Economy 15 October 2024, 8:41am

Shocking figures: this is how Hungary used the energy subsidy fund

Portfolio

The decrease in world energy prices creates an opportunity for the Hungarian government to reallocate some of the resources earmarked for the reduction of utility tariffs for households to other areas. This is the conclusion of the latest fiscal report of the National Bank of Hungary (MNB), local daily Népszava reported.

forint forintárfolyam forintgyengülés költségvetés deviza

According to the MNB's half-yearly analysis, in 2022 the government spent a total of HUF 2,282 billion on various expenditures from the budget earmarked for energy subsidies.

However, some HUF 298 billion of this was used for purposes not directly related to the so-called 'overheads protection', i.e. to keep households' utility bills low(er). This amount represents 13% of the total budget.

Based on the central bank's forecast, the government is expected to spend HUF 996 billion from the energy subsidy fund in 2023.

However, only a part of this, exactly HUF 689 billion, is directly earmarked for household utility subsidies. The remainder will go to support companies, local authorities, churches and NGOs.

The central bank staff also point out that HUF 129 billion is expected to remain in the 'overheads protection Fund' by the end of the year.

According to the central bank, "a significant part of this amount could be used for other purposes, including those that do not constitute energy subsidies", which means that the government could have the possibility to reallocate this amount to other areas.

Background

The government has set up the 'Overheads Protection Fund', i.e. an energy subsidy fund to finance the effects of skyrocketing energy prices triggered by the Russian invasion of Ukraine in February 2022, without passing on the full cost to the public.

Because of the war, the European Union has decided to decouple from Russian energy supplies within a few months, which has led to an unrealistic rise in European gas and electricity prices. The fund was set up to partly offset the price boom. It was partly financed from the budget through tax revenues, but the cabinet also imposed special taxes on several sectors.

The government sold this to the public by saying this was an 'extra profit tax' on "war profiteering multinational companies", but it imposed the new levy not just on energy companies, but also pharmaceuticals and airlines where there was no profit, let alone windfall profit.

According to MNB figures, the energy subsidy fund closed with a surplus of HUF 204 billion last year and is up at HUF 128 billion this year. In other words, in two years the government has levied 330 billion in extra taxes that it did not really need, Népszava said.