The Defence Committee had key budgets on its agenda

 03. 11. 2022      category: Events
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The Ministry of Defence budget, the National Security Agency budget for 2023 and the outlook for 2024, 2025 were on the agenda of the 18th meeting of the Defence Committee. The discussion was attended by NSA Director Maj. Gen. Jiří Lang and Deputy Director Zdeňka Jůzlová was also present. The Minister of Defence Jana Černochová, 1st Deputy Minister František Šulc and Deputy Minister for the Management of the Economic Section Blanka Cupáková presented the departmental budget to the Committee, while the Czech Army was represented by Lieutenant General Miroslav Hlaváč and other guests. The meeting was also attended by the Deputy Speaker of the Chamber of Deputies Jan Bartošek.

vybor_01Picture: The Defence Committee had key budgets on its agenda | Jan Zilvar / CZ DEFENCE

At the beginning of the meeting, General Lang presented the draft budget for 2023 and the outlook for 2024 and 2025 for the NSA. According to General Lang, the structure of the budget had to be adapted to the price development of all services, as there is a sharp increase in prices and also the budget had to be balanced after several years of cuts in current expenditure. Expenditure for 2023 is proposed at 332.3 million, of which 71% is to be spent on salaries and levies. The salary increase of approximately 9.7 million allows for the systematisation of 262 posts within the NSA. This was approved by the government in August this year. CZK 27.3 million is planned for investments, while a total of CZK 70.3 million should be allocated for operations. These current expenses are increased by 30% compared to the previous year, mainly due to higher energy costs. As stated by Deputy Minister Jůzlová, the NSA buys both electricity and gas through the stock exchange and expects the tendered price to be lower than the ceiling price in both cases.  

In preparation for the technological renewal of the information system used for the NSA's core business, referred to as the Cefeus project, the Military Intelligence Service, which uses the same system, helped with funding. Therefore, both systems will be financed together. The amount of CZK 70 071 100 will be spent on its technological renewal within the framework of budgetary measures in the period 2022-2027, of which capital expenditure amounts to CZK 51 884 800. "Without this assistance, we would no longer have secured support for a key system for NSA operations after 2024," said Director Lang. The salary costs will then cover the tariffs for 262 employees. Similarly, Lang said, the energy budget needs to be increased by 80 per cent compared to this year.

IMG20221102094720Picture: Approved budget by spending category | Jan Zilvar / CZ DEFENCE

In a subsequent vote, the Defence Committee recommended the NSA's budget for 2023 to the Chamber of Deputies for approval, with total revenues of CZK 850,000 and total expenditures of CZK 332,001,158.

Prior to the discussion of the budget of the Ministry of Defence, Minister Černochová informed the Committee members about her meeting with the Ukrainian government earlier this week and mentioned that she had outlined five possible directions of cooperation with the Ukrainian side as part of her agenda. According to the Minister, industrial cooperation, which is very important for both the Czech and Ukrainian defence industry, is crucial for mutual cooperation. "Within the framework of this cooperation, we discussed the establishment of a joint venture between Ukraine and the Czech Republic. This enterprise would of course have its headquarters and factory in our country, because Ukraine is not in such a condition at the moment that such a weapons enterprise would not become a target of any attacks," the minister said. Another topic of discussion with the Ukrainian side was the 80th anniversary of the Battle of Sokolov, where 104 Czech soldiers fought on 8 and 9 March 1943. "In this context, a new memorial should be built on this site and it would be appropriate to at least tap the foundation stone in March next year. The next level is cooperation between the two parliaments. And also the questions about training were an essential part. We are ready to launch training missions for both Ukrainian civilians and soldiers. The Ukrainian side has asked us specifically for basic training on, for example, engineers and the MEDEVAC system," the Minister added.

The Defence Committee subsequently discussed the draft budget of the Ministry of Defence, including the outlook for the next two years. The Ministry's budget should increase by about a quarter compared to last year. The total planned expenditure will reach CZK 111.8 billion, i.e. 1.52% of GDP. The army will spend the most money, amounting to CZK 80.3 billion, i.e. 71.8% of the total.  The army representative, Lieutenant General Miroslav Hlaváč, added that this amount would be directed to all categories of the army's development. More than a third of the budget goes to investments in weapons, equipment, infrastructure, information technology, etc. The second highest amount will go to the main types of military equipment. In third place are personnel costs for exactly 28 134 professional soldiers. These should amount to CZK 19.4 billion. It is expected that the number of members of the armed forces will increase by a total of 1 100 next year. Part of the planned funds will also be provided for military education, the army's participation in foreign missions, science, research and innovation, and infrastructure. For 2024 and 2025, expenditure of CZK 130 billion, i.e. 1.7% of GDP in 2024 and CZK 155 billion, i.e. 1.9% of GDP in 2025, is planned. According to Blanka Cupáková, the deputy of the economic section, the MoD based the amount on the original macroeconomic forecast and the defence spending before this recalculation amounted to 2% of GDP in 2025.

IMG20221102094257Picture: Approved MoD budget by spending area | Jan Zilvar / CZ DEFENCE

Minister Černochová described this budget and outlook as significantly pro-investment. The investment expenditure reaches 35.2% and a decisive part is planned to fulfil the Concept of Build-up of the Czech Army. At least 20% of the defence budget is to be spent on the main types of military equipment. According to the Minister, the proposal fulfils the basic prerequisites for meeting the needs of the Ministry of Defence. The personnel costs amount to CZK 19.4 billion. For example, the significant strengthening of the armed forces will be reflected here. 
The planned number of the Czech Armed Forces soldiers amounts to 28 134 men and women, of which 11 171 for the ground forces, 5 078 for the air forces, 423 for the territorial forces, 271 for the cyber forces and 11 191 others. The target number of soldiers in the Active Reserve for 2023 is 4 500. In addition, the MoD has 8 292 civilian employees, 7 102 civil servants and 1 190 civil service employees.

The budget presentation to the Defence Committee included a listing of the Army's multi-year capital projects. For the ground forces, these include the acquisition of tracked IFVs worth 51.7 billion (4.4 billion for 2023), CAESAR self-propelled guns worth 8.5 billion (1.2 billion in 2023). In addition, the purchase of wheeled armored command-and-staff and communications vehicles TITUS is planned for a total value of 5.8 billion (2 billion in 2023) and light assault vehicles for a total value of 5.6 billion (0.4 billion in 2023). The Air Force is to pursue MADR projects worth 3.5 billion (0.03 billion in 2023), SHORAD - SPYDER for 13.7 billion (1.2 billion in 2023), H-1 multirole helicopters for 17.6 billion (6.7 billion in 2023), tactical drones for 2.7 billion (0.8 billion in 2023), and Gripen C/D lease for 19.3 billion (1.9 billion in 2023). The Defence Committee also approved this draft budget of the Ministry of Defence, with total revenue of CZK 6 264 143 000 and total expenditure of CZK 111 808 741 000.

We posed the following poll question to the committee members: Defence spending is up by about 22 billion crowns, or almost 25%, compared to 2022. In your opinion, is this increase sufficient in view of inflation and rising prices?

Lubomír Metnar (ANO), Chairman of the Committee

The budget of the Ministry of Defence, and hence of the Army of the Czech Republic, should be based on the plans and requirements of the Army of the Czech Republic, which are set out in strategic documents (e.g. the Concept for the Construction of the Army of the Czech Republic and others), i.e. the budget should correspond to the real requirements of the Army of the Czech Republic in order to maintain the required pace of modernisation and building of the capabilities of the Army of the Czech Republic, aimed at increasing the defence capability of the Czech Republic. It is essential that the planned investment actions are prepared so that the funds are spent efficiently and effectively. From the structure of the budget of Chapter 307 – Ministry of Defence, significant and financially demanding investment expenditures for 2023, it is clear from the list of items that the current government is continuing the acquisitions that we have started, where out of 38 such significant actions, it is following up on the 27 that we have concluded. In 11 cases, these are new projects that the Army has been developing. In this year's budget, I criticised, among other things, the failure to implement the indexation of soldiers' service tariffs, which was approved during my time in the Ministry of Defence, so I am pleased that next year there will also be a 10% indexation.

Josef Flek (STAN), Vice-Chairman of the Committee

This is the art of the possible at a time when we cannot increase funding for defence alone, but at the same time deal with emergency situations such as the capping of energy prices, etc. The next few years will depend on the economic condition of the state, but we are doing our utmost to ensure that the defence budget is sustainable. I certainly want to highlight that money for defence and national security research and development is a priority for me. I will watch with interest how it is allocated.

Jan Hofmann (ODS), Vice-Chairman of the Committee

The increase in the MoD budget is appropriate at the moment. The amount corresponds to the projects and acquisitions that are planned for the future. The main part of the increased funding goes to them. For the big projects we are at the beginning, so the budgeted money is lower for the time being. We are now at 1.5% of GDP, and with the projects that have started, we should meet the target of 2% of GDP by 2025. I am glad that the budget finally includes an amount for financing the BVP, which is now being discussed and hopefully everything can be agreed this year.

Jiří Horák (KDU-ČSL), Member of the committee

I consider the 25% increase in defence spending in 2023 to be sufficient, even in view of the very tight state budget. More than the actual year-on-year increase in defence spending, I consider it crucial that a trend has been set towards meeting the NATO member commitment of spending 2% of GDP on defence. We have long been a stowaway among NATO member countries (and we were certainly not the only ones), and even given the security situation in Europe, it is high time to start behaving like a responsible member of the Alliance. The security of our country is an absolute priority for this Government and increasing the budget of the Ministry of Defence has my support.

Karel Krejza (ODS), Member of the committee

Of course, the MoD budget could do with even more increases, but given the need to counter the energy shock, falling inflation, the need to increase public sector salaries and pensions and the need to 'breathe through' covid measures - we must keep our feet on the ground. Moreover, it is not possible to increase the budget by leaps and bounds anyway, given the need to plan acquisitions and prepare tenders. But the crucial point is that the pro-growth trend will continue as planned, i.e. in 2023, 2024, 2025 it will rise from 1.52% of GDP to 1.66% of GDP, or up to 1.89% of GDP. The magic 2% is coming. But it is important to disentangle the budget - the highest increase in funding is in programme funding, from 31% to 44%, i.e. armaments, and the decrease is in mandated expenditure, pensions and current expenditure. For the construction of the heavy brigade, which is currently a priority, the increase in funding is sufficient. Investment in complete weapon systems will be necessary in future years.

Petr Liška (STAN), Member of the committee

The budget for 2023, with its increase, is in the right direction to meet our commitment within NATO (i.e. to meet the ratio of expenditure on armaments to GDP of 2%) and at the same time it is probably the maximum possible in the current difficult economic situation of the state, where unfortunately our debt is deepening. If we stick to the set trend, we will meet the 2% spending in a smooth, non-jump way over the next 3 years, which is also a commitment of our government. The increase in expenditure is at the level of about CZK 22 billion, of which about CZK 0.6 billion is attributable to energy price increases. The impact of inflation is not so significant because inflation is determined from the so-called consumer basket, which does not include defence spending. Rather, we should be looking at the evolution of prices of materials for production and construction. Prices may also be affected by increased demand, particularly for weapons, caused by Russia's aggression in Ukraine and the destabilisation of the situation in Europe. A significant part of the increase in spending goes mainly to investments and purchases, which are for a significant part already contracted or at least tendered, so that only for a minor part of this spending can we predict now how these external influences will affect their prices against expectations.   

The increase in the MoD budget is at around 25% compared to this year's budget, which is very significant, and I for one will be watching very closely whether such an increase can be meaningfully absorbed by the MoD and the army and translated into the necessary spending on the defence of the country that I see as necessary. However, other vital areas that the state provides also need either savings or an increase in resources. Our aim must be to stabilise the development of public finances, to reduce the national debt and it is not acceptable that we are meeting the country's obligations on debt, even while knowing that other needs are not being met.

Michaela Opltová (STAN), Member of the Committee

In the government's programme declaration, we already committed to increasing defence spending to 2% of GDP by 2025, so we are keeping this promise. At the same time, it shows that we really need to invest in the defence of our country and to cooperate within NATO, so that we are able to defend ourselves against anyone who wants to threaten us. In proposing defence spending, we have also taken into account whether the department can fully utilise it. In the current situation, where other ministries are spending more because of inflation, I consider the increase in the defence budget to be sufficient.

Radovan Vích (SPD), Member of the Committee

This is the same amount of defence spending as a proportion of GDP as it was in 2009. So there is no real increase in the MoD budget, even taking inflation into account. Moreover, at a time when commodity prices are skyrocketing and the cost of armaments is thus rising to astronomical heights. There is also no guarantee that the MoD will be able to prepare and tender individual strategic and important projects in time and thus spend the allocated funds in a meaningful way that the army will be able to absorb them.

Lubomír Wenzl (ANO), Member of the Committee

It is good that the MoD budget has been increased in the proposal submitted and discussed today by the PSC to the level of 1.52% of GDP. Now it is a matter of ensuring that the funds in the planned amount of almost CZK 112 billion after the approval of the SR for 2023 are used effectively.

 Author: Jan Zilvar

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