Cuts in almost all departments
Cabinet passes trimmed budget
7/5/2023 1:44 p.m
The federal government struggled for a long time, now the cabinet is deciding on the draft for the federal budget for 2024. Finance Minister Lindner has achieved his goal: he is complying with the debt brake. However, the departments have to save for this, only one ministry is exempt.
The federal cabinet has approved the government draft for the federal budget for 2024. This was reported from government circles. The federal government had struggled for a long time to draw up the budget. Despite difficult framework conditions, it will comply with the requirements of the debt brake in 2024. According to the budget, this is bought with cuts in almost all areas, with the exception of the Bundeswehr: federal subsidies for social security are badly affected, but also parental allowance. In addition, the cabinet decision leaves the financing of the planned basic child security largely open.
How high is the new debt?
Net borrowing should amount to 16.6 billion euros in the coming year. The debt brake in the Basic Law would thus be just about adhered to after the government made use of an exception clause from 2020 to 2022 – first because of the corona pandemic and then also because of the Russian war of aggression against Ukraine. In 2025, the new debt should amount to 16.0 billion euros, in 2026 then 15.4 billion euros and in 2027 another 15.0 billion euros.
How much money does the federal government spend on what?
A total of 445.7 billion euros are earmarked for federal spending in the coming year. That is 6.4 percent less than estimated for 2023. The largest single item remains the budget for labor and social affairs at 171.7 billion euros, followed by the defense budget at 51.8 billion euros and digital and transport at 38.7 billion euros. The largest cut in a year-on-year comparison is in the healthcare budget, down 33.7 percent to just 16.2 billion euros. Special grants to the health insurance companies are omitted here.
Where is saving?
The federal subsidy for long-term care insurance will be completely canceled in 2024, as will supplementary subsidies that went to statutory health insurance in previous years. Subsidies to pension funds will also be reduced. There are therefore warnings of impending premium increases. There will also be massive cuts in parental allowance due to the savings targets set by the finance department. The Family Ministry wants to remove this for households with an annual income of 150,000 euros or more, but this is still a matter of debate. In total, all departments apart from defense must save around 3.5 billion euros per year in 2024 and 2025.
What is intended for defense?
The defense budget is increased by 1.7 billion euros. But savings are also being made here: Defense Minister Boris Pistorius from the SPD had actually announced an additional requirement of around ten billion euros. In addition, according to the plan, there will even be a decrease in the budget item by 300 million euros in 2023. The NATO target of spending two percent of economic output on defense will only be achieved in 2024 with the help of the 100 billion special fund, from which 19.2 billion euros are to flow to the Bundeswehr next year – after 8.4 billion euros in 2023.
Are there other focal points?
More money should flow primarily into climate protection and the expansion of digital infrastructure, as well as into the renovation of the rail network. The Climate and Transformation Fund (KTF) plays an important role in financing, which would make it easier on the budget. The fund is financed from reserves and income from CO2 certificate trading. The railway should also benefit from additional income from the higher truck toll. Humanitarian aid has also increased compared to previous financial planning. However, the development budget is 5.3 percent lower year-on-year.
Are further savings to be expected?
According to the current status, the financial planning is still missing 14.4 billion euros up to 2027, of which 5.2 billion euros for 2025 alone. The reasons are the significantly increased interest costs, the difficult economic situation and the high inflation as well as the relatively high nominal growth associated with this personnel costs. In addition, additional money is likely to be needed for the planned basic child security, for which there is only a “note item” of two billion euros per year in the financial plan. Finance Minister Christian Lindner from the FDP excludes tax increases for high earners from financing.