Fiscal Discipline Council warns hospital reform violates budget rules
Latvia's Fiscal Discipline Council has warned that the government's hospital network reform does not comply with the Fiscal Discipline Law because no compensating measures were adopted alongside the spending increase. The council recommends either finding funding sources or revoking the decision until proper approval.
The Fiscal Discipline Council (FDP) has drawn the government's attention to an alleged breach of the Fiscal Discipline Law in the amendments to the organisation and payment of health care services approved on 28 July. The Cabinet decision instructs the Ministry of Finance (FM) to review functions and streamline processes in order to free up 14 million euros for the Ministry of Health, to be used for regional health care availability and regional hospital services from 2027 to 2030.
According to the FDP, no regulations that would compensate the increase in expenditure were adopted at the same time as the amendments. The law requires that if the Cabinet adopts a regulation that would push state budget spending beyond the maximum allowed envelope or reduce expected revenues, it must simultaneously adopt measures to compensate the difference, either by boosting revenue or cutting expenditure.
The council does not question the need for health care funding, but stresses that EU and national fiscal rules must be respected. The EU Council approved Latvia's fiscal-structural plan for 2025–2028 in January this year, setting a binding net expenditure growth trajectory. Current Finance Ministry forecasts show a negative fiscal space in the medium term: minus 28 million euros in 2027, minus 279.1 million in 2028, minus 237.8 million in 2029, and minus 936.2 million in 2030.
The FDP also notes that a significant number of previously approved measures still lack identified funding sources. According to Finance Ministry estimates provided to the council in July, their fiscal impact amounts to 219.8 million euros in 2027, 284.2 million in 2028, 348.2 million in 2029, and 424.7 million euros a year thereafter.
The council recommends that the government adopt regulations fully compensating the additional spending for the hospital reform without exceeding the maximum allowable budget expenditure, or alternatively cancel the amendments until funding has been secured. The reform should be evaluated as part of the budget priority process, taking into account other national development priorities.
