Saulius Skvernelis
© DELFI / Andrius Ufartas

Voting regarding the VAT exemption for heating costs did not demonstrate unity between Prime Minister Saulius SKvernelis and colleagues from the party which delegated him. The PM himself says that this happened only because party members were not directed how to vote and everyone could decide themselves. Regarding this decision and the other first actions of the new government, S. Skvernelis talked on the show Dėmesio Centre on LRT.

- Mister Skvernelis, today the Seimas extended the VAT exemption for central heating. You were against that. What does this mean?

It means nothing, nothing new happened in Lithuania. That exemption was constantly renewed. This only shows that there is need for fundamental change. This exemption has little justification to remain. Even more so because an alternative model to support the people who need this exemption has been proposed and it did not receive support. The Seimas has simply expressed its will in such a way, calming people, but there is no calm because the cabinet still needs to figure out a little detail in the form of 32 million euro that is needed to fund this exemption. The exemption supports everyone, including those who do not need it. We also support an ineffective heating infrastructure, we will support poorly insulated apartment blocks without trying to renovate them. Most importantly the fact that the non-taxed income size is changing drastically from January 1st has been neglected, many people’s incomes will be larger and perhaps they will not even be able to receive that exemption, which they could get if we shifted to the new model.

- Would you have been prepared to do everything, if the Seimas had voted otherwise?

Today there is a support law, which has a specific mechanism. The law has a 20% limit. If heating expenses exceed 20% of an individual’s income, then they have the right to receive support. All of this is financed, several years ago a ruling was made that this function would not be delegated to municipalities, but would be an autonomous function with a clear source of funding (in 2011-2013 state budget funds were used), which makes up around 230 million euro per year. These funds intended for municipalities, they are not used up over a year. This is funding intended for support and reducing social segregation. Only half of them is used, while the other half is used for other purposes, building monuments, installing pipelines, repairing roads and elevators, severance pay and such. If this is social support, then we could say that we are not prepared, but overall the mechanism functions, new functions are not appearing. By changing this from 20% to 10%, potentially it could have covered more people who really need this assistance. The argument was that there is very little time. Another important thing is the billions spent on IT infrastructure development, but today we see a hopelessness, when paper reports are still requested, being placed in one of the registers. Unambiguously I, as a member of Seimas, will register a respective amendment, so that such things would not happen. So I believe that we would have been prepared.

Even if we take the worst case scenario, then twice as many people would have received the exemption, while those who do not need it would not even have felt it. Even more so that with the non-taxed income size increase, speaking of those earning a wage of 944 euro, through the rise in non-taxed income size, 50 euro will return to them every year. Given data from the heating infrastructure providers’ association, by removing the exemption, heating costs for an average apartment would rise by 50 euro.

- But the problem is that you did not receive support even from your own fraction. You voted against, as did 10 members of your fraction, with 9 abstaining. How were you unable to convince your comrades?

There is no need for conspiracy theories. Someone started to escalate that perhaps opinions split.

- But of course they did.

The situation is very simple. The amendment was registered by our partners, the Social Democrats. The former government did not consider extending the exemption and did not dedicate a single euro to it in the budget. The amendment was registered and had passed all the stages up to this moment, only passing it remained. Knowing that the Social Democrats will vote for their own amendment, the opposition is acting as usual.

- It is fairly odd that the majority of the Liberals voted in support. That appeared peculiar.

In our morning fraction meeting we discussed that even all 53 votes of our fraction could not block the legislation.

- However you are incorrect that it is only an initiative from the last term. A. Sysas, T. Tomilinas, S. Jakeliūnas, A. Palionis and R. Karbauskis – these aren’t just partners, this is your vanguard.

The amendment was presented by the previous term’s Seimas and it was stated that it will be matched with the budget. Because of this there was a withdrawal and we stated that voting is free, everyone could express their opinion. Not last week, not today will I change my opinion. I respect their will. On Wednesday the cabinet will find the missing funds, but they will be found from all of us. We will be suffering doubly. We will support those who need no support and will also all contribute by reducing funds in important programmes. We are talking about the roadwork programme which is very necessary.

- Has this situation helped you understand where the centre of power is? Or have you understood it in some other way?

Definitely not. The government started working only recently. Our conclusions were not requested. You have to understand the mechanism of government change itself. The Seimas started on November 14, the cabinet was formed for one and a half months. We have to deal with legislation carried over from the previous term, finish it or amend it. These transitory period laws are what is creating such a situation.

- For now you, as a political leader, are not controlling the situation.

However it will be viewed, the cabinet is performing its functions, the situation is well under control.
- How is it under control, if in the morning prior to going to the fraction you say one thing, while the majority of the fraction votes otherwise in the end, unlike what their delegated Prime Minister said?
If fraction members were told they have to vote as the PM wishes, not even the cabinet, that’s what would have happened. Realistically predicting our votes will not suffice, we allowed the people to vote on their own. We realistically knew what moods we have and what votes we will see. Then you would have another argument that see, the “Peasants” are insensitive, while all the others care about the people. We have to take care of the state responsibly, take care of its people, its finances.

- Or perhaps it means that you are not gauging the political atmosphere sufficiently well? Risking in places where you cannot why. Why?

We made no promises on a specific outcome.

- You said the exemption will be abolished.

It was abolished, it ceased to function on January 1st. The new state budget was prepared based on this. We received it and now we have to amend it because we have to seek a source, which is fairly painful. From our first to our second reading we managed to reduce the GDP deficit and structural government sector deficit by a tenth of a percent. Unofficially this has been praised by European Commission officials that our steps are correct and we can expect that the reforms started (the social model, the Labour Code) will be acknowledged as structural reform and we will certainly reach the goals we are after without breaching fiscal discipline.

- Politics is, among other things, the art of exploitation. There is a need for a certain craftiness, not just hot bloodedness. You, I mean your fraction, have announced a future decision and then withdrew from it for several times now. It does not look very serious.

This is a new majority, there is yet to be the sort of cooperation, which I expect we will definitely have with the Social Democrats. Much is said and only then are consequences considered. However I am glad that the government is currently is not an example of that. Normal work will begin when we conclude this year’s main task – the state budget. Then the initiative will be in the cabinet’s hands. There are no divisions in the fraction, just for now we have chosen this path of political proceedings. Everything will return to the path it should be on. We are also in constant communication with the new ministers. We are working, making decisions and then we start talking. I have told colleagues – understand that you are no longer private individuals, any voiced thoughts about cups, sugar, salt or water can be taken as a future decision by the public.

- Another topic – excises. At the tart your colleagues presented a conception for four years, particularly in raising beer prices. The cabinet, which the Seimas referred to, agreed, gave a positive response. Now we have new initiatives, it is now a one year plan, increasing beer excises by almost twofold, but also increasing them for spirits. This is also confusion.

Not quite so. The cabinet made a protocol ruling, it is public and available. It will be monitoring the changes to our economy and labour market by these excises. If we see that the decisions are not giving results, the cabinet will be the first to present a new legislative project to Seimas to make appropriate tax changes.

- You are now discussing a one year period?

Yes, because it is a very important decision. You cannot rely on an excel spreadsheet in reducing taxes. Raise it this much, collect this much. That never happens. We have to watch markets in neighbouring countries, how we manage to combat illegal sales and etc. Thus I believe that the decision to work with a span of one year is correct. Secondly the cabinet will not watch formally, we will perform a normal monitoring and then will make a decision. Regarding extra needs, today we see that there was demand for the VAT exemption. Or for examples let us remember teachers, it was offhand signed, albeit not judicially confirmed, but promises were made just so that the strike would end. But there we have not little, not much – 35 million euro is needed. We understand the teachers and we are seeking possibilities to satisfy those expectations, so that trust in the state would not be breached. A deal was made after all.

- Prime Minister, you are now talking slightly differently than before. There was talk that excises were to be raised so that people would consume less and even if we gather less excise, it is no problem because the core is to reduce alcohol consumption. Now you are saying that excises are also being raised because it is necessary for teachers, for the exemption…

Speaking of beer and other weaker drinks, these decisions are unchanging. Strong alcoholic beverages were included because a need to reduce accessibility appeared, one which was due based on our stages. And also, of course, to patch the holes made by decisions made by others.

- Also probably to remove a certain disproportion which would appear after making beer prices rise so much, comparing beer and spirits?

If the decision is made regarding 2017 excises, then half a litre of beer would increase in price by 12-14 cents. This is not a sum which would significantly impact consumption. However we will monitor market changes. Even more so considering that now, during the cold period of the year, less alcohol is consumed overall. Thus the results, if the decisions are validated or not, it will be visible in summer or autumn.

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