The work-based economy is successful
21. 11. 2016.
In an interview on the Kossuth Rádió programme “180 Minutes”, Prime Minister Viktor Orbán described the Hungarian economic model – the work-based economy – as successful. He said that as the country’s economic foundations are sound and the financial system is stable, there can be a significant rise in the minimum wage, and a similarly substantial cut in corporation tax.

In the pre-recorded interview, which focused on economic issues and was broadcast on Monday morning, the Prime Minister said: “These measures can now be implemented, because we have done the hard work. The Hungarian economic model – the work-based economy – is successful. We have always believed in this, and now it is also recognised by the outside world”. He said that the next phase is about to begin, and Minister for National Economy Mihály Varga is currently engaged in negotiations with employers and workers’ representatives regarding a six-year economic plan.

The Prime Minister believes that the planned minimum wage increase is feasible. He pointed out, however, that on this issue “we have problems with businesses”, but the aim is to come to an agreement with them in the next few days. The Minister for National Economy “has been given room for manoeuvre” in the negotiations, he added. Mr. Orbán said that businesses are right to point out that payroll taxes are high, and they are therefore demanding that they be reduced. Only the percentages have yet to be set, he confirmed, but Mr. Varga has made a proposal to employers for a six-year programme for reductions in payroll taxes. Mr. Orbán added that no similar proposal has been offered to Hungarian businesses over the past thirty years.

He stated that businesses will be able to pay higher wages if taxes imposed on them fall – and payroll taxes will indeed fall. The Sunday preview of the interview had also included his statement that if an agreement with businesses is reached on a larger increase in the minimum wage, the resulting rising wages and higher inflation will create an opportunity for a larger pension increase. The Prime Minister added that if pay talks prove to be successful, this year’s pension increase could be maintained at 1.6 per cent, instead of the currently planned 0.9 per cent increase, with which pensioners are understandably dissatisfied.

He said that the Government has kept its promise: over the last few years it has preserved – and, indeed, increased – the purchasing power of pensions. Responding to a question on the 40 per cent real wage increase planned for the next few years, the Prime Minister said the following: “I can accept these as initial figures, and if we can implement them, it will be quite an achievement”, but they must be pushed “higher and higher – and higher still”. Speaking about the reduction in corporation tax, Mr. Orbán said that the new nine per cent tax rate will benefit every Hungarian business. The Government is seeking to make Hungary the region’s most business-friendly environment, he said.

The Government expects that the reduction will lead to a rise in foreign investment in Hungary, and that everyone “will be able to feel relaxed about declaring” what they have. If the tax reductions are implemented well, he said, economic performance and activity will increase, and therefore revenues received by the state can be maintained at the present level, despite lower tax rates. When asked about the future use of corporation tax revenues, he said the following: “I am not giving up on the goal of creating higher standards in sport and culture alongside lower taxes, because even with lower tax rates it is possible to raise higher revenues”. Culture and sport will continue to improve, he added.

Speaking about the local business tax, he said that this will not be amended, because if it were, local governments would be starved of revenue. Mr. Orbán again stated that he does not “moan” about Hungarians working abroad; on the contrary, he sees them as a resource and an opportunity. In his view, during the period ahead one must be prepared for a scenario in which “our people will come and go, depending on when and where they see an opportunity”, and he does not propose the imposition of state restrictions of any kind.

He stated that in 2010 the Hungarian economy was in worse shape than that of Greece, and that it did not have clearly-defined foundations. Therefore, he continued, the “rules of the thumb” had to be established, “the IMF had to be sent home, we had to learn to stand on our own two feet” and Hungary had to state that “we do not want to live on handouts”. Consequently the Government introduced a work-oriented economic policy, to replace a benefits-based economic policy, he said: there are now 4.3 million taxpayers – compared with just 1.8 million in 2010; instead of an excess of labour, Hungary is now experiencing a shortage of labour, and “we are close to full employment”.

In his view, the 20th century “conditioned [the Hungarian people] to failure and pessimism”, and therefore now there is a need for people in positions of responsibility who are optimistic and hopeful, and who set high targets. He added that Hungary needs many more economically successful years, and that the levels of wages, pensions and welfare benefits must ensure that funds “are not exhausted, but are continuously replenished”.

The last topic was the Hungarian-Serbian government summit on Sunday and Monday in Niš in southern Serbia, in relation to which the Prime Minister said that Hungary supports Serbia’s goal of becoming a member of the European Union. “The EU does not have a bright future if it does not admit countries which are eligible, suitable, and have ties to Europe. Serbia is one such country”, he said. He added that Serbia’s policy on minorities is more than fair. He also indicated that now there is a desire to improve opportunities for Hungarian businesses in southern Serbia.