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David Pirner | April 13, 2023

GT verdict: Let us not write off subsidies because of absurdities

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You may have noticed it in the media or on social media, too. In Hungary, a treetop trail was made using EU money, with just one little thing missing: the trees. Doesn’t this remind you of a swimming pool in a community with no water source or other similar cases from the recent past? Of course I laughed, when I saw it, but it also gave me chills. What does this lead to? What conclusion will every reader necessarily reach? That subsidies are useless, that it is dirt, that it distorts the normal functioning

Our team helps governments, municipalities and businesses evaluate programs and implement their strategies. This does not mean coming up with a great solution, but implementing the best possible solution in a given situation. It may also involve subsidies. These are not a priori bad or good, it is a tool in the hands of people. Through subsidies, governments seek to influence the strategic direction of investment in a direction that will benefit our society in the long term. Ensure better education and access to information, level out regional disparities, integrate selected social groups, promote sustainable entrepreneurship, transform selected industries using new technologies. To sum it up, improve the quality of public intervention.

The Hungarian sidewalk brought no benefit for society, but cheap ridicule is the last thing that would help us. We do not want to throw the baby out with the bathwater and say that subsidies do not serve their purpose and should be abolished, do we? If we familiarise ourselves with the objectives of the subsidy programmes that we define together in Brussels, we agree that they cannot be blamed for the scandal. 

I know from experience that European officials judge the correctness of the subsidy awarded mainly by the extent, to which the defined objectives have been met, by its benefits. On the contrary, the national level often brings more emphasis on meeting the formal conditions of a given grant call and less understanding of the dynamic development of the external environment, which can fundamentally affect the initial assumptions. At the national level, all the details may fit, but the result may be miles away from the original intention.

What we need are educated, confident civil servants, professionals with sufficient autonomy to decide what is by the rules and what is not. It is also about culture. The decision-maker must not be afraid of losing his career because of his decision. Another element is a standard system for evaluating the entire process, from setting up the programme, launching calls for proposals, to applying for subsidies, obtaining them and implementing the investment or project. The evaluation system should be an organic part of the programme cycle. This alone will not prevent possible excesses. Mistakes can happen, but they should not be repeated.

The bottom line. Let us laugh together at the treeless treetop trail (The Monty Pythons would surely feel envious), but at the same time, let us not condemn subsidy programmes as such, let us support their evaluation and in a good way influence politicians, officials and experts to be less formalistic, more adventurous and try to better meet the real objectives of subsidy programmes. We will then be able to better avoid similar blunders in the future.