The 40th Cabinet of Ministers led by Krišjānis Kariņš took office on 23 January 2019. It is the longest-serving government in the history of democratic Latvia. The 40th Cabinet of Ministers implemented administrative territorial reform, adopted the packaging deposit system, as well as implemented reforms in the education system, financial and energy sectors, as well as other areas.
The government also tackled unexpected challenges caused by the Covid-19 pandemic, the hybrid war on the Latvian-Belarusian border, Russian-Ukrainian war and the rapid rise of prices of energy resources, as reported by the Cabinet of Ministers.
Financial sector’s capital repair initiative
This was one of the first and most important successes of this government. In an effort to enhance the country’s ability to prevent money laundering and financing of terrorism, Latvia accomplished full compliance with international standards and successfully prevented the problems outlined in a previous Moneyval report. Latvia also managed to avoid being added to the so-called grey list and proved its commitment to ensuring a stable and transparent financial sector. This also helped overcome economic challenges caused by the Covid-19 pandemic and provide appropriate aid to residents and businesses.
Domestic and external security
Even before the change to the geopolitical situation Latvia was already working on enhancing the country’s security. During this time Latvia secured expanded NATO presence in the country and developed headquarters for a multinational division.
Latvia also expanded military exercises, especially as part of National Armed Forces training cycle. The country also increased the army’s capacity. A comprehensive national defence system was developed and the government also started the system’s implementation. The 40th Cabinet of Ministers also approved Latvia’s cyber security strategy, which now has an action plan.
The government also commenced work on reorganisation of its interior sector across the country. Wages of people employed in the interior sector were also increased, including police officers, fire fighters, rescuers and border guards.
Funding for the creation of publicly important content by Latvian mass media was increased by EUR 3.7 million this year. The government also ensured that all public media in Latvia broadcast content without commercial advertisement. Latvia now also has a new supervisory council – the Public Electronic Mass Media Council.
Last year a sharp increase of illegal border-crossing attempts was observed on the Latvian-Belarusian border. It is believed to have been organised by the regime of Belarusian President Aleksandr Lukashenko. To prevent the entry of illegal migrants to Latvia, the government ordered the construction of a temporary fence along 60 km of the border shared with Belarus. By spring 2023 installation of an 85.9 km-long fence is planned to be completed on the Latvian-Belarusian border.
Equal opportunities across all of Latvia’s regions
During the 40th government’s term it was possible to implement one of the biggest reforms of recent years – the administrative territorial reform (ATR). Latvia now has 43 municipalities instead of the previous 119. This reform was also intended to promote higher quality municipal services for all residents regardless of their place of residence. The government also carried out a municipal management reform, providing greater public involvement opportunities in the work of municipal administrations and introducing other improvements. The reform also helped reduce the number of municipal deputies.
After ATR it was also possible to implement improvements to the school network and introduce a new financing model, which provides municipalities with the right to pick which schools to develop and how to best compose optimal and competitive wages for teachers.
By developing regions, the government invested EUR 2 billion into the development of Latvia’s countryside regions. EU’s General Agriculture Policy was reformed as well. As a result, between 2023 and 2027 Latvia will introduce a fairer and more direct EU and state support, which will be provided to small and medium-sized farms.
Additionally, in order to ensure replacement of generations in the countryside, young farmers will have access to aid in the form of income and deposits starting with 2023.
Development of the green course
Another major contribution of the 40th government was the development of the beverage packaging deposit system, which is intended to ensure a greener, more sustainable and more responsible consumption. This new system provides residents the option to deposit beverage packaging (bottles, cans) as long as packaging is marked with a special label.
The government’s approved support programme for the use of renewable energy resources by households not only helps residents overcome the rapid rise of prices of energy resources, but also represents an important step towards more environment friendly heating and energy supplies.
A joint company was founded by Latvenergo JSC and Latvian State Forests JSC – Latvian Wind Parks. This new company is to construct wind turbine parks in the next decade in order to significantly increase production of green energy and assist with Latvia’s goal to reach climate neutrality, reduce emissions of harmful substances and develop recycling economy. Work continues on a joint Latvian-Estonian wind turbine park in the Baltic Sea.
To achieve the Single European Green Goal, Latvia also develops sustainable transport infrastructure and railway is developed as the backbone of public transportation. Implementation of Rail Baltica project continues, as construction of a hub connecting Riga Central Railway Station and Riga International Airport progresses.
It is during this government’s term that officials continued efforts to reorganise the country’s road network – construction and repair work was carried out along more than 3 000 km. To promote safer and more convenient everyday travel for cyclists and pedestrians, the government also implemented construction of micro-mobility infrastructure.
Improvements to the tax system
During the term of the 40th Cabinet of Ministers work was put into reducing the labour force tax. For example, the maximum differentiated non-taxable minimum from personal income tax has been increased to EUR 500 a month and the differentiated non-taxable minimum is applied to income under EUR 1 800 a month. Additionally, in an effort to improve the business environment, the government adopted a Single Tax Account, which is intended to reduce the administrative burden for companies. The single account for all business operations for micro-enterprise tax payers, too, is intended to reduce the administrative burden.
Support for residents
The government also performed numerous support activities for residents. For example – the guaranteed minimal income threshold was increased, which is now EUR 109 for the first and only person in a household, whereas for every next person in a households this amount is EUR 76. Minimal wage was increased from EUR 430 to EUR 500. The non-taxable minimum for pensioners was reduced – it is now EUR 500 a month. Pension indexation was carried out two months earlier than usual this year.
Disability pensions and state social security benefits were increased as well. The income threshold for low-income households was increased to EUR 272 for the first and only person in a households and EUR 190 for every next person. On top of that the support for orphans was increased as well.
The government also expanded the housing programme for families with children. Funding was also increased for the restoration of apartment buildings. Improvements were added to the housing rent market, balancing the interests of owners and tenants.
The Whistle-blower Law adopted in 2019 and accompanying system helped introduce opportunities for residents to improve their work environment and contribute to public welfare. For three years now residents in Latvia have been able to report potential violations and receive guaranteed protection – legal protection, relief from legal expenses, receive consultations and compensations if reporting possible violations resulted in negative consequences for them.
Improvements in healthcare
Latvia’s 40th government also managed to change the medicine prescription order – now prescriptions for medication list the active ingredient and pharmacies are required to provide residents cheaper medicines whenever possible.
Improvements were added for services provided to cancer patients – a ‘yellow corridor’ was engaged for cases when cancer re-appears. The state now fully covers expenses of women’s breast reconstruction surgeries. New and innovative medicines were added to the list of state-compensated medicines in Latvia.
A new remuneration model was approved for healthcare workers in Latvia during this government’s term. Under this new model, it is planned to raise wages for each group of healthcare workers in the 2023-2027 period.
Education and science
Latvia’s 40th government also commenced the change of the higher education facilities’ internal management model in an effort to promote competitiveness of the country’s higher education and science sector.
Conditions were lowered for students to receive student loans – the new model makes higher education in Latvia more accessible for more people. A new stipend fund with appropriate social criteria was created.
The government also implemented a full transition to education in official language only at pre-schools and elementary schools. Transition is planned to be completed by 2025.
The increase of wages for teachers will be done in accordance with a previously approved schedule. As of 1 September 2022 teachers’ wages are 8.4% higher, with the lowest wage at EUR 900 (EUR 970 for pre-school teachers). As of 1 September 2023, however, the lowest wages are planned to be increased to EUR 1 080 (EUR 1 070 for pre-school teachers).
Smaller and more efficient state administration
The objective of the state administration reform plan 2020 was creating an efficient, responsible and flexible state administration in the country. To accomplish this goal, part of state institutions’ support functions were centralised and the number of workers in state administration was reduced by 7.6%. It was also possible to organise the remuneration system and achieve modernisation and digitisation of many processes. In an effort to reduce the administrative burden, the government adopted a ‘zero bureaucracy’ principle.
Adoption of TAP portal was another major contribution towards the digitisation of the state administration process. This means transition to e-government – for more than a year all legislative acts have been developed, coordinated and passed in a single environment. The portal’s public section is accessible to all residents. Anyone can follow legislative drafts and participate in their creation.
Covid-19 challenges
Like elsewhere in the world, Latvia was hit by the Covid-19 pandemic and the challenges that came with it. To reduce the spread of the virus, the government secured Covid-19 vaccines for all residents. Other safety measures were implemented as well to slow the growth of infections and keep healthcare services available. The government also reorganised the education process to make sure children still have access to education during lockdowns.
Because many of the measures had an impact on employed people, the government also provided numerous support measures to aid residents and companies impacted by Covid-19 crisis.
Aid for Ukraine and Ukrainians
All of these events were followed by the Russian invasion of Ukraine. From the very beginning of this war Latvia has been one of the most active countries that has condemned Russia’s aggression. The country also stands in favour of a strong international reaction to oppose Vladimir Putin’s regime. Latvian representatives in the EU, NATO and other formats have insisted on sanctions against Russia and provision of aid to Ukraine. The volume of aid Latvia has provided Ukraine is equal to at least 0.9% of the country’s GDP.
Support to compensate rapidly growing energy prices
The war in Ukraine, Covid-19 pandemic and climate change have caused a rapid energy resources price rise. To support residents and companies during this energy crisis, the government in Latvia adopted multi-sided support measures.
State support will be provided to help cover heating costs. The state also provides money to help partially compensate increasing electricity costs. The government also found a solution to cancel MPC payments for all electricity users as of 1 September 2022. MPC costs will be covered from dividends of Latvenergo JSC. In additional to these support measures, support is also available to different social groups in Latvia: low-income families, seniors, disabled people, families with disabled children, and orphans.
The government plans to allocate more than EUR 1 billion from the state budget towards different support measures in the 2022-2023 period.
The 40th government also made numerous decisions to help enhance Latvia’s energy security, including the decision to create strategic oil and natural gas reserves in order to supply households and companies with necessary energy resources during emergencies.
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