Prior to the introduction of the overhead cost reduction program, Hungarian families had to face continuous and significant price increase.
With overhead cost reduction, the right has restored what the left previously took away from families
In 2013, the government launched an overhead cost reduction program, under which it reduced household utility tariffs through official regulations. In our analysis, we examined how the development of overhead costs affected the expenditures of Hungarian households between 2005 and 2021. The lesson drawn from the calculations is that by the end of 2021, the savings due to the overhead cost reduction had almost reached the losses of the pre-measure period.
The increase in utility tariffs between 2005 and 2012 caused an average of HUF 9,000 in additional cost, a total of HUF 768,000 per household per month,
i.e., the damage to families exceeded HUF 3,000 billion nationwide. In addition, the various social benefits were not able to alleviate the unfavourable trend in a differentiated way, so even the poorest families had to pay a large additional cost (on average HUF 646,000).
With the introduction of the 2013 overhead cost reduction program, the right-wing government has stopped and then gradually reduced charges for six items (electricity, gas, water, waste collection, sewage use and replacement of propane-butane gas cylinders), the rate of which has not changed since then. Due to the measures, compared to the price level before the introduction of the program,
by the end of 2021, a total of HUF 627,000 (i.e., HUF 6,000 a month) had remained in the pocket of an average Hungarian family,
that is, savings of about HUF 2.6 thousand billion nationwide.
Due to the overhead cost reduction, the living standards of families have improved
The rise in prices prior to the overhead cost reduction period has held back the opportunity for families to improve their standards of living. Although the increase in incomes allowed households to increase their average monthly expenditure by 20 percent (from HUF 225,000 to HUF 275,000) between 2005 and 2012, a significant part of the increase was taken away by rising utility tariffs. While in 2005 an average household spent 10 percent of its expenditure on the six items already mentioned, the rate rose to 14 percent by 2012, so it was unable to substantially increase the share of spending on transport, clothing, food, or education in its own consumption pattern.
In contrast, due to the overhead cost reduction program, the share of spending on utilities were halved, from 14 percent to 8 percent between 2012 and 2019. A significant increase in income during the period allowed for a larger, 60 percent increase in expenses (from HUF 275,000 to HUF 411,000 per month), but the average overhead costs still decreased (from HUF 38,500 to HUF 35,280 per month). Thus, households were able to significantly increase their spending on education, health, transport, or entertainment, both in proportion and in nominal terms.
Data used and method applied
The breakdown of household expenditures and the estimate for 2021 were made on the basis of the survey of the Central Statistical Office on Household Budgetary and Living Conditions (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.