Making Family a Top Priority
Since taking office in 2010, the Orbán Government has pursued policy that gives priority to families as the core of Hungarian society in both economic and cultural terms.
Highlighting the issue’s importance, the Fundamental Law promulgated in 2011 affirms state support for “the family as the basis of the survival of the nation” (Article L (1)), while on the economic side, the government spends almost 3.1 percent of GDP on financial support for families, compared to an average of 2.2 percent among the 28 Member States of the European Union.
By introducing a family-friendly personal income tax system in 2010 and further subsequent improvements, families are eligible for significant breaks on their income tax based on the number of children they raise. In this way, the state makes an investment in the future by providing tangible support to families to help reverse negative demographic trends.
Between 2010 and 2013, the government’s family policy also provided debt relief and stimulated job growth. Measures included significant utility price cuts beginning in January 2013 as well as requiring banks to convert into Hungarian forints up to 12 billion USD in foreign currency-denominated loans by November 2014. By drastically reducing the amount of private debt denominated in foreign currency – many of the loans were in Swiss francs – the government’s timely action prevented a 700 billion HUF spike in household debt after the franc exchange rate jumped substantially in January 2015.
In place of social welfare payments, the other pillar of the government’s family policy strives to stimulate employment. In 2013, the government launched the job protection action plan, offering tax incentives to employers to hire mothers with small children. The same year a new Labor Code came into force, supporting the development of a more flexible and family-friendly labor market.
The family tax allowance that came into effect from January 1, 2011, and which was subsequently restructured and extended, was expanded further in 2014. This alone meant that by 2015, family incomes have risen by 240 billion HUF (approximately 790 million EUR).
Also in 2014, the Child Care Fee supplementary benefit package was introduced, encouraging work alongside raising children, as well as reducing restrictions on working while receiving the Child Home Care Allowance (also known as GYES, a benefit paid to parents who stop working to care for a child younger than three and the Child Care Fee (also known as GYED, a benefit paid from the time a child turns six months old until he or she reaches two years. The amount is 70 percent of the parent’s daily average gross earnings but is capped at 70 percent of twice the minimum daily wage. To be eligible, the recipient must be insured for at least 365 days in the previous two years.The eligibility period of the Child Home Care Allowance was also raised from two to three years, and at the same time the working week for eligible parents was capped at 30 hours in order to encourage part-time employment. As a result, by 2014, 30,000 mothers were able to return to work without losing childcare benefits after their child reached the age of one year.
The measures have already shown results. Births in Hungary increased by 3.2 percent in 2014 compared with the previous year, while in the first two months of 2015 the increase accelerated to 3.6 percent.
In 2016, as an extension of the family first home benefit, the government will pay up to 10 million HUF in grant assistance to couples for the purchase of new homes. To be eligible, the couples agree to have three children within ten years and, furthermore, may apply for an additional loan of 10 million HUF for a term of twenty-five years at an interest rate that may not exceed 3 percent.
The government intends to continue increasing family subsidies to a level that would reach 300 billion HUF (approximately 967 million EUR) by 2019. That’s in addition to other social expenditures such as extending maternity benefits and offering free textbooks and meals for children in public education. The tax base benefit available to families raising two children will also increase gradually over four years beginning in 2016.
Statistics show that it is not only Hungary that struggles with negative demographic trends but Europe as a whole has become the most rapidly ageing continent. By placing the family among our top priorities, the government of Hungary aims to show that supporting families and protecting individual freedoms and innovative government policy can have positive impact on demographic trends, consumer confidence and economic stability.