Main results and trends of budget policy (стр. 8 )

	Unit of measurement	2005	2006	2007	2008	2009	2010
Housing provision level	Sq. m/ person	20.2	20.5	20.9	21.2	21.4	21.6
Affordability of housing (ratio of the average market value of a standard 54 sq. m flat to the average annual income of a three-member family)	Times	3.7	3.5	3.2	3.2	3.2	3.2
Housing commissioned annually	Sq. m/ person	43.6	50.8	56.3	63.1	70.6	80.0

Utilities Infrastructure for Residential Construction

As part of the national priority project “Accessible and comfortable housing for the citizens of Russia” the federal government will focus special attention on access to utilities infrastructure at land lots slated for residential construction. In it has appropriated a total of 38.1 *****bles for state guarantees in this regard.

Mortgage Lending System

The federal government will continue to augment the system of guarantees for loans taken out in the name of OAO Agency for Mortgage Lending. The total amount of guarantees for the period is set at 108 *****bles: 28 bln., 36 bln. and 44 bln., respectively.

As a result, the sum of mortgage loans will rise from 60 *****bles in 2005 to 212 *****bles in 2008 and 315 *****bles in 2010, allowing a greater number of families to purchase housing.

	Unit of measu­rement	2005	2006	2007	2008	2009	2010
The share of families that can afford to buy housing conforming to the housing provision standards with their own and borrowed money	%	11	14	17	21	26	28
Volume of housing mortgage credits and loans issued annually	*****bles	60	108	151	212	296	315
Market rate for housing mortgage credits	%	14%		11%		8%

Housing for Military Personnel

In 2008 the federal government will set aside 8.3 *****bles in mortgage payments toward housing military personnel; this figure will rise to 11.7 bln. in 2009 and 14.2 bln. in 2010. The amount of down payment amount will rise from 40,600 to 82,800 rubles in 2007; amount paid on the mortgage will be adjusted annually using a deflator index.

At present 54,700 individuals are participating in the program; this figure will grow to reach 82,700 service men and women in 2008, and 178,400 by 2010.

The federal budget for 2008 includes additional funds that make it possible to provide all members of the Armed Forces of the Russian Federation with permanent housing by 2010, and service housing by 2012. Service members of other federal agencies that require military service will receive permanent housing by 2011 and service housing by 2013.

In a total of 156.2 *****bles will be appropriated to this end, including 36.5 bln. in 2008, which is double this year’s amount.

Housing for Young Families and Socially Vulnerable Population Groups

The federal government will spend 18.8 *****bles in to provide housing for veterans and disabled persons, resulting in new housing for 45,000 families.

In 2008 over 110,000 families will be offered apartment housing under the subprogram “Housing for young families:

One result of the federal housing policy felt directly the socially vulnerable population will be a reduced waiting period for state housing: from 18-20 years in to 8 years in .

Implementing Free Market Mechanisms in the Hosing Sector

and Improving the Quality of Housing Services

The restructuring of presently state-subsidized housing services will bring about consumer-funded services, resulting in improved economic health of the industry, affordable public utilities and higher quality housing maintenance:

	Unit of measu­rement	2005	2006	2007	2008	2009	2010
Overdue accounts payable of housing and utility companies	*****bles	220	167	100	75	50	25
The share of private companies among organizations managing utility infrastructure	%	2	8	15	20	25	30
Wear and tear of utility infrastructure	%	59	57	55	53	51	50
The share of off-budgetary sources in investments in the modernization of utility infrastructure	%	14	17	20	30	40	50

At the same time low-income families will be offered subsidies on housing services. The amount set aside in federal budget for 2008, and the outlook for 2010, for said subsidies will grow by 32.8% by 2010 (as compared with 2007); this will allow the federal government to co-finance up to 20% of regional spending on subsidies for low-income families.

3.6 Fiscal Support of the Regions; Incentives to Better Regional and Municipal Fiscal Management

A significant portion of social services and guarantees is offered by regional and local governments. However, due to uneven distribution of the tax base and differences in climatic and socio-economic conditions, funding requirements vary significantly by region, as well as their ability to raise these funds through local revenues.

Consequently, one of the key challenges of the federal fiscal policy is providing fiscal support for the subjects of the Russian Federation.

Directives from the Budget Address

Realized in the Fiscal Code of the Russian Federation

I find the measures proposed by the Government concerning further incentives aimed at lowering subsidy demands among the subjects of the Russian Federation well-founded. We must continue to reorganize financing of new constructions, shifting the responsibility for structures under regional ownership to regional and local budgets. The federal budget must set aside completion funds for items currently under construction that are owned by one of the subjects of the Russian Federation or a municipality, but were included in the list of structures required for federal purposes; federal co-funding in such cases must correspond with the share of the federal government in such a structure. It is imperative to establish effective oversight to ensure that the subjects of the Russian Federation receiving subsidies are also complying with additional requirements and limitations put upon them. Public authorities at all levels must operate on principle that the most effective incentive for increasing tax potential is anchoring tax revenues to a corresponding budget; moreover there can be no direct dependence between actual or projected revenues and expenditures, on the one hand, and the amount of federal subsidies on the other. We must carry on backing fiscal reform through the Reform Fund for regional and municipal finances, a practice that has proven to be successful. Moreover we must augment the existing mechanisms of incentives for regions and municipalities working toward priority reforms and development in general.

The amounts of cash subsidies distributed to the regions in have been determined through an advanced methodology, taking into account the use of incentives toward improving the tax revenue of a specific subject. In developing this methodology we have accounted for subsidies directed at developed social and public works infrastructure of the regions and municipalities: finishing funds for such projects have been set aside in the federal budget. We have instituted regular monitoring of regional authorities with respect to their compliance with the Russian Fiscal Code and the quality of fiscal management, there are assessments of improvements in the efficacy of fiscal management and increased tax revenue among the subjects of the Russian Federation receiving high-grade subsidies. The budget of the Russian Federation presupposes anchoring tax revenues at specific government levels. To the new system of regional subsidization involved incentives aimed at increasing the tax base and taxation sources; it determines the minimal required subsidy amount for regions with low revenues. The Reform Fund for regional and municipal finances will be augmented over , and the number of subject and municipalities receiving subsidies on a competitive basis toward fiscal reform will likewise increase.

Fiscal support for the subjects of the Russian Federation makes up the largest portion of the budget article “Interbudget transfers.”

The federal government will increase the total amount of subsidies given out as fiscal support for the subjects of the Russian Federation; this will allow federal subjects receiving high-grade subsidies to retain the same minimum level of fiscal sufficiency as in 2007. The total amount in subsidies will rise to 328.6 *****bles in 2008, with further inflation adjustments of 6.8% and 6.5% in 2009 and 2010, respectively.

	2007 (by law)	Draft budget
2008	2009	2010
Total subsidies for evening out regions’ budget sufficiency, *****bles	260.4	328.6	351.0	373.8
Growth from previous year, *****bles	-	68.2	22.4	22.8
Growth from previous year, %	100	26.2	6.8	6.5
Growth from 2007, %	100	26.2	34.8	43.5

For 2008 the rate of fiscal sufficiency subsidies for each of the federal subjects is determined by comparing the tax potential of the region with the cost of government services offered to the citizens of said region. Beginning in 2008 changes have been made to the methodology of determining the tax potential of a region with respect to its proposed subsidy; this was done for the purposes of attaining accurate assessments of the region financial situation and improving the incentives for the regional authorities to develop their tax base.

As a result financial inequality among regions will be significantly reduced:

Percentage of Population Living in the Regions with Different Budget Sufficiency Levels

(Percent of the Total Population of the Russian Federation)

Budget sufficiency level	2007	2008
before adjustment	after adjustment	before adjustment	after adjustment
critically low (up to 60%)	31.4	0.0	35.4	0.0
low (from 60 to 70%)	12.0	32.8	13.6	38.4
below average (from 70 to 90%)	16.2	26.8	11.2	21.8
average (from 90 to 105%)	8.7	8.7	12.8	12.8
above average (from 105 to 150%)	21.2	21.2	16.5	16.5
high (above 150%)	10.5	10.5	10.5	10.5

In consequence of leveling subsidies distributed to the subjects of the Russian Federation the difference between the 10 poorest and the 10 wealthiest regions will shrink from a factor of 13.4 to a factor of 3.4.