Arpad Kovacs: Reform is not the same as experimentation

We spent some Ft1,500bn on economic development every year, but it's not doing us much good. And with economic uncertainty driving up the cost of credit, the burden is set to grow by several hundred million more. We spoke to Arpad Kovacs, president of the State Audit Office (ASZ) about the difficult economic climate and what may still be to come.

Árpád Kovács. We spend 1500bn HUF a year and it doesn't show © Ákos Stiller

hvg.hu: Reform is slowing - it seems like we can't get anything done. What's the fundamental problem?

Á.K.: In the recent past, the problem we've been dealing with is that we haven't been spending less on certain items of budget spending and there is no benefit to our spending. We spend Ft1,500bn on economic stimulus every year - but it has no effect. That's bad, because Hungary spends just one third of the European average on research and development, while the scale of our subsidies puts us near the top of the European league table. But we're still declining. The problem is with state administration. We are in a transitional state. We're trying to get rid of the old systems and adopt new administrative approaches - but it hasn't really started yet.

hvg.hu: What could we change?

Á.K.: The Audit Office thinks the quality of state administration needs to improve. We have to go back to the kind of administrative models that worked and continue to work. Reform is not about lots of experiments. If you don't have a proper model then reform programmes can easily fall apart.

hvg.hu: Why? Inertia? Irresponsibility?

Á.K.: Party politics are very dominant in Hungary. It's proven difficult to build a sustainable, long-term policy agenda out of party politics. So reform becomes more like a wrestling match. Since there is no public policy, responsibility cannot be apportioned. This exaggerated party dominance creates a situation where ideas are born in small reform workshops which are then adopted by individual party leaders. It becomes a question of personality. One example is the way we once discovered Ft300m worth of unread research in the Health Ministry. When we tried to find out who was responsible, it turned out that the people who had commissioned the research were no longer in the same position six months later - and not only because there had been a government change. These kinds of management issues cause huge redundancy of the kind that no state budget in the world could deal with.

hvg.hu: Andras Simor recently said state spending should be cut by Ft2000-2500bn. How could cuts like this be made?

Á.K.: To give you a sense of the scale, the number Mr Simor cited is twice the size of our debt servicing, or about the same size as the entire budget of the local authority system. You can't take that kind of sum away from the population and from entrepreneurs in one go. At the same time, it's clear that you have to spend money when things are so unstable. Officials keep moving around, steps are taken which haven't been thought through, programmes are abandoned mid-run, and money is spent on reactivating old programmes. The audit office has tried to calculate the costs of contradictory or abandoned programmes, and we've realised that a huge amount of money could be saved if policy programmes were designed more coherently for the long term.