It was a tedious undertaking – but now the draft for the 2024 federal budget is in place. However, there are still many construction sites, especially when it comes to financial planning for the coming years. For example, it has still not been resolved how the planned basic child security scheme is to be financed, one of the most important socio-political projects of the traffic light coalition of SPD, Greens and FDP. And there is a risk of budget deficits worth billions.
key points of the budget
It is usual for the key points for the budget for the coming year to be approved by the cabinet in March. But the coalition failed. Now the cabinet should agree on Wednesday. There were discussions behind the scenes for months. The departments had requests for additional spending of around 70 billion euros for 2024 alone. Far too much, according to Finance Minister Christian Lindner (FDP), also against the background of weak economic prospects. Lindner sent the departments a plan of how much money they can spend.
In the coming years, a “strict budget course” will now be followed in order to open up room for maneuver for the future, as the Ministry of Finance said on Monday about the draft budget for 2024 and the financial plan up to 2027. Expenditures and measures would have to be prioritized, potential savings identified and implemented. Motto: “Back to fiscal normality”.
In order to cushion the consequences of the corona pandemic and the energy crisis triggered by the Russian war of aggression in Ukraine, the federal government spent a lot of money on relief packages, i.e. tens of billions of new debts were incurred. The debt brake anchored in the Basic Law, which only allows new debts to a very limited extent, was suspended. After the exceptional years, however, it should be observed again in the coming year – as in this year.
In addition, there are rising interest payments for the federal government. And: A reserve worth billions built up in good times is almost completely used up.
According to the draft, expenditure of 445.7 billion euros is planned in the federal budget for 2024, significantly less than this year (476.3 billion euros). According to the financial plan, expenditure should increase to 451.8 billion euros in 2025, 460.3 billion euros in 2026 and 467.2 billion euros in 2027.
New borrowing is expected to be EUR 16.6 billion in the coming year (2023: EUR 45.6 billion) and to fall to EUR 15.0 billion by 2027. This should also dampen inflationary pressure, according to the Ministry of Finance.
Priorities and Savings
The task areas of defence, digitization and climate protection would have priority in the next few years, it said. Defense spending is set to increase by €1.7 billion in 2024 to a “record approach” of €51.8 billion. Objective: To increase Germany’s alliance and defense capabilities. The NATO goal of defense spending of two percent of gross domestic product should be achieved, and spending from the Bundeswehr special fund should also contribute to this. This special fund totaling 100 billion euros was set up as a reaction to the Russian war of aggression in Ukraine.
Relief for the federal budget should bring various shifts, for example in the case of special funds. With the exception of the defense department, all departments are to make a savings contribution of 3.5 billion euros per year in 2024 and 2025 “according to their efficiency”. For example, the federal subsidy to nursing care insurance of one billion euros per year introduced in 2022 should not be continued.
In the case of parental allowance, the “expenditure dynamics” are to be dampened: Specifically, the income limit up to which there is an entitlement to parental allowance is to be significantly lowered. This limit is currently 300,000 euros for taxable annual income for couples and 250,000 euros for single parents. The parental benefit compensates for a lack of income when parents look after their child after the birth.
As the “mirror” reported, in the future only parents with an annual income of up to 150,000 euros should be entitled to parental allowance. According to this, expenditure in 2024 should fall by 290 million euros to almost 8 billion euros compared to this year. Initially, cuts in parental benefits were also discussed, the magazine writes. However, the Paus Ministry was able to avoid this by restricting the circle of those entitled.
Impending budget holes
Despite the consolidation measures, there is a budgetary “need for action” totaling 14.4 billion euros in the years 2025 to 2027, according to the Ministry of Finance. One could also speak of budget holes. So this money still needs to be saved. There is a risk of further distribution battles within the federal government. It is also conceivable that subsidies will be eliminated. The FDP rules out tax increases.
Union parliamentary group Vice Mathias Middelberg (CDU) criticized that Lindner was playing the “show of a tough savings commissioner”. In fact, for weeks he only haggled with his traffic light partners about silly amounts. “You just drag yourself over the next year.”
Dispute over the financing of basic child security
The dispute over how basic child security should be financed has not yet been resolved. It is intended to bring together services such as child benefit, child citizenship benefit, child allowance and those from the so-called education and participation package in order to better combat child poverty.
Provisions of two billion euros per year are to be made from 2025 onwards for the effects of the digitization of procedures in connection with basic child security, as stated in the cabinet proposal. That is significantly less than the twelve billion euros that Family Minister Lisa Paus (Greens) had demanded. Paus would also like to increase performance.
On Monday evening there was movement in the dispute: Chancellor Scholz wrote to Paus in a letter that a draft “unified” within the federal government should be available by the end of August. Paus’ ministry should now quickly develop or supplement the new draft law along the key points available. The ARD capital studio reported first.
With regard to the improvements in performance intended with the introduction of basic child security, Scholz asks Paus to develop alternatives – including one that only includes the immediate child allowance, as well as various others that recalculate the “socio-cultural subsistence level” for children. How the basic child security will now continue in concrete terms remains open until political Berlin returns from the summer break in August.
