The idea voiced this week by Latvian Transport Minister Uldis Augulis about diverting pension fund money towards road repairs is unjustified and absurd, says the party For Latvia’s Development.
«The transport minister, a figure directly responsible for the funding model intended to maintain and restore roads, could not come up with a single development model during last year’s budget talks,» explains the leader of For Latvia’s Development Juris Puce.
He notes that Augulis has made sure vehicle tax increases, but he has done nothing to bring improvements to the financing side of state roads. Even the plan for the use of EU fund money on roads is planned in such a way to use everything up in two years. «Augulis has done nothing to change the situation.»
On Wednesday, 8 March, Augulis mentioned in his interview to LTV that it would be possible to divert money from pension funds in order to fix up roads. The minister mentioned that it would be one of the solutions for finding money to afford road repairs. It is important, though, to be absolutely certain that the yield of second level pension funds does not decrease as a result.
Augulis explained that by saying the deficit on road repairs has reached EUR 4 billion over the course of the past 25 years. «The state budget simply cannot afford that, as it would be equal to half of the state expenditures for an entire year.»
Puce, on the other hand, says that the election programme of Augulis’ represented Greens and Farmer Union had mentioned the restoration of the State Roads Fund in multiple elections. In spite of that, Augulis has not done a thing to found such a model.
«Now the minister has proposed an idea to steal money from Latvian people to cover up his own failure,» Puce explains, adding that money deposited on the second level pension plan is personal property of Latvia’s residents.
For Latvia’s Development urges the transport minister to offer a reasonable road funding model. For example, returning to the idea for using fuel excise tax revenue for a separate State Road Fund.
Bank analysts, commenting on Augulis’ proposal, said that pension funds are not a source of money that can be drained to cover all kinds of costs.
Swedbank’s senior economist Martins Kazaks told LETA that if investment projects are created for the development of the road fund, and if pension funds can contribute, then such an initiative should be considered. But such investments have to be voluntary and reasonable. «In a forced way, however, diversion of pension fund money would be unacceptable. Pension fund money is private property of the people. This money is untouchable,» Kazaks said.
SEB Bank’s macroeconomic expert Dainis Gaspuitis noted that the minister’s offer does fit the current political approach, which is not associated with any specific politician or industry, but rather the system as a whole. «This is also noticed in healthcare and other sectors. Respectively, politicians are looking for simple short-term solutions for problems that would only deepen in a long-term perspective,» he said.
Citadele Bank’s economist Martins Abolins notes that such statements about using residents’ pension savings should be viewed very carefully, because it is not clear from the proposal what it is intended to achieve and it only serves to question the stability of Latvia’s pension system. «Surveys in Latvia regularly show that belief in state institutions is on the lowest level. This is why stable and predictable pension system is important for creating motivation for residents to pay taxes,» he said.
DNB Bank’s macroeconomics expert Peteris Strautins told LETA that it is not possible to establish paid roads in Latvia, at least not on a reasonable level. Industry specialists know that very well. «Roads cannot be the place in which pensioners should look for a return from their deposits. It is self-evident that it is not possible to simply take from pension funds to cover holes in the budget,» he said.