E.) RESEARCH ACTIVITIES;
PUBLIC PARTICIPATION

6. Research Supporting Measures Described in Chapters 1 - 5
6.1. Detailed Preliminary Impact Assessment of Measures
6.2. Determining External Costs
6.3. Application of Genuine Progress Indicator to Hungarian Environment

7. Public Participation

§ 36 of Act XXXVIII of 1992 on the General Rules of the State Budget says: "At the time of submitting the state budget bill … the government is responsible for presenting the social and the economic impacts of the budget and evaluating the economic and budgetary changes in the previous year." Furthermore, Act XI of 1987 on Legislation reads as follows: "§ 18 (1) Before passing a law, relevant social and economic aspects, rights and duties of citizens and ways of managing conflicts of interests shall be analysed scientifically as well as the expected impacts of the new law and the grounds for its enactment shall be investigated. Legislators need to be supplied with information about the findings."

Social and economic impacts of implementing the yearly state budget bills should be analysed more thoroughly and carefully than it has been done lately. The recently elected government lacked the time to do so in 1998, however, there is no excuse this year to forget about it when analysing the budget bill for the year 2000. The Prime Minister’s Office should be made responsible for research and analysis, which makes sure that issues are carefully and impartially studied. The current study would like to help to meet that requirement.

It is of primary importance to analyse environmental impacts of the state budget bill. So far, no effort has been made to do so although various documents and resolutions would require so, such as

• sections 18, 61 and 70/D of the Constitution of the Hungarian Republic,
• Act LIII of 1995 – primarily sections 6, 9-12 and 37-45 – on General Rules of Protecting the Environment,
• the resolution No. 28/1994 of the Constitution Court (reinforced in resolution No. 48/1997) saying: "The government is not authorised to let the state of environment decline or let the risks of damage develop. … Fluctuations reflecting economic and social changes are not allowed when it comes to implementing rights to environmental protection. These are not the same kind of rights as the cultural or social rights where restrictions today can remedied later on… Therefore, prevention must be given priority among the means of protection as sanctioning the irreversible damage after the damage is done is not capable of replacing the environment to its original state."

Resolutions of the Constitution Court need to be observed when passing the bill on the state budget since it is a fundamental piece of legislation which, together with other regulations, has a crucial impact on the environment. (The resolutions, of course, do not mean to entitle the government to ignore social and cultural rights, or to prevent people from exercising those rights. Other resolutions of the Constitution Court give evidence of this.)

The past governments failed to give priority to those rights in the budget and caused harm to the society as a whole by letting the environment deteriorate and damaging people’s health. It is a practice that requires an upside-down change in the near future.

The state budget has key impacts on children as well. Thorough analysis of the impacts is required by all means since children are the most defenceless and they are the major losers of the transition period (as found by UNICEF). Still, they and their lives at present will determine the future of Hungary. Analyses and impact assessments are inevitable to meet the guidelines of the UN’s Children Rights Commission. Article 26 says: "The Commission proposes that each member state should carry out an overall and integrated policy to protect the children. Nation-wide action plans need to be prepared to understand central and local developments and difficulties of exercising the rights approved by the Convention*; with special emphasis given to monitoring the impacts of economic changes on children." (*The word Convention refers to the Convention on the Rights of the Child that Hungary joined in 1991. It declares among others: "States Parties recognise the right of the child to the enjoyment of the highest attainable standard of health.")

We whole-heartedly support a prominent representative of Fidesz-MPP in the Parliament, Professor János Horváth’s, proposals. (They were published in a Hungarian daily, Magyar Nemzet on 18 July 1999.) We propose that his ideas on the issue be incorporated in the Act on the General Rules of the State Budget or other legislation.

6.1. Detailed Preliminary Impact Assessment of Measures

It has been a long-established bad practice in the Hungarian legislation that the impacts of measures involved in the state budget law or related regulations are not assessed in detail. (A much-quoted example is the austerity measures initiated by the previous government in the mid-90s.) This is a practice to be changed.

Impact assessments are vital; however, they are not capable of giving a full picture of the impacts expected from future measures. However, the necessary and undisputedly rational measures should not be cancelled or delayed for the reason that available information is inadequate or scarce. The state of environment is deteriorating, people are suffering from various diseases, the number of deviations and other problems are growing – all of them are signs of improper practices today and the need for a radical change. The government should act without delay, applying the precautionary principle.

6.2. Determining External Costs

The costs of damages that are not paid by the polluter are called external costs. There is a growing trend to incorporate external costs into prices. The polluter pays principle has been accepted in the EU as well and it is also required by Act LIII of 1995 on the General Rules of Protecting the Environment in Hungary.

Without incorporating the costs of environmental and other damage into the prices of goods, the costs of that damage are not paid (directly or indirectly) by the users of those goods. This is not only unfair with those who do not use those goods but also irrational. Distorted prices can only lead to wrong decisions, regardless of the decision-maker being a consumer or a business enterprise, a minister or the parliament itself. And wrong decisions can lead to economic problems or crisis. (It is enough to remember the case of Hungary and other Eastern European countries where prices were completely distorted for several decades.) Thus, all players in the economy have a vested interest to avoid it.

It is also the reason why several EU countries and other developed nations have invested funds into determining external costs. Hungary should also make efforts to implement their findings and intensify research about external costs.

6.3. Application of Genuine Progress Indicator to Hungarian Environment

Traditional economic indicators are not capable of measuring welfare. GDP, for instance, does not indicate the values that Humans take from the Nature irrevocably. GDP fails to reflect the value of "products" found in nature and not sold through trading outlets, or "services" provided by various ecosystems. It also neglects work done in and around the house, or in other communities for free. On the other hand, GDP involves factors that do not serve the individuals or the society as a whole and assumes something as a benefit when it really is not. GDP can grow when people buy burglar alarms to protect against the increasing number of thefts, which is far from being a value. So, GDP may be misleading in some respects, and may compel politicians to make erroneous decisions.

To eliminate the controversies of using GDP only, we suggest that another indicator be used as well. GPI, Genuine Progress Indicator proposed by Herman Daly and John Cobb, seems reasonable to apply because it includes work done in homes and small communities for free and, at the same time, subtracts the value of depleted natural resources, environmental pollution, income structure changes and crime. It takes research efforts, and relatively small amounts devoted, to apply GPI to the Hungarian circumstances. Politicians need to have something at hand to make the right decisions. It is up to them how and to what extent they consider the various indicators, but they can be made responsible for their decisions only if they are provided with adequate information.

7. Public Participation

Proposals and modifications can be satisfactorily elaborated and accepted by the public only if the people themselves are involved in the preparatory work. Civil movements, trade unions and other interest groups must have their say and incorporate their ideas into the proposals. The legal, educational and financial background for involving them in the decision-making process are to be improved greatly. It is the government’s responsibility to grant sufficient funds so that civil, non-profit oriented organisations can better their operations. Revenues of non-profit oriented organisations are significantly less than those of their counterparts in developed countries. (See Table 55.) This is especially sad because their duties are not any less than in developed countries, or even more when it comes to issues like social welfare and poverty.

Table 55

Revenues of Non-Profit Oriented Organisations

Source: Salamon-Anheier (1998) published in Éva Kuti’s book (Hívjuk talán nonprofitnak...)

People in Western Europe and the United States recognise and appreciate the work done by non-profit oriented organisations, and they express their admiration by money granted to those organisations. This is not a well-established practice yet in Hungary. In the US, people are rather distrustful of government actions in the non-profit sector, and respecting that, the government does not get involved very much. It is especially amazing that even with its "reluctance", the US government grants considerably more financial support to non-profit oriented organisations than the government does in Hungary (see Table 56).

Table 56

Sources of Revenues of Non-Profit Oriented Organisations
in Selected Countries (1990)

Source: DemNet, 1998

Table 56 is about the year 1990; but it could have been about more recent years as well. (Or, as national statistics show, the share of government subsidies in Hungary was even less in 1995.) Subsidies to non-profit oriented organisations represent only a small portion of total government expenditure. Even a modest nominal increase could enable the non-profit sector to become a driving force of our society.

Non-profit oriented organisations are essential to develop before Hungary can join the EU. A Communication by the EU Commission about the need for more powerful voluntary organisations and foundations (COM(97) 241 final. Brussels 6 June 1997) says: "Voluntary organisations play a key role in nearly all aspects of life. They provide people with job opportunities, make people act in public, support democratic values, grant a wide range of services, play a key role in sports, represent people’s rights against authorities, ensure and defend human rights as well as elaborate public policies ."

We propose an extra HUF 20 billion to be spent to assist non-profit oriented organisations. It is essential so that they could exercise their rights stipulated in Act XI of 1987 on Legislation:

"§ 19 Citizens (directly, or indirectly through their representatives) participate in the preparation of laws that affect their lives.

§ 20 Institutions applying the laws, voluntary organisations and interest groups must be involved in the preparatory work for legislation that affects social conditions, or other interests represented and safeguarded by them.

…

§ 27 … c) the interested voluntary organisations and interest groups … give their opinion about bills and drafts of regulations to be submitted for the government."

The EU provides increasing financial assistance for Hungarian non-profit oriented organisations, which benefits the entire country and the state budget in the form of net revenues. This assistance, however, can only be called if the organisations have sufficient own funds at their disposal.