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National defence has improved and the level of defence costs will rise up to 2.05%.

One of the most important commitments of the government was to improve the livelihood of families and reduce child poverty. Child benefits will increase next year – the benefit for the first and second child will rise to 45 euros per month and for the third child to 100 euros per month. Families, who need more support from the government, will receive additionally 45 euros as need-based aid for the first and the second child, respectively. Next year, high school students will also have free school lunches. This decision concerns more than 22,000 high school students. The draft initiated by the government will also improve the process of recovering alimony from the debtors.

The government did not propose any substantial amendments to the tax system – it will remain straightforward and with as few exceptions as possible. In order to create new jobs and recover the economic environment, the government decided to reduce labour taxes – the unemployment insurance premium rate will decrease from 3% to 2.4%, the basic exemption rate will increase from 144 euros to 154 euros per month, and the income tax rate will decrease from 21% to 20%. The average pension will also remain exempt from tax in the coming year.

The government has quickly responded to the changed security situation. At the NATO Summit in Wales, the heads of state and government of the allies approved the NATO Readiness Action Plan, which will increase NATO’s presence in our region. Defence costs will increase up to 2.05% from the gross domestic product in the state budget of 2015. Several major arms procurements progressed significantly this year – the Minister of Defence concluded a procurement contract with the Netherlands to purchase 44 infantry battle machines and with the US to acquire third-generation Javelin anti-tank missile systems.

The changed security situation has also demonstrated the importance of energy independence and security of supply. Preparations have continued to establish the third electricity connection between Estonia and Latvia in order to improve energy security. Estonia and Finland have also reached an agreement on the establishment of gas pipe Balticconnector between the two countries by 2019 and the construction of an LNG terminal in Finland during the same time period. Final preparations have been made to separate the gas transmission network from the gas production.

Connections and transport projects vital for Estonia have taken on a new dynamic – the Baltic countries signed the memorandum of association of the Rail Baltic joint venture in autumn and the route selection of the Rail Baltic has moved into the phase of preparing sketch solutions. In order to ensure ferry traffic between the mainland and the islands, a contract was concluded with the ferry traffic organiser.

In December, the project of e-residency was launched, contributing to expanding Estonia and making excellent Estonian e-services available to the world. It is expected that by 2017, a total of 5,000 active companies will be operating in Estonia.

The government of Taavi Rõivas assumed office on 26 March. The annual action programme, prepared by the coalition partners, was approved on 24 April. There are a total of 199 pledges in the government action programme of which 27% have been fully completed, 43% are currently carried out, 14% are partially completed and 16% have been delayed.