Overhead cost reduction is an indispensable support for those on modest income

As an introduction, it is important to clarify that due to the price increase under left-liberal governments, overheads in Hungarian households in the lower income quintile (on average HUF 25,000 per month) had almost reached per capita income (HUF 32,000 per month) by 2010. In other words,

This was typical for about 760,000 households, which meant more than 2 million people in 2010. We should also remember that in the period between 2005 and 2012, even though monthly expenditures increased by 20 percent (from HUF 225,000 to HUF 275,000), the less affluent households in question were not able to increase their expenditures on transport, education, or health care to a greater extent, thus, their consumption did not increase significantly. During this period, the members of this group could spend less on clothing, culture, entertainment, or on furnishing.

However, in the years following the change of government, per capita income increased significantly, reaching HUF 59,000 by 2020, due to a decrease in unemployment and an increase in wages. At the same time, the reduction in overhead tariffs compensated for the transformation of the energy consumption structure of this social group, so that the average amount of public utility expenditures was only HUF 26,000 per month. As a result of the trend, the expenditure structure of the lowest-income households changed: while in 2010 they spent on average 14 percent of their total expenditure (HUF 2 million) on overheads, this ratio decreased to 10 percent (HUF 3.2 million) in 2020. It shows that

Due to the measure, those on the lowest income can spend one and a half times as much on other cultural items as before the overhead cost reduction.

Regarding energy poverty, overhead cost reduction has resulted in significant progress. Prior to the measure,

The problem hit those in need harder: 26.9 percent (215,000 households) of 800,000 households belonging to the 20 percent of the lowest income had heating difficulties and 50.6 percent (405,000 households) had payment difficulties. As a result of the overhead cost reduction program, both indicators improved dramatically:

Many years of practical experience of the overhead cost reduction program show that

allowing those most in need to use these resources for other purposes or shop more. With regard to reducing energy poverty, it should also be emphasized that

However, left-liberal politicians have been attacking the government’s measure for years, ignoring the positive effects of the overhead cost reduction on the population. In 2013, Katalin Ertsey, a former member of parliament for LMP, called the overhead cost reduction a “cheap bullshit”, while Benedek R. Sallai, also from the eco-party, thought that “It is a much more important goal to reduce overhead costs permanently by reducing consumption than pushing prices down”. In addition, in 2018, Bence Tordai from Párbeszéd believed that the overhead cost reduction program “not only did not help, but it is now clear that it has done harm to the income and wealth of Hungarian households, we simply pay more for overheads than if this famous overhead cost reduction had not taken place”. Then in 2020 he stated that, instead of officially pricing overheads, “consumption needs to be limited to contribute to the reduction in consumption”.

The breakdown of household expenditures and estimates for 2010 and 2021 were made on the basis of the survey of the Central Statistical Office on Household Budgetary and Living Conditions (KSH HKÉF) (2005, 2012 and 2019). Six utility tariffs (electricity, gas, water, waste collection, sewage use and replacement of propane-butane gas cylinders) were taken into account in the analysis, but district heating expenditures were not considered in the absence of adequate data. The overheads were weighted on the basis of how much a Hungarian household would have of them in terms of national consumption. The monthly net income per capita was calculated from the database of the Central Statistical Office of Gross and Net Income Per Capita According to Income Deciles. The energy poverty indicators were estimated on the basis of Eurostat and KSH HKÉF.