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Estonia – a liberal success story

June 11, 2013

While Britain seems set for a long period of debate about our continued membership of the European Union, other countries are strengthening their position in the European family of nations. Last year I went on a double MP delegation to help Macedonia in its preparatory stages for EU membership. Last week I returned from a visit to another small state that has made a huge success since joining, Estonia.

The delegation was entirely Lib Dem, led by Malcolm Bruce, also including Simon Hughes, Andrew Stunell and Robin Teverson, a former MEP now in the Lords. For Malcolm and myself it was a follow up to our visit in 2007. Estonia also has a centre-right coalition, but this one is Liberal led by the Reform Party and we met with several of our fellow liberals on the visit.

Estonia is one of the smallest EU states, with a population of 1.3 million. The majority of its inhabitants are Estonian speaking but there is a significant Russian speaking minority of about 23%, a legacy of the long period of rule by imperial Russia and then occupation by the Soviet Union until 1991. Estonian is a unique language, of little use outside Estonia, a miracle of survival next to the dominant Russian bear. As a Welshman, I can empathise! But while Wales is mountainous, Estonia is flat and 70% trees and bog. Our road journey from the capital Tallin, to Kuresssare on the island of Saaremaa was one of the most monotonous of my life as the bus swept through endless forest.

In its second period of independence (the first being between the deposition of Czar Nicholas II and the invasion by Stalin in 1940) since 1991 Estonia has established itself as a liberal, high tech, fiscally sound country. It has achieved the greatest prosperity of the three ex Soviet Baltic states, in particular since joining the EU in 2004. The Reform Party led coalition has persued a policy of free market economics. It has the lowest proportion of government debt to the economy of any EU state, at about 10%, an eighth of our rate. When we met Prime Minister Andrus Ansip he bluntly told us that governments should not borrow off the next generation. Summit meetings with Gordon Brown must have been lively.

Estonia’s finances were so sound that they were able to join the € in 2011. Its southern neighbour Latvia will join next year so any right wing Tory hopes for a collapse of the single currency are wide of reality. Estonia is unique in Europe for its flat rate of taxes. Income and company taxes are both 21%. Individuals have a tiny personal allowance of €144 a month so the flat rate is quite regressive. All is not what it seems on the corporate side either with a swingeing 30% payroll tax, an equivalent of our NIC but used to fund all health and welfare spending. A dedicated tax for the NHS is something the Liberal Democrats have considered and this may be the way to separate out political wrangling on NHS spending and bureaucracy from actual health care policies.

While Estonia practices free market economics I wouldn’t necessarily say it’s also socially liberal. But this may be due to a more relaxed attitude to social norms from elsewhere in Europe. The country has the lowest rate of religious adherence and marriage rates are low. I hope they will soon allow same sex marriage and it will probably happen with less fuss than in the UK. The country is run by a relatively young group of people. I had a great discussion with the 32 year old Taavi Roivas, the minister for social affairs…which covers the equivalent of our health department and DWP, like the old UK DHSS of the 1970s and 80s.

But the most radical, though unsurprising, innovation by this young country is its embrace of new technology. One of the highlights of the week was the visit to the ICT Demo Centre http://e-estonia.com/ict-demo-center The country won’t be chopping down any of its millions of trees to make paper as it moves steadily towards an e-enabled society. All government services can be accessed or implemented on line. Internet access was described as a “social right” with fast broadband available everywhere and also free wi-fi access in most public and commercial buildings. More than 90% of tax returns are filed on line. In the 2011 general election a quarter of people voted via the Internet. Once the election campaign is underway voting can begin and the system even allows for people to change their vote up to 7 days before the election! It may make our campaigning sound antiquated though I’m a long way from being converted to e-voting.

Finally, a little note on Estonia’s painful history. They are well disposed towards the British as the Royal Navy saw off the Soviet ships in 1918, enabling Estonian independence. Freedom was short lived as the Molotov-Ribbentrop pact handed the country back to Soviet occupation. Prime Minister Ansip showed us the portraits of his predecessors from 1918-1940, all murdered by Stalin.

On my last visit in 2007 there was a visit to Narva, on the border with Russia. Two medieval castles, one Swedish and one Russian, face each other across the river. The town is literally at the edge of the European Union. The two castles act as a metaphor for two visions of Europe. One is a bastion of freedom of expression, of trade and innovation and international cooperation. The other expresses a quite different fortress mentality, with limited personal freedom. Estonia may be at the fringes of Europe but in its mind it is at the centre of the modern Europe that all liberals want to see.

4 Comments leave one →
  1. Antony Berridge permalink
    June 12, 2013 6:11 am

    I have been visiting friends in Estonia for six years now and am very keen to support the nation however this excellent article says nothing about the dire employment situation, Three men I no have to leave their families to work in Denmark Sweden or Norway for long stretches and the pay scale is poor. Many blocks of flat need facelifts badly, so Im sorry, it isnt all sweetness and light !

  2. Antony Berridge permalink
    June 12, 2013 6:12 am

    sorry for grammatical errors its early in the day !

  3. June 12, 2013 9:02 am

    In my previous working life I employed an Estonian graduate who was an excellent ambassador for their education system—-articulate in English, hard working, forward looking and an asset to us—-a great role model ——-I can echo Antony’s comments about having to leave to find work——easy to forget key issues in smaller states when we hear so much about potential mass immigration from larger EU members

  4. June 12, 2013 9:54 am

    We did hear quite a bit about the labour market. It was a five day programme of meetings so I couldn’t write up the whole visit! Broadly, wages are low, outside Tallin in particular. They are still suffering net outward migration, mainly well educated young. This leads to a skills shortage in some of their hi tech industries. Superficially to an outsider that may seem a simple chicken and egg issue but given our own complex labour market problems I would be wary of being judgemental or prescriptive about another country, particularly one that is only 22 years out of a centrally planned communist dictatorship!

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