basis. We should discuss as a matter of routine all the draft laws, just as we do it with the State Duma, in the so-called "zero reading" regime. I hope that a similar practice will be established in our work with the upper house of parliament.

I would like to thank you for your very active work during the spring session. The Federation Council has examined about 170 draft laws. I would like to single out the laws on raising the minimum wage, guardianship and trusteeship, the Housing Construction Fund, co-financing of voluntary pension contributions and savings.

Today we will consider law-making plans for the future. But first I would like to dwell on the regional aspects of the Federation Council's activities.

We have said before - and indeed this is what the law determines - that the Federation Council, the upper house of Parliament, is a key link between the regions and the federal centre, a key agency that determines the interaction between the federal centre and the regions. It closely monitors the interests of the Russian regions in the context of national tasks.

We need such constant feedback. Especially now that we are drafting serious policy documents. You know that the Concept for Long-Term Social and Economic Development of Russia up to 2020 is to be adopted in the coming months.

It is important that its key provisions are treated as priorities at all levels of government, both federal and regional, and I very much hope, also at the municipal level. Then, the pooling of federal, regional and local resources will yield the maximum effect.

We allocate considerable amounts from the federal budget to increase wages, grants and other benefits.

Obviously, the implementation of such an active social policy would require additional disbursements from the regional budgets as well. We will look for solutions together with the Federation Council.

The important thing is that the new social benefits be equally accessible to all the citizens regardless of the region in which a person lives and of the source from which the benefits come. I will speak a little later about how the federal centre helps the regions in practice.

You know about the recent decision to increase by 30% the wage fund for employees of federal institutions. Of course, it will have some impact on public-sector employees in the regions as well. And of course, we will help them to meet that challenge.

At the same time, I would like to draw your attention and that of the chief executives of the regions to the fact that this does not mean that the regions are no longer responsible for paying benefits and wages to the employees at their level, in regional institutions. That is primarily their task. The regions must determine the priorities of their budgets accordingly. I will speak later about how regional budgets are growing.

The regions' compliance with their obligations depends on their budget revenues. I am aware that you discussed taxation issues during the Government Hour on July 4. You looked at how the recent decisions on tax cuts will affect the local budgets.

Let me remind you that the underlying logic of our actions is enlarging the financial potential of the regions. Over the past few years the total volume of regional budgets has grown substantially. In 2006, it amounted to 3.7 trillion roubles ($150.53 billion, or €102.13 billion) and in 2007, to 4.8 trillion rubles ($195.28 billion, or €132.49 billion), a growth of 15%. I would like to stress that this is growth in real terms, in spite of inflation.

In 2008, the regional budgets are expected to grow by another trillion to 5.8 trillion roubles ($235.96 billion, or €160.09 billion). That is comparable to what the federal budget can afford to spend.

Federal assistance to the regions grows year in and year out. It will exceed 1 trillion roubles this year, not to mention the money that comes to the regions through other channels. I am referring to the Housing and Utilities Reform Fund and the Investment Fund. That is additional money, over and above the 1 trillion I have mentioned earlier.

Funding of the programmes under National Projects continues. Subsidies to the regions for road building will amount to about 100 billion roubles ($4.07 billion, or €2.76 billion) every year.

We intend to work seriously to further improve the mechanisms of federal aid to the regions. I will speak about it in more detail in a moment. I believe that it is very important and we should put our minds together on this matter if there are questions.

Today the Ministry of Regional Development is preparing amendments to the rules of subsidizing the regions to address socially sensitive problems. We discussed these mechanisms in the former years as well. I wouldn't say that they do not work at all, but in all fairness, there have been problems. The problems are still there.

The neediest regions do not always receive what they should have received from the federal budget. Unfortunately, it has sometimes happened that the regions that received help were those whose leaders are more active in the ministries and agencies, in the Moscow corridors of power, so to speak.

Now the federal budget renders about 80 types of support to the regions to the tune of 415 billion roubles ($16.88 billion, or €11.45 billion). However, some of them are quite small in terms of volume.

Instead we propose to make a list of priorities and use it to extend larger subsidies to regional budgets. The regions will have more freedom to choose how to use that funding so that Moscow officials do not tell the Governors the heads of regions how they should spend the money. The Governors, together with the regional legislatures, will be able to determine the priorities. Naturally, this system will function on condition that the targeted indicators are achieved. We in the Government, in parliament, including the Federation Council, will have to take a closer look not only at the areas the money is spent in, but also at how effectively it is spent.

In this connection I suggest that we also discuss today the monitoring of the exercise of the powers delegated from the federal centre to the local authorities. They include water management, forestry, urban construction, the employment policy and culture.

Effective performance of these functions has national importance. If we delegate some powers to the local authorities, that does not mean that we should wash our hands of it at the federal level, forget it and think we have nothing to do with it. The maxim "out of sight, out of mind" does not apply here. The activities of regional authorities must be constantly within our common attention.

Optimizing the work of the federal government bodies in the regions is an equally important topic. These bodies often duplicate the local structures and do not always interact with them effectively. There are some objective complaints about the performance of some federal officials in the regions and about their number.

As for redistribution of authority, we should also look into this matter more closely.

As you know, I was in the Rostov Region yesterday. The governor briefed me on the situation there. On fisheries, many powers have been transferred to the regions, yet he has no right to build fish uptake canals. That is within the federal scope of authority. Why? The Governor says: "If I spend that money, inspectors will come and claim that I have used it improperly." There are still many such inconsistencies. I would ask the members of the Federation Council to take a close look at these problems, join this work and prompt the Government on what still needs to be corrected.

In conclusion I would like to go back to the law-making plans.

I ask you, during the course of the next session, to pay particular attention to the block of issues connected with housing construction. New building regulations must be adopted.

I am sure you have taken note of my recent public remarks on that score. In implementing major projects - preparation for the Sochi Olympics, preparation for the APEC summit in Vladivostok and some other projects - we are facing a unique situation when building and engineering work in Russia costs several times more than the same work in neighbouring European countries. And yet on many counts this work is cheaper in Russia. I am not just talking about the cost of labour, but energy, land, even water and other resources are also much cheaper here. But on balance it turns out to be more expensive. Why is that? Legally, everything is in order. The reason is outdated regulations going back to the 1950s and 1960s applied to what appear to be natural and simple instruments. But at the end of the day it is a mess.

We have to put an end to it. I set the task to the Government, the Ministry of Regional Development to complete this work in November. That will leave some time for parliament to make a decision. I ask you to join this work now so that when it is completed, the Duma and the Federation Council would be familiar with the issue and able to make the decision promptly.

That is all I wanted to say in the beginning.

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Prime Minister Vladimir Putin's closing remarks at the meeting with the leaders of the Federation Council:

With your permission, I would like to make some remarks. I would comment not on all, but on some of the things that I found to be interesting and important.

As regards redistribution of tax revenues between different budget levels, we should be careful. I spoke in my opening remarks about some areas of our joint work in the near future, but I did not mention the main thing, the budget. We will have to adopt the budget.

The budget has been put together and calculated. We are finalizing details with various agencies. Arguments and battles are still underway between the Finance Ministry and the industrial ministries, between representatives of various sectors as they choose and determine the priorities. Obviously, once the budget is introduced in parliament it will be impossible to redistribute the tax burden at the law-making level.

Still, I think that your proposal merits serious attention. In particular, I am thinking about small business and the stake the municipalities have in the development of this type of activity. We should do it in the following way: adopt the budget and then, without undue haste, look at what will happen in the taxation sphere and how to stimulate various types of activities and levels of government to support these activities. So, I will not go into detail. On the whole, I think it is interesting.

Now about the Bologna process [addressing Sergei Mironov]. If I understood you correctly you believe that awarding European-type diplomas recognized in European countries provides an additional incentive for our graduates, for their employment by foreign companies or abroad. Mr Mirinov, we do not see eye to eye on the underlying concept. Although it does create conditions for the employment of our young people by foreign companies and maybe even abroad, and although as the Prime Minister I am not happy that our graduates leave Russian territory to take up jobs abroad, nevertheless I think it would be wrong to restrict our people's rights. On the contrary, however unpleasant it may be, there are some pluses in it. The plus is that in this way our education system demonstrates that it is competitive. And that is an important sign that our economy and our society as a whole are competitive. That is not so bad in itself.

As for the fulfillment of the tasks that the government considers to be priorities, we should proceed not by imposing restrictions but by creating conditions for the use of qualified labour. What does it mean? It means that we should raise wages, it means that we should create conditions for young people to marry and raise families. We should provide proper housing conditions. You know that we have decided, together with the Academy of Sciences, to start building houses for young scientists on vacant land belonging to the Academy.

If we act in accordance with these principles, along these lines I think we will not only encourage people to seek employment in Russia, with our companies and in our regions and in the regions that are of critical importance for us, for example Eastern Siberia and the Far East... We should raise their pay, provide living conditions, build apartments. If we approach these problems in this way it will not only encourage our people to be employed here, but it will encourage those who work abroad to return. Such a trend is in evidence.

From that point of view there is also a certain plus. If a person feels free, if he or she has worked abroad and then feels that he/she would like to return to the country, he/she comes back enriched with experience and knowledge of new technologies, and works more effectively at home.

In general, of course, we want all of them to work in this country. But to be part of the world education system and part of the world economy is not bad and there are pluses in it. All that is needed is to skillfully use it for our own development. That is how it will be.

Now regarding other matters that you have raised. Regarding the dacha amnesty.

Much has been done. We discussed this issue practically every year during my live television linkups. I think much has been done to improve this process. For example, whereas we registered 600,000 garden plots during the whole of last year, we have registered as many in the first six months of this year. In other words, the process is gathering momentum.

Regarding pay. Perhaps we should think again about the size of the pay if it is too large for an ordinary citizen. That is the road to follow, I think.

As regards the proposal to register them at once as members of the gardeners' partnerships, which you said will eliminate all the problems, we should look at it one more time. Perhaps problems will arise. You see, the relations between the management, even though it is elected, and the rank-and-file members of these associations are not always simple. How will they divide it up among themselves? And is the government supposed to be out of it altogether? Could it be that by delegating all the authority to these associations we will leave some people unprotected? I am not saying that this should not be done, but we should think twice.

Let us think about it. Forgive me, but we should proceed from the realities of life. We should see what happens. OK, we may delegate all these powers to them. What next? Are you so sure that everything will be honest and above board? I am not saying that this should not be done. It can be done. But we should "measure seven times before cutting the cloth".

Now about the mother's capital. You know that when we were discussing how mother's capital could be spent, it was not by chance that we chose the improvement of housing conditions. Of course, we did not assume that mother's capital would be enough to buy a new flat. It is just an addition to the family budget which the woman brings into the family in order to improve the housing conditions.

As I promised when I introduced that form of additional benefit, we will adjust it for inflation. That is what we are doing. You have mentioned the current figure, it exceeds the initial figure of 250,000 roubles with which we started, and if inflation continues at its current rate, if it is not too high and does not threaten the economy and stays within the limits we determine, we will make the adjustment next year too. That may bring the figure to over 300,000, depending on inflation.

I think that is an honest, open and clear approach. As far as tying it to a square metre of housing floor space, this can be imagined theoretically, but it requires very thorough calculations by region because the cost of housing differs in different regions. But that does not stop citizens, if they live in one region but want to improve their housing conditions and use mother's capital, among other things, to buy housing where it is cheaper.

I am not speaking about the citizens of Moscow and St Petersburg, especially those who have been born and raised here and have their roots here. One can hardly imagine that they would move anywhere easily. But we have millions upon millions of citizens born in the provinces who spend all their lives in the provinces and move fairly easily between provinces. This form of using "live money" is very acceptable for that category of citizens.

There are instances when people move from large cities with a population of over a million to rural areas and less developed regions. For example, to Eastern Siberia. I think we should look above all at the size of the mother's capital and meet our obligations to our people. I stress that this is not an awful lot of money. So far, we have kept all our promises. At least we have done everything to keep them.

The current mechanism for the use of mother's capital is such that we can keep our promise. Of course, we may try to improve it, but I repeat that we should proceed very carefully and think. Let us first make the calculations.

As for public councils, some private companies have already created such councils. Let us study their experience, look at how the Public Chamber and the corresponding division of the Public Chamber functions. Let us think.