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Apr 30, 2019 - Zoltán Kovács

Hungary’s Family Protection Action Plan: Here’s what happens next and how we see it bearing fruit

In response to today’s demographic challenges, the seven-point action plan, announced by Prime Minister Viktor Orbán in February, is coming into force on July 1st.

While birth numbers are declining all over Europe, Hungary is pursuing an alternative path to reverse the negative trends, one that does not rely on immigration. The action plan, introduced in PM Orbán’s “State of the Nation” address earlier this year, includes:

[1] interest-fee, all-purpose loan; [2] extension of loan program to support home purchase (also known as CSOK); [3] subsidy for car purchase for large families; [4] mortgage reduction; [5] exemption from personal income tax; [6] 21,000 new crèche places will be established over three years; and [7] childcare leave allowance for grandparents.

The Hungarian National Assembly has already approved a series of amendments and bills to lay the foundation for Hungary’s new family policy, allowing the first four measures to come into force on July 1st of this year.

Since its announcement, the plan has generated a good deal of international attention. Hungary’s new family policy stands as an example, not least because it devotes 4.8 percent of GDP to support family and childbirth. And it’s just the latest set of measures in a series of programs that reflect the top priorities of the Orbán Government since taking office in 2010.

Within the framework of the major reform of personal income tax, between 2010 and 2013, the government introduced the expansion of the family tax allowance and the flat tax, abolished the super-gross salary calculation, and brought about family-friendly tax credits. These measures were intended to take the burden off of labor and make it more worthwhile to work and that working families could keep more of the income they earn.

And it’s not just about better a flat tax and family allowances. Back in 2010, Hungarians paid some of the highest prices in Europe for utilities. In order to ease the financial burden on Hungarian families, the government undertook a gradual cut in public utility costs.  By the end of 2014, Hungarian families were paying 25 percent less for energy than in 2010.

These policies, according to the numbers, are bearing fruit. Back in 2010, the fertility rate stood at 1.25. The latest statistics show it at 1.49. That’s still low but rising and at a 20-year high, and so is the number of marriages, which has increased by 43 percent in the last eight years, while the number of divorces fell by 23 percent. The employment rate of women has hit an all-time high, and the number of abortions has fallen 30 percent since 2010 to an all-time low.

The new family protection plan is the latest step in the government’s efforts to support families, to encourage childbirth and open up opportunities to young people to start a family.