From the 2026 budget audit
60.5 billion forints injected into state companies every year — your wages fund equity you can never vote on
The Ministry of National Economy's company portfolio draws 60.5 billion Ft in fresh capital from the budget annually, while the same portfolio pays 94.8 billion Ft in dividends back to the Treasury — dividends that never reach the taxpayer who funded the equity.
Roughly 14,500 Ft per taxpayer per year — 60.5 billion Ft of capital injected from a combined labour-tax wedge of 55 to 60 percent on every forint of employment cost.
What you see — and what you don't
The seen: a large portfolio of companies kept capitalised by annual budget transfers, some of which are profitable and pay dividends. The unseen: the wage-earner contributing to a 55-60% all-in labour-tax wedge who funds equity in companies they cannot identify, cannot vote on as a shareholder, and from whose dividends they receive nothing — those dividends return to the Treasury, not to the taxpayer.
Objection
"The portfolio earns more than it costs — the companies pay 94.8 billion in dividends against 60.5 billion injected. Why end something that generates a net return?"
Answer
Because a profitable state company is worth more sold than held: privatisation realises the company's value as a one-off capital receipt and removes it from political direction; the corporate tax on the privately-owned company then continues. And because the aggregate masks the split: some companies are genuinely profitable candidates for privatisation, others are loss-making recipients of the soft budget constraint whose losses are covered by the profitable ones' dividends. The 5-year phase-out is a structured privatisation and restructuring programme — separating the two and ending the cross-subsidy. By the end of the next electoral term, the profitable companies can be in private hands, the loss-making ones restructured or wound down, and the Treasury receiving privatisation proceeds rather than recycling dividends as fresh equity.
Share if you think profitable companies should be sold to citizens, not kept as political assets.
The analyst's verdict
Resource allocations to companies under NGM ownership
Rationale
This is the largest expenditure line in the chapter and the analytically heaviest: 60,500.0 millió Ft of capital injected into the portfolio of companies whose ownership rights the NGM exercises. It must be read against the matching revenue line — 94,805.2 millió Ft of dividend income from the same NGM portfolio. The portfolio earns more than this line costs. That fact cuts both ways. It means the state's company holdings are not uniformly loss-making; some are genuinely profitable enterprises. It also means the state is recycling: it draws 94,805.2 millió Ft of dividends out of the portfolio and pushes 60,500.0 millió Ft of fresh capital back in. The reform question is not whether the portfolio earns — parts of it plainly do — but whether the state needs to *own* it to capture that value, and whether the capital recycling is funding genuine investment or absorbing the losses of the weaker companies in the portfolio. The classical-liberal reading distinguishes the two halves. A state-owned company that is genuinely profitable on a hard budget constraint is a candidate for *privatisation*, not subsidy: selling it returns capital to the Treasury, removes the company from the reach of political direction, and exposes it to the discipline of private ownership — and the proceeds are real, one-off revenue the reform programme can use. A state-owned company that needs the capital injection to cover operating losses is exhibiting the soft budget constraint: it survives not because it creates value but because the shortfall is met from the dividends of the profitable companies and from general taxation. Aggregating both inside a single 60,500.0 millió Ft line obscures which is which. Until the portfolio is itemised company by company, the line cannot be shown to fund anything the analytical frame recognises as a necessary state function — and 60,500.0 millió Ft is too large a discretionary capital allocation to default to Keep on the strength of the portfolio's aggregate dividend yield. For a worker at the roughly 540,000 Ft median monthly gross wage, the labour-tax wedge that part-funds general expenditure of this kind is not the visible payroll deduction alone. Counting the employer-side SzocHo (13% on gross, paid before the worker ever sees the wage), the 15% SZJA and approximately 18.5% employee social-insurance contributions on the declared gross, and then the 27% ÁFA applied to a large share of what the remaining take-home buys: the gross employer cost is 113% of the declared gross; the worker's net-of-SZJA-and-contributions take-home is roughly 66.5% of that declared gross, or 58.8% of full employer cost; and if approximately 70% of take-home income is spent on 27% ÁFA-bearing goods and services, a further 13–14 percentage points of employer cost is absorbed in consumption tax — yielding a combined all-in wedge in the 55–60% range.[^8] The 60,500.0 millió Ft on this line is drawn from that take. The wage-earner funding a capital injection into a state enterprise portfolio cannot identify which company received the money, cannot vote on it as a shareholder, and receives no dividend from it — the dividends flow back to the Treasury, not to the taxpayer whose labour funded the equity.
Transition mechanism
A 5-year phase-out, linear. The horizon reflects the scale and heterogeneity of the portfolio: itemising dozens of companies, separating the profitable from the loss-making, and executing privatisations on terms that realise fair value rather than fire-sale prices takes several years. During the transition: (a) each company is itemised and its accounts separated from the aggregate; (b) profitable companies are prepared for sale, the proceeds returning capital to the Treasury — the New Zealand SOE programme demonstrated that commercial reconstitution before or instead of sale already raises sector dividend revenue sharply[^5], and the UK 1979-1997 privatisations show clear productivity gains where the activity is genuinely competitive, with more contested outcomes where it is a network monopoly requiring careful regulator design[^6]; (c) loss-making companies are either converted to a hard budget constraint and made viable or wound down. The 60,500.0 millió Ft of annual capital injection falls to zero as the portfolio is restructured and divested. Year 1 saves 12,100.0 millió Ft.
Affected groups
Employees and managers of the NGM-portfolio companies — a large and heterogeneous group across multiple sectors. Profitable companies passing to private ownership change employer but not viability; their workforces are not displaced. Loss-making companies face genuine adjustment, and the 5-year horizon plus company-by-company treatment is what allows that adjustment to be handled case by case rather than through a uniform shock. The taxpayer is the beneficiary: privatisation proceeds are real revenue, and ending the loss-absorption recycling stops the diversion of the profitable companies' dividends into covering the weaker ones.
Sources
- NAO UK reports; IFS evaluations; Ofcom / Ofgem / Ofwat / ORR annual reports · UK National Audit Office; Institute for Fiscal Studies (1997)
Free Society Institute
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